<SEC-DOCUMENT>0000891092-11-005229.txt : 20110809
<SEC-HEADER>0000891092-11-005229.hdr.sgml : 20110809
<ACCEPTANCE-DATETIME>20110809120231
ACCESSION NUMBER:		0000891092-11-005229
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20110630
FILED AS OF DATE:		20110809
DATE AS OF CHANGE:		20110809

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ALBANY INTERNATIONAL CORP /DE/
		CENTRAL INDEX KEY:			0000819793
		STANDARD INDUSTRIAL CLASSIFICATION:	BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221]
		IRS NUMBER:				140462060
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0218

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-10026
		FILM NUMBER:		111019617

	BUSINESS ADDRESS:	
		STREET 1:		1373 BROADWAY
		CITY:			ALBANY
		STATE:			NY
		ZIP:			12204
		BUSINESS PHONE:		5184452200

	MAIL ADDRESS:	
		STREET 1:		1373 BROADWAY
		CITY:			ALBANY
		STATE:			NY
		ZIP:			12204

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ALBINT INC
		DATE OF NAME CHANGE:	19870924
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>e44779_10q.htm
<DESCRIPTION>FORM 10-Q
<TEXT>

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<P style="text-align: center;"> <B>UNITED STATES</B><BR>
<B>SECURITIES AND EXCHANGE COMMISSION</B><BR>
<B>Washington, D.C. 20549</B></P>
<P style="text-align: center;"> <B>Form 10-Q</B></P>

<p align="center"><b>(</b><b>&radic;</b><b>)</b> <B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B>
</p>
<P style="text-align: center;"> For the quarterly period ended: <U>June 30, 2011</U></P>
<P style="text-align: center;"> OR</P>

<p align="center"><B>(&nbsp;&nbsp;) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B>
</p>
<P style="text-align: center;"> For the transition period from __________ to __________<BR>
<BR>
Commission file number: <U>1-10026</U><BR>
<BR>
<U>ALBANY INTERNATIONAL CORP.</U><BR>
(Exact name of registrant as specified in its charter)</P>
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    <TD></TD>
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    <TD width="40%"> Delaware</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="40%"> 14-0462060</TD>
  </TR>

  <TR align="center">

    <TD>
      <HR noshade size=1>

</TD>
    <TD>&nbsp;</TD>
    <TD>
      <HR noshade size=1>

</TD>
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  <TR valign="bottom" align="center">

    <TD> (State or other jurisdiction of</TD>
    <TD>&nbsp;</TD>
    <TD>(IRS Employer Identification No.)</TD>
  </TR>

  <TR valign="bottom" align="center">

    <TD> incorporation or organization)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
  </TR>

  <TR align="center">

    <TD colspan=3>&nbsp; </TD>
  </TR>

  <TR valign="bottom" align="center">

    <TD> 216 Airport Drive, Rochester, New Hampshire</TD>
    <TD>&nbsp;</TD>
    <TD> 03867</TD>
  </TR>

  <TR align="center">

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      <HR noshade size=1>

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    <TD>&nbsp;</TD>
    <TD>
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  <TR valign="bottom" align="center">

    <TD> (Address of principal executive offices)</TD>
    <TD>&nbsp;</TD>
    <TD> (Zip Code)</TD>
  </TR>

</TABLE>

<P style="text-align: left;"> Registrant's telephone number, including area code <u>518-445-2200</u></P>
<P style="text-align: left;"> 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 [&nbsp;&radic;&nbsp;] No [ &nbsp;&nbsp;]</P>
<P style="text-align: left;"> Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (&sect;232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [&nbsp;&radic;&nbsp;] No [ &nbsp;&nbsp;&nbsp;] </P>
<TABLE border=0 width=100% cellpadding="0" cellSpacing=0 style="font-family: 'Arial';font-size: 10pt;">

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    <TD width=21%></TD>
    <TD width=45%></TD>
    <TD width=5%></TD>
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  <TR valign="bottom">
    <TD align=left colspan="4">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.</TD>
  </TR>

  <TR valign="bottom">

    <TD align=left> Large accelerated filer</TD>
    <TD align=left> [ &nbsp;&nbsp;]</TD>
    <TD align=left> Accelerated filer</TD>
    <TD align=left> [&nbsp;&radic;&nbsp;]</TD>
  </TR>

  <TR valign="bottom">

    <TD align=left> Non-accelerated filer</TD>
    <TD align=left> [ &nbsp;&nbsp;]</TD>
    <TD align=left> Smaller reporting company</TD>
    <TD align=left> [ &nbsp;&nbsp;]</TD>
  </TR>

</TABLE>

<P style="text-align: left;"> Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ &nbsp;&nbsp;] No [&nbsp;&radic;&nbsp;]</P>
<P style="text-align: left;"> The registrant had 28.0 million shares of Class A Common Stock and 3.2 million shares of Class B Common Stock outstanding as of June 30, 2011.</P>
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<P style="text-align: center;"> <B>ALBANY INTERNATIONAL CORP.</B><BR>
<BR>
<B>TABLE OF CONTENTS</B></P>
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    <TD></TD>
    <TD></TD>
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    <TD align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left width="5%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align=left>&nbsp; </TD>
    <TD align=center nowrap> Page  No.</TD>
  </TR>

  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp; </TD>
    <TD>
      <HR noshade size=1>

</TD>
  </TR>





  <TR>

    <TD colspan=4>&nbsp; </TD>
  </TR>

  <TR valign="bottom">
    <TD align=left colspan="3"> <B>Part I Financial information</B></TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR>

    <TD colspan=4>&nbsp; </TD>
  </TR>

  <TR valign="bottom">
    <TD align=left>&nbsp;</TD>
    <TD align=left colspan="2"> Item 1. Financial Statements</TD>
    <TD align=left>&nbsp; </TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p1"></a></TD>
    <TD align=left><a href="#p1"></a></TD>
    <TD align=left><a href="#p1"> Consolidated statements of income - three and six months ended June 30, 2011 and 2010</a></TD>
    <TD align=center>
      <p>&nbsp;&nbsp;<a href="#p1">1</a></p>
    </TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p2"></a></TD>
    <TD align=left><a href="#p2"></a></TD>
    <TD align=left><a href="#p2"> Consolidated balance sheets - June 30, 2011 and December 31, 2010</a></TD>
    <TD align=center>&nbsp;&nbsp;<a href="#p2">2</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p3"></a></TD>
    <TD align=left><a href="#p3"></a></TD>
    <TD align=left><a href="#p3"> Consolidated statements of cash flows - three and six months ended June 30, 2011 and 2010</a></TD>
    <TD align=center>&nbsp;&nbsp;<a href="#p3">3</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p4"></a></TD>
    <TD align=left><a href="#p4"></a></TD>
    <TD align=left><a href="#p4"> Notes to consolidated financial statements</a></TD>
    <TD align=center>&nbsp;&nbsp;<a href="#p4">4</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p31"></a></TD>
    <TD align=left colspan="2"><a href="#p31"> Forward-looking statements</a></TD>
    <TD align=center><a href="#p31">31</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p32"></a></TD>
    <TD align=left colspan="2"><a href="#p32">Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations</a></TD>
    <TD align=center><a href="#p32">32</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p53"></a></TD>
    <TD align=left colspan="2"><a href="#p53">Item 3. Quantitative and Qualitative Disclosures about Market Risk </a></TD>
    <TD align=center><a href="#p53">53</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p53a"></a></TD>
    <TD align=left colspan="2"><a href="#p53a"> Item 4. Controls and Procedures</a></TD>
    <TD align=center><a href="#p53a">53</a></TD>
  </TR>

  <TR>

    <TD colspan=4>&nbsp; </TD>
  </TR>

  <TR valign="bottom">
    <TD align=left colspan="3"> <B>Part II Other Information</B></TD>
    <TD align=center>&nbsp; </TD>
  </TR>

  <TR>

    <TD colspan=4>&nbsp; </TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p54"></a></TD>
    <TD align=left colspan="2"><a href="#p54"> Item 1. Legal Proceedings</a></TD>
    <TD align=center><a href="#p54">54</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p57"></a></TD>
    <TD align=left colspan="2"><a href="#p57"> Item 1A. Risk Factors</a></TD>
    <TD align=center><a href="#p57">57</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p57a"></a></TD>
    <TD align=left colspan="2"><a href="#p57a"> Item 2. Unregistered Sales of Equity Securities and Use of Proceeds</a></TD>
    <TD align=center><a href="#p57a">57</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p57b"></a></TD>
    <TD align=left colspan="2"><a href="#p57b"> Item 3. Defaults upon Senior Securities</a></TD>
    <TD align=center><a href="#p57b">57</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p58"></a></TD>
    <TD align=left colspan="2"><a href="#p58"> Item 4. (Removed and Reserved)</a></TD>
    <TD align=center><a href="#p58">58</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p58a"></a></TD>
    <TD align=left colspan="2"><a href="#p58a"> Item 5. Other Information</a></TD>
    <TD align=center><a href="#p58a">58</a></TD>
  </TR>

  <TR valign="bottom">
    <TD align=left><a href="#p58b"></a></TD>
    <TD align=left colspan="2"><a href="#p58b"> Item 6. Exhibits</a></TD>
    <TD align=center><a href="#p58b">58</a></TD>
  </TR>

</TABLE>
<BR>
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<p style="TEXT-ALIGN: center"><a name="p1"></a>ALBANY INTERNATIONAL CORP.<br>

CONSOLIDATED STATEMENTS OF INCOME<br>

(in thousands, except per share data)<br>

(unaudited)</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td align=center colspan=5>Three Months Ended <br>
      June 30,
    </td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=5>Six Months Ended <br>
      June 30,
    </td>
  </tr>





  <tr valign=bottom>

    <td align=center colspan=2>2011</td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan=2>2010</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>2011</td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan=2>2010</td>
  </tr>
  <tr>

    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;


</td>
    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
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  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">$244,015</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">$227,450</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Net sales</td>
    <td align=right bgcolor="#CCCCCC">$495,865</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">$441,323</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>149,115</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>141,615</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Cost of goods sold</td>
    <td align=right>295,972</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>278,259</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;


</td>
    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">94,900</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">85,835</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Gross profit</td>
    <td align=right bgcolor="#CCCCCC">199,893</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">163,064</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>58,359</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>46,482</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Selling, general, and administrative expenses</td>
    <td align=right>116,124</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>99,392</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">15,367</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">14,884</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;&nbsp;&nbsp;Technical, product engineering, and research expenses</td>
    <td align=right bgcolor="#CCCCCC">30,502</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">28,050</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>2,092</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>689</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Restructuring and other, net</td>
    <td align=right>2,278</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>2,081</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;


</td>
    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">19,082</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">23,780</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Operating income</td>
    <td align=right bgcolor="#CCCCCC">50,989</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">33,541</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>4,786</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>3,882</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Interest expense, net</td>
    <td align=right>9,562</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>7,707</td>
    <td align=left>&nbsp;</td>
  </tr>




  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">55</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">(2,991</td>
    <td align=left bgcolor="#CCCCCC">)</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;&nbsp;&nbsp;Other expense/(income), net</td>
    <td align=right bgcolor="#CCCCCC">4,924</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">(5,272</td>
    <td align=left bgcolor="#CCCCCC">)</td>
  </tr>
  <tr>

    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;


</td>
    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>14,241</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>22,889</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Income before income taxes</td>
    <td align=right>36,503</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>31,106</td>
    <td align=left>&nbsp;</td>
  </tr>




  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">5,359</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">15,102</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;&nbsp;&nbsp;Income tax expense</td>
    <td align=right bgcolor="#CCCCCC">10,668</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">17,729</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>
  <tr>

    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;


</td>
    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>8,882</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>7,787</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Income before equity in (losses)/earnings of associated companies</td>
    <td align=right>25,835</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>13,377</td>
    <td align=left>&nbsp;</td>
  </tr>




  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">(120</td>
    <td align=left bgcolor="#CCCCCC">)</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">90</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;&nbsp;&nbsp;Equity in (losses)/earnings of associated companies</td>
    <td align=right bgcolor="#CCCCCC">(340</td>
    <td align=left bgcolor="#CCCCCC">)</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">98</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>
  <tr>

    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;


</td>
    <td colspan="2">
      <hr noshade size=1>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>
    </td>
  </tr>




  <tr valign=bottom>

    <td align=right>$8,762</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>$7,877</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Net income</td>
    <td align=right>$25,495</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>$13,475</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td colspan="2">
      <hr noshade size=2>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=2>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;


</td>
    <td colspan="2">
      <hr noshade size=2>



</td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=2>
    </td>
  </tr>
  <tr>
    <td colspan=12>&nbsp;</td>
  </tr>







  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Net income per share:</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">$0.28</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">$0.25</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;&nbsp;&nbsp;Basic</td>
    <td align=right bgcolor="#CCCCCC">$0.82</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">$0.43</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>$0.28</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>$0.25</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Diluted</td>
    <td align=right>$0.81</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>$0.43</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Shares used in computing earnings per share:</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">31,263</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">31,058</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;&nbsp;&nbsp;Basic</td>
    <td align=right bgcolor="#CCCCCC">31,243</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">31,001</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>31,489</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>31,161</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Diluted</td>
    <td align=right>31,455</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>31,105</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>





  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">$0.13</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">$0.12</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Dividends per share</td>
    <td align=right bgcolor="#CCCCCC">$0.25</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">$0.24</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>
</table>

<p style="TEXT-ALIGN: center">The accompanying notes are an integral part of the consolidated financial statements</p>
<p align=center>1</p>
<hr align=center width="100%" noshade size=5>

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<br>

<p style="TEXT-ALIGN: center"><a name="p2"></a>ALBANY INTERNATIONAL CORP.<br>

CONSOLIDATED BALANCE SHEETS<br>

(in thousands, except share and per share data)<br>

(unaudited)</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <tr>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>



  <tr valign=bottom>
    <td align=center width="1%">&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>June 30,<br>

2011</td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan=2>December 31,<br>

2010</td>
  </tr>

  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>
    <td colspan="2">ASSETS</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>



  <tr valign=bottom>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Cash and cash equivalents</td>
    <td align=right bgcolor="#CCCCCC">$157,046</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC"></td>
    <td align=right bgcolor="#CCCCCC">$122,301</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Accounts receivable, net</td>
    <td align=right>178,788</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>176,716</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Inventories</td>
    <td align=right bgcolor="#CCCCCC">179,729</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">156,171</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Income taxes receivable and deferred</td>
    <td align=right>43,448</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>39,721</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Prepaid expenses and other current assets</td>
    <td align=right bgcolor="#CCCCCC">14,619</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC">11,883</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Total current assets</td>
    <td align=right>573,630</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>506,792</td>
    <td align=left>&nbsp;</td>
  </tr>




  <tr>

    <td colspan=7>&nbsp;</td>
  </tr>

  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Property, plant and equipment, net</td>
    <td align=right>484,301</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>488,121</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Investments in associated companies</td>
    <td align=right>3,254</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>2,926</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Intangibles</td>
    <td align=right>3,351</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>4,182</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Goodwill</td>
    <td align=right>122,542</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>115,616</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Deferred taxes</td>
    <td align=right>142,638</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>141,701</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Other assets</td>
    <td align=right>18,344</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>18,955</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Total assets</td>
    <td align=right>$1,348,060</td>
    <td align=left>&nbsp;</td>
    <td align=right></td>
    <td align=right>$1,278,293</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=2>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=2>
    </td>
  </tr>




  <tr>

    <td colspan=7>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left colspan="2">LIABILITIES AND SHAREHOLDERS' EQUITY</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Notes and loans payable</td>
    <td align=right>$1,246</td>
    <td align=left>&nbsp;</td>
    <td align=right></td>
    <td align=right>$1,587</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Accounts payable</td>
    <td align=right>51,895</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>44,294</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Accrued liabilities</td>
    <td align=right>110,864</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>110,292</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Current maturities of long-term debt</td>
    <td align=right>12</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>12</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Income taxes payable and deferred</td>
    <td align=right>14,960</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>9,670</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Total current liabilities</td>
    <td align=right>178,977</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>165,855</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=7>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Long-term debt</td>
    <td align=right>417,012</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>423,647</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Other noncurrent liabilities</td>
    <td align=right>192,718</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>190,493</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Deferred taxes and other credits</td>
    <td align=right>73,185</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>72,038</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Total liabilities</td>
    <td align=right>861,892</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>852,033</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=7>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left colspan="2">Commitments and Contingencies</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=7>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left colspan="2">SHAREHOLDERS' EQUITY</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Preferred stock, par value $5.00 per share;<br>
      &nbsp;authorized 2,000,000 shares; none issued</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>





  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Class A Common Stock, par value $.001 per share;<br>
      &nbsp;authorized 100,000,000 shares; issued<br>
      &nbsp;36,515,942 in 2011 and 36,442,209 in 2010</td>
    <td align=right>37</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>36</td>
    <td align=left>&nbsp;</td>
  </tr>





  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Class B Common Stock, par value $.001 per share;<br>
      &nbsp;authorized 25,000,000 shares; issued and<br>
      &nbsp;outstanding 3,236,098 in 2011 and 2010</td>
    <td align=right>3</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>3</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Additional paid in capital</td>
    <td align=right>389,393</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>387,876</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Retained earnings</td>
    <td align=right>420,729</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>403,048</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>Accumulated items of other comprehensive income:</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Translation adjustments</td>
    <td align=right>33,830</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(6,041</td>
    <td align=left>)</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Pension and post retirement liability adjustments</td>
    <td align=right>(98,703</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(100,355</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Derivative valuation adjustment</td>
    <td align=right>(1,201</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(276</td>
    <td align=left>)</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>Treasury stock (Class A), at cost 8,479,487 shares<br>
      &nbsp;in 2011 and 8,484,528 shares in 2010</td>
    <td align=right>(257,920</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(258,031</td>
    <td align=left>)</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Total shareholders' equity</td>
    <td align=right>486,168</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>426,260</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity</td>
    <td align=right>$1,348,060</td>
    <td align=left>&nbsp;</td>
    <td align=right></td>
    <td align=right>$1,278,293</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=2>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=2>
    </td>
  </tr>


</table>

<p align="center">The accompanying notes are an integral part of the consolidated financial statements
</p>
<p align=center>2</p>
<hr align=center width="100%" noshade size=5>

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<br>

<p style="TEXT-ALIGN: center"><a name="p3"></a>ALBANY INTERNATIONAL CORP.<br>

CONSOLIDATED STATEMENTS OF CASH FLOWS<br>

(in thousands)<br>

(unaudited)</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td align=center colspan=5>Three Months Ended<br>
      June 30,
    </td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=5>Six Months Ended<br>
      June 30,
    </td>
  </tr>





  <tr valign=bottom>

    <td align=center colspan=2>2011</td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan=2>2010</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>2011</td>
    <td align=center>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
    <td align=center colspan=2>2010</td>
  </tr>

  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>OPERATING ACTIVITIES</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=right bgcolor="#CCCCCC">$8,762</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC"></td>
    <td align=right bgcolor="#CCCCCC">$7,877</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=left bgcolor="#CCCCCC">Net income</td>
    <td align=right bgcolor="#CCCCCC">$25,495</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
    <td align=right bgcolor="#CCCCCC"></td>
    <td align=right bgcolor="#CCCCCC">$13,475</td>
    <td align=left bgcolor="#CCCCCC">&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Adjustments to reconcile net income to net cash provided by operating <br>
      activities:
    </td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=right>120</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(90</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Equity in losses/(earnings) of associated companies</td>
    <td align=right>340</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(98</td>
    <td align=left>)</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>14,393</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>13,309</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Depreciation</td>
    <td align=right>28,526</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>27,250</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>2,312</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>2,276</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Amortization</td>
    <td align=right>4,489</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>4,230</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>181</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>189</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Noncash interest expense</td>
    <td align=right>377</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>377</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>2,189</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>9,709</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Provision for deferred income taxes, other credits and long-term liabilities</td>
    <td align=right>(24</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>11,215</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>23</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>1,626</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Provision for write-off of property, plant and equipment</td>
    <td align=right>64</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>3,093</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>(594</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Gain on disposition of assets</td>
    <td align=right>(1,022</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>847</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Decrease in cash surrender value of life insurance</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>(21</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Excess tax benefit of options exercised</td>
    <td align=right>(35</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>950</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>2,054</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Compensation and benefits paid or payable in Class A Common Stock</td>
    <td align=right>1,290</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>3,009</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td>Changes in operating assets and liabilities, net of business acquisitions and<br>
       divestitures: </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=right>5,049</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(8,740</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Accounts receivable</td>
    <td align=right>6,905</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(344</td>
    <td align=left>)</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>(8,940</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>9,748</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Inventories</td>
    <td align=right>(17,312</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>12,018</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>797</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>739</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets</td>
    <td align=right>(2,473</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(2,030</td>
    <td align=left>)</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>1,654</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(2,369</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Accounts payable</td>
    <td align=right>3,902</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(4,444</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=right>1,343</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>3,429</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Accrued liabilities</td>
    <td align=right>(4,090</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(8,693</td>
    <td align=left>)</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>1,161</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>1,758</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Income taxes payable</td>
    <td align=right>4,859</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>321</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>1,371</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>1,560</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Other, net</td>
    <td align=right>507</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>1,443</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>30,750</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>43,922</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Net cash provided by operating activities</td>
    <td align=right>51,798</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>60,822</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>INVESTING ACTIVITIES</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>(8,975</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(7,094</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Purchases of property, plant and equipment</td>
    <td align=right>(13,894</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(13,915</td>
    <td align=left>)</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>(705</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(873</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Purchased software</td>
    <td align=right>(1,752</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(1,946</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=right>1,159</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Proceeds from sale of assets</td>
    <td align=right>2,860</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Acquisitions, net of cash acquired</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(1,902</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>49,302</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Cash received from life insurance policy terminations</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>49,302</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>(8,521</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>41,335</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Net cash (used in)/provided by investing activities</td>
    <td align=right>(12,786</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>31,539</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>FINANCING ACTIVITIES</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>4</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Proceeds from borrowings</td>
    <td align=right>644</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>6,152</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>(980</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(69,738</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Principal payments on debt</td>
    <td align=right>(7,997</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(69,755</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=right>192</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>49</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Proceeds from options exercised</td>
    <td align=right>301</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>136</td>
    <td align=left>&nbsp;</td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>21</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Excess tax benefit of options exercised</td>
    <td align=right>35</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>(3,750</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(3,714</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Dividends paid</td>
    <td align=right>(7,494</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(7,419</td>
    <td align=left>)</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>(4,513</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(73,403</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;&nbsp;&nbsp;Net cash (used in) financing activities</td>
    <td align=right>(14,511</td>
    <td align=left>)</td>
    <td align=right>&nbsp;</td>
    <td align=right>(70,886</td>
    <td align=left>)</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>1,812</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(10,939</td>
    <td align=left>)</td>
    <td align=left>&nbsp;</td>
    <td align=left>Effect of exchange rate changes on cash and cash equivalents</td>
    <td align=right>10,244</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>(16,268</td>
    <td align=left>)</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr>

    <td colspan=12>&nbsp;</td>
  </tr>

  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>19,528</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>915</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Increase in cash and cash equivalents</td>
    <td align=right>34,745</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>5,207</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=right>137,518</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>101,758</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Cash and cash equivalents at beginning of period</td>
    <td align=right>122,301</td>
    <td align=left>&nbsp;</td>
    <td align=right>&nbsp;</td>
    <td align=right>97,466</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=1>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=1>
    </td>
  </tr>



  <tr valign=bottom bgcolor="#CCCCCC">

    <td align=right>$157,046</td>
    <td align=left>&nbsp;</td>
    <td align=right></td>
    <td align=right>$102,673</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Cash and cash equivalents at end of period</td>
    <td align=right>$157,046</td>
    <td align=left>&nbsp;</td>
    <td align=right></td>
    <td align=right>$102,673</td>
    <td align=left>&nbsp;</td>
  </tr>
  <tr>

    <td align=center colspan=2>
      <hr noshade size=2>



</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=2>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=2>
    </td>
    <td align=center>&nbsp;</td>
    <td align=center colspan=2>
      <hr noshade size=2>
    </td>
  </tr>


</table>


<p style="TEXT-ALIGN: center">The accompanying notes are an integral part of the consolidated financial statements</p>
<p align=center>3</p>
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<P style="TEXT-ALIGN: center"><a name="p4"></a>ALBANY INTERNATIONAL CORP.<BR>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>

(unaudited)</P>
<P style="TEXT-ALIGN: left"><B>1. Basis of Presentation</B></P>
<P style="TEXT-ALIGN: left">In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal, recurring adjustments, necessary for a fair presentation of results for such periods. The results for any interim period are not necessarily indicative of results for the full year. The preparation of financial statements for interim periods does not require all of the disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. These consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K as filed with the SEC for the year ended December 31, 2010.</P>
<P style="TEXT-ALIGN: left">In the first quarter of 2011, we modified our business segment reporting by reclassifying our Fiber Preparation business from the Engineered Fabrics segment to the Paper Machine Clothing segment. The change was made to better align our organizational structure with the customers that purchase these products. Prior year data has been modified to conform to the current year presentation. On April 29, 2011 we filed a current report on Form 8-K with reclassified segment data for quarterly periods in 2010, as well as annual data for 2010 and 2009.</P>
<P style="TEXT-ALIGN: left">In the first quarter of 2011, we adopted an accounting pronouncement related to revenue recognition principles for contracts with multiple revenue elements. This change, which affects the Albany Door Systems segment, accelerates revenue recognition associated with contracts that include both the sale of a door and installation services. We determine the consideration allocated to each revenue element at the inception of the arrangement, based on the relative fair values of the goods and services provided under the contract. The change was applied on a prospective basis, resulting in a one-time acceleration of net sales without the offsetting effect of applying the change to previous periods. As a result, we recognized in 2011 additional net sales and operating income, as follows:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="500">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=5>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=2>Three Months<BR>

Ended</TD>
    <TD align=center colSpan=2>Six Months<BR>

Ended</TD>
  </TR>

  <TR vAlign=bottom>

    <TD>(in thousands)</TD>
    <TD align=center colSpan=4>June 30, 2011</TD>
  </TR>

  <TR>

    <TD colSpan=5>
      <hr noshade size=1>

</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left>Net sales</TD>
    <TD align=right>($665</TD>
    <TD align=left>)</TD>
    <td align=right>$1,832</TD>
    <td align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Operating income</TD>
    <TD align=right>(9</TD>
    <TD align=left>)</TD>
    <TD align=right>953</TD>
    <TD align=right>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=5>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">The effect of this change on any future quarterly period could vary significantly due to timing, or the number and value of contracts that include both the sale of a door and installation services. Normally, installation is completed within a few months after the door is delivered.</P>
<P align=center>4</P>
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<P style="TEXT-ALIGN: left"><B>2. Reportable Segment Data</B></P>
<P style="TEXT-ALIGN: left">The following table shows data by reportable segment, reconciled to consolidated totals included in the financial statements:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=4>Three Months Ended<BR>

June 30,</TD>
    <TD align=center colSpan=4>Six Months Ended<BR>

June 30,</TD>
  </TR>

  <TR vAlign=bottom>

    <TD>(in thousands)</TD>
    <TD align=right colSpan=2><B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
    <TD align=right colSpan=2><B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>Net Sales</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Paper Machine Clothing</TD>
    <TD align=right><B>$</B><B>158,577</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$153,662</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>326,473</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$300,399</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Albany Door Systems</TD>
    <TD align=right><B>45,393</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>33,792</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>90,521</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>67,547</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Engineered Fabrics</TD>
    <TD align=right><B>20,600</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>21,032</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>41,186</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>40,144</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Engineered Composites</TD>
    <TD align=right><B>10,504</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>10,870</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>21,976</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>19,511</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;PrimaLoft&#174; Products</TD>
    <TD align=right><B>8,941</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>8,094</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>15,709</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>13,722</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Consolidated total</TD>
    <TD align=right><B>$</B><B>244,015</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$227,450</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>495,865</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$441,323</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>Operating income/(loss)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Paper Machine Clothing</TD>
    <TD align=right><B>$</B><B>34,909</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$38,575</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>81,139</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$66,236</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Albany Door Systems</TD>
    <TD align=right><B>4,053</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,339</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>9,424</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>5,223</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Engineered Fabrics</TD>
    <TD align=right><B>2,800</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,835</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>6,841</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>5,492</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Engineered Composites</TD>
    <TD align=right><B>(1,144</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(1,989</TD>
    <TD align=left>)</TD>
    <TD align=right><B>(2,187</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(4,218</TD>
    <TD align=left>)</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;PrimaLoft&#174; Products</TD>
    <TD align=right><B>3,165</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,926</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>5,076</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>4,995</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Research expense</TD>
    <TD align=right><B>(7,212</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(7,132</TD>
    <TD align=left>)</TD>
    <TD align=right><B>(14,377</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(12,943</TD>
    <TD align=left>)</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Unallocated expenses</TD>
    <TD align=right><B>(17,489</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(14,774</TD>
    <TD align=left>)</TD>
    <TD align=right><B>(34,927</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(31,244</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Operating income before reconciling items</TD>
    <TD align=right><B>19,082</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>23,780</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>50,989</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>33,541</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>Reconciling items:</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Interest expense, net</TD>
    <TD align=right><B>4,786</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>3,882</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>9,562</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>7,707</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Other expense/(income), net</TD>
    <TD align=right><B>55</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(2,991</TD>
    <TD align=left>)</TD>
    <TD align=right><B>4,924</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(5,272</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Income before income taxes</TD>
    <TD align=right><B>$</B><B>14,241</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$22,889</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>36,503</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$31,106</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P align=center>5</P>
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<BR>
<P style="TEXT-ALIGN: left">The table below presents restructuring costs by reportable segment for the three and six month periods ended June 30, 2011 and 2010:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=right></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=7>
      <hr noshade size=1>

</td>
  </tr>

  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=3>Three Months Ended <br>
      June 30,
    </TD>
    <TD align=center colSpan=3>Six Months Ended <br>
      June 30,
    </TD>
  </TR>


  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD align=right>

<B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
    <TD align=right>

<B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=7>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>Restructuring expense</B></TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Paper Machine Clothing</TD>
    <TD align=right><B>$</B><B>448</B></TD>
    <td align=right>$676</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>481</B></TD>
    <td align=right>$2,962</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Albany Door Systems</TD>
    <TD align=right><B>361</B></TD>
    <TD align=right>446</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>513</B></TD>
    <TD align=right>474</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Engineered Fabrics</TD>
    <TD align=right><B>124</B></TD>
    <TD align=right>607</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>124</B></TD>
    <TD align=right>607</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Engineered Composites</TD>
    <TD align=right><B>44</B></TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>57</B></TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Unallocated</TD>
    <TD align=right><B>1,115</B></TD>
    <TD align=right>(1,040</TD>
    <TD align=left>)</TD>
    <TD align=right><B>1,103</B></TD>
    <TD align=right>(1,962</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Consolidated total</TD>
    <TD align=right><B>$</B><B>2,092</B></TD>
    <td align=right>$689</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>2,278</B></TD>
    <td align=right>$2,081</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">The 2011 expense was principally due to organizational changes associated with the substantial completion of the SAP conversion project. The expense in 2010 was partially reduced by other post retirement curtailment gains, which was included in the Unallocated reportable segment.</P>
<P style="TEXT-ALIGN: left">There were no material changes in the total assets of reportable segments during this period.</P>
<P align=center>6</P>
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<P style="TEXT-ALIGN: left"><B>3. Pensions and Other Benefits</B></P>
<P style="TEXT-ALIGN: left">We sponsor defined benefit pension plans in various countries. The amount of contributions to the plans is based on several factors including the funding rules in each country. Employer contributions of $22.1 million in 2010 included $13.2 million transferred into pension trusts, plus $8.9 million for benefits paid directly to participants. We expect 2011 contributions to be approximately $16.0 million, including $12.3 million to be transferred to pension trusts, plus $3.7 million for benefits paid directly to participants. We also provide certain medical, dental and life insurance benefits (&#147;Other Postretirement Benefits&#148;) for retired United States employees that meet program qualifications. We currently fund this plan as claims are paid.</P>
<P style="TEXT-ALIGN: left">The components of net periodic benefit cost for the six months ended June 30, 2011 and 2010 are, as follows:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>



  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=4>Pension Plans</TD>
    <TD align=center colSpan=4>Other Postretirement <br>
      Benefits </TD>
  </TR>

  <TR vAlign=bottom>

    <TD>(in thousands)</TD>
    <TD align=right colSpan=2><B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
    <TD align=right colSpan=2><b>2011</b></TD>
    <TD align=right colSpan=2>2010</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Service cost</TD>
    <TD align=right><B>$</B><B>1,890</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$1,235</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>456</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$428</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Interest cost</TD>
    <TD align=right><B>10,222</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>9,999</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,909</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,026</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Expected return on plan assets</TD>
    <TD align=right><B>(7,990</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(7,567</TD>
    <TD align=left>)</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Amortization:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Transition obligation</TD>
    <TD align=right><B>48</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>50</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Prior service cost/(credit)</TD>
    <TD align=right><B>18</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>8</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(1,833</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(1,757</TD>
    <TD align=left>)</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Net actuarial loss</TD>
    <TD align=right><B>2,863</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,371</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,506</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,428</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Settlement/curtailment loss/(gain)</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>675</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(1,921</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Net periodic benefit costs</TD>
    <TD align=right><B>$</B><B>7,051</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$6,771</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>2,038</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$204</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">During 2010 a pension plan settlement loss of $0.7 million and a post retirement benefit curtailment gain of $1.9 million were recorded related to restructuring activities.</P>
<P align=center>7</P>
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<P style="TEXT-ALIGN: left"><B>4. Restructuring</B></P>
<P style="TEXT-ALIGN: left">Restructuring charges during 2011 were principally due to organizational changes associated with the substantial completion of the SAP conversion project. The following tables summarize charges reported in the Statement of Operations under &#147;Restructuring and other, net&#148; for the first six months of 2011 and 2010:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colspan="8">Six months ending June 30,</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center>2011<BR>

</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=right colSpan=2>2010</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
    <TD align=center>&nbsp;</TD>
  </TR>





  <TR vAlign=bottom>

    <TD>(in thousands)</TD>
    <TD align=right width="15%">Total<br>

restructuring<br>

costs*</TD>
    <TD align=right colSpan=2 width="15%">Total<br>

restructuring<br>
      costs</TD>
    <TD align=right colspan="2" width="15%">Termination<br>
      and other costs</TD>
    <TD align=right width="15%">Writedown of<BR>

plant and<BR>

equipment</TD>
    <TD align=right colSpan=2 width="15%">Benefit plan<BR>

curtailment</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Paper Machine Clothing</TD>
    <td align=right>$481</TD>
    <td align=right>$2,962</TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$1,044</TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$1,243</TD>
    <td align=right>$675</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Albany Door Systems</TD>
    <TD align=right>513</TD>
    <TD align=right>474</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>474</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Engineered Fabrics</TD>
    <TD align=right>124</TD>
    <TD align=right>607</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>607</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Engineered Composites</TD>
    <TD align=right>57</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Unallocated</TD>
    <TD align=right>1,103</TD>
    <TD align=right>(1,962</TD>
    <TD align=left>)</TD>
    <TD align=right>(41</TD>
    <TD align=left>)</TD>
    <TD align=right>-</TD>
    <TD align=right>(1,921</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Total</TD>
    <td align=right>$2,278</TD>
    <td align=right>$2,081</TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$2,084</TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$1,243</TD>
    <TD align=right>($1,246</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: left">* Restructuring costs incurred during 2011 pertain to termination and other costs.</P>
<P style="TEXT-ALIGN: left">The tables below present year-to-date summaries of changes in restructuring liabilities for 2011 and 2010:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center width="25%"></TD>
    <TD align=center width="15%"></TD>
    <TD align=center width="16%"></TD>
    <TD align=center width="12%"></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="14%"></TD>
    <TD align=center width="2%"></TD>
    <TD align=center width="15%"></TD>
  </TR>
  <tr>

    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>






  <TR vAlign=bottom>

    <TD align=left width="25%">(in thousands)</TD>
    <TD align=right width="15%">Restructuring<BR>

charges accrued<BR>

December 31,<BR>

2010</TD>
    <TD align=right width="16%">Restructuring<BR>

accruals in 2011</TD>
    <TD align=right colSpan=2>Payments</TD>
    <TD align=right colSpan=2>Currency<BR>

translation/ other</TD>
    <TD align=right width="15%">Restructuring<BR>

charges accrued<BR>

June 30, 2011</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">Termination</TD>
    <TD align=left width="15%">&nbsp;</TD>
    <TD align=left width="16%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="14%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="15%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">costs</TD>
    <td align=right width="15%">$3,443</TD>
    <td align=right width="16%">$1,915</TD>
    <TD align=right width="12%">($2,018</TD>
    <TD align=left width="1%">)</TD>
    <td align=right width="14%">$166</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <td align=right width="15%">$3,506</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>
  <TR>
    <TD colSpan=8>&nbsp;</TD>
  </TR>





  <TR>

    <TD colSpan=8>
      <hr noshade size=1>
    </TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">&nbsp;</TD>
    <TD align=right width="15%">Restructuring</TD>
    <TD align=right width="16%">&nbsp;</TD>
    <TD align=right width="12%">&nbsp;</TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="14%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="15%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">&nbsp;</TD>
    <TD align=right width="15%">charges accrued</TD>
    <TD align=right width="16%">&nbsp;</TD>
    <TD align=right width="12%">&nbsp;</TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right width="14%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="15%">Restructuring</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">&nbsp;</TD>
    <TD align=right width="15%">December 31,</TD>
    <TD align=right width="16%">Restructuring</TD>
    <TD align=right width="12%">&nbsp;</TD>
    <TD align=right width="1%">&nbsp;</TD>
    <TD align=right colSpan=2>Currency</TD>
    <TD align=right width="15%">charges accrued</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">(in thousands)</TD>
    <TD align=right width="15%">2009</TD>
    <TD align=right width="16%">accruals in 2010</TD>
    <TD align=right colSpan=2>Payments</TD>
    <TD align=right colSpan=2>translation/ other</TD>
    <TD align=right width="15%">June 30, 2010</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">Termination</TD>
    <TD align=left width="15%">&nbsp;</TD>
    <TD align=left width="16%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="14%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="15%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">costs</TD>
    <td align=right width="15%">$22,067</TD>
    <td align=right width="16%">$1,110</TD>
    <TD align=right width="12%">($14,642</TD>
    <TD align=left width="1%">)</TD>
    <TD align=right width="14%">($685</TD>
    <TD align=left width="2%">)</TD>
    <td align=right width="15%">$7,850</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: left">We expect that substantially all accruals for restructuring liabilities as of June 30, 2011 will be paid within one year and therefore have been recorded in current accrued liabilities in the accompanying financial statements.</P>
<P align=center>8</P>
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<P style="TEXT-ALIGN: left"><B>5. Other Expense/(Income), net</B></P>
<P style="TEXT-ALIGN: left">Other expense/(income), net consists of the following:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=4>Three Months Ended <br>
      June 30,
    </TD>
    <TD align=center colSpan=4>Six Months Ended <br>
      June 30,
    </TD>
  </TR>


  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD align=right colSpan=2 width="10%">

<B>2011</B></TD>
    <TD align=right colSpan=2 width="10%">2010</TD>
    <TD align=right colSpan=2 width="10%">

<B>2011</B></TD>
    <TD align=right colSpan=2 width="10%">2010</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Currency transactions</TD>
    <TD align=right><B>($</B><B>491</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>($3,933</TD>
    <TD align=left>)</TD>
    <TD align=right><B>$</B><B>3,375</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>($6,726</TD>
    <TD align=left>)</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Amortization of debt issuance costs and</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;loan origination fees</TD>
    <TD align=right><B>264</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>104</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>526</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>208</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Letter of credit fees</TD>
    <TD align=right><B>416</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>721</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>1,272</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,240</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Other miscellaneous (income)/expense</TD>
    <TD align=right><B>(134</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>117</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(249</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>6</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Total</TD>
    <TD align=right><B>$</B><B>55</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>($2,991</TD>
    <TD align=left>)</TD>
    <TD align=right><B>$</B><B>4,924</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>($5,272</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P align=center>9</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: left"><B>6. Income Taxes</B></P>
<P style="TEXT-ALIGN: left">The following table presents components of income tax expense for the three and six month periods ended June 30, 2011 and 2010:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=3 nowrap>Three Months Ended<BR>

June 30,</TD>
    <TD align=center colSpan=4>Six Months Ended<BR>

June 30,</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD align=right><B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
    <TD align=right colSpan=2><B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=8>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Income tax expense based on income from continuing operations,</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>at estimated tax rates of 33.0% in 2011 and 32.6% in 2010,</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>respectively</TD>
    <TD align=right><B>$</B><B>4,700</B></TD>
    <td align=right>$7,470</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>12,046</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$10,152</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Redemption of life insurance policies</TD>
    <TD align=right><B>-</B></TD>
    <TD align=right>9,382</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>9,382</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Provision for change in estimated tax rates</TD>
    <TD align=right><B>624</B></TD>
    <TD align=right>55</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Income tax from continuing operations before discrete items</TD>
    <TD align=right><B>$</B><B>5,324</B></TD>
    <td align=right>$16,907</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>12,046</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$19,534</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=8>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Discrete tax expense/(benefit):</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Provision for/resolution of tax audits and contingencies</TD>
    <TD align=right><B>35</B></TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(1,378</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Repatriation of non-US prior years earnings</TD>
    <TD align=right><B>-</B></TD>
    <TD align=right>(1,805</TD>
    <TD align=left>)</TD>
    <TD align=right><B>-</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(1,805</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Total income tax expense</TD>
    <TD align=right><B>$</B><B>5,359</B></TD>
    <td align=right>$15,102</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>10,668</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$17,729</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=8>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">The second-quarter estimated effective tax rate on
continuing operations was 33.0% in 2011, as compared to 32.6% for the same
period in 2010. The increase in the tax rate was primarily due to a change in
the distribution of income and loss among the various countries within which
we operate.</P>
<P style="TEXT-ALIGN: left">We conduct business globally and, as a result, the
Company or one or more of our subsidiaries files income tax returns in the U.S.
federal jurisdiction and various state and foreign jurisdictions. We are
currently under audit in the U.S. and non-U.S. tax jurisdictions, including but
not limited to Canada, Germany, France, Japan and Sweden. Tax reserves are
recorded for the outcome of these uncertainties in accordance with U.S. GAAP
principles.</P>
<P style="TEXT-ALIGN: left">It is reasonably possible that over the next twelve
months the amount of unrecognized tax benefits may change within a range of a
net increase of $1.0 million to a net decrease of $12.7 million, from the
reevaluation of certain uncertain tax positions arising in examinations, in
appeals, or in the courts, or from the closure of tax statutes. Not included in
the range is $24.5 million of tax benefits in Germany related to a 1999
reorganization that have been challenged by the German tax authorities in the
course of an audit of tax years 2000-2003. In 2008 the German Federal Tax Court
denied tax benefits to other taxpayers in a case involving German tax laws
relevant to our reorganization. One of these cases involved a non-German party,
and in the ruling in that case, the German Federal Tax Court acknowledged that
the German law in question may be violative of European Union (&#147;EU&#148;)
principles and referred the issue to the European Court of Justice
(&#147;ECJ&#148;)
for its determination. In September 2009, the ECJ issued an opinion in this case that is generally favorable to the other taxpayer and referred the case back to the German Federal Tax Court for further consideration. In May 2010 the German Federal Tax Court released its decision, in which it resolved certain tax issues that may be relevant to our audit and remanded the case to a lower court for further development. Although we were required to pay approximately $15.0 million to the German tax authorities in order to continue to pursue the position, we believe that it is more likely than not that the relevant German law is violative of EU principles and accordingly we have not accrued tax expense on this matter. As we continue to monitor developments it may become necessary for us to accrue tax expense and related interest.</P>
<P align=center>10</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: left">In addition, we received reassessment notices comprised of tax, interest and penalties in the amount of $62.3 million from the Canadian Revenue Agency (CRA) for the tax years 2001 through 2008. Although management continues to believe that the reassessments were substantially without merit and have not accrued tax expense with regard to the full amount of these assessments, we were required to provide letters of credit to the CRA in the amount of $53.2 million and to remit a payment in the amount of $1.8 million in connection with these reassessments. We made the $1.8 million payment to the CRA in July 2011.</P>
<P align=center>11</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: left"><B>7. Earnings Per Share</B></P>
<P style="TEXT-ALIGN: left">Earnings per share are computed using the weighted average number of shares of Class A Common Stock and Class B Common Stock outstanding during the period. Diluted earnings per share include the effect of all potentially dilutive securities.</P>
<P style="TEXT-ALIGN: left">The amounts used in computing earnings per share, including the effect on income and the weighted average number of shares of potentially dilutive securities, are as follows:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center width="59%"></TD>
    <TD align=right width="7%"></TD>
    <TD align=center width="2%"></TD>
    <TD align=center width="8%"></TD>
    <TD align=center width="2%"></TD>
    <TD align=right width="9%"></TD>
    <TD align=center width="2%"></TD>
    <TD align=center width="9%"></TD>
    <TD align=center width="2%"></TD>
  </TR>
  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <TR vAlign=bottom>

    <TD align=center width="59%">&nbsp;</TD>
    <TD align=center colSpan=4>Three Months Ended<br>
      June 30,
    </TD>
    <TD align=center colSpan=4>Six Months Ended<br>
      June 30,
    </TD>
  </TR>


  <TR vAlign=bottom>

    <TD align=left width="59%">(in thousands, except market price data)</TD>
    <TD align=right colSpan=2>
<B>2011</B></TD>
    <TD align=right colSpan=2>2010</TD>
    <TD align=right colSpan=2><b>2011</b></TD>
    <TD align=right colSpan=2>2010</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">Net income</TD>
    <TD align=right width="7%"><B>$</B><B>8,762</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="8%">$7,877</TD>
    <td align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>$</B><B>25,495</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="9%">$13,475</TD>
    <td align=right width="2%">&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%"><B>Weighted average number of shares:</B></TD>
    <TD align=right width="7%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="8%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="9%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">&nbsp;&nbsp;&nbsp;Weighted average number of shares used in</TD>
    <TD align=right width="7%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="8%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="9%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">&nbsp;&nbsp;&nbsp;calculating basic earnings per share</TD>
    <TD align=right width="7%"><B>31,263</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="8%">31,058</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>31,243</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%">31,001</TD>
    <TD align=right width="2%">&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%"><B>Effect of dilutive stock-based compensation</B></TD>
    <TD align=right width="7%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="8%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="9%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%"><B>awards:</B></TD>
    <TD align=right width="7%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="8%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="9%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">&nbsp;&nbsp;&nbsp;Stock options</TD>
    <TD align=right width="7%"><B>144</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="8%">53</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>130</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%">54</TD>
    <TD align=right width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">&nbsp;&nbsp;&nbsp;Long-term incentive awards</TD>
    <TD align=right width="7%"><B>82</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="8%">50</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>82</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%">50</TD>
    <TD align=right width="2%">&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">Weighted average number of shares used in</TD>
    <TD align=right width="7%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="8%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="9%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">calculating diluted earnings per share</TD>
    <TD align=right width="7%"><B>31,489</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="8%">31,161</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>31,455</B></TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%">31,105</TD>
    <TD align=right width="2%">&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">Average market price of common stock used</TD>
    <TD align=right width="7%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="8%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="9%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">for calculation of dilutive shares</TD>
    <TD align=right width="7%"><B>$</B><B>25.32</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="8%">$20.95</TD>
    <td align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>$</B><B>24.57</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="9%">$21.00</TD>
    <td align=right width="2%">&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%"><B>Net income per share:</B></TD>
    <TD align=right width="7%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="8%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="9%">&nbsp;</TD>
    <TD align=right width="2%">&nbsp;</TD>
    <TD align=left width="9%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">&nbsp;&nbsp;&nbsp;Basic</TD>
    <TD align=right width="7%"><B>$</B><B>0.28</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="8%">$0.25</TD>
    <td align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>$</B><B>0.82</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="9%">$0.43</TD>
    <td align=right width="2%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="59%">&nbsp;&nbsp;&nbsp;Diluted</TD>
    <TD align=right width="7%"><B>$</B><B>0.28</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="8%">$0.25</TD>
    <td align=right width="2%">&nbsp;</TD>
    <TD align=right width="9%"><B>$</B><B>0.81</B></TD>
    <td align=right width="2%"></td>
    <td align=right width="9%">$0.43</TD>
    <td align=right width="2%">&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">There was no dilution resulting from the convertible debt instrument, purchased call option, and warrant that are described in Note 10 as of June 30, 2011 and 2010.</P>
<P style="TEXT-ALIGN: left">The following table presents the number of shares issued and outstanding:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td align=center colspan="5">
      <hr noshade size=1>




</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center>Class A<BR>

Shares</TD>
    <TD align=center>Class B<BR>

Shares</TD>
    <TD align=center>Less: Treasury<BR>

Shares</TD>
    <TD align=center>Net shares<BR>

Outstanding</TD>
  </TR>

  <TR>

    <TD align=center colspan="5">
      <hr noshade size=1>




</TD>
  </TR>

  <TR>

    <TD colSpan=5>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>December 31, 2010</TD>
    <TD align=center>36,442,209</TD>
    <TD align=center>3,236,098</TD>
    <TD align=center>(8,484,528)</TD>
    <TD align=center>31,193,779</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>March 31, 2011</TD>
    <TD align=center>36,505,292</TD>
    <TD align=center>3,236,098</TD>
    <TD align=center>(8,484,528)</TD>
    <TD align=center>31,256,862</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>June 30, 2011</B></TD>
    <TD align=center><B>36,515,942</B></TD>
    <TD align=center><B>3,236,098</B></TD>
    <TD align=center><B>(8,479,487)</B></TD>
    <TD align=center><B>31,272,553</B></TD>
  </TR>
  <tr>
    <td align=center colspan="5">&nbsp;</td>
  </tr>
  <tr>

    <td align=center colspan="5">
      <hr noshade size=1>




</td>
  </tr>

</TABLE>
<BR>
<P align=center>12</P>
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<BR>
<P style="TEXT-ALIGN: left"><B>8. Inventories</B></P>
<P style="TEXT-ALIGN: left">Inventories consist of the following:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=3>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD align=right width="15%"><B>June 30,</B><BR>

<B>2011</B></TD>
    <TD align=right width="15%">December 31,<BR>

2010</TD>
  </TR>

  <TR>

    <TD align=center colSpan=3>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Finished goods</TD>
    <TD align=right><B>$</B><B>78,402</B></TD>
    <td align=right>$71,919</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Work in process</TD>
    <TD align=right><B>59,238</B></TD>
    <TD align=right>48,973</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Raw material and supplies</TD>
    <TD align=right><B>42,089</B></TD>
    <TD align=right>35,279</TD>
  </TR>

  <TR>

    <TD colSpan=3>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Total inventories</TD>
    <TD align=right><B>$</B><B>179,729</B></TD>
    <td align=right>$156,171</TD>
  </TR>

  <TR>

    <TD colSpan=3>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">Inventories are stated at the lower of cost or market and are valued at average cost, net of reserves. We record a provision for obsolete inventory based on the age and category of the inventories.</P>
<P align=center>13</P>
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<P style="TEXT-ALIGN: left"><B>9. Goodwill and Other Intangible Assets</B></P>
<P style="TEXT-ALIGN: left">Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. Our reporting units are consistent with our operating segments.</P>
<P style="TEXT-ALIGN: left">Determining the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates, and future market conditions, among others. Goodwill and other long-lived assets are reviewed for impairment whenever events, such as significant changes in the business climate, plant closures, changes in product offerings, or other circumstances indicate that the carrying amount may not be recoverable.</P>
<P style="TEXT-ALIGN: left">To determine fair value, we utilize two market-based approaches and an income approach. Under the market-based approaches, we utilize information regarding the Company as well as publicly available industry information to determine earnings multiples and sales multiples. Under the income approach, we determine fair value based on estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.</P>
<P style="TEXT-ALIGN: left">We completed our 2011 annual evaluation of goodwill for the Paper Machine Clothing reporting unit and the Albany Door Systems reporting unit in the second quarter of 2011. Our assessment of goodwill impairment indicated that the fair value of each reporting unit exceeded its carrying value and therefore no impairment provision was required.</P>
<P style="TEXT-ALIGN: left">We are continuing to amortize certain patents, trade names, customer contracts and technology assets that have finite lives. The changes in intangible assets and goodwill from January 1, 2011 to June 30, 2011, were as follows:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center width="31%"></TD>
    <TD align=center width="13%"></TD>
    <TD align=center width="12%"></TD>
    <TD align=center width="2%"></TD>
    <TD align=center width="11%"></TD>
    <TD align=center width="14%"></TD>
    <TD align=center width="17%"></TD>
  </TR>
  <tr>

    <td align=center colspan=7>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=left width="31%">(in thousands)</TD>
    <TD align=right width="13%">Balance at<BR>

January 1, 2011</TD>
    <TD align=right colSpan=2>Amortization</TD>
    <TD align=right width="11%">Currency<BR>

translation</TD>
    <TD align=right width="14%">Other changes</TD>
    <TD align=right width="17%"><B>Balance at June <br>
      30, 2011 </B></TD>
  </TR>

  <TR>

    <TD align=center colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%"><B>Amortized intangible assets:</B></TD>
    <TD align=left width="13%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="11%">&nbsp;</TD>
    <TD align=left width="14%">&nbsp;</TD>
    <TD align=left width="17%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%">&nbsp;&nbsp;&nbsp;Patents</TD>
    <td align=right width="13%">$221</TD>
    <TD align=right width="12%">($179</TD>
    <TD align=left width="2%">)</TD>
    <td align=right width="11%">$13</TD>
    <TD align=right width="14%">-</TD>
    <TD align=right width="17%"><B>$</B><B>55</B></TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%">&nbsp;&nbsp;&nbsp;Trade names</TD>
    <TD align=right width="13%">48</TD>
    <TD align=right width="12%">(2</TD>
    <TD align=left width="2%">)</TD>
    <TD align=right width="11%">-</TD>
    <TD align=right width="14%">-</TD>
    <TD align=right width="17%"><B>46</B></TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%">&nbsp;&nbsp;&nbsp;Customer contracts</TD>
    <TD align=right width="13%">3,521</TD>
    <TD align=right width="12%">(674</TD>
    <TD align=left width="2%">)</TD>
    <TD align=right width="11%">17</TD>
    <TD align=right width="14%">-</TD>
    <TD align=right width="17%"><B>2,864</B></TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%">&nbsp;&nbsp;&nbsp;Technology</TD>
    <TD align=right width="13%">392</TD>
    <TD align=right width="12%">(39</TD>
    <TD align=left width="2%">)</TD>
    <TD align=right width="11%">33</TD>
    <TD align=right width="14%">-</TD>
    <TD align=right width="17%"><B>386</B></TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=7>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%">Total amortized intangible assets</TD>
    <td align=right width="13%">$4,182</TD>
    <TD align=right width="12%">($894</TD>
    <TD align=left width="2%">)</TD>
    <td align=right width="11%">$63</TD>
    <TD align=right width="14%">-</TD>
    <TD align=right width="17%"><B>$</B><B>3,351</B></TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%"><B>Unamortized intangible assets:</B></TD>
    <TD align=left width="13%">&nbsp;</TD>
    <TD align=left width="12%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="11%">&nbsp;</TD>
    <TD align=left width="14%">&nbsp;</TD>
    <TD align=left width="17%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="31%">&nbsp;&nbsp;&nbsp;Goodwill</TD>
    <td align=right width="13%">$115,616</TD>
    <TD align=right width="12%">-</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <td align=right width="11%">$6,926</TD>
    <TD align=right width="14%">-</TD>
    <TD align=right width="17%"><B>$</B><B>122,542</B></TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">As of June 30, 2011, the balance of goodwill was $82.1 million in the Paper Machine Clothing segment and $40.4 million in the Albany Doors Systems segment.</P>
<P align=center>14</P>
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<P style="TEXT-ALIGN: left">Estimated amortization expense of amortized intangible assets for the years ending December 31, 2011 through 2015 is as follows:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="500" align="center">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td align=center colspan=3>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=center>Year</TD>
    <TD align=right colSpan=2>Annual amortization<BR>

(in thousands)</TD>
  </TR>

  <TR>

    <TD align=center colSpan=3>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=3>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=center>2011</TD>
    <td align=right></td>
    <td align=right>$1,600</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=center>2012</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>1,000</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=center>2013</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>800</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=center>2014</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>500</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=center>2015</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>200</TD>
  </TR>

  <TR>

    <TD colSpan=3>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P align=center>15</P>
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<P style="TEXT-ALIGN: left"><B>10. Financial Instruments</B></P>
<P style="TEXT-ALIGN: left">Long-term debt consists of:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=5>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>


    <TD align=left>(in thousands, except interest rates)</TD>
    <TD align=right colSpan=2><B>June 30,</B><BR>

<B>2011</B></TD>
    <TD align=right colSpan=2>December 31,<BR>

2010</TD>
  </TR>

  <TR>

    <TD align=center colSpan=5>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Convertible notes, par value $28,437, issued in March</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>2006 with fixed contractual interest rates of 2.25%, due</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>in 2026</TD>
    <TD align=right><B>$</B><B>26,851</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$26,474</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Private placement with a fixed interest rate of 6.84%, due</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>in 2013 through 2017</TD>
    <TD align=right><B>150,000</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>150,000</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Credit agreement with borrowings outstanding at an end</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>of period interest rate of 3.53% in 2011 and 3.55% in</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>2010, due in 2015</TD>
    <TD align=right><B>230,000</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>237,000</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Various notes and mortgages relative to operations</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>principally outside the United States, at an average end</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>of period rate of 3.04% in 2011 and 2010, due in varying</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>amounts through 2021</TD>
    <TD align=right><B>10,173</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>10,185</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=5>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Long-term debt</TD>
    <TD align=right><B>417,024</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>423,659</TD>
    <TD align=left>&nbsp;</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Less: current portion</TD>
    <TD align=right><B>(12</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(12</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=5>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Long-term debt, net of current portion</TD>
    <TD align=right><B>$</B><B>417,012</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$423,647</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=5>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">A note agreement and guaranty (&#147;the
Prudential agreement&#148;) was entered into in October 2005 and was amended and
restated September 17, 2010, with the Prudential Insurance Company of America,
and certain other purchasers, in an aggregate principal amount of $150 million,
with interest at 6.84% and a maturity date of October 25, 2017. There are
mandatory payments of $50 million on October 25, 2013 and October 25, 2015. At
the noteholders&#146; election, certain prepayments may also be required in
connection with certain asset dispositions or financings. The notes may not
otherwise be prepaid without a premium, under certain market conditions. The
note agreement contains customary terms, as well as affirmative covenants,
negative covenants, and events of default comparable to those in our current
principal credit facility. For disclosure purposes, we are required to measure
the fair value of outstanding debt on a recurring basis. As of June 30, 2011,
the fair value
of the note agreement was approximately $172.3 million, which was measured using active market interest rates.</P>
<P style="TEXT-ALIGN: left">On July 16, 2010, we entered into a $390 million unsecured five-year revolving credit facility agreement, under which $230.0 million of borrowings and $53.2 million in letters of credit were outstanding as of June 30, 2011. The 2010 credit agreement replaces the previous $460.0 million credit agreement made in 2006. The applicable interest rate for borrowings under the 2010 agreement, as well as under the former agreement, is LIBOR plus a spread, based on our leverage ratio at the time of borrowing. Spreads under the 2010 agreement are higher than under the former agreement, reflecting changes in market spreads.</P>
<P style="TEXT-ALIGN: left">Our ability to borrow additional amounts under the credit agreement is conditional upon the absence of any defaults, as well as the absence of any material adverse change. Based on our maximum leverage ratio and our consolidated EBITDA (as defined in the credit agreement), and without modification to any other credit agreements, as of June 30, 2011 we would have been able to borrow an additional $106.8 million under the credit agreement.</P>
<P align=center>16</P>
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<P style="TEXT-ALIGN: left">Also on July 16, 2010, we entered into interest rate hedging transactions that have the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $105.0 million of the indebtedness drawn under the 2010 agreement at the rate of 2.04% for the next five years. Under the terms of these transactions, we pay the fixed rate of 2.04% and the counterparties pay a floating rate based on the three-month LIBOR rate at each quarterly calculation date, which on April 18, 2011 was 0.28%. The net effect is to fix the effective interest rate on $105.0 million of indebtedness at 2.04%, plus the applicable spread, until these swap agreements expire on July 16, 2015. On April 18, the applicable spread was 250 basis points, yielding an effective annual rate of 4.54%. This interest rate swap is accounted for as a hedge of future cash flows, as further described in Note 11 of the Notes to Consolidated Financial Statements.</P>
<P style="TEXT-ALIGN: left">Reflecting, in each case, the effect of subsequent amendments to each agreement, we are currently required to maintain a leverage ratio of not greater than 3.50 to 1.00 and a minimum interest coverage of 3.00 to 1.00 under the credit agreement and Prudential agreement.</P>
<P style="TEXT-ALIGN: left">As of June 30, 2011, our leverage ratio was 2.16 to 1.00 and our interest coverage ratio was 7.96 to 1.00. We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 to 1.00, and may make acquisitions with cash provided our leverage ratio would not exceed 3.00 to 1.00 after giving pro forma effect to the acquisition.</P>
<P style="TEXT-ALIGN: left">In March 2006, we issued $180 million principal amount of 2.25% convertible notes. The notes are convertible upon the occurrence of specified events and at any time on or after February 15, 2013, into cash up to the principal amount of notes converted and shares of our Class A common stock with respect to the remainder, if any, of our conversion obligation at a conversion rate of 23.0467 shares per $1,000 principal amount of notes (equivalent to a conversion price of $43.39 per share of Class A common stock). As of June 30, 2011, $28.4 million principal amount of convertible notes were outstanding, with a fair value of approximately $28.0 million, which was measured using quoted prices in active markets. These amounts reflect the reduction in principal amount and fair value as a result of purchases made in 2009, as described below.</P>
<P style="TEXT-ALIGN: left">Holders may convert their notes at any time on or after February 15, 2013. Before February 15, 2013, a holder may convert notes during the five-business day period immediately after any period of five consecutive trading days in which the trading price per note for each of such five days was less than 103% of the product of the last reported sale price of our Class A common stock and the conversion rate on such day. Additionally, holders may convert prior to February 15, 2013, if we elect to distribute to all or substantially all of our Class A shareholders (a) rights or warrants to purchase shares of Class A common stock for less than their trading value, or (b) assets, debt securities, or rights to purchase securities, which distribution has a per-share value exceeding 15% of the current trading value of the Class A common stock.</P>
<P style="TEXT-ALIGN: left">Converting holders are entitled to receive, upon conversion of their notes, (1) an amount in cash equal to the lesser of the principal amount of the note and the note&#146;s conversion value, and (2) if the conversion value of the note exceeds the principal amount, shares of our Class A common stock in respect of the excess conversion value. The conversion rate of the notes (subject to adjustment upon the occurrence of certain events) is 23.0467 shares per $1,000 principal amount of notes (equivalent to a conversion price of $43.39 per share of Class A common stock). The exact amount payable upon conversion would be determined in accordance with the terms of the indenture pursuant to which the notes were issued and will be based on a daily conversion value calculated on a proportionate basis by reference to the volume-weighted average price of our Class A common stock for each day during a twenty-five day period relating to the conversion.</P>
<P style="TEXT-ALIGN: left">The notes are not redeemable before March 15, 2013. On or after March 15, 2013, we may, at our option, redeem for cash all or part of the notes for a price equal to 100% of the principal amount of the notes to be purchased, plus any accrued and unpaid interest, including any additional interest, up to but excluding the redemption date.</P>
<P align=center>17</P>
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<P style="TEXT-ALIGN: left">On each of March 15, 2013, and March 15, 2021,
holders may require that we purchase all or a portion of their notes at a
purchase price equal to 100% of the principal amount of the notes to be
purchased, plus any accrued and unpaid interest, including any additional
interest, up to but excluding the purchase date. Holders also have the right to
require that we repurchase notes upon the occurrence of certain fundamental
events, including, without limitation, (1) a person or group, other than the
Standish family, becoming beneficial owner of shares of common stock carrying
more than 50% of the voting power of our common stock, (2) consummation of an
exchange offer, tender offer, or similar event whereby our Class A common stock
is converted into cash, securities, or other property, or any sale, lease, or
other transfer of all or substantially all of our consolidated assets, (3)
approval by our stockholders of a plan or proposal of liquidation or
dissolution, or (4) the
delisting of our Class A common stock under certain circumstances.</P>
<P style="TEXT-ALIGN: left">In connection with the sale of the notes, we entered into hedge and warrant transactions with respect to our Class A common stock. These transactions are intended to reduce the potential dilution upon conversion of the notes by providing us with the option, subject to certain exceptions, to acquire shares in an amount equal to the number of shares that we would be required to deliver upon conversion of the notes. These transactions had the economic effect to the Company of increasing the conversion price of the notes to $52.25 per share.</P>
<P style="TEXT-ALIGN: left">Pursuant to the hedge transactions, if we deliver
notice to the counterparties of any conversion of the notes on or prior to March
15, 2013, the counterparties are in the aggregate obligated to deliver to the
Company the number of shares of Class A common stock that we are obligated to
deliver to the holders of the notes with respect to such conversion, exclusive
of any shares deliverable by the Company by reason of any additional (or
&#147;make whole&#148;) premium relating to the notes or by reason of any
election by the Company to unilaterally increase the conversion rate. The note
hedge and warrant transactions had a net cost of $14.7 million. Pursuant to the
warrant transactions, we sold a total of 4.1 million warrants, each exercisable
to buy a single share of Class A common stock at an initial strike price of
$52.25 per share. The warrants are American-style warrants (exercisable at any
time), and expire over a period of sixty trading days beginning on September 15,
2013. If the warrants are exercised when they expire, we may choose either net cash or net share settlement. If the warrants are exercised before they expire, they must be net share settled. If we elect to net cash settle the warrants, we will pay cash in an amount equal to, for each exercise of warrants, (i) the number of warrants exercised multiplied by (ii) the excess of the volume weighted average price of the our Class A common stock on the expiration date of such warrants (the &#147;settlement price&#148;) over the strike price. Under net share settlement, we will deliver to the warrant holders a number of shares of our Class A common stock equal to, for each exercise of warrants, the amount payable upon net cash settlement divided by the settlement price.</P>
<P style="TEXT-ALIGN: left">As of June 30, 2011, the carrying amounts of the debt and equity components of our bifurcated convertible debt instrument were $26.9 million and $25.5 million, respectively. The carrying values of the debt and equity components include reductions of $134.6 million and $5.2 million, respectively, related to our convertible note purchases in 2009. The equity component is included in additional paid-in capital in the equity section of the balance sheet.</P>
<P style="TEXT-ALIGN: left">The convertible feature of the notes, the convertible note hedge, and the warrant transactions each meet the requirements of the applicable accounting guidance to be accounted for as equity instruments. As such, the convertible feature of the notes has not been accounted for as a derivative (which would be marked to market each reporting period) and in the event the debt is converted, no gain or loss is recognized, as the cash payment of principal reduces the recorded liability and the issuance of common shares would be recorded in stockholders&#146; equity.</P>
<P style="TEXT-ALIGN: left">In addition, the amount paid for the call option and the premium received for the warrant were recorded as additional paid-in capital in the accompanying Consolidated Balance Sheets and are not accounted for as derivatives (which would be marked to market each reporting period). Incremental net shares for the</P>
<P align=center>18</P>
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<P style="TEXT-ALIGN: left">convertible note feature and the warrant agreement will be included in future diluted earnings per share calculations for those periods in which our average common stock price exceeds $43.39 per share in the case of the Senior Notes and $49.83 per share in the case of the warrants. The purchased call option is antidilutive and is excluded from the diluted earnings per share calculation.</P>
<P style="TEXT-ALIGN: left">Indebtedness under the note and guaranty agreement, the convertible notes, and the credit agreement is ranked equally in right of payment to all unsecured senior debt.</P>
<P style="TEXT-ALIGN: left">We were in compliance with all debt covenants as of June 30, 2011.</P>
<P align=center>19</P>
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<P style="TEXT-ALIGN: left"><B>11. Fair Value Measurements</B></P>
<P style="TEXT-ALIGN: left">Accounting principles generally accepted in the
United States define fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants at the measurement date. Accounting principles
establish a hierarchy for inputs used in measuring fair value that maximizes the
use of observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available. The hierarchy
is broken down into three general levels: Level 1 inputs are quoted prices in
active markets for identical assets or liabilities; Level 2 inputs include data
points that are observable, such as quoted prices for similar assets or
liabilities in active markets, quoted prices for identical assets or similar
assets or liabilities in markets that are not active, and inputs (other than
quoted
prices) such as interest rates and yield curves that are observable for the asset and liability, either directly or indirectly; Level 3 inputs are unobservable data points for the asset or liability, and include situations in which there is little, if any, market activity for the asset or liability.</P>
<P style="TEXT-ALIGN: left">The following table presents the fair-value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center width="32%"></TD>
    <TD align=center width="13%"></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="17%"></TD>
    <TD align=center width="16%"></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="20%"></TD>
  </TR>
  <tr>

    <td colspan=7>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=right width="32%">&nbsp;</TD>
    <TD colSpan=2 align=right><B>Total fair</B><BR>

<B>value at</B></TD>
    <TD align=right width="17%">Quoted prices<BR>

in active markets</TD>
    <TD colSpan=2 align=right>Significant other<BR>

observable inputs</TD>
    <TD align=right width="20%">Significant<BR>

unobservable inputs</TD>
  </TR>

  <TR>

    <TD colSpan=7 align=right>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD width="32%">(in thousands)</TD>
    <TD colSpan=2 align=right><B>June 30, 2011</B></TD>
    <TD align=right width="17%">(Level 1)</TD>
    <TD colSpan=2 align=right>(Level 2)</TD>
    <TD align=right width="20%">(Level 3)</TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="32%"><I>Assets:</I></TD>
    <TD align=left width="13%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="17%">&nbsp;</TD>
    <TD align=left width="16%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="20%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="32%">&nbsp;&nbsp;&nbsp;Cash equivalents</TD>
    <TD align=right width="13%"><B>$</B><B>28,380</B></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <td align=right width="17%">$28,380</TD>
    <TD align=right width="16%">-</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="20%">-</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left width="32%" nowrap>&nbsp;&nbsp;&nbsp;Common stock of foreign public company</TD>
    <TD align=right width="13%"><B>611</B></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="17%">611</TD>
    <TD align=right width="16%">-</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="20%">-</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="32%">&nbsp;&nbsp;&nbsp;Foreign exchange contracts</TD>
    <TD align=right width="13%"><B>915</B></TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="17%">&nbsp;</TD>
    <TD align=right width="16%">915</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="20%">-</TD>
  </TR>



  <TR>

    <TD colSpan=7>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="32%"><I>Liabilities:</I></TD>
    <TD align=left width="13%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="17%">&nbsp;</TD>
    <TD align=left width="16%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="20%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="32%">&nbsp;&nbsp;&nbsp;Interest rate swap</TD>
    <TD align=right width="13%"><B>(1,968</B></TD>
    <TD align=left width="1%"><B>)</B></TD>
    <TD align=right width="17%">-</TD>
    <TD align=right width="16%">(1,968</TD>
    <TD align=left width="1%">)</TD>
    <TD align=right width="20%">-</TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P align=center>20</P>
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<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center width="25%"></TD>
    <TD align=center width="13%"></TD>
    <TD align=center width="2%"></TD>
    <TD align=center width="18%"></TD>
    <TD align=center width="18%"></TD>
    <TD align=center width="1%"></TD>
    <TD align=center width="23%"></TD>
  </TR>
  <tr valign=bottom>
    <td align=left width="100%" colspan="7">
      <hr noshade size=1>
    </td>
  </tr>


  <TR vAlign=bottom>

    <TD align=center width="25%">&nbsp;</TD>
    <TD align=right colSpan=2 rowSpan=2>Total fair<BR>

value at<BR>

December 31,<BR>

2010</TD>
    <TD align=right width="18%">Quoted prices<BR>

in active markets</TD>
    <TD align=right colSpan=2>Significant other<BR>

observable inputs</TD>
    <TD align=right width="23%">Significant<BR>

unobservable inputs</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left width="25%">(in thousands)</TD>
    <TD align=right width="18%">(Level 1)</TD>
    <TD align=right colSpan=2>(Level 2)</TD>
    <TD align=right width="23%">(Level 3)</TD>
  </TR>

  <TR>

    <TD colSpan=7>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%"><I>Assets:</I></TD>
    <TD align=left width="13%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="18%">&nbsp;</TD>
    <TD align=left width="18%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="23%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">&nbsp;&nbsp;&nbsp;Cash equivalents</TD>
    <td align=right width="13%">$23,087</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <td align=right width="18%">$23,087</TD>
    <TD align=right width="18%">-</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="23%">-</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left width="25%" nowrap>&nbsp;&nbsp;&nbsp;Common stock of foreign public company</TD>
    <TD align=right width="13%">561</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="18%">561</TD>
    <TD align=right width="18%">-</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="23%">-</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left width="25%">&nbsp;&nbsp;&nbsp;Foreign exchange contracts</TD>
    <TD align=right width="13%">862</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=right width="18%">-</TD>
    <TD align=right width="18%">862</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=right width="23%">-</TD>
  </TR>

  <TR>

    <TD colSpan=7>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%"><I>Liabilities:</I></TD>
    <TD align=left width="13%">&nbsp;</TD>
    <TD align=left width="2%">&nbsp;</TD>
    <TD align=left width="18%">&nbsp;</TD>
    <TD align=left width="18%">&nbsp;</TD>
    <TD align=left width="1%">&nbsp;</TD>
    <TD align=left width="23%">&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left width="25%">&nbsp;&nbsp;&nbsp;Interest rate swap</TD>
    <TD align=right width="13%">(452</TD>
    <TD align=left width="2%">)</TD>
    <TD align=right width="18%">-</TD>
    <TD align=right width="18%">(452</TD>
    <TD align=left width="1%">)</TD>
    <TD align=right width="23%">-</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left width="100%" colspan="7">
      <hr noshade size=1>
    </TD>
  </TR>
</TABLE>
<P style="TEXT-ALIGN: left">During the six-months ended June 30, 2011, there were no transfers between levels 1, 2, and 3.</P>
<P style="TEXT-ALIGN: left">Cash equivalents include short-term securities that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities.</P>
<P style="TEXT-ALIGN: left">The common stock of a foreign public company is traded in an active market exchange. The shares are measured at fair value using closing stock prices and are recorded in the Consolidated Balance Sheets as Other assets. The securities are classified as available for sale, and as a result any gain or loss is recorded in the Shareholders&#146; Equity section of the Consolidated Balance Sheets rather than in the Consolidated Statements of Income. When the security is sold or impaired, gains and losses are reported on the Consolidated Statements of Income. Investments are considered to be impaired when a decline in fair value is judged to be other than temporary.</P>
<P style="TEXT-ALIGN: left">Foreign currency instruments are entered into periodically, and consist of foreign currency option contracts or forward contracts that are valued using quoted prices in active markets obtained from independent pricing sources. During the six months ended June 30, 2011 and 2010, we entered into foreign currency options (&#147;options&#148;) only, which are measured using market foreign exchange prices and are recorded in the Consolidated Balance Sheets as Other current assets. Changes in fair value of these instruments are recorded as gains or losses within Other (income)/expense, net. Gains and (losses) on the options totaled $0.3 million and ($0.4) million for the six months ended June 30, 2011 and 2010, respectively.</P>
<P style="TEXT-ALIGN: left">When exercised, the foreign currency instruments are net settled with the same financial institution that bought or sold them. For all positions, whether options or forward contracts, there is risk from the possible inability of the financial institution to meet the terms of the contracts and the risk of unfavorable changes in interest and currency rates, which may reduce the value of the instruments. We seek to control risk by evaluating the creditworthiness of counterparties and by monitoring the currency exchange and interest rate markets while reviewing the hedging risks and contracts to ensure compliance with our internal guidelines and policies.</P>
<P style="TEXT-ALIGN: left">We operate our business in many regions of the world, and currency rate movements can have a significant effect on operating results.</P>
<P style="TEXT-ALIGN: left">Changes in exchange rates can result in revaluation gains and losses that are recorded in Selling, General, Technical, Product Engineering, and Research expenses or Other income/expense, net. Revaluation gains</P>
<P align=center>21</P>
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<P style="TEXT-ALIGN: left">and losses occur when our business units have intercompany or third-party trade receivable or payable balances in a currency other than their local reporting (or functional) currency.</P>
<P style="TEXT-ALIGN: left">Operating results can also be affected by the translation of sales and costs, for each non-U.S. subsidiary, from the local functional currency to the U.S. dollar. The translation effect on the income statement is dependent on our net income or expense position in each non-U.S. currency in which we do business. A net income position exists when sales realized in a particular currency exceed expenses paid in that currency; a net expense position exists if the opposite is true.</P>
<P style="TEXT-ALIGN: left">In order to mitigate foreign exchange volatility in the financial statements, we periodically enter into foreign currency financial instruments from time to time. There were no foreign currency financial instruments designated as hedging instruments at June 30, 2011.</P>
<P style="TEXT-ALIGN: left">As described in Note 10 of the Notes to Consolidated Financial Statements, on July 16, 2010, we entered into a $390 million unsecured five-year revolving credit facility agreement. The applicable interest rate for borrowings under the agreement is LIBOR plus a spread, based on our leverage ratio at the time of borrowing. Interest rate changes on this variable rate debt cause changes in cash flows, and in order to mitigate this cash flow risk we have fixed a portion of the effective interest rate on part of the indebtedness drawn under the agreement by entering into interest rate hedging transactions on July 16, 2010. This interest rate swap locked in our interest rate on the forecasted outstanding borrowings of $105 million at 2.04% plus the credit spread on the debt for a five year period. The credit spread is based on the pricing grid, which can go as low as 2.0% or as high as 2.75%, based on our leverage ratio.</P>
<P style="TEXT-ALIGN: left">The interest rate swap is accounted for as a hedge
of future cash flows. The fair value of our interest rate swap is derived from a
discounted cash flow analysis based on the terms of the contract and the
interest rate curve, and is recorded in the Consolidated Balance Sheets as of
June 30, 2011 as Other noncurrent liabilities of $2.0 million. Unrealized gains
and losses on the swap will flow through the caption Derivative valuation
adjustment in the Shareholders&#146; equity section of the Consolidated Balance
Sheets, to the extent that the hedge is highly effective. Gains and losses
related to the ineffective portion of the hedge will be recognized in the
current period in earnings. Amounts accumulated in Other comprehensive income
are reclassified as Interest expense, net when the related interest payments
(that is, the hedged forecasted transactions) affect earnings. For the six
months ended June 30, 2011, $0.9 million of interest expense was recorded
related to the
swap.</P>
<P align=center>22</P>
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<P style="TEXT-ALIGN: left">Fair value amounts of derivative instruments were as follows:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=6>
      <hr noshade size=1>

</td>
  </tr>


  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD>Balance sheet caption</TD>
    <TD align=right colSpan=2 nowrap><B>June 30, 2011</B></TD>
    <TD align=center colSpan=2>December 31,<BR>

2010</TD>
  </TR>

  <TR>

    <TD colSpan=6>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=6>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>Asset Derivatives</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Derivatives not designated as hedging</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>instruments:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Foreign exchange contracts</TD>
    <TD align=left>Other assets</TD>
    <TD align=right><B>$</B><B>915</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$862</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=6>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Total asset derivatives not designated</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>as hedging instruments</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>915</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$862</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colspan="6">
      <hr noshade size=1>







</TD>
  </TR>

  <TR>

    <TD colSpan=6>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>Liability Derivatives</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Derivatives designated as hedging</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>instruments:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Interest rate swap</TD>
    <TD align=left>Other noncurrent liabilities</TD>
    <TD align=right><B>($</B><B>1,968</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>($452</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=6>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Total liability derivatives designated as</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>hedging instruments</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>($</B><B>1,968</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>($452</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colspan="6">
      <hr noshade size=1>







</TD>
  </TR>
</TABLE>

<P style="TEXT-ALIGN: left">(Losses)/gains on changes in fair value of derivative instruments were as follows:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan="9">
      <hr noshade size=1>

</td>
  </tr>

  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=4>Three months ended <br>
      June 30,
    </TD>
    <TD align=center colSpan=4>Six months ended <br>
      June 30,
    </TD>
  </TR>


  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD align=right colSpan=2 width="10%">
<B>2011</B></TD>
    <TD align=right colSpan=2 width="10%">2010</TD>
    <TD align=right colSpan=2 width="10%">
<B>2011</B></TD>
    <TD align=right colSpan=2 width="10%">2010</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Derivatives designated as hedging instruments</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Interest rate swap <SUP>1</SUP></TD>
    <TD align=right><B>($</B><B>1,328</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>($</B><B>925</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Derivatives not designated as hedging instruments</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Foreign exchange contracts <SUP>2</SUP></TD>
    <TD align=right><B>24</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(348</TD>
    <TD align=left>)</TD>
    <TD align=right><B>258</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(421</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colspan="9">
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>
<BR>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0>
<TR>
     <TD vAlign=top nowrap width="2%">1&nbsp; &nbsp; &nbsp; </TD>
     <TD width="98%">Unrealized gains are recognized in Other comprehensive income, net of tax. This derivative was an effective hedge of interest rate cash flow risk for the six months ended June 30, 2011. </TD></TR>
<TR>
     <TD vAlign=top nowrap width="2%">2&nbsp; &nbsp; &nbsp; </TD>
     <TD width="98%">Gains/(losses) are recognized in Other expense, net. </TD></TR></TABLE>
<P align=center>23</P>
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<BR>
<P style="TEXT-ALIGN: left"><B>12. Contingencies</B></P>
<P style="TEXT-ALIGN: left"><B>Asbestos Litigation</B></P>
<P style="TEXT-ALIGN: left">Albany International Corp. is a defendant in suits brought in various courts in the United States by plaintiffs who allege that they have suffered personal injury as a result of exposure to asbestos-containing products that we previously manufactured. We produced asbestos-containing paper machine clothing synthetic dryer fabrics marketed during the period from 1967 to 1976 and used in certain paper mills. Such fabrics generally had a useful life of three to twelve months.</P>
<P style="TEXT-ALIGN: left">We were defending 4,714 claims as of July 25, 2011. This compares with 4,799 claims as of April 18, 2011, 5,158 claims as of February 11, 2011, 5,170 claims as of October 29, 2010, and 7,343 claims as of July 23, 2010. These suits allege a variety of lung and other diseases based on alleged exposure to products that we previously manufactured.</P>
<P style="TEXT-ALIGN: left">The following table sets forth the number of claims filed, the number of claims settled, dismissed, or otherwise resolved, and the aggregate settlement amount during the periods presented:</P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="4" cellspacing=0 width="90%" border=1 align="center">





  <tr valign=middle align="right">
    <td><i>Year ended</i><br>

<i>December</i><br>

<i>31,</i></td>
    <td><i>Opening</i><br>

<i>Number</i><br>

<i>of Claims</i></td>
    <td><i>Claims Dismissed,</i><br>

<i>Settled, or</i><br>

<i>Resolved</i></td>
    <td><i>New Claims</i></td>
    <td><i>Closing</i><br>

<i>Number of</i><br>

<i>Claims</i></td>
    <td><i>Amounts Paid</i><br>

<i>(thousands)</i><br>

<i>to Settle or</i><br>

<i>Resolve ($)</i></td>
  </tr>







  <tr valign=bottom>

    <td align=left><i>2005</i></td>
    <td align=right><i>29,411</i></td>
    <td align=right><i>6,257</i></td>
    <td align=right><i>1,297</i></td>
    <td align=right><i>24,451</i></td>
    <td align=right><i>504</i></td>
  </tr>

  <tr valign=bottom>

    <td align=left><i>2006</i></td>
    <td align=right><i>24,451</i></td>
    <td align=right><i>6,841</i></td>
    <td align=right><i>1,806</i></td>
    <td align=right><i>19,416</i></td>
    <td align=right><i>3,879</i></td>
  </tr>

  <tr valign=bottom>

    <td align=left><i>2007</i></td>
    <td align=right><i>19,416</i></td>
    <td align=right><i>808</i></td>
    <td align=right><i>190</i></td>
    <td align=right><i>18,798</i></td>
    <td align=right><i>15</i></td>
  </tr>

  <tr valign=bottom>

    <td align=left><i>2008</i></td>
    <td align=right><i>18,798</i></td>
    <td align=right><i>523</i></td>
    <td align=right><i>110</i></td>
    <td align=right><i>18,385</i></td>
    <td align=right><i>52</i></td>
  </tr>

  <tr valign=bottom>

    <td align=left><i>2009</i></td>
    <td align=right><i>18,385</i></td>
    <td align=right><i>9,482</i></td>
    <td align=right><i>42</i></td>
    <td align=right><i>8,945</i></td>
    <td align=right><i>88</i></td>
  </tr>

  <tr valign=bottom>

    <td align=left><i>2010</i></td>
    <td align=right><i>8,945</i></td>
    <td align=right><i>3,963</i></td>
    <td align=right><i>188</i></td>
    <td align=right><i>5,170</i></td>
    <td align=right><i>159</i></td>
  </tr>

  <tr valign=bottom>

    <td align=left><b><i>2011 to date</i></b></td>
    <td align=right><b><i>5,170</i></b></td>
    <td align=right><b><i>504</i></b></td>
    <td align=right><b><i>48</i></b></td>
    <td align=right><b><i>4,714</i></b></td>
    <td align=right><b><i>1,111</i></b></td>
  </tr>
</table>

<P style="TEXT-ALIGN: left">We anticipate that additional claims will be filed against the Company and related companies in the future, but are unable to predict the number and timing of such future claims. These suits typically involve claims against from twenty to more than two hundred defendants, and many complaints fail to identify the plaintiffs&#146; work history or the nature of the plaintiffs&#146; alleged exposure to our products. Pleadings and discovery responses in cases in which work histories have been provided indicate claimants with paper mill exposure in approximately 15% of the total claims filed against the Company to date, and only a portion of those claimants have alleged time spent in a paper mill to which we are believed to have supplied asbestos-containing products.</P>
<P style="TEXT-ALIGN: left">The significant increase in the number of dismissed claims during 2009 and early 2010 was in large part the result of changes in the administration of claims assigned to the multidistrict litigation panel of the federal district courts (the &#147;MDL&#148;). As of July 25, 2011, 448 claims remained against the Company in the MDL. This compares to 12,758 claims that were pending at the MDL as of February 6, 2009.</P>
<P style="TEXT-ALIGN: left">With respect to claims remaining at the MDL, future discovery may yield more relevant information regarding work histories and the basis, if any, for a plaintiff&#146;s claim against the Company. The Company does not currently believe a meaningful estimate can be made regarding the range of possible loss with respect to the claims remaining at the MDL, although this conclusion could change as the MDL&#146;s efforts to advance resolution of these claims progresses.</P>
<P align=center>24</P>
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<BR>
<P style="TEXT-ALIGN: left">As of July 25, 2011, the remaining 4,266 claims
pending against the Company were pending in a number of jurisdictions other than
the MDL. Pleadings and discovery responses in those cases in which work
histories have been provided indicate claimants with paper mill exposure in
approximately 25% of claims reported, and only a portion of those claimants have
alleged time spent in a paper mill to which we are believed to have supplied
asbestos-containing products. For these reasons, we expect the percentage of
these remaining claimants able to demonstrate time spent in a paper mill to
which we supplied asbestos-containing products during a period in which our
asbestos-containing products were in use to be considerably lower than the total
number of pending claims. Detailed exposure and disease information sufficient
meaningfully to estimate a range of possible loss of a particular claim is
typically not available until late in the discovery process, and often not until
a trial
date is imminent and a settlement demand has been received. For these reasons, we do not believe a meaningful estimate can be made regarding the range of possible loss with respect to these remaining claims.</P>
<P style="TEXT-ALIGN: left">It is our position, and the position of other paper
machine clothing defendants, that there was insufficient exposure to asbestos
from any paper machine clothing products to cause asbestos-related injury to any
plaintiff. Furthermore, asbestos contained in our synthetic products was
encapsulated in a resin-coated yarn woven into the interior of the fabric,
further reducing the likelihood of fiber release. While we believe we have
meritorious defenses to these claims, we have settled certain of these cases for
amounts we consider reasonable given the facts and circumstances of each case.
Our insurer, Liberty Mutual, has defended each case and funded settlements under
a standard reservation of rights. As of July 25, 2011, we had resolved, by means
of settlement or dismissal, 35,995 claims. The total cost of resolving all
claims was $8.116 million. Of this amount, almost 100% was paid by our insurance
carrier. The Company has approximately $130 million in confirmed insurance
coverage that should be available with respect to current and future asbestos claims, as well as additional insurance coverage that we should be able to access.</P>
<P style="TEXT-ALIGN: left">Brandon Drying Fabrics, Inc. (&#147;Brandon&#148;), a subsidiary of Geschmay Corp., which is a subsidiary of the Company, is also a separate defendant in many of the asbestos cases in which Albany is named as a defendant. Brandon was defending against 7,877 claims as of July 25, 2011. This compares with 7,876 claims as of April 18, 2011, 7,868 claims as of February 11, 2011, 7,869 claims as of October 28, 2010, and 7,907 claims as of July 23, 2010.</P>
<P style="TEXT-ALIGN: left">The following table sets forth the number of claims filed, the number of claims settled, dismissed, or otherwise resolved, and the aggregate settlement amount during the periods presented:</P>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="4" cellspacing=0 width="90%" border=1 align="center">




  <tr valign=middle align="right">
    <td><i>Year ended</i><br>

<i>December</i><br>

<i>31,</i></td>
    <td><i>Opening</i><br>

<i>Number of</i><br>

<i>Claims</i></td>
    <td><i>Claims Dismissed,</i><br>

<i>Settled, or</i><br>

<i>Resolved</i></td>
    <td><i>New Claims</i></td>
    <td><i>Closing</i><br>

<i>Number</i><br>

<i>of</i><br>

<i>Claims</i></td>
    <td><i>Amounts Paid</i><br>

<i>(thousands) to</i><br>

<i>Settle or</i><br>

<i>Resolve ($)</i></td>
  </tr>

  <tr valign=bottom>

    <td align=left><i>2005</i></td>
    <td align=right><i>9,985</i></td>
    <td align=right><i>642</i></td>
    <td align=right><i>223</i></td>
    <td align=right><i>9,566</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2006</i></td>
    <td align=right><i>9,566</i></td>
    <td align=right><i>1,182</i></td>
    <td align=right><i>730</i></td>
    <td align=right><i>9,114</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2007</i></td>
    <td align=right><i>9,114</i></td>
    <td align=right><i>462</i></td>
    <td align=right><i>88</i></td>
    <td align=right><i>8,740</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2008</i></td>
    <td align=right><i>8,740</i></td>
    <td align=right><i>86</i></td>
    <td align=right><i>10</i></td>
    <td align=right><i>8,664</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2009</i></td>
    <td align=right><i>8,664</i></td>
    <td align=right><i>760</i></td>
    <td align=right><i>3</i></td>
    <td align=right><i>7,907</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2010</i></td>
    <td align=right><i>7,907</i></td>
    <td align=right><i>47</i></td>
    <td align=right><i>9</i></td>
    <td align=right><i>7,869</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><b><i>2011 to date</i></b></td>
    <td align=right><b><i>7,869</i></b></td>
    <td align=right><b><i>3</i></b></td>
    <td align=right><b><i>11</i></b></td>
    <td align=right><b><i>7,877</i></b></td>
    <td align=right><b><i>0</i></b></td>
  </tr>


</table>

<P style="TEXT-ALIGN: left">We acquired Geschmay Corp., formerly known as Wangner Systems Corporation, in 1999. Brandon is a wholly owned subsidiary of Geschmay Corp. In 1978, Brandon acquired certain assets from Abney Mills (&#147;Abney&#148;), a South Carolina textile manufacturer. Among the assets acquired by Brandon from Abney were assets of Abney&#146;s wholly owned subsidiary, Brandon Sales, Inc. which had sold, among other things, dryer fabrics</P>
<P align=center>25</P>
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<P style="TEXT-ALIGN: left">containing asbestos made by its parent, Abney. It is
believed that Abney ceased production of asbestos-containing fabrics prior to
the 1978 transaction. Although Brandon manufactured and sold dryer fabrics under
its own name subsequent to the asset purchase, none of such fabrics contained
asbestos. Under the terms of the Assets Purchase Agreement between Brandon and
Abney, Abney agreed to indemnify, defend, and hold Brandon harmless from any
actions or claims on account of products manufactured by Abney and its related
corporations prior to the date of the sale, whether or not the product was sold
subsequent to the date of the sale. It appears that Abney has since been
dissolved. Nevertheless, a representative of Abney has been notified of the
pendency of these actions and demand has been made that it assume the defense of
these actions. Because Brandon 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 with respect to products manufactured by Abney, 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 July 25, 2011, Brandon has resolved, by means of settlement or dismissal, 9,721 claims for a total of $0.2 million. Brandon&#146;s insurance carriers initially agreed to pay 88.2% of the total indemnification and defense costs related to these proceedings, subject to the standard reservation of rights. The remaining 11.8% of the costs had been borne directly by Brandon. During 2004, Brandon&#146;s insurance carriers agreed to cover 100% of indemnification and defense costs, subject to policy limits and the standard reservation of rights, and to reimburse Brandon for all indemnity and defense costs paid directly by Brandon related to these proceedings.</P>
<P style="TEXT-ALIGN: left">As of July 25, 2011, 6,821 (or approximately 81%) of the claims pending against Brandon were pending in Mississippi. For the same reasons set forth above with respect to Albany&#146;s claims, as well as the fact that no amounts have been paid to resolve any Brandon claims since 2001, we do not believe a meaningful estimate can be made regarding the range of possible loss with respect to these remaining claims.</P>
<P style="TEXT-ALIGN: left"><B>Mount Vernon</B></P>
<P style="TEXT-ALIGN: left">In some of these asbestos cases, the Company is named both as a direct defendant and as the &#147;successor in interest&#148; to Mount Vernon Mills (&#147;Mount Vernon&#148;). We acquired certain assets from Mount Vernon in 1993. Certain plaintiffs allege injury caused by asbestos-containing products alleged to have been sold by Mount Vernon many years prior to this acquisition. Mount Vernon is contractually obligated to indemnify the Company against any liability arising out of such products. We deny any liability for products sold by Mount Vernon prior to the acquisition of the Mount Vernon assets. Pursuant to its contractual indemnification obligations, Mount Vernon has assumed the defense of these claims. On this basis, we have successfully moved for dismissal in a number of actions.</P>
<hr width="150" align="center" size="1">
<P style="TEXT-ALIGN: left">Although we do not believe, based on currently
available information and for the reasons stated above, that a meaningful
estimate of a range of possible loss can be made with respect to such claims,
based on our understanding of the insurance policies available, how settlement
amounts have been allocated to various policies, our settlement experience, the
absence of any judgments against the Company or Brandon, the ratio of paper mill
claims to total claims filed, and the defenses available, we currently do not
anticipate any material liability relating to the resolution of the
aforementioned pending proceedings in excess of existing insurance limits.
Consequently, we currently do not anticipate, based on currently available
information, that the ultimate resolution of the aforementioned proceedings will
have a material adverse effect on the financial position, results of operations,
or cash flows of the Company. Although we cannot predict the number and timing
of future
claims, based on the foregoing factors and the trends in claims against us to date, we do not anticipate that additional claims likely to be filed against us in the future will have a material adverse effect on our financial position, results of operations, or cash flows. We are aware that litigation is inherently uncertain, especially when the outcome is dependent primarily on determinations of factual matters to be made by juries.</P>
<hr width="150" align="center" size="1">
<p align="center">26
</p>
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<P style="TEXT-ALIGN: left"><B>NAFTA Audits</B></P>
<P style="TEXT-ALIGN: left">The Company&#146;s affiliate in Mexico was notified in November 2010 that Mexican customs authorities expected to issue demands for duties on certain imports of PMC from the Company and the Company&#146;s affiliate in Canada for which the Company has claimed duty-free treatment under the North American Free Trade Agreement (&#147;NAFTA&#148;).</P>
<P style="TEXT-ALIGN: left">The notices result from a decision by the Mexican Servicio de Administraci&#243;n Tributaria (&#147;SAT&#148;) to invalidate NAFTA certificates provided by the Company on products shipped to its Mexican affiliate during the years 2006 through 2008. The Demand Notices arose from an SAT audit during 2010, at the conclusion of which the SAT determined that the Company had failed to provide documentation sufficient to show that the certificates were validly issued, and declared the certificates issued during this period to be invalid. The Company believes that the certificates of origin were valid and properly issued and has commenced administrative appeals with SAT disputing its resolutions.</P>
<P style="TEXT-ALIGN: left">The import duties identified in such notices to date are approximately US $2.5 million, and relate to only a portion of the shipments covered by the invalidated certificates.</P>
<P style="TEXT-ALIGN: left">In the event of an adverse ruling at the conclusion of the administrative appeal process, the Company would have an opportunity to appeal the outcome in Mexican Tax Court, during which it would have an opportunity to present evidence to establish that the shipments in question were of U.S. and Canadian origin and entitled to the benefits of NAFTA. As all of the shipments covered by the invalidated certificates were, in fact, of U.S. or Canadian origin, the Company expects that it will be able to demonstrate that the certificates were validly issued. The Company has been advised by counsel that, if this is the case, then the Tax Court is likely to revoke the SAT invalidation actions and rule in favor of the Company.</P>
<P style="TEXT-ALIGN: left">In the unlikely event that the Company were not to
prevail, however, then it could become subject to additional demand notices for
the balance of the shipments during the period from 2006 through 2008 covered by
the invalidated certificates. If such demand notices were to be issued for all
the shipments so covered, then the Company could be liable for duties
aggregating between US $8.0 and $10.0 million. The Company has also been advised
by counsel that SAT would likely seek additional antidumping duties and
penalties which could increase these amounts by up to 900%, but that the
possibility that SAT would succeed in obtaining such additional duties and
penalties is remote. The Company also does not believe that it faces any
material risk of certificates being invalidated with respect to any period other
than the 2006 through 2008 audit period. For this reason, the Company does not
feel that this matter is likely to have a material adverse effect on the
Company&#146;s
financial position, results of operations and cash flows.</P>
<P align=center>27</P>
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<P style="TEXT-ALIGN: left"><B>13. Changes in Stockholders&#146; Equity</B></P>
<P style="TEXT-ALIGN: left">The following table summarizes changes in Stockholders&#146; Equity:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=13>
      <hr noshade size=1>

</td>
  </tr>







  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD align=center>Class A <br>
    Common <br>
       Stock</TD>
    <TD align=center>Class B <br>
      Common <br>
      Stock </TD>
    <TD align=center>Additional<BR>

paid in<BR>

capital</TD>
    <TD align=center colSpan=2>Retained<BR>

earnings</TD>
    <TD align=center colSpan=3> Accumulated<br>

items of other <br>
      comprehensive  <br>
      income </TD>
    <TD align=center colSpan=2>Treasury <br>
      stock </TD>
    <TD align=center colSpan=2>Total <br>
      Shareholders'  <br>
      Equity </TD>
  </TR>

  <TR>

    <TD colSpan=13>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=13>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>December 31, 2010</TD>
    <td align=right>$36</TD>
    <td align=right>$3</TD>
    <td align=right>$387,876</TD>
    <td align=right>$403,048</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right>($106,672</TD>
    <TD align=left>)</TD>
    <TD align=right>($258,031</TD>
    <TD align=left>)</TD>
    <td align=right>$426,260</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=13>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Net income</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>25,495</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>25,495</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=13>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Dividends declared</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>(7,814</TD>
    <TD align=left>)</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(7,814</TD>
    <TD align=left>)</TD>
  </TR>
  <TR vAlign=bottom>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Compensation and</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>benefits paid or payable in</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Class A Common Stock</TD>
    <TD align=right>1</TD>
    <TD align=right>-</TD>
    <TD align=right>1,179</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>111</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,291</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=13>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Options exercised</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>338</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>338</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=13>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Cumulative translation</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>adjustment</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>39,936</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>39,936</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=13>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Amortization of pension</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>liability</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>1,587</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,587</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=13>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Change in derivative</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>valuation adjustment</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>&nbsp;</TD>
    <TD align=right>(925</TD>
    <TD align=left>)</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(925</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=13>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left><B>June 30, 2011</B></TD>
    <TD align=right><B>$</B><B>37</B></TD>
    <TD align=right><B>$</B><B>3</B></TD>
    <TD align=right><B>$</B><B>389,393</B></TD>
    <TD align=right><B>$</B><B>420,729</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right></TD>
    <TD align=right><B>($</B><B>66,074</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right><B>($</B><B>257,920</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right><B>$</B><B>486,168</B></TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=13>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P align=center>28</P>
<HR align=center width="100%" noshade SIZE=5>
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<BR>
<P style="TEXT-ALIGN: left"><B>14. Comprehensive Income</B></P>
<P style="TEXT-ALIGN: left">Comprehensive income consists of the following:</P>
<TABLE style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <TR>

    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
    <TD align=center></TD>
  </TR>
  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <TR vAlign=bottom>

    <TD align=center>&nbsp;</TD>
    <TD align=center colSpan=4>Three Months Ended <br>
      June 30,
    </TD>
    <TD align=center colSpan=4>Six Months Ended <br>
      June 30,
    </TD>
  </TR>


  <TR vAlign=bottom>

    <TD align=left>(in thousands)</TD>
    <TD align=right colSpan=2 width="10%">

<B>2011</B></TD>
    <TD align=right colSpan=2 width="10%">2010</TD>
    <TD align=right colSpan=2 width="10%">

<B>2011</B></TD>
    <TD align=right colSpan=2 width="10%">2010</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Net income</TD>
    <TD align=right><B>$</B><B>8,762</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$7,877</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>$</B><B>25,495</B></TD>
    <TD align=left>&nbsp;</TD>
    <td align=right>$13,475</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Other comprehensive income/(loss), before tax:</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Foreign currency translation adjustments</TD>
    <TD align=right><B>14,024</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(36,019</TD>
    <TD align=left>)</TD>
    <TD align=right><B>39,936</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(55,580</TD>
    <TD align=left>)</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Amortization of pension liability adjustment</TD>
    <TD align=right><B>1,305</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,047</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>2,602</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>2,100</TD>
    <TD align=left>&nbsp;</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Pension and postretirement liability adjustments</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>1,289</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(48</TD>
    <TD align=left>)</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Derivative valuation adjustment</TD>
    <TD align=right><B>(2,176</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>(1,516</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Income taxes related to items of other</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>comprehensive income/(loss):</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Amortization of pension liability adjustment</TD>
    <TD align=right><B>(509</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(408</TD>
    <TD align=left>)</TD>
    <TD align=right><B>(1,015</B></TD>
    <TD align=left><B>)</B></TD>
    <TD align=right>(819</TD>
    <TD align=left>)</TD>
  </TR>



  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Pension and postretirement liability adjustments</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(502</TD>
    <TD align=left>)</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>19</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>&nbsp;&nbsp;&nbsp;Derivative valuation adjustment</TD>
    <TD align=right><B>848</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right><B>591</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>-</TD>
    <TD align=left>&nbsp;</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Other comprehensive income/(loss), net of tax</TD>
    <TD align=right><B>13,492</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(34,593</TD>
    <TD align=left>)</TD>
    <TD align=right><B>40,598</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>(54,328</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>

  <TR>

    <TD colSpan=9>&nbsp;</TD>
  </TR>

  <TR vAlign=bottom>

    <TD align=left>Comprehensive income/(loss)</TD>
    <TD align=right><B>$</B><B>22,254</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>($26,716</TD>
    <TD align=left>)</TD>
    <TD align=right><B>$</B><B>66,093</B></TD>
    <TD align=left>&nbsp;</TD>
    <TD align=right>($40,853</TD>
    <TD align=left>)</TD>
  </TR>

  <TR>

    <TD colSpan=9>
      <hr noshade size=1>

</TD>
  </TR>
</TABLE>

<P align=center>29</P>
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<P style="TEXT-ALIGN: left"><B>15. Recent Accounting Pronouncements</B></P>
<P style="TEXT-ALIGN: left">In May 2011, the Financial Accounting Standards Board (FASB) amended authoritative guidance related to common fair value measurements and disclosure requirements. This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. This pronouncement changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements, and is effective for reporting periods beginning on or after December 15, 2011. The adoption of this guidance is not expected to have a material effect on our financial statements.</P>
<P style="TEXT-ALIGN: left">In June 2011, the FASB issued guidance that eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders&#146; equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this guidance concerns presentation and disclosure only and will not have a material impact on our financial statements.</P>
<P align=center>30</P>
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<br>

<p style="TEXT-ALIGN: left"><b><a name="p31"></a>Forward-looking statements</b></p>
<p style="TEXT-ALIGN: left">This quarterly report may contain statements, estimates, or projections that constitute &#147;forward-looking statements&#148; as defined under U.S. federal securities laws. Generally, the words &#147;believe,&#148; &#147;expect,&#148; &#147;intend,&#148; &#147;estimate,&#148; &#147;anticipate,&#148; &#147;project,&#148; &#147;will,&#148; and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties (including, without limitation, those set forth in the Company&#146;s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q) that could cause actual results to differ materially from the Company&#146;s historical experience and our present expectations or projections.</p>
<p><font face="Arial, Helvetica, sans-serif" size="2">Forward-looking statements in this
report include, without limitation, statements about future economic and paper industry
conditions; sales and operating income expectations during the next several quarters in
each of the Company&#146;s businesses; anticipated improvements in cash generation, revenue
growth and income expectations for the Company&#146;s non-PMC businesses, including Albany
Engineered Composites, Inc.; pricing conditions in the PMC industry; the amount and
timing of capital expenditures; future tax rates and cash paid for taxes; depreciation
and amortization; future debt levels and debt covenant ratios;  future revaluation gains
and losses; and future levels of EBITDA. Furthermore, a change in any one or more of the
foregoing factors could have a material effect on the Company&#146;s financial results in any
period. Such statements are based on current expectations, and the Company undertakes no
obligation to publicly update or revise any forward-looking statements. </font></p>
<p><font face="Arial, Helvetica, sans-serif" size="2">Statements in this report expressing
management&#146;s assessments of the growth potential of various businesses, or referring to
earlier assessments of such potential, are not intended as forecasts of actual future
growth, and should not be relied on as such. While management believes such assessments
to have a reasonable basis, such assessments are, by their nature, inherently uncertain.
Historical growth rates are no guarantee of future growth, and such independent forecasts
and assumptions could prove materially incorrect, in some cases. </font></p>
<p style="TEXT-ALIGN: left">&nbsp;</p>
<p style="TEXT-ALIGN: center">31</p>
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<p style="text-align: left;"> <b><a name="p32"></a>ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</b></p>
<p style="text-align: left;"> Management&#146;s Discussion and Analysis (&#147;MD&amp;A&#148;) is intended to help the reader understand the results of operations and financial condition of the Company. MD&amp;A  is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes. In addition, the results of operations below reflect a previously reported segment reclassification, as described in Note 1 to our Consolidated Financial Statements.</p>
<p style="text-align: left;"> <b><i>Overview</i></b></p>
<p style="text-align: left;"> After a period of intense restructuring, the Company has become a portfolio of businesses, each with roots in advanced textiles and materials processing: Paper Machine Clothing (PMC), Albany Door Systems (ADS), Engineered Fabrics (EF), PrimaLoft<sup>&#174;</sup> Products, and Albany Engineered Composites, Inc. (AEC).</p>
<p style="text-align: left;"> PMC remains the Company&#146;s core business
segment and primary generator of cash. While the paper industry in our
traditional geographic markets has suffered from well-documented overcapacity in
the publication grades, especially newsprint, the industry is still expected to
grow on a global basis, driven by demand for packaging and tissue grades, as
well as the expansion of paper consumption and production in Asia and South
America. Although we no longer consider the PMC industry as having significant
growth potential, our PMC business has significant prospects for long-term
cash generation. We feel we are now well-positioned in this industry, with
high-quality, low-cost production in growth markets, substantially lower fixed
costs in mature markets, and continued strength in new product development and
field services. We seek to maintain the cash-generating potential of this
business by maintaining the low costs that we achieved through restructuring,
and competing vigorously by using our differentiated products and services to
reduce our customers&#146; total cost of operation and improve their paper
quality.</p>
<p style="text-align: left;"> During the recession, we focused on reducing fixed costs in each of the ADS, Engineered Fabrics, and PrimaLoft<sup>&#174;</sup> Products businesses. </p>
<p style="text-align: left;"> We believe that AEC provides the greatest growth potential, both near and long term, for our Company. Our goal is to develop AEC into a second core business by the end of this decade. Our strategy is to grow organically by focusing our proprietary technology on high-value aerospace and defense applications that cannot be served effectively by conventional composites. AEC supplies a number of customers in the aerospace industry. AEC&#146;s most significant aerospace customer is the SAFRAN Group, for whom we make braces for the Boeing 787 main landing gear, outer guide vanes for the CFM-56 engine, and fan blades and other components for the LEAP-X engine. AEC is also developing other new and potentially significant products for airframe (both civilian and military) and land-based defense applications.</p>
<p align="center">32</p>
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<p style="TEXT-ALIGN: left"><b>Consolidated Results of Operations</b></p>
<p style="TEXT-ALIGN: left"><b>Net sales</b></p>
<p style="TEXT-ALIGN: left">The following table summarizes our net sales by business segment:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>



  <tr>

    <td colspan="10">(USD in thousands)
      <hr noshade size=1>






</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=2>Three months ended<br>

June 30,</td>
    <td align=center colspan="2">% </td>
    <td align=center colspan=3>Six months ended<br>

June 30,</td>
    <td align=center colspan="2">%</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right width="12%"><b>2011</b></td>
    <td align=right width="12%">2010</td>
    <td align=center colspan=2 width="12%">
      Change </td>
    <td align=right width="12%"><b>2011</b></td>
    <td align=right colspan=2 width="12%">2010</td>
    <td align=center colspan=2 width="12%">
      Change </td>
  </tr>

  <tr>

    <td colspan="10">
      <hr noshade size=1>




</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Paper Machine Clothing</td>
    <TD align=right><B>$</B><b>158,577</b></td>
    <td align=right>$153,662</td>
    <td align=right>3.2</td>
    <td align=left>%</td>
    <TD align=right><B>$</B><b>326,473</b></td>
    <td align=right></td>
    <td align=right>$300,399</td>
    <td align=right>8.7</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Albany Door Systems</td>
    <td align=right><b>45,393</b></td>
    <td align=right>33,792</td>
    <td align=right>34.3</td>
    <td align=left>%</td>
    <td align=right><b>90,521</b></td>
    <td align=right>&nbsp;</td>
    <td align=right>67,547</td>
    <td align=right>34.0</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Fabrics</td>
    <td align=right><b>20,600</b></td>
    <td align=right>21,032</td>
    <td align=right>-2.1</td>
    <td align=left>%</td>
    <td align=right><b>41,186</b></td>
    <td align=right>&nbsp;</td>
    <td align=right>40,144</td>
    <td align=right>2.6</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Composites</td>
    <td align=right><b>10,504</b></td>
    <td align=right>10,870</td>
    <td align=right>-3.4</td>
    <td align=left>%</td>
    <td align=right><b>21,976</b></td>
    <td align=right>&nbsp;</td>
    <td align=right>19,511</td>
    <td align=right>12.6</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>PrimaLoft<sup>&#174; </sup>Products</td>
    <td align=right><b>8,941</b></td>
    <td align=right>8,094</td>
    <td align=right>10.5</td>
    <td align=left>%</td>
    <td align=right><b>15,709</b></td>
    <td align=right>&nbsp;</td>
    <td align=right>13,722</td>
    <td align=right>14.5</td>
    <td align=left>%</td>
  </tr>

  <tr>

    <td colspan=10>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Total</td>
    <TD align=right><B>$</B><b>244,015</b></td>
    <td align=right>$227,450</td>
    <td align=right>7.3</td>
    <td align=left>%</td>
    <TD align=right><B>$</B><b>495,865</b></td>
    <td align=right></td>
    <td align=right>$441,323</td>
    <td align=right>12.4</td>
    <td align=left>%</td>
  </tr>

  <tr>

    <td colspan=10>
      <hr noshade size=2>

</td>
  </tr>
</table>

<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<ul>

  <li>Changes in currency translation rates had the effect of increasing net sales by $12.1 million during 2011.
  <li>Excluding the effect of changes in currency translation rates, 2011 net sales increased 2.0%.
  <li>2011 net sales increased by $1.0 million due to lower sales returns and allowances accruals, primarily in our PMC segment.
  <li>Sales volume was flat in our PMC business while sales grew significantly in our ADS and PrimaLoft<sup>&#174;</sup> Products businesses, which were offset in part by lower sales in our EF and AEC businesses. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<ul>

  <li>Changes in currency translation rates had the effect of increasing net sales by $14.6 million during 2011.
  <li>Excluding the effect of changes in currency translation rates, 2011 net sales increased 9.1%.
  <li>2011 net sales increased by $2.1 million due to lower sales returns and allowances accruals, primarily in our PMC segment.
  <li>Sales growth during the first half of 2011 was uneven for our PMC business with strong growth in Q1 and relatively flat sales during Q2, which was principally due to the seasonal nature of the business.
  <li>Sales growth in our ADS and PrimaLoft<sup>&#174;</sup> Products business segments was consistently strong in Q1 and Q2, reflecting economic growth, successful product introductions, and geographic expansion in most regions in which we conduct our business.
  <li>Sales in our EF and AEC business were slightly higher in 2011, as a result of higher Q1 sales and flat to lower Q2 sales. </li>
</ul>
<p align=center>33</p>
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<p style="TEXT-ALIGN: left"><b>Gross Profit</b></p>
<p style="TEXT-ALIGN: left">The following table summarizes gross profit by business segment:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>



  <tr>

    <td colspan="9">
      (USD in thousands)
      <hr noshade size=1>




</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4>Three months ended <br>
      June 30,
    </td>
    <td align=center colspan=4>Six months ended<br>

June, 30</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%">

<b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td align=center colspan="9">
      <hr noshade size=1>




</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Paper Machine Clothing</td>
    <TD align=right><B>$</B><b>67,373</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$64,013</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>145,693</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$122,026</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Albany Door Systems</td>
    <td align=right><b>16,174</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>11,756</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>32,322</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>23,553</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Fabrics</td>
    <td align=right><b>7,580</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>7,872</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>15,797</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>13,709</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Composites</td>
    <td align=right><b>155</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(545</td>
    <td align=left>)</td>
    <td align=right><b>136</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(1,590</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=left>PrimaLoft<sup>&#174; </sup>Products</td>
    <td align=right><b>4,786</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>4,473</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>8,443</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>8,072</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Unallocated</td>
    <td align=right><b>(1,168</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(1,734</td>
    <td align=left>)</td>
    <td align=right><b>(2,498</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(2,706</td>
    <td align=left>)</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Total</td>
    <TD align=right><B>$</B><b>94,900</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$85,835</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>199,893</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$163,064</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>% of Net Sales</td>
    <td align=right><b>38.9</b></td>
    <td align=left><b>%</b></td>
    <td align=right>37.7</td>
    <td align=left>%</td>
    <td align=right><b>40.3</b></td>
    <td align=left><b>%</b></td>
    <td align=right>36.9</td>
    <td align=left>%</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in gross profit during 2011 was principally due to the net effect of the following:</p>
<ul>

  <li>$2.2 million increase due to higher sales.
  <li>$4.6 million increase due to higher profitability in our PMC, ADS, AEC, and PrimaLoft<sup>&#174;</sup> Products Segments, principally resulting from a lower cost structure.
  <li>$1.5 million increase due to an absence of costs associated with PMC equipment relocation and idle capacity related to restructuring activities in 2010. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in gross profit during 2011 was principally due to the net effect of the following:</p>
<ul>

  <li>$13.7 million increase due to higher sales.
  <li>$16.2 million increase due to higher profitability in our PMC , ADS, AEC, and PrimaLoft<sup>&#174;</sup> Products Segments, principally resulting from a lower cost structure.
  <li>$5.7 million increase due to an absence of costs associated with PMC equipment relocation and idle capacity related to restructuring activities in 2010. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Selling, Technical, General, and Research (STG&amp;R)</b></p>
<p style="TEXT-ALIGN: left">The following table summarizes STG&amp;R by business segment:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellSpacing=0 border=0 width="100%">

  <tr>

    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
    <td></td>
  </tr>



  <tr>

    <td colspan="9">
      (USD in thousands)
      <hr noshade size=1>




</td>
  </tr>



  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=center colspan=4>Three months ended <br>
      June 30, </td>
    <td align=center colspan=4>Six months ended <br>
      June, 30 </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=center colspan=2 width="10%"><b>2011</b></td>
    <td align=center colspan=2 width="10%">2010</td>
    <td align=center colspan=2 width="10%"><b>2011</b></td>
    <td align=center colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td colspan="9">
      <hr noshade size=1>




</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Paper Machine Clothing</td>
    <TD align=right><B>$</B><b>32,016</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$24,762</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>64,073</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$52,828</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Albany Door Systems</td>
    <td align=right><b>11,760</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>8,971</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>22,385</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>17,856</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Fabrics</td>
    <td align=right><b>4,656</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>3,430</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>8,832</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>7,610</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Composites</td>
    <td align=right><b>1,255</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>1,444</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>2,266</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>2,628</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>PrimaLoft<sup>&#174; </sup>Products</td>
    <td align=right><b>1,621</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>1,547</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>3,367</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>3,077</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Research</td>
    <td align=right><b>7,212</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>7,132</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>14,377</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>12,943</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Unallocated</td>
    <td align=right><b>15,206</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>14,080</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>31,326</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>30,500</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Total</td>
    <TD align=right><B>$</B><b>73,726</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$61,366</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>146,626</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$127,442</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>% of Net Sales</td>
    <td align=right><b>30.2</b></td>
    <td align=left><b>%</b></td>
    <td align=right>27.0</td>
    <td align=left>%</td>
    <td align=right><b>29.6</b></td>
    <td align=left><b>%</b></td>
    <td align=right>28.9</td>
    <td align=left>%</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p align=center>34</p>
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<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">STG&amp;R expenses for 2011 were higher than 2010, principally due to the net effect of the following:</p>
<ul>

  <li>Salaries and social costs increased $4.3 million, of which $2.5 million was related to changes in foreign currency rates. The remaining increase was principally within selling expense due to higher sales.
  <li>Revaluation of nonfunctional currency assets and liabilities resulted in a loss of $2.0 million compared to a gain of $2.8 million in 2010. The revaluation losses were principally due to the strengthening euro and the resulting effects on nonfunctional currency trade receivables and payables.
  <li>Travel expense increased $1.2 million principally in selling expense, of which $0.5 million was due to changes in currency rates.
  <li>Bad debt expense increased $1.2 million.
  <li>Sale of a building provided a gain totaling $0.6 million in 2011.
  <li>Incentive
compensation expense linked to the value of the Company&#146;s shares of common stock, which
is included in          unallocated, was $2.3 million for Q2 2011, including $0.3 million
that resulted from a share price increase during the          quarter.  In comparison, Q2
2010 expense was $0.1 million, which included a reduction of $1.3 million that resulted
from a          share price decrease during the quarter.
  <li>SAP implementation expense, which is included in unallocated expense, decreased $1.0 million. The cutover of our Eurasian operations to the new platform was completed during Q2 2011, substantially completing the SAP project. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">STG&amp;R expenses for 2011 were higher than 2010, principally due to the net effect of the following:</p>
<ul>

  <li>Salaries and social costs increased $6.0 million, of which $3.2 million was related to changes in foreign currency rates. The remaining increase was principally within selling expense due to higher sales.
  <li>Revaluation of nonfunctional currency assets and liabilities resulted in a loss of $4.0 million compared to a gain of $2.8 million in 2010. The revaluation losses were principally due to the strengthening euro and the resulting effects on nonfunctional currency trade receivables and payables.
  <li>Travel expense increased $1.8 million principally in selling expense, of which $0.7 million was due to changes in currency rates.
  <li>Bad debt expense increased $0.9 million.
  <li>Sale of two buildings provided a gain totaling $1.0 million in 2011.
  <li>The increase in research expense was principally due to an increase in activities that support the growth in our AEC segment.
  <li>Incentive
compensation expense linked to the value of the Company&#146;s shares of common stock, which
is included in          unallocated, was $4.1 million in 2011, including $0.5 million
that resulted from a share price increase during the first          half of the year.  In
comparison, 2010 expense was $1.4 million, which included a reduction of $1.6 million
that resulted          from a share price decrease during the first half of the year.
  <li>SAP implementation expense, which is included in unallocated expense, decreased $1.4 million. The cutover of our Eurasian operations to the new platform was completed during Q2 2011, substantially completing the SAP project. </li>
</ul>
<p align=center>35</p>
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<p style="TEXT-ALIGN: left"><b>Operating Income</b></p>
<p style="TEXT-ALIGN: left">The following table summarizes operating income by business segment:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4>Three months ended<br>

June 30,</td>
    <td align=center colspan=4>Six months ended<br>

June, 30</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Paper Machine Clothing</td>
    <TD align=right><B>$</B><b>34,909</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$38,575</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>81,139</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$66,236</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Albany Door Systems</td>
    <td align=right><b>4,053</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>2,339</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>9,424</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>5,223</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Fabrics</td>
    <td align=right><b>2,800</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>3,835</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>6,841</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>5,492</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Composites</td>
    <td align=right><b>(1,144</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(1,989</td>
    <td align=left>)</td>
    <td align=right><b>(2,187</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(4,218</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=left>PrimaLoft<sup>&#174; </sup>Products</td>
    <td align=right><b>3,165</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>2,926</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>5,076</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>4,995</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Research expense</td>
    <td align=right><b>(7,212</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(7,132</td>
    <td align=left>)</td>
    <td align=right><b>(14,377</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(12,943</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Unallocated expenses</td>
    <td align=right><b>(17,489</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(14,774</td>
    <td align=left>)</td>
    <td align=right><b>(34,927</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(31,244</td>
    <td align=left>)</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Total</td>
    <TD align=right><B>$</B><b>19,082</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$23,780</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>50,989</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$33,541</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>
<br>

<p style="TEXT-ALIGN: left">In addition to the items discussed above affecting gross profit and STG&amp;R, operating income in 2011 and 2010 was reduced by restructuring costs.</p>
<p style="TEXT-ALIGN: left"><b>Restructuring Expense</b></p>
<p style="TEXT-ALIGN: left">The following table summarizes restructuring expense by business segment:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center colspan="7">
      <hr noshade size=1>




</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=3>Three months ended <br>
      June 30,
    </td>
    <td align=center colspan=3>Six months ended <br>
      June, 30
    </td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right width="10%">

<b>2011</b></td>
    <td colspan=2 align=right width="10%">2010</td>
    <td align=right width="10%">

<b>2011</b></td>
    <td colspan=2 align=right width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=6>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Paper Machine Clothing</td>
    <td align=right><b>$</b><b>448</b></td>
    <td align=right>$676</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>$</b><b>481</b></td>
    <td align=right>$2,962</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Albany Door Systems</td>
    <td align=right><b>361</b></td>
    <td align=right>446</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>513</b></td>
    <td align=right>474</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Fabrics</td>
    <td align=right><b>124</b></td>
    <td align=right>607</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>124</b></td>
    <td align=right>607</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Engineered Composites</td>
    <td align=right><b>44</b></td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>57</b></td>
    <td align=right>-</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Unallocated expenses</td>
    <td align=right><b>1,115</b></td>
    <td align=right>(1,040</td>
    <td align=left>)</td>
    <td align=right><b>1,103</b></td>
    <td align=right>(1,962</td>
    <td align=left>)</td>
  </tr>

  <tr>

    <td colspan=7>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Total</td>
    <TD align=right><b>$</b><b>2,092</b></TD>
    <td align=right>$689</td>
    <td align=left>&nbsp;</td>
    <TD align=right><b>$</b><b>2,278</b></TD>
    <td align=right>$2,081</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=7>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left">Restructuring charges in Q2 2011 were principally due to organizational changes associated with the substantial completion of the SAP conversion project. Restructuring charges in Q1 2011 were remaining costs associated with restructuring actions initiated prior to 2011 to reduce manufacturing capacity in the U.S. and in Europe.</p>
<p style="TEXT-ALIGN: left">Restructuring charges in Q2 and Q1 during 2010 were $0.7 million and $1.4 million, respectively, and were associated with restructuring actions initiated in 2009 to reduce manufacturing capacity in the U.S. and in Europe. Post-retirement benefit plan curtailment gains reduced restructuring expense in 2010 by $1.0 million in Q2 and $0.9 million in Q1. Restructuring expense in Q1 2010 included a non-cash charge of $1.2 million to write-down property, plant, and equipment related to previously announced reductions in manufacturing capacity.</p>
<p align=center>36</p>
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<p style="TEXT-ALIGN: left"><b>Other Earnings Items</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4>Three months ended<br>

June 30,</td>
    <td align=center colspan=4>Six months ended<br>

June, 30</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Interest expense, net</td>
    <TD align=right><B>$</B><b>4,786</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$3,882</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>9,562</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$7,707</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Other expense/(income), net</td>
    <td align=right><b>55</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(2,991</td>
    <td align=left>)</td>
    <td align=right><b>4,924</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(5,272</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Income tax expense</td>
    <td align=right><b>5,359</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>15,102</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>10,668</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>17,729</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Equity in (losses)/earnings of associated companies</td>
    <td align=right><b>(120</b></td>
    <td align=left><b>)</b></td>
    <td align=right>90</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>(340</b></td>
    <td align=left><b>)</b></td>
    <td align=right>98</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net income</td>
    <td align=right><b>8,762</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>7,877</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>25,495</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>13,475</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=2>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left"><b>Interest Expense, net</b></p>
<p style="TEXT-ALIGN: left">The increase in interest expense, net is principally the result of higher interest rates during 2011, partly offset by lower levels of outstanding debt. In July 2010 we renegotiated our revolving credit agreement and entered into an interest rate swap agreement that fixes the interest rate on a portion of the debt. The new agreements resulted in a weighted average interest rate of 3.56% during the six-months of 2011, compared to a rate of 1.23% during same period during 2010 under the old agreement. The average balance of the revolving credit agreement during the six-months of 2011 and 2010 was $230.3 million and $305.1 million, respectively. See the <b>Capital Resources</b> section below for further discussion of borrowings and interest rates.</p>
<p style="TEXT-ALIGN: left"><b>Other Expense/(Income), net</b></p>
<p style="TEXT-ALIGN: left">Other expense/(income), net included the following:</p>
<ul>

  <li>
    For the three-month period, foreign currency revaluations of intercompany balances resulted in gains of $0.5 million in 2011 and $3.9 million in 2010. For the six-month period, revaluations resulted in losses of $3.4 million in 2011 and gains of $6.7 million in 2010. The strengthening of the US dollar, Canadian dollar, Australian dollar, and Japanese yen against the euro results in revaluation gains, while losses result when the euro strengthens in relationship to those currencies.
  <li>
    For the three-month period, amortization of capitalized debt issuance costs were $0.3 million in 2011 and $0.1 million in 2010. For the six-month period, the same costs were $0.5 million in 2011 and $0.2 million in 2010. The increase is due to an increase in capitalized professional fees associated with the renegotiation of our revolving credit agreement during July 2010.
  <li>
    <p>For the three-month period, letter-of-credit fees (LOC) were $0.4 million in 2011 compared with $0.7 million in 2010. For the six-month period, LOC fees were $1.3 million in 2011 compared with $1.2 million in 2010. These costs are principally fees associated with a LOC that is required by the Canadian government until pending tax issues are resolved. We expect to resolve our tax issues with Canada during the second half of 2011, which will result in lower LOC fees. </p>
  </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Income Tax Expense</b></p>
<p style="TEXT-ALIGN: left">For the three-month period, 2011 income tax expense was $9.7 million lower than 2010. Income tax expense in 2010 included a discrete tax charge of $9.4 million related to the liquidation of our company-held life insurance policies. Income tax expense in 2010 also included a discrete tax benefit of $1.8 million related to repatriation of funds held by a subsidiary.</p>
<p style="TEXT-ALIGN: left">For the six-month period, our effective income tax rate, exclusive of discrete tax items, was 33.0% in 2011 and 32.6% in 2010. Income tax expense in 2011 was reduced by favorable discrete tax adjustments of $1.4 million. The net effect of the two discrete items discussed above resulted in a $7.6 million increase to 2010 income tax expense.</p>
<p align=center>37</p>
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<p style="TEXT-ALIGN: left"><b>Outlook</b></p>
<p style="TEXT-ALIGN: left">The outlook in the short term, excluding currency effects and assuming continued success in offsetting inflation, is for year-over-year improvement, driven by stable performance in PMC and growth in our other segments.</p>
<p style="TEXT-ALIGN: left"><b>Segment Results of Operations</b></p>
<p style="TEXT-ALIGN: left"><b>Paper Machine Clothing Segment  <br>
  </b><b>
  Business Environment and Trends</b></p>
<p style="TEXT-ALIGN: left">PMC is our primary business segment and continues to account for nearly 67% of our consolidated revenues in current and prior periods. PMC is purchased primarily by manufacturers of paper and paperboard.</p>
<p style="TEXT-ALIGN: left">According to data published by RISI, Inc., paper and paperboard production decreased severely during 2009 and 2008 due to the global recession. The decline was especially pronounced in North America and Europe driven mainly by declining demand for newsprint and certain printing and writing grades. Paper and paperboard production recovered somewhat during 2010, but global production still remains well below pre-recession levels. According to RISI, global production is expected to grow at an annual rate of 3.3% over the next five years, driven primarily by secular demand increases in the Asia and South America, with stabilization in the mature markets of Europe and North America.</p>
<p style="TEXT-ALIGN: left">Shifting demand for paper, across different paper grades as well as across geographical regions, triggered the elimination of a large number of older, less efficient machines in areas with significant established capacity, primarily in the mature markets of Europe and North America. At the same time newer, faster, and more efficient machines were being installed in areas of growing demand. Recent technological advances in PMC, while contributing to the papermaking efficiency of customers, have lengthened the useful life of many of our products and had an adverse impact on overall PMC demand. These factors help to explain why PMC revenue growth has not kept pace with the rate of growth in paper production.</p>
<p style="TEXT-ALIGN: left">Economic conditions over the past three years have had a significant impact on the structure of the global PMC industry. The ability to make and sell paper machines and PMC together could be perceived as providing a competitive advantage, and during the recent recession two of our competitors were acquired by paper machine builders. One of our competitors filed for bankruptcy and reorganized itself, reducing some of the indebtedness on its balance sheet. Some of the aggressive pricing practices that contributed to price erosion during the recession seem to have abated, as prices have remained relatively stable over the past few quarters. Future price erosion, especially in the mature markets of Europe and North America, remains a risk. We would expect such risk to be greatest were there to be any return to recession or general economic uncertainty, or if there is any future secular reduction in demand for certain printing and writing paper grades.</p>
<p style="TEXT-ALIGN: left">Our strategy for meeting the challenges and trends in this segment has been (a) to grow share in the mature markets of North America and Europe with new products and technology, (b) grow sales in the emerging markets of Asia and South America, (c) continue to create higher quality, higher performing products and services that deliver greater value to our customers, and (d) offset the effects of inflation through continuous productivity improvement.</p>
<p align=center>38</p>
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<p style="TEXT-ALIGN: left"><b>Review of Operations</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4 rowspan=2>Three months ended<br>

June 30,</td>
    <td align=center colspan=4 rowspan=2>Six months ended<br>

June 30,</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net sales</td>
    <TD align=right><B>$</B><b>158,577</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$153,662</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>326,473</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$300,399</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Gross profit</td>
    <td align=right><b>67,373</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>64,013</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>145,693</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>122,026</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>% of net sales</td>
    <td align=right><b>42.5</b></td>
    <td align=left><b>%</b></td>
    <td align=right>41.7</td>
    <td align=left>%</td>
    <td align=right><b>44.6</b></td>
    <td align=left><b>%</b></td>
    <td align=right>40.6</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Operating income</td>
    <td align=right><b>34,909</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>38,575</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>81,139</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>66,236</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left"><b>Net Sales</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>
    Changes in currency translation rates had the effect of increasing 2011 sales by $5.9 million.
  <li>
    Excluding the effect of changes in currency translation rates, 2011 sales decreased 0.6%.
  <li>
    The decrease in sales excluding currency effects was the result of lower sales volume in Asia and Europe, offset in part by higher sales volume in North America and Brazil.
  <li>
    Sales were negatively affected in Q2 by very strong sales at the end of Q1 2011, which resulted in weak sales in April.
  <li>
    2011 net sales increased by $1.2 million due to lower sales returns and allowances accruals, primarily due to the resolution of quality issues with our process belts product line. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>
    Changes in currency translation rates had the effect of increasing 2011 sales by $7.4 million.
  <li>
    Excluding the effect of changes in currency translation rates, 2011 sales increased 6.2%.
  <li>
    The overall increase in 2011 is due to uneven growth, with strong sales during Q1 and flat sales during Q2, which is attributable to the secular nature of the business affecting regional demand for our products.
  <li>
    2011 net sales increased by $2.2 million due to lower sales returns and allowances accruals, primarily due to the resolution of quality issues in our process belts and dryer fabrics product lines. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Gross Profit</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 gross profit was principally due to the net effect of the following:</p>
<ul>

  <li>
    $0.4 million increase due to higher sales.
  <li>
    $1.6 million increase due to a lower cost structure provided by the full effect of our restructuring and cost reduction activities in prior years.
  <li>
    $1.5 million increase due to lower machinery and equipment relocation costs.
  <li>
    $0.8 million decrease due to higher depreciation expense. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 gross profit was principally due to the net effect of the following:</p>
<ul>

  <li>
    $7.5 million increase due to higher sales.
  <li>
    $7.9 million increase due to a lower cost structure provided by the full effect of our restructuring and cost reduction activities in prior years.
  <li>
    $2.0 million increase due to higher levels of plant utilization partly due to the replenishment of inventory held for customers.
  <li>
    $1.0 million increase related to favorable geographic sales mix.
  <li>
    $5.6 million increase due to lower costs associated with PMC equipment relocation and idle capacity related to restructuring activities in 2010. </li>
</ul>
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<br>

<ul>
  <li>$1.1 million decrease due to higher depreciation expense.</li>
</ul>
<p style="TEXT-ALIGN: left"><b>Operating Income</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The decrease in 2011 operating income was principally due to the net effect of the following:</p>
<ul>

  <li>
    $3.4 million increase due to higher gross profit.
  <li>
    Salaries and social costs increased $1.7 million, of which $1.0 million was related to changes in foreign currency rates. The remaining increase was principally within selling expense due to higher sales.
  <li>
    Revaluation of nonfunctional currency assets and liabilities resulted in a loss of $1.7 million compared to a gain of $3.3 million in 2010. The revaluation losses were principally due to the strengthening euro and the resulting effects on nonfunctional currency trade receivables and payables.
  <li>
    Travel expense increased $0.6 million principally in selling expense, of which $0.3 million was due to changes in currency rates.
  <li>
    Bad debt expense increased $0.6 million.
  <li>
    Sale of a building provided a gain totaling $0.6 million in 2011. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 operating income was principally due to the net effect of the following:</p>
<ul>

  <li>
    $23.7 million increase due to higher gross profit.
  <li>
    $2.5 million increase due to lower restructuring costs, as our restructuring activities were substantially completed during 2010.
  <li>
    Salaries and social costs increased $3.0 million, of which $1.6 million was related to changes in foreign currency rates. The remaining increase was principally within selling expense due to higher sales.
  <li>
    Revaluation of nonfunctional currency assets and liabilities resulted in a loss of $3.2 million compared to a gain of $3.6 million in 2010. The revaluation losses were principally due to the strengthening euro and the resulting effects on nonfunctional currency trade receivables and payables.
  <li>
    Travel expense increased $1.3 million principally in selling expense, of which $0.5 million was due to changes in currency rates.
  <li>
    Bad debt expense increased $0.6 million.
  <li>
    Sale of two buildings provided a gain totaling $1.0 million in 2011. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Outlook</b></p>
<p style="TEXT-ALIGN: left">Sales during the second half of the year  should be roughly comparable to the first half. More generally, the global paper industry has now moved beyond the inventory restocking phase of the business cycle, and the long-term sectoral trend of incremental year-over-year growth seems once again to have taken hold. Since we are well-positioned in all of the growth segments of the global paper industry, this suggests, over the long run, a return to steady or slightly improving annual performance. The most likely source of downside risk to this outlook in the short- and medium-term is periodic consolidation in the paper industry, especially in Europe; the most likely source of upside potential is performance-driven market share gains in the growth segments of the global paper industry.</p>
<p style="TEXT-ALIGN: left"><b>Albany Door Systems Segment <br>
  Business Environment and Trends</b></p>
<p style="TEXT-ALIGN: left">ADS derives approximately 70% of its revenue from the sale of high-performance doors, with the balance derived from aftermarket parts and service which carry a higher profit margin. Geographically, approximately two-thirds of segment revenue comes from our European operations. Historically, sales volume in this segment has been tightly connected to gross domestic product, which is the principal driver of the change in sales from 2008 to 2010. Our priorities in this segment have been:</p>
<p align=center>40</p>
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<br>

<ul>

  <li>
    Acceleration of new product introduction, which represents a major source of competitive advantage
  <li>
    Expansion of our aftermarket business
  <li>
    <p>Geographic expansion </p>
  </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Review of Operations</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4>Three months ended<br>

June 30,</td>
    <td align=center colspan=4>Six months ended<br>

June 30,</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net sales</td>
    <TD align=right><B>$</B><b>45,393</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$33,792</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>90,521</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$67,547</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Gross profit</td>
    <td align=right><b>16,174</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>11,756</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>32,322</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>23,553</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>% of net sales</td>
    <td align=right><b>35.6</b></td>
    <td align=left><b>%</b></td>
    <td align=right>34.8</td>
    <td align=left>%</td>
    <td align=right><b>35.7</b></td>
    <td align=left><b>%</b></td>
    <td align=right>34.9</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Operating income</td>
    <td align=right><b>4,053</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>2,339</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>9,424</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>5,223</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left"><b>Net Sales</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>
    Changes in currency translation rates had the effect of increasing 2011 sales by $4.8 million.
  <li>
    Excluding the effect of changes in currency translation rates, 2011 sales increased 20.1%.
  <li>
    Sales of new products and aftermarket sales increased 37.0% and 30.6%, respectively.
  <li>
    New products sales increased 50.8% in Europe and 14.1% in North America.
  <li>
    Sales growth in all regions was driven by geographic expansion of our products, and a positive economic cycle. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>
    Changes in currency translation rates had the effect of increasing 2011 sales by $5.6 million.
  <li>
    Excluding the effect of changes in currency translation rates, 2011 sales increased 25.7%.
  <li>
    Adoption of authoritative guidance related to revenue recognition of multiple-element arrangements provided a one-time acceleration of deferred revenue totaling $1.8 million in 2011.
  <li>
    Sales of new products and aftermarket sales increased 40.5% and 24.4%, respectively.
  <li>
    New products sales increased 51.3% in Europe and 24.3% in North America.
  <li>
    Sales grew in all regions during the first of half of 2011, which was driven by the cyclical nature of our business in response to the continued positive economic environment in the regions where we operate our business, particularly in Germany.
  <li>
    New products sales were also higher due to geographic expansion in Europe and Asia and the successful introduction of new products during the first half of 2011. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Gross Profit</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 gross profit was principally due to the net effect of the following:</p>
<ul>

  <li>
    $2.2 million increase due to higher sales.
  <li>
    $2.2 million increase in profitability due to overall higher sales volume along with higher aftermarket sales, which carry a higher level of profitability. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 gross profit was principally due to the net effect of the following:</p>
<ul>

  <li>$6.8 million increase due to higher sales, of which $0.9 million was related to the adoption of the authoritative guidance for revenue recognition of multiple-element arrangements. </li>
</ul>
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<br>

<ul>

  <li>$2.2 million increase in profitability, principally during the second-quarter due to overall higher sales volume and higher aftermarket sales, which carry a higher level of profitability. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Operating Income</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 operating income was principally due to the following:</p>
<ul>

  <li>
    $4.4 million increase due to higher gross profit.
  <li>
    Salaries and social costs increased $1.4 million, of which $0.9 million was related to changes in foreign currency rates. The remaining increase was principally within selling expense due to higher sales.
  <li>
    Travel expense increased $0.3 million principally in selling expense, of which $0.1 million was due to changes in currency rates.
  <li>
    Bad debt expense increased $0.4 million. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 operating income was principally due to the following:</p>
<ul>

  <li>
    $8.8 million increase due to higher gross profit.
  <li>
    Salaries and social costs increased $2.3 million, of which $1.2 million was related to changes in foreign currency rates. The remaining increase was principally within selling expense due to higher sales.
  <li>
    Travel expense increased $0.4 million principally in selling expense, of which $0.1 million was due to changes in currency rates.
  <li>
    Bad debt expense increased $0.7 million. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Outlook</b></p>
<p style="TEXT-ALIGN: left">ADS operating results during the first half of 2011 suggests that this business has returned to pre-recession performance levels, driven by three major trends, each of which we believe to be sustainable through the second half of the year: economic growth in Germany, the growth of new product sales, and expansion of our aftermarket business.</p>
<p style="TEXT-ALIGN: left"><b>Engineered Fabrics Segment <br>
  Business Environment and Trends</b></p>
<p style="TEXT-ALIGN: left">EF manufactures products similar to PMC, but for customers in industries other than paper. The largest portion of revenue in this segment is derived from sales to the nonwovens industry, which includes the manufacture of diapers, personal care and household wipes. Other markets that are served by this segment are businesses adjacent to the paper industry, and manufacturers of tannery, textile and building products. Segment sales in the European and Pacific regions combined are almost at the same level as sales within the Americas.</p>
<p style="TEXT-ALIGN: left"><b>Review of Operations</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4>Three months ended<br>

June 30,</td>
    <td align=center colspan=4>Six months ended<br>

June 30,</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net sales</td>
    <TD align=right><B>$</B><b>20,600</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$21,032</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>41,186</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$40,144</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Gross profit</td>
    <td align=right><b>7,580</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>7,872</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>15,797</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>13,709</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>% of net sales</td>
    <td align=right><b>36.8</b></td>
    <td align=left><b>%</b></td>
    <td align=right>37.4</td>
    <td align=left>%</td>
    <td align=right><b>38.4</b></td>
    <td align=left><b>%</b></td>
    <td align=right>34.1</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Operating income</td>
    <td align=right><b>2,800</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>3,835</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>6,841</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>5,492</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p align=center>42</p>
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<br>

<p style="TEXT-ALIGN: left"><b>Net Sales</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>
    Changes in currency translation rates had the effect of increasing 2011 sales by $1.0 million.
  <li>
    Excluding the effect of changes in currency translation rates, 2011 sales decreased 6.9%.
  <li>
    The decrease in 2011 sales was principally due to higher sales volume of nonwoven products in North America offset completely by lower tannery sales in Europe.
  <li>
    Sales were relatively flat in all other EF product lines due lower demand in Europe and North America. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>
    Changes in currency translation rates had the effect of increasing 2011 sales by $1.2 million.
  <li>
    Excluding the effect of changes in currency translation rates, 2011 sales decreased 0.4%.
  <li>
    Sales trends in each product-line were consistent from Q1 to Q2 in 2011 with higher sales in nonwoven products offset by lower sales of tannery products, and relatively flat sales in our corrugators and fiber cement product- lines. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Gross Profit</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The decrease in 2011 gross profit is principally due to following:</p>
<ul>

  <li>
    $0.7 million decrease due to lower sales.
  <li>
    $0.5 million increase due to lower depreciation expense. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">The increase in 2011 gross profit is principally due to following:</p>
<ul>

  <li>
    $1.4 million increase due to lower depreciation expense.
  <li>
    $0.7 million increase in profitability due to prior year restructuring activities and process improvement initiatives. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Operating Income</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">2011 operating income decreased principally due to the following changes:</p>
<ul>

  <li>
    $0.3 million decrease due to lower gross profit.
  <li>
    Salaries and social costs increased $1.0 million, of which $0.6 million was related to changes in foreign currency rates.
  <li>
    Travel expense increased $0.2 million principally in selling expense, of which $0.1 million was due to changes in currency rates. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">2011 operating income increased principally due to the following changes:</p>
<ul>

  <li>$2.1 million increase due to higher gross profit.
  <li>$0.5 million increase due to lower restructuring costs, as our restructuring activities were substantially completed during 2010.
  <li>Salaries and social costs increased $0.8 million, of which $0.4 million was related to changes in foreign currency rates.
  <li>Travel expense increased $0.2 million principally in selling expense, of which $0.1 million was due to changes in currency rates. </li>
</ul>
<p align=center>43</p>
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<br>

<p style="TEXT-ALIGN: left"><b>Outlook</b></p>
<p style="TEXT-ALIGN: left">While Q2 2011 gross margins and operating income margin were weaker than in prior year, orders in Q2 2011 orders levels suggest that prospects for year-over-year performance improvement in Q3 are stronger than Q2 performance might otherwise indicate.</p>
<p style="TEXT-ALIGN: left"><b>Engineered Composites Segment <br>
  Business Environment and Trends</b></p>
<p style="TEXT-ALIGN: left">AEC provides custom-designed advanced composite structures based on proprietary technology to customers in the aerospace and defense industries. AEC&#146;s most significant customer is the SAFRAN Group, for whom we supply landing gear components for the Boeing 787 and outer guide vanes for the CFM-56 engine. AEC is currently developing for SAFRAN a family of composite parts, including fan blades and fan cases, to be incorporated into the CFM LEAP-X engine.</p>
<p style="TEXT-ALIGN: left">While SAFRAN is AEC&#146;s most significant customer and the LEAP-X engine our most significant program, we are also developing applications that will enable AEC to diversify from engine components and landing gear braces to other potentially significant airframe (both civilian and military) and land-based defense applications. The Company&#146;s goal is to grow AEC into a second core business by the end of this decade, primarily by using proprietary technology to develop new, high-value aerospace and defense applications that cannot be served effectively by conventional composites. AEC&#146;s unique, proprietary composites technologies provide opportunities to displace metal components with lower-weight, high-strength, and, in some cases, potentially high-temperature composite components. Achieving lower weight is the key to improving fuel efficiency, and is thus a critical performance requirement in the aerospace industry and driver of growth in aerospace composites.</p>
<p style="TEXT-ALIGN: left"><b>Review of Operations</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4>Three months ended<br>

June 30,</td>
    <td align=center colspan=4>Six months ended<br>

June 30,</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net sales</td>
    <TD align=right><B>$</B><b>10,504</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$10,870</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>21,976</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$19,511</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Gross profit</td>
    <td align=right><b>155</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(545</td>
    <td align=left>)</td>
    <td align=right><b>136</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(1,590</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=left>% of net sales</td>
    <td align=right><b>1.5</b></td>
    <td align=left><b>%</b></td>
    <td align=right>-5.0</td>
    <td align=left>%</td>
    <td align=right><b>0.6</b></td>
    <td align=left><b>%</b></td>
    <td align=right>-8.1</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Operating income</td>
    <td align=right><b>(1,144</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(1,989</td>
    <td align=left>)</td>
    <td align=right><b>(2,187</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(4,218</td>
    <td align=left>)</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left"><b>Net Sales</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>Net sales in 2011 were 3.4% lower than in 2010.
  <li>Sales were lower in 2011 due to lower sales of landing gear braces as a result of the temporary slow-down of Boeing&#146;s 787 program, which was offset in part by higher sales in LEAP-X and Joint Strike Fighter advanced composite components. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Net sales were affected by the following:</p>
<ul>

  <li>Net sales in 2011 grew 12.6% over 2010.
  <li>The increase in 2011 sales is principally due to the stronger sales during the first quarter with slightly weaker sales during Q2, as a result of the temporary slow-down of Boeing&#146;s 787 program. </li>
</ul>
<p align=center>44</p>
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<p style="TEXT-ALIGN: left"><b>Gross Profit</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">2011 gross profit included the following:</p>
<ul>

  <li>Lower sales had no significant impact.
  <li>$1.0 million increase due to higher levels of plant utilization.
  <li>$0.2 million decrease due to higher depreciation expense. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">2011 gross profit included the following:</p>
<ul>

  <li>$2.6 million increase due to higher sales and plant utilization related to higher production levels.
  <li>$0.4 million decrease due to higher depreciation expense.
  <li>$0.5 million decrease due to write-offs related to obsolete equipment and materials. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Operating Income</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">2011 operating income increased principally due to the following:</p>
<ul>

  <li>$0.7 million increase due to higher gross profit.
  <li>$0.1 million increase due to a reduction in bad debt reserve. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">2011 operating income increased principally due to the following:</p>
<ul>

  <li>$1.7 million increase due to higher gross profit.
  <li>$0.3 million increase due to a reduction in bad debt reserve. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Outlook</b></p>
<p style="TEXT-ALIGN: left">In the short term, we look for continued positive EBITDA performance in the second half of the year, with improving sales across a wide array of programs. In the medium term, we continue to look for significant growth, although the slope of that growth curve is uncertain and hinges in part on a number of programs still under development. The most significant of these programs include: the composite substrate for a new engine nozzle being developed by Boeing; a variety of potential airframe applications for both fixed-wing aircraft and rotorcraft; and a family of secondary engine parts, such as outer guide vanes, acoustic panels, and spinners, for a variety of aircraft engines and engine manufacturers.</p>
<p style="TEXT-ALIGN: left"><b>PrimaLoft</b><b><sup>&#174; </sup></b><b>Products Segment <br>
  Business Environment and Trends</b></p>
<p style="TEXT-ALIGN: left">The PrimaLoft<sup>&#174; </sup>Products segment includes sales of high performance insulation and yarns for outdoor clothing, home furnishings and sleeping bags. Approximately two-thirds of sales are derived from the North American market. Top-line growth in this segment is affected by the health of consumer apparel markets in North America and Europe, and the severity and harshness of the winter weather in those markets.</p>
<p align=center>45</p>
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<p style="TEXT-ALIGN: left"><b>Review of Operations</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4>Three months ended <br>
      June 30,
    </td>
    <td align=center colspan=4>Six months ended<br>

June 30,</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td colspan=2 align=right width="10%">

<b>2011</b></td>
    <td colspan=2 align=right width="10%">2010</td>
    <td colspan=2 align=right width="10%"><b>2011</b></td>
    <td colspan=2 align=right width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net sales</td>
    <TD align=right><B>$</B><b>8,941</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$8,094</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>15,709</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$13,722</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Gross profit</td>
    <td align=right><b>4,786</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>4,473</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>8,443</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>8,072</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>% of net sales</td>
    <td align=right><b>53.5</b></td>
    <td align=left><b>%</b></td>
    <td align=right>55.3</td>
    <td align=left>%</td>
    <td align=right><b>53.7</b></td>
    <td align=left><b>%</b></td>
    <td align=right>58.8</td>
    <td align=left>%</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Operating income</td>
    <td align=right><b>3,165</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>2,926</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>5,076</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>4,995</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left"><b>Net Sales</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<ul>

  <li>Changes in currency translation rates had the effect of increasing 2011 sales by $0.3 million.
  <li>Excluding the effect of changes in currency translation rates, 2011 sales increased 6.1%.
  <li>2011 sales increased principally due to higher outdoor product sales, offset in part by lower military product sales. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<ul>

  <li>Changes in currency translation rates had the effect of increasing 2011 sales by $0.3 million.
  <li>Excluding the effect of changes in currency translation rates, 2011 sales increased 12.0%.
  <li>2011 sales increased principally due to strong demand for outdoor clothing, driven by cold weather in North America and Europe along with the successful introduction of new product-lines. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Gross Profit</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Gross profit in 2011 was relatively flat with 2010 principally due to the following:</p>
<ul>

  <li>2011 gross profit was $0.3 million higher due to higher sales.
  <li>Profitability was not significantly affected by changes in material and labor costs during the quarter. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Gross profit in 2011 was relatively flat with 2010 principally due to the following:</p>
<ul>

  <li>2011 gross profit was $1.0 million higher due to higher sales.
  <li>2011 profitability was reduced by $0.6 million due to higher toll-manufacturing expenses, driven-by higher material and labor costs, particularly in Asia during Q1. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Operating Income</b></p>
<p style="TEXT-ALIGN: left"><b><i>Three month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Operating income was slightly higher in 2011 principally due to the following:</p>
<ul>

  <li>Higher gross profit totaling $0.3 million.
  <li>$0.1 million in higher selling and administration expenses. </li>
</ul>
<p style="TEXT-ALIGN: left"><b><i>Six month comparison</i></b></p>
<p style="TEXT-ALIGN: left">Operating income was slightly higher in 2011 principally due to the following:</p>
<ul>

  <li>Higher gross profit totaling $0.4 million.
  <li>$0.3 million in higher selling and administration expenses. </li>
</ul>
<p style="TEXT-ALIGN: left"><b>Outlook</b></p>
<p style="TEXT-ALIGN: left">Operating results for 2011 in our PrimaLoft<sup>&#174;</sup> Products segment suggests the prospect of continued improvement in year-over-year performance, while considering that the second half of the year for this business is always much weaker than the first half.</p>
<p align=center>46</p>
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<p style="TEXT-ALIGN: left"><b>Liquidity and Capital Resources</b></p>
<p style="TEXT-ALIGN: left"><b>Cash Flow Summary</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td align=left>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=4>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4 rowspan=2>Six months ended<br>

June 30,</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net income</td>
    <TD align=right><B>$</B><b>25,495</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$13,475</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;&nbsp;&nbsp;&nbsp;Changes in working capital</td>
    <td align=right><b>(7,702</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(1,729</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;&nbsp;&nbsp;&nbsp;Other operating items</td>
    <td align=right><b>34,005</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>49,076</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net cash provided by operating activities</td>
    <td align=right><b>51,798</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>60,822</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net cash (used in)/provided by investing activities</td>
    <td align=right><b>(12,786</b></td>
    <td align=left><b>)</b></td>
    <td align=right>31,539</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net cash (used in) financing activities</td>
    <td align=right><b>(14,511</b></td>
    <td align=left><b>)</b></td>
    <td align=right>(70,886</td>
    <td align=left>)</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Effect of exchange rate changes on cash and cash</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>equivalents</td>
    <td align=right><b>10,244</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(16,268</td>
    <td align=left>)</td>
  </tr>

  <tr>

    <td colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Increase in cash and cash equivalents</td>
    <td align=right><b>34,745</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>5,207</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Cash and cash equivalents at beginning of year</td>
    <td align=right><b>122,301</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>97,466</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Cash and cash equivalents at end of period</td>
    <TD align=right><B>$</B><b>157,046</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$102,673</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=5>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left">Below is our discussion of cash flow activities comparing the six-months ending June 30, 2011 to the same period of 2010:</p>
<p style="TEXT-ALIGN: left"><b>Operating activities</b></p>
<p style="TEXT-ALIGN: left">The decrease in cash provided by operating activities in 2011, as compared to the same period of 2010, was principally due to an increase in inventories, offset partially by an increase in net income. Depreciation and amortization expense totaled $33.0 million in 2011 and $31.5 million in 2010. For the full year of 2011, we expect our depreciation and amortization to total $65.0 million.</p>
<p style="TEXT-ALIGN: left">Changes in working capital include changes in inventories and accounts receivable. Inventories increased $17.3 million in 2011 and decreased $12.0 million in 2010. Accounts receivable decreased by $6.9 million in 2011 and increased $0.3 million in 2010. The decrease in accounts receivable during 2011 is the result of successful collection effects, primarily in our PMC segment. The increase in inventory during 2011 was mostly in the PMC segment as high production levels replenished inventory we are required to hold for customers. The decrease in inventory and minor increase in accounts receivable during 2010 were due in part to lower sales and our company-wide initiatives to reduce working capital.</p>
<p style="TEXT-ALIGN: left">Cash payments made in connection with restructuring activities, primarily employee severance payments, were $2.0 million in 2011 and $14.6 million in 2010. We expect to pay substantially all of our remaining $3.5 million restructuring accrual as of June 30, 2011 by the end of this year.</p>
<p style="TEXT-ALIGN: left">Cash used for incentive compensation and profit sharing in 2011 was $11.3 million, compared to $7.6 million in 2010. The increase was primarily due to the Company&#146;s decision in 2011 to fund profit-sharing payouts totaling $2.4 million with cash instead of shares.</p>
<p style="TEXT-ALIGN: left">Cash payments for income taxes were $7.3 million in 2011 and $4.0 million in 2010. We expect to make payments for income taxes of $15.0 million for the full year.</p>
<p style="TEXT-ALIGN: left">We purchased foreign currency options for $0.3 million in 2011 and $0.6 million in 2010. The options serve as part of our strategy to mitigate volatility in operating cash flows and EBITDA caused by the effect of changes in foreign currency rates on sales and costs denominated in currencies other than the U.S. dollar.</p>
<p align=center>47</p>
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<p style="TEXT-ALIGN: left"><b>Investing Activities</b></p>
<p style="TEXT-ALIGN: left">Capital expenditures, including purchased software, were $15.6 million during 2011 and $15.9 million in 2010. Capital expenditures in our PMC segment amounted to $6.5 million and $9.4 million in 2011 and 2010, respectively, while capital expenditures in our AEC business amounted to $5.5 million and $3.5 million for the same periods. We estimate capital spending for the full year of 2011 to be approximately $40.0 million.</p>
<p style="TEXT-ALIGN: left">We actively manage our global portfolio of real estate that is available for sale due to prior restructuring activities. In 2011 we sold two properties located in the United States for $2.9 million in cash proceeds.</p>
<p style="TEXT-ALIGN: left">During the first quarter of 2010, we acquired certain assets and liabilities of Envico Ltd., a New Zealand-based manufacturer and distributor of high-performance doors, for approximately $1.9 million.</p>
<p style="TEXT-ALIGN: left">During the second quarter of 2010, we liquidated all holdings in life insurance policies for approximately $49.3 million. This transaction led to a discrete tax charge of $9.4 million. Also during this quarter, we repatriated funds held by a subsidiary that resulted in a discrete tax benefit of $1.8 million. The proceeds from both of these transactions were used to pay down our revolving debt prior to refinancing and reduce our overall leverage. In addition, under the terms of the new agreement, the impact of cash and the cash surrender value of life insurance policies was limited to $65.0 million for the purposes of calculating net debt in the leverage ratio.</p>
<p style="TEXT-ALIGN: left"><b>Financing Activities</b></p>
<p style="TEXT-ALIGN: left">Cash dividends paid were $7.5 million during 2011 and $7.4 million during 2010. Dividends have been declared each quarter since the fourth quarter of 2001. Decisions with respect to whether a dividend will be paid, as well as the amount of the dividend, if applicable, are made by the Board of Directors each quarter. To the extent the Board declares cash dividends in the future, we would expect to pay such dividends out of operating cash flows. Future cash dividends will depend on debt covenants and on the Board&#146;s assessment of our ability to generate sufficient cash flows.</p>
<p style="TEXT-ALIGN: left"><b>Capital Resources</b></p>
<p style="TEXT-ALIGN: left">We finance our business activities primarily with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below. Our subsidiaries outside of the United States may also maintain working capital lines with local banks, but borrowings under such local facilities tend not to be significant.</p>
<p style="TEXT-ALIGN: left">We have a $390.0 million five-year revolving credit agreement that was executed during 2010. During 2011 we paid down outstanding debt under this agreement of $7.0 million, leaving $230.0 million outstanding as of June 30, 2011. In addition, as of June 30, 2011, $53.2 million in letters of credit were outstanding under this agreement, in respect of preliminary assessments for income tax contingencies. Income tax contingencies are more fully described in Note 6 of Notes to Consolidated Financial Statements.</p>
<p style="TEXT-ALIGN: left">The applicable interest rate for borrowings under the agreement is LIBOR plus a spread (all-in), based on our leverage ratio at the time of borrowing. Spreads under the 2010 agreement are higher than under the old agreement, reflecting changes in market spreads. The all-in average interest rate was 3.56% in 2011 and 1.23% in 2010.</p>
<p align=center>48</p>
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<p style="TEXT-ALIGN: left">In connection with our 2010 credit agreement, we entered into interest rate swap agreements that have the effect of fixing the LIBOR portion of the effective interest rate (before addition of the spread) on $105.0 million of the indebtedness drawn under the credit agreement at the rate of 2.04% until these swap agreements expire on July 16, 2015. Under the terms of hedging transactions, we pay the fixed rate of 2.04% and the counterparties pay a floating rate based on the three-month LIBOR rate at each quarterly calculation date. On June 30, 2011, the applicable spread was 250 basis points, yielding an effective annual rate of 4.54%.</p>
<p style="TEXT-ALIGN: left">We have a $150.0 million borrowing from the Prudential Insurance Company of America, for which the agreement was amended and restated during 2010. The principal is due in three installments of $50.0 million each in 2013, 2015, and 2017, and the interest rate is fixed at 6.84%.</p>
<p style="TEXT-ALIGN: left">We also have $28.4 million principal amount of 2.25% convertible notes outstanding that were issued March 2006. The notes are convertible upon the occurrence of specified events, as described in Note 10 of Notes to Consolidated Financial Statements.</p>
<p style="TEXT-ALIGN: left">Reflecting, in each case, the effect of subsequent amendments to each agreement, we are currently required to maintain a leverage ratio of not greater than 3.50 to 1.00 and to maintain a minimum interest coverage of 3.00 to 1.00 under the new credit agreement and Prudential agreement.</p>
<p style="TEXT-ALIGN: left">As of June 30, 2011, our leverage ratio was 2.16 to 1.00 and our interest coverage ratio was 7.96 to 1.00. We may purchase our Common Stock or pay dividends to the extent our leverage ratio remains at or below 3.50 to 1.00, and may make acquisitions with cash provided our leverage ratio would not exceed 3.00 to 1.00 after giving pro forma effect to the acquisition. As of June 30, 2011, we were in compliance with the covenants of our debt and credit agreements.</p>
<p style="TEXT-ALIGN: left">Our ability to borrow additional amounts under the credit agreement is conditional upon the absence of any defaults, as well as the absence of any material adverse change. Based on the maximum leverage ratio and our consolidated EBITDA (as defined in the new agreement), and without modification to any other credit agreements, as of June 30, 2011, we would have been able to borrow an additional $106.8 million under our credit agreements.</p>
<p style="TEXT-ALIGN: left"><b>Off-Balance Sheet Arrangements</b></p>
<p style="TEXT-ALIGN: left">As of June 30, 2011, we have no off-balance sheet arrangements required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K.</p>
<p style="TEXT-ALIGN: left"><b>Recent Accounting Pronouncements</b></p>
<p style="TEXT-ALIGN: left">In May 2011, the FASB amended authoritative guidance related to common fair value measurements and disclosure requirements. This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. This pronouncement changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements, and is effective for reporting periods beginning on or after December 15, 2011. The adoption of this guidance is not expected to have a material effect on our financial statements.</p>
<p style="TEXT-ALIGN: left">In June 2011, the FASB issued guidance that eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders&#146; equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this guidance concerns presentation and disclosure only and will not have a material impact on our financial statements.</p>
<p align=center>49</p>
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<p style="TEXT-ALIGN: left"><b>Non-GAAP Measures</b></p>

<p><font face="Arial, Helvetica, sans-serif" size="2">This Form 10-Q contains certain
items, such as earnings before interest, taxes, depreciation and amortization (EBITDA),
EBITDA excluding restructuring charges and foreign currency revaluation effects, sales
excluding currency effects, effective income tax rate excluding discrete tax items, net
debt, and certain income and expense items on a per share basis, that could be considered
non-GAAP financial measures. Such items are provided because we believe that, when
presented together with the GAAP items to which they relate, they provide additional
useful information to investors regarding our operational performance. </font></p>
<p><font face="Arial, Helvetica, sans-serif" size="2">The effect of changes in currency
translation rates is calculated by converting amounts reported in local currencies into
U.S. dollars at the exchange rate of a prior period. That amount is then compared to the
U.S. dollar amount reported in the current period.  Presenting increases or decreases in
sales, after currency effects are excluded, can give us and investors insight into
underlying sales trends. </font></p>
<p><font face="Arial, Helvetica, sans-serif" size="2">We calculate our effective tax excluding discrete tax items by
removing discrete tax items from total Income tax expense, then dividing that result by
Income before tax.   Discrete tax items may include the effect of certain events, such as
the reversal of reserves related to potential income tax exposures that have been
resolved, that management believes to be less indicative of our ongoing business
operations. </font></p>
<p><font face="Arial, Helvetica, sans-serif" size="2">We calculate EBITDA by adding
Interest expense net, Income taxes, Depreciation, and Amortization to Net income.  We
calculate EBITDA excluding restructuring and foreign currency effects by adding or
subtracting losses or gains attributable to [GAAP] restructuring and those attributable
to revaluation of certain working capital assets due to changes in exchange rates.   We
believe that both measures  provide useful information to investors as  potential
indicators of the strength and performance of our ongoing business operations. While
depreciation and amortization are operating costs under GAAP, they are non-cash expenses
equal to current period allocation of costs associated with capital and other long- lived
investments made in prior periods. While we will continue to make capital and other
investments in the future, it is currently in the process of concluding a period of
significant investment in plant, equipment, and software. Depreciation and amortization
associated with these investments have a significant impact on our net income. EBITDA is
also a calculation commonly used by investors and analysts to evaluate and compare the
periodic and future operating performance and value of companies. EBITDA, as defined by
us, may not be similar to EBITDA measures of other companies. EBITDA may not be
considered a measurement under GAAP, and should be considered in addition to, but not as
a substitute for, the information contained in our statements of operations. </font></p>
<p align=center>50</p>
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<p style="TEXT-ALIGN: left">The following table contains the calculation of EBITDA and EBITDA excluding restructuring charges and foreign currency revaluation effects:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=center colspan=4 rowspan=2>Three Months Ended<br>

June 30,</td>
    <td align=center colspan=4 rowspan=2>Six Months Ended<br>

June 30,</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
    <td align=right colspan=2 width="10%"><b>2011</b></td>
    <td align=right colspan=2 width="10%">2010</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=8>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Net income</td>
    <TD align=right><B>$</B><b>8,762</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$7,877</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>25,495</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$13,475</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Interest expense, net</td>
    <td align=right><b>4,786</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>3,882</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>9,562</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>7,707</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Income tax expense</td>
    <td align=right><b>5,359</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>15,102</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>10,668</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>17,729</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Depreciation</td>
    <td align=right><b>14,393</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>13,309</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>28,526</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>27,250</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Amortization</td>
    <td align=right><b>2,312</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>2,276</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>4,489</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>4,230</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>EBITDA</td>
    <TD align=right><B>$</B><b>35,612</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$42,446</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>78,740</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$70,391</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Restructuring and other, net</td>
    <td align=right><b>2,092</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>689</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>2,278</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>2,081</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Foreign currency revaluation losses (gains)</td>
    <td align=right><b>1,530</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(6,739</td>
    <td align=left>)</td>
    <td align=right><b>7,381</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>(9,507</td>
    <td align=left>)</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>EBITDA excluding restructuring charges and</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>foreign currency revaluation</td>
    <TD align=right><B>$</B><b>39,234</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$36,396</td>
    <td align=left>&nbsp;</td>
    <TD align=right><B>$</B><b>88,399</b></td>
    <td align=left>&nbsp;</td>
    <td align=right>$62,965</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=9>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Percentage increase in 2011</td>
    <td align=right><b>7.8</b></td>
    <td align=left><b>%</b></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=right><b>40.4</b></td>
    <td align=left><b>%</b></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=3>
      <hr noshade size=1>

</td>
    <td colspan=2>
      <hr noshade size=1>

</td>
    <td colspan=2>
      <hr noshade size=1>

</td>
    <td colspan=2>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left">We disclose certain income and expense items on a per share basis. We believe that such disclosures provide important insight of the underlying quarterly earnings and are financial performance metrics commonly used by investors. We calculate the per share amount for items included in continuing operations by using the effective tax rate utilized during the applicable reporting period and the weighted average number of shares outstanding for the period.</p>
<p style="TEXT-ALIGN: left">The following tables show the earnings per share effect of certain income and expense items:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td><b>(USD in thousands, except per share amounts)</b></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=5>
      <hr noshade size=1>

</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right><b>Pre tax</b><br>

<b>Amounts</b></td>
    <td align=right><b>Tax</b><br>

<b>Effect</b></td>
    <td align=right><b>After tax</b><br>

<b>Effect</b></td>
    <td align=right><b>Shares</b><br>

<b>Outstanding</b></td>
    <td align=right><b>Per Share</b><br>

<b>Effect</b></td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Three Months Ended June 30, 2011:</b></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Foreign currency revaluation losses</b></td>
    <TD align=right><B>$</B><b>1,530</b></td>
    <TD align=right><B>$</B><b>505</b></td>
    <TD align=right><B>$</B><b>1,025</b></td>
    <td align=right><b>31,263</b></td>
    <TD align=right><B>$</B><b>0.03</b></td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Restructuring and other, net</b></td>
    <td align=right><b>2,092</b></td>
    <td align=right><b>690</b></td>
    <td align=right><b>1,402</b></td>
    <td align=right><b>31,263</b></td>
    <td align=right><b>0.04</b></td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Income tax adjustments</b></td>
    <td align=left>&nbsp;</td>
    <td align=right><b>659</b></td>
    <td align=right><b>659</b></td>
    <td align=right><b>31,263</b></td>
    <td align=right><b>0.02</b></td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td>
      <hr noshade size=1>

</td>
    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Three Months Ended June 30, 2010:</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Foreign currency revaluation gain</td>
    <td align=right>$6,739</td>
    <td align=right>$2,197</td>
    <td align=right>$4,542</td>
    <td align=right>31,058</td>
    <td align=right>$0.15</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Restructuring and other, net</td>
    <td align=right>689</td>
    <td align=right>225</td>
    <td align=right>464</td>
    <td align=right>31,058</td>
    <td align=right>0.01</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Income tax adjustments</td>
    <td align=left>&nbsp;</td>
    <td align=right>7,632</td>
    <td align=right>7,632</td>
    <td align=right>31,058</td>
    <td align=right>0.25</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td>
      <hr noshade size=1>

</td>
    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p align=center>51</p>
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<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td><b>(USD in thousands, except per share amounts)</b></td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right rowspan=2><b>Pre tax</b><br>

<b>Amounts</b></td>
    <td align=right rowspan=2><b>Tax</b><br>

<b>Effect</b></td>
    <td align=right rowspan=2><b>After tax</b><br>

<b>Effect</b></td>
    <td align=right rowspan=2><b>Shares</b><br>

<b>Outstanding</b></td>
    <td align=right rowspan=2><b>Per Share</b><br>

<b>Effect</b></td>
  </tr>

  <tr valign=bottom>

    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=5>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Six Months Ended June 30, 2011:</b></td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Foreign currency revaluation losses</b></td>
    <TD align=right><B>$</B><b>7,381</b></td>
    <TD align=right><B>$</B><b>2,436</b></td>
    <TD align=right><B>$</B><b>4,945</b></td>
    <td align=right><b>31,243</b></td>
    <TD align=right><B>$</B><b>0.16</b></td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Restructuring and other, net</b></td>
    <td align=right><b>2,278</b></td>
    <td align=right><b>752</b></td>
    <td align=right><b>1,526</b></td>
    <td align=right><b>31,243</b></td>
    <td align=right><b>0.05</b></td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Income tax adjustments</b></td>
    <td align=left>&nbsp;</td>
    <td align=right><b>1,378</b></td>
    <td align=right><b>1,378</b></td>
    <td align=right><b>31,243</b></td>
    <td align=right><b>0.04</b></td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td>
      <hr noshade size=1>

</td>
    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Six Months Ended June 30, 2010:</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Foreign currency revaluation gain</td>
    <td align=right>$9,507</td>
    <td align=right>$3,099</td>
    <td align=right>$6,408</td>
    <td align=right>31,001</td>
    <td align=right>$0.21</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Restructuring and other, net</td>
    <td align=right>2,081</td>
    <td align=right>678</td>
    <td align=right>1,403</td>
    <td align=right>31,001</td>
    <td align=right>0.05</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Income tax adjustments</td>
    <td align=left>&nbsp;</td>
    <td align=right>7,577</td>
    <td align=right>7,577</td>
    <td align=right>31,001</td>
    <td align=right>0.24</td>
  </tr>

  <tr>

    <td>
      <hr noshade size=1>

</td>
    <td>
      <hr noshade size=1>

</td>
    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p style="TEXT-ALIGN: left">We define net debt as total debt minus cash. We view net debt, a non-GAAP financial measure, as a measure of our ability to reduce debt, add to cash balances, pay dividends, repurchase stock, and fund investing and financing activities.</p>
<p style="TEXT-ALIGN: left">The following table contains the calculation of net debt:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
    <td align=center></td>
  </tr>

  <tr valign=bottom>

    <td>(USD in thousands)</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
    <td align=center>&nbsp;</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=3>
      <hr noshade size=1>

</td>
  </tr>

  <tr>

    <td align=center colspan=4>&nbsp;</td>
  </tr>



  <tr valign=bottom>

    <td align=center>&nbsp;</td>
    <td align=right width="15%">June 30,<br>

2011</td>
    <td align=right width="15%">March 31,<br>

2011</td>
    <td align=right width="15%">December 31,<br>

2010</td>
  </tr>

  <tr>

    <td align=center>
      <hr noshade size=1>

</td>
    <td align=center colspan=3>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Notes and loans payable</td>
    <td align=right>$1,246</td>
    <td align=right>$2,227</td>
    <td align=right>$1,587</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Current maturities of long-term debt</td>
    <td align=right>12</td>
    <td align=right>12</td>
    <td align=right>12</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Long-term debt</td>
    <td align=right>417,012</td>
    <td align=right>416,827</td>
    <td align=right>423,647</td>
  </tr>

  <tr>

    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Total debt</b></td>
    <td align=right><b>418,270</b></td>
    <td align=right><b>419,066</b></td>
    <td align=right><b>425,246</b></td>
  </tr>

  <tr>

    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Cash</td>
    <td align=right>157,046</td>
    <td align=right>137,518</td>
    <td align=right>122,301</td>
  </tr>

  <tr>

    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left><b>Net debt</b></td>
    <TD align=right><B>$</B><b>261,224</b></td>
    <TD align=right><B>$</B><b>281,548</b></td>
    <TD align=right><B>$</B><b>302,945</b></td>
  </tr>

  <tr>

    <td colspan=4>
      <hr noshade size=1>

</td>
  </tr>
</table>


<p align=center>52</p>
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<p style="TEXT-ALIGN: left"><b><a name="p53"></a>Item 3. Quantitative and Qualitative Disclosures about Market Risk</b></p>
<p style="TEXT-ALIGN: left">For discussion of our exposure to market risk, refer to &#147;Quantitative and Qualitative Disclosures About Market Risk&#148; under Item 7A of form 10-K, which is included as an exhibit to this Form 10-Q.</p>
<p style="TEXT-ALIGN: left"><b><a name="p53a"></a>Item 4. Controls and Procedures</b></p>
<p style="TEXT-ALIGN: left">a) Disclosure controls and procedures.</p>

<p style="TEXT-ALIGN: left">The principal executive officers and principal
financial officer, based on their evaluation of disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this Quarterly Report on Form 10-Q, have concluded
that the Company&#146;s disclosure controls and procedures are effective for
ensuring that information required to be disclosed in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission&#146;s rules and forms. Disclosure controls and procedures, include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in filed or submitted reports is accumulated and
communicated to the Company&#146;s management, including its principal executive
officer and principal financial officer as appropriate, to allow timely
decisions regarding required disclosure.</p>
<p style="TEXT-ALIGN: left">(b) Changes in internal control over financial reporting.</p>
<p style="TEXT-ALIGN: left">In the second quarter of 2011, the Company completed the cutover of its Eurasian operations to SAP, substantially completing the SAP implementation project. Except for that change, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to have, a material effect on our internal controls over financial reporting.</p>
<p align=center>53</p>
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<p style="TEXT-ALIGN: center"><b>PART II &#150; OTHER INFORMATION</b></p>
<p style="TEXT-ALIGN: left"><b><a name="p54"></a>Item 1. LEGAL PROCEEDINGS</b></p>
<p style="TEXT-ALIGN: left"><b>Asbestos Litigation</b></p>
<p style="TEXT-ALIGN: left">Albany International Corp. is a defendant in suits brought in various courts in the United States by plaintiffs who allege that they have suffered personal injury as a result of exposure to asbestos-containing products that we previously manufactured. We produced asbestos-containing paper machine clothing synthetic dryer fabrics marketed during the period from 1967 to 1976 and used in certain paper mills. Such fabrics generally had a useful life of three to twelve months.</p>
<p style="TEXT-ALIGN: left">We were defending 4,714 claims as of July 25, 2011. This compares with 4,799 claims as of April 18, 2011, 5,158 claims as of February 11, 2011, 5,170 claims as of October 29, 2010, and 7,343 claims as of July 23, 2010. These suits allege a variety of lung and other diseases based on alleged exposure to products that we previously manufactured.</p>
<p style="TEXT-ALIGN: left">The following table sets forth the number of claims filed, the number of claims settled, dismissed, or otherwise resolved, and the aggregate settlement amount during the periods presented:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="2" border=1 width="80%" align="center">



  <tr valign=middle>
    <td align=center><i>Year ended</i><br>

<i>December</i><br>

<i>31,</i></td>
    <td align=right><i>Opening</i><br>

<i>Number</i><br>

<i>of Claims</i></td>
    <td align=right><i>Claims Dismissed,</i><br>

<i>Settled, or</i><br>

<i>Resolved</i></td>


    <td align=right><i>New Claims</i></td>
    <td align=right><i>Closing</i><br>

<i>Number of</i><br>

<i>Claims</i></td>
    <td align=right><i>Amounts Paid</i><br>

<i>(thousands)</i><br>

<i>to Settle or</i><br>

<i>Resolve ($)</i></td>
  </tr>







  <tr valign=bottom>

    <td align=left><i>2005</i></td>
    <td align=right><i>29,411</i></td>
    <td align=right><i>6,257</i></td>
    <td align=right><i>1,297</i></td>
    <td align=right><i>24,451</i></td>
    <td align=right><i>504</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2006</i></td>
    <td align=right><i>24,451</i></td>
    <td align=right><i>6,841</i></td>
    <td align=right><i>1,806</i></td>
    <td align=right><i>19,416</i></td>
    <td align=right><i>3,879</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2007</i></td>
    <td align=right><i>19,416</i></td>
    <td align=right><i>808</i></td>
    <td align=right><i>190</i></td>
    <td align=right><i>18,798</i></td>
    <td align=right><i>15</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2008</i></td>
    <td align=right><i>18,798</i></td>
    <td align=right><i>523</i></td>
    <td align=right><i>110</i></td>
    <td align=right><i>18,385</i></td>
    <td align=right><i>52</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2009</i></td>
    <td align=right><i>18,385</i></td>
    <td align=right><i>9,482</i></td>
    <td align=right><i>42</i></td>
    <td align=right><i>8,945</i></td>
    <td align=right><i>88</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2010</i></td>
    <td align=right><i>8,945</i></td>
    <td align=right><i>3,963</i></td>
    <td align=right><i>188</i></td>
    <td align=right><i>5,170</i></td>
    <td align=right><i>159</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><b><i>2011 to date</i></b></td>
    <td align=right><b><i>5,170</i></b></td>
    <td align=right><b><i>504</i></b></td>
    <td align=right><b><i>48</i></b></td>
    <td align=right><b><i>4,714</i></b></td>
    <td align=right><b><i>1,111</i></b></td>
  </tr>


</table>


<p style="TEXT-ALIGN: left">We anticipate that additional claims will be filed against the Company and related companies in the future, but are unable to predict the number and timing of such future claims. These suits typically involve claims against from twenty to more than two hundred defendants, and many complaints fail to identify the plaintiffs&#146; work history or the nature of the plaintiffs&#146; alleged exposure to our products. Pleadings and discovery responses in cases in which work histories have been provided indicate claimants with paper mill exposure in approximately 15% of the total claims filed against the Company to date, and only a portion of those claimants have alleged time spent in a paper mill to which we are believed to have supplied asbestos-containing products.</p>
<p style="TEXT-ALIGN: left">The significant increase in the number of dismissed claims during 2009 and early 2010 was in large part the result of changes in the administration of claims assigned to the multidistrict litigation panel of the federal district courts (the &#147;MDL&#148;). As of July 25, 2011, 448 claims remained against the Company in the MDL. This compares to 12,758 claims that were pending at the MDL as of February 6, 2009.</p>
<p style="TEXT-ALIGN: left">With respect to claims remaining at the MDL, future discovery may yield more relevant information regarding work histories and the basis, if any, for a plaintiff&#146;s claim against the Company. The Company does not currently believe a meaningful estimate can be made regarding the range of possible loss with respect to the claims remaining at the MDL, although this conclusion could change as the MDL&#146;s efforts to advance resolution of these claims progresses.</p>
<p align=center>54</p>
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<p style="TEXT-ALIGN: left">As of July 25, 2011, the remaining 4,266 claims
pending against the Company were pending in a number of jurisdictions other than
the MDL. Pleadings and discovery responses in those cases in which work
histories have been provided indicate claimants with paper mill exposure in
approximately 25% of claims reported, and only a portion of those claimants have
alleged time spent in a paper mill to which we are believed to have supplied
asbestos-containing products. For these reasons, we expect the percentage of
these remaining claimants able to demonstrate time spent in a paper mill to
which we supplied asbestos-containing products during a period in which our
asbestos-containing products were in use to be considerably lower than the total
number of pending claims. Detailed exposure and disease information sufficient
meaningfully to estimate a range of possible loss of a particular claim is
typically not available until late in the discovery process, and often not until
a trial date is imminent and a settlement demand has been received. For these
reasons, we do not believe a meaningful estimate can be made regarding the range
of possible loss with respect to these remaining claims.</p>

<p style="TEXT-ALIGN: left">It is our position, and the position of other paper
machine clothing defendants, that there was insufficient exposure to asbestos
from any paper machine clothing products to cause asbestos-related injury to any
plaintiff. Furthermore, asbestos contained in our synthetic products was
encapsulated in a resin-coated yarn woven into the interior of the fabric,
further reducing the likelihood of fiber release. While we believe we have
meritorious defenses to these claims, we have settled certain of these cases for
amounts we consider reasonable given the facts and circumstances of each case.
Our insurer, Liberty Mutual, has defended each case and funded settlements under
a standard reservation of rights. As of July 25, 2011, we had resolved, by means
of settlement or dismissal, 35,995 claims. The total cost of resolving all
claims was $8.116 million. Of this amount, almost 100% was paid by our insurance
carrier. The Company has approximately $130 million in confirmed insurance
coverage that should be available with respect to current and future asbestos
claims, as well as additional insurance coverage that we should be able to
access.</p>
<p style="TEXT-ALIGN: left">Brandon Drying Fabrics, Inc. (&#147;Brandon&#148;), a subsidiary of Geschmay Corp., which is a subsidiary of the Company, is also a separate defendant in many of the asbestos cases in which Albany is named as a defendant. Brandon was defending against 7,877 claims as of July 25, 2011. This compares with 7,876 claims as of April 18, 2011, 7,868 claims as of February 11, 2011, 7,869 claims as of October 28, 2010, and 7,907 claims as of July 23, 2010.</p>
<p style="TEXT-ALIGN: left">The following table sets forth the number of claims filed, the number of claims settled, dismissed, or otherwise resolved, and the aggregate settlement amount during the periods presented:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="2" border=1 width="80%" align="center">
<tr valign=middle>
    <td align=center><i>Year ended</i><br>

<i>December</i><br>

<i>31,</i></td>
    <td align=right><i>Opening</i><br>

<i>Number of</i><br>

<i>Claims</i></td>
    <td align=right><i>Claims Dismissed,</i><br>

<i>Settled, or</i><br>

<i>Resolved</i></td>
    <td align=right><i>New Claims</i></td>
    <td align=right><i>Closing</i><br>

<i>Number</i><br>

<i>of</i><br>

<i>Claims</i></td>
    <td align=right><i>Amounts Paid</i><br>

<i>(thousands) to</i><br>

<i>Settle or</i><br>

<i>Resolve ($)</i></td>
  </tr>







  <tr valign=bottom>

    <td align=left><i>2005</i></td>
    <td align=right><i>9,985</i></td>
    <td align=right><i>642</i></td>
    <td align=right><i>223</i></td>
    <td align=right><i>9,566</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2006</i></td>
    <td align=right><i>9,566</i></td>
    <td align=right><i>1,182</i></td>
    <td align=right><i>730</i></td>
    <td align=right><i>9,114</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2007</i></td>
    <td align=right><i>9,114</i></td>
    <td align=right><i>462</i></td>
    <td align=right><i>88</i></td>
    <td align=right><i>8,740</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2008</i></td>
    <td align=right><i>8,740</i></td>
    <td align=right><i>86</i></td>
    <td align=right><i>10</i></td>
    <td align=right><i>8,664</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2009</i></td>
    <td align=right><i>8,664</i></td>
    <td align=right><i>760</i></td>
    <td align=right><i>3</i></td>
    <td align=right><i>7,907</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><i>2010</i></td>
    <td align=right><i>7,907</i></td>
    <td align=right><i>47</i></td>
    <td align=right><i>9</i></td>
    <td align=right><i>7,869</i></td>
    <td align=right><i>0</i></td>
  </tr>



  <tr valign=bottom>

    <td align=left><b><i>2011 to date</i></b></td>
    <td align=right><b><i>7,869</i></b></td>
    <td align=right><b><i>3</i></b></td>
    <td align=right><b><i>11</i></b></td>
    <td align=right><b><i>7,877</i></b></td>
    <td align=right><b><i>0</i></b></td>
  </tr>


</table>


<p style="TEXT-ALIGN: left">We acquired Geschmay Corp., formerly known as Wangner Systems Corporation, in 1999. Brandon is a wholly owned subsidiary of Geschmay Corp. In 1978, Brandon acquired certain assets from Abney Mills (&#147;Abney&#148;), a South Carolina textile manufacturer. Among the assets acquired by Brandon from Abney were assets of</p>
<p align=center>55</p>
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<p style="TEXT-ALIGN: left">Abney&#146;s wholly owned subsidiary, Brandon Sales,
Inc. which had sold, among other things, dryer fabrics containing asbestos made
by its parent, Abney. It is believed that Abney ceased production of
asbestos-containing fabrics prior to the 1978 transaction. Although Brandon
manufactured and sold dryer fabrics under its own name subsequent to the asset
purchase, none of such fabrics contained asbestos. Under the terms of the Assets
Purchase Agreement between Brandon and Abney, Abney agreed to indemnify, defend,
and hold Brandon harmless from any actions or claims on account of products
manufactured by Abney and its related corporations prior to the date of the
sale, whether or not the product was sold subsequent to the date of the sale. It
appears that Abney has since been dissolved. Nevertheless, a representative of
Abney has been notified of the pendency of these actions and demand has been
made that it assume the defense of these actions. Because Brandon 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
with respect to products manufactured by Abney, 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 July 25,
2011, Brandon has resolved, by means of settlement or dismissal, 9,721 claims
for a total of $0.2 million. Brandon&#146;s insurance carriers initially agreed
to pay 88.2% of the total indemnification and defense costs related to these
proceedings, subject to the standard reservation of rights. The remaining 11.8%
of the costs had been borne directly by Brandon. During 2004, Brandon&#146;s
insurance carriers agreed to cover 100% of indemnification and defense costs,
subject to policy limits and the standard reservation of rights, and to
reimburse Brandon for all indemnity and defense costs paid directly by Brandon
related to these proceedings.</p>
<p style="TEXT-ALIGN: left">As of July 25, 2011, 6,821 (or approximately 81%) of the claims pending against Brandon were pending in Mississippi. For the same reasons set forth above with respect to Albany&#146;s claims, as well as the fact that no amounts have been paid to resolve any Brandon claims since 2001, we do not believe a meaningful estimate can be made regarding the range of possible loss with respect to these remaining claims.</p>
<p style="TEXT-ALIGN: left"><b>Mount Vernon</b></p>
<p style="TEXT-ALIGN: left">In some of these asbestos cases, the Company is named both as a direct defendant and as the &#147;successor in interest&#148; to Mount Vernon Mills (&#147;Mount Vernon&#148;). We acquired certain assets from Mount Vernon in 1993. Certain plaintiffs allege injury caused by asbestos-containing products alleged to have been sold by Mount Vernon many years prior to this acquisition. Mount Vernon is contractually obligated to indemnify the Company against any liability arising out of such products. We deny any liability for products sold by Mount Vernon prior to the acquisition of the Mount Vernon assets. Pursuant to its contractual indemnification obligations, Mount Vernon has assumed the defense of these claims. On this basis, we have successfully moved for dismissal in a number of actions.</p>
<hr size=1 noshade align=CENTER width=150>

<p style="TEXT-ALIGN: left">Although we do not believe, based on currently
available information and for the reasons stated above, that a meaningful
estimate of a range of possible loss can be made with respect to such claims,
based on our understanding of the insurance policies available, how settlement
amounts have been allocated to various policies, our settlement experience, the
absence of any judgments against the Company or Brandon, the ratio of paper mill
claims to total claims filed, and the defenses available, we currently do not
anticipate any material liability relating to the resolution of the
aforementioned pending proceedings in excess of existing insurance limits.
Consequently, we currently do not anticipate, based on currently available
information, that the ultimate resolution of the aforementioned proceedings will
have a material adverse effect on the financial position, results of operations,
or cash flows of the Company. Although we cannot predict the number and timing
of future claims, based on the foregoing factors and the trends in claims
against us to date, we do not anticipate that additional claims likely to be
filed against us in the future will have a material adverse effect on our
financial position, results of operations, or cash flows. We are aware that
litigation is inherently uncertain, especially when the outcome is dependent
primarily on determinations of factual matters to be made by juries.</p>
<p align=center>56</p>
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<p style="TEXT-ALIGN: left"><b>NAFTA Audits</b></p>
<p style="TEXT-ALIGN: left">The Company&#146;s affiliate in Mexico was notified in November 2010 that Mexican customs authorities expected to issue demands for duties on certain imports of PMC from the Company and the Company&#146;s affiliate in Canada for which the Company has claimed duty-free treatment under the North American Free Trade Agreement (&#147;NAFTA&#148;).</p>
<p style="TEXT-ALIGN: left">The notices result from a decision by the Mexican Servicio de Administraci&#243;n Tributaria (&#147;SAT&#148;) to invalidate NAFTA certificates provided by the Company on products shipped to its Mexican affiliate during the years 2006 through 2008. The Demand Notices arose from an SAT audit during 2010, at the conclusion of which the SAT determined that the Company had failed to provide documentation sufficient to show that the certificates were validly issued, and declared the certificates issued during this period to be invalid. The Company believes that the certificates of origin were valid and properly issued and has commenced administrative appeals with SAT disputing its resolutions.</p>
<p style="TEXT-ALIGN: left">The import duties identified in such notices to date are approximately US $2.5 million, and relate to only a portion of the shipments covered by the invalidated certificates.</p>
<p style="TEXT-ALIGN: left">In the event of an adverse ruling at the conclusion of the administrative appeal process, the Company would have an opportunity to appeal the outcome in Mexican Tax Court, during which it would have an opportunity to present evidence to establish that the shipments in question were of U.S. and Canadian origin and entitled to the benefits of NAFTA. As all of the shipments covered by the invalidated certificates were, in fact, of U.S. or Canadian origin, the Company expects that it will be able to demonstrate that the certificates were validly issued. The Company has been advised by counsel that, if this is the case, then the Tax Court is likely to revoke the SAT invalidation actions and rule in favor of the Company.</p>

<p style="TEXT-ALIGN: left">In the unlikely event that the Company were not to
prevail, however, then it could become subject to additional demand notices for
the balance of the shipments during the period from 2006 through 2008 covered by
the invalidated certificates. If such demand notices were to be issued for all
the shipments so covered, then the Company could be liable for duties
aggregating between US $8.0 and $10.0 million. The Company has also been advised
by counsel that SAT would likely seek additional antidumping duties and
penalties which could increase these amounts by up to 900%, but that the
possibility that SAT would succeed in obtaining such additional duties and
penalties is remote. The Company also does not believe that it faces any
material risk of certificates being invalidated with respect to any period other
than the 2006 through 2008 audit period. For this reason, the Company does not
feel that this matter is likely to have a material adverse effect on the
Company&#146;s financial position, results of operations and cash flows.</p>
<p style="TEXT-ALIGN: left"><b><a name="p57"></a>Item 1A. Risk Factors</b>.</p>
<p style="TEXT-ALIGN: left">There have been no material changes in risks since December 31, 2010. For discussion of risk factors, refer to Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010.</p>
<p style="TEXT-ALIGN: left"><b><a name="p57a"></a>Item 2. Unregistered Sales of Equity Securities and Use of Proceeds</b></p>
<p style="TEXT-ALIGN: left">We made no share purchases during the second quarter of 2011. We remain authorized by the Board of Directors to purchase up to 2 million shares of our Class A Common Stock.</p>
<p style="TEXT-ALIGN: left"><b><a name="p57b"></a>Item 3. Defaults Upon Senior Securities</b></p>
<p style="TEXT-ALIGN: left">None.</p>
<p align=center>57</p>
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<p style="TEXT-ALIGN: left"><b><a name="p58"></a>Item 4. (Removed and Reserved) </b></p>
<p style="TEXT-ALIGN: left"><b><a name="p58a"></a>Item 5. Other Information</b></p>
<p style="TEXT-ALIGN: left">On May 26, 2011, the Compensation Committee of the Registrant's Board of Directors adopted the Registrant's 2011 Performance Phantom Stock Plan (the &#147;Plan"), effective immediately. The Plan is intended as an incentive to officers and key employees to remain in the employ of the Registrant by providing an interest in pursuing the long-term growth, profitability and financial success of the Registrant. A copy of this Plan is furnished as Exhibit 10(l)(viii) to this report.</p>
<p style="TEXT-ALIGN: left"><b><a name="p58b"></a>Item 6. Exhibits</b></p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign=top>
    <td width="10%">
      <p><b>Exhibit No.</b></p>
      <p></p>
    </td>
    <td colspan=2><b>Description</b></td>
  </tr>
  <tr valign=top>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
  </tr>
  <tr valign=top>
    <td>10(l)(viii)</td>
    <td colspan=2>2011 Performance Phantom Stock Plan on May 26, 2011.</td>
  </tr>
  <tr valign=top>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>31.1</p>
    </td>
    <td colspan=2>
      <p>Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.</p>
    </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>31.2</p>
    </td>
    <td colspan=2>
      <p>Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.</p>
    </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>32.1</p>
    </td>
    <td colspan=2>
      <p>Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).</p>
    </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>
  <tr valign=top>
    <td>99.1</td>
    <td colspan=2>Quantitative and qualitative disclosures about market risks as reported at December 31, 2010.</td>
  </tr>
  <tr valign=top>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>101</p>
    </td>
    <td colspan=2>
      <p>The following financial information from the Registrant&#146;s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in eXtensible Business Reporting Language (XBRL), furnished herewith:</p>
    </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left width="5%">(i)</td>
    <td align=left>Consolidated Balance Sheets at June 30, 2011 and December 31, 2010,</td>
  </tr>
  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>(ii)</td>
    <td align=left>Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010,</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>(iii)</td>
    <td align=left>Consolidated Statements of Cash Flows for the three and six months ended June 30, 2011 and 2010, and</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>(iv)</td>
    <td align=left>Notes to Consolidated Financial Statements</td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>&nbsp;</td>
    <td colspan=2>
      <p>As provided in Rule 406T of Regulation S-T, this information shall not be deemed &#147;filed&#148; for purposes of Sections 11 and 12 of the Securities Act and Section 18 of the Securities Exchange Act or otherwise subject to liability under those sections.</p>
    </td>
  </tr>
</table>


<p align=center>58</p>
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<p style="TEXT-ALIGN: center"><b>SIGNATURES</b></p>
<p style="TEXT-ALIGN: left">Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellspacing=0 border=0 width="100%">

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    <td align=left width="50%">&nbsp;</td>
    <td align=left colspan="2" width="50%">ALBANY INTERNATIONAL CORP.</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1>

</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=center colspan="2">(Registrant)</td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>Date: August 9, 2011</td>
    <td align=left colspan="2">&nbsp;</td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left nowrap width="1%">By&nbsp;</td>
    <td align=left>/s/ John B. Cozzolino</td>
  </tr>

  <tr>

    <td>&nbsp;</td>
    <td>&nbsp;

</td>
    <td>
      <hr noshade size=1>
    </td>
  </tr>

  <tr valign=bottom>

    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>John B. Cozzolino <br>
      Chief Financial Officer and Treasurer <br>
      (Principal Financial Officer)</td>
  </tr>




</table>
<p align="center">59
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<TYPE>EX-10.(I)(VIII)
<SEQUENCE>2
<FILENAME>e44779ex10iviii.htm
<DESCRIPTION>2011 PERFORMANCE PHANTOM STOCK PLAN
<TEXT>

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<p style="TEXT-ALIGN: center"><b>EXHIBIT 10(l)(viii)</b></p>
<p style="TEXT-ALIGN: center">ALBANY INTERNATIONAL CORP.<br>

2011 PERFORMANCE PHANTOM STOCK PLAN</p>
<p style="TEXT-ALIGN: center">As adopted May 26, 2011</p>
<p style="TEXT-ALIGN: left">1. <u>Purpose of the Plan</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Albany International Corp. 2011 Performance Phantom Stock Plan (the &#147;<u>Plan</u>&#148;) is intended as an incentive to officers and other key employees of Albany International Corp. (the &#147;<u>Company</u>&#148;) and its subsidiaries to encourage them to remain in the employ of the Company and its subsidiaries by providing officers and other key employees with an interest in pursuing the long-term growth, profitability and financial success of the Company and its subsidiaries.</p>
<p style="TEXT-ALIGN: left">2. <u>Definitions</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used herein, or in any instrument governing the terms of any award granted hereunder, the following terms shall have the following meanings:</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) &#147;<u>Albany Group</u>&#148; shall mean the Company and all corporations which are, at the time, subsidiaries of the Company.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &#147;<u>Award Agreement</u>&#148; shall have the meaning set forth in Section 4(c).</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) &#147;<u>Beneficiary</u>&#148; shall mean a person designated by the Participant in a written instrument delivered pursuant to the Plan to receive a payment due under the Plan upon the Participant&#146;s death, signed by the Participant and delivered to the Company prior to the Participant&#146;s death or, if no such written instrument is on file, the Participant&#146;s estate.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) &#147;<u>Board</u>&#148; shall mean the Board of Directors of the Company.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) &#147;<u>Business Day</u>&#148; shall mean any day on which the shares of Common Stock are traded on The New York Stock Exchange or, if the shares of Common Stock are not traded on such exchange, on such other securities market or securities exchange on which such shares are traded as the Committee may determine.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) &#147;<u>Cause</u>&#148; shall be deemed to exist if a majority of the members of the Board determine that the Participant has (i) undertaken a position in competition with the Company; (ii) caused substantial harm to the Company with intent to do so or as a result of gross negligence in the performance of his or her duties; (iii) failed to make a good faith effort to carry out his or her duties; (iv) wrongfully and substantially enriched himself or herself at the expense of the Company; (v) violated any material Company policy; or (vi) been convicted of a felony.</p>

<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) &#147;<u>Change in
Control</u>&#148; shall, unless otherwise restricted in an Award Agreement, be
deemed to have occurred if (i) there is a change of ownership of the Company as
a result of one person, or more than one person acting as a group, acquiring
ownership of stock of the Company that, together with stock held by such person
or group, constitutes more than 50% of the total fair market value or total
voting power of the stock of the Company, provided, however, that the
acquisition of additional stock by a person or group who already owns 50% of the
total fair market value or total voting power of the stock of the Company shall
not be considered a Change in Control; (ii) notwithstanding that the Company has
not undergone a change in ownership as described in subsection (i) above, there
is a change in the effective control of the Company as a result of either (a)
one person, or more than one person acting as a group, acquiring (or having
acquired during the 12 month period ending on the date of the most recent
acquisition) ownership of stock of the Company possessing 30% or more of the
total voting power of the stock of the Company, or (b) a majority of the members
of the Board is replaced during any 12 month period by directors whose
appointment or election is not endorsed by a majority of the members of the
Board before the date of appointment or election, provided, however, that in
either case the acquisition of additional control by a person or group who
already is considered to effectively control the Company shall not be considered
a Change in Control; or (iii) there is a change in ownership of a substantial
portion of the Company&#146;s assets as a result of one person, or more than one
person acting as a group, acquiring (or having acquired during the 12 month
period ending on the date of the most recent acquisition) assets from the
Company that have a total gross fair market value equal to or more than 40% of
the total gross fair market value of all the assets of the Company immediately
before such acquisition or acquisitions, provided, however, that there is no
Change in Control if the transfer of</p>
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<p style="TEXT-ALIGN: left">assets is to the shareholders of the Company or an entity controlled by the shareholders of the Company. A more restrictive definition of Change in Control that may be set forth in any Award Agreement shall nonetheless conform to the regulations promulgated pursuant to Section 409A of the Code.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) &#147;<u>Code</u>&#148; shall mean the Internal Revenue Code of 1986, as amended, and the regulations, interpretations and administrative guidance promulgated thereunder.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) &#147;<u>Committee</u>&#148; shall mean either the Board, the Compensation Committee of the Board, or such other committee of the Board as the Board may from time to time designate to exercise the powers conferred upon &#147;the Committee&#148; by the Plan.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) &#147;<u>Common Stock</u>&#148; shall mean the Class A common stock ($0.001 par value) of the Company, or any other security into which such stock shall be changed pursuant to the adjustment provisions of Section 9 of the Plan.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) &#147;<u>Determination Date</u>&#148; shall have the meaning set forth in Section 5(a).</p>

<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)
&#147;<u>Disability</u>&#148; shall be deemed to have occurred if the Committee
has determined that a Participant is &#147;disabled&#148; under the
Company&#146;s long term disability policy and meets one or more of the
following requirements: (i) the Participant is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months; (ii) the Participant
is, by reason of any medically determinable physical or mental impairment that
can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, receiving income replacement benefits for a
period of not less than three months under an accident and health plan covering
employees of the Company; or (iii) the Participant is determined to be totally
disabled by the Social Security Administration.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) &#147;<u>Exchange Act</u>&#148; shall mean the Securities Exchange Act of 1934, as amended from time to time, and all regulations, interpretations and administrative guidance promulgated thereunder.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) &#147;<u>Fair Market Value</u>&#148; shall mean, with respect to any share of Common Stock, as of the applicable date of determination, (i) the closing price of such share as reported in &#147;New York Stock Exchange Composite Transactions&#148; in &#147;The Wall Street Journal&#148; (or, if no quotation shall have been made on such relevant date, on the next preceding day on which there were quotations); or (ii) if the Company&#146;s shares of Common Stock are not traded on such exchange, such price as reported on such other securities market or exchange on which such shares are traded as the Committee shall determine; or (iii) if the Company&#146;s shares of Common Stock are not traded on any other securities market or exchange, as reasonably determined by the Board in good faith using a reasonable valuation method.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) &#147;<u>Final Award</u>&#148;, with respect to a Performance Period, shall mean the number of shares of Performance Phantom Stock equal to the product of the Target Award multiplied by the Performance Percentage for the Performance Period (which number may be zero).</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) &#147;<u>Good Reason</u>&#148; shall mean a termination of the Participant&#146;s employment as a result of the occurrence of any of the following, without the Participant&#146;s consent: (i) a material adverse change in the Participant&#146;s authority and responsibilities or (ii) a change in the Participant&#146;s principal place of business to a location more than 50 miles from such Participant&#146;s location on the date of grant of the Performance Phantom Stock; <u>provided</u>, <u>that</u>, in either case, the Participant shall have delivered written notice to the Company of his or her intention to terminate his or her employment for Good Reason, which notice specifies in reasonable detail the circumstances claimed to give rise to the Participant&#146;s right to terminate employment for Good Reason, and the Company shall not have cured such circumstances within 30 days following receipt of such notice.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) &#147;<u>Involuntary Termination</u>&#148; shall mean a termination of the employment of a Participant by the Company or one of its subsidiaries for any reason other than Cause.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) &#147;<u>Participant</u>&#148; shall mean an employee of the Company or a subsidiary of the Company who is eligible to participate in the Plan and to whom one or more Award Agreements have been issued pursuant to the Plan and, following the death of any such employee, his or her Beneficiary.</p>
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<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) &#147;<u>Performance Measures</u>&#148; shall mean, with respect to any Award Agreement, the business criteria selected by the Committee to measure the level of performance of the Company and/or a business unit, segment, division or subsidiary of the Company during a Performance Period.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) &#147;<u>Performance Percentage</u>&#148; shall mean, for any Performance Period, the percentage determined in respect of any Performance Measure reflecting actual performance compared to the Performance Target.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u) &#147;<u>Performance Period</u>&#148; shall mean the period of time during which performance under a Performance Measure will be measured in order to determine the degree of payout and/or vesting with respect to an award under the Plan. Performance Periods may be equal to or longer than, but not less than, one fiscal year of the Company and may be overlapping.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) &#147;<u>Performance Phantom Stock</u>&#148; shall mean a right granted by the Committee pursuant to Section 4(a) to receive the value (as determined pursuant to the Plan) of a share of Common Stock, to the extent such share of Performance Phantom Stock is earned and vested pursuant to the terms of the Plan, as of a specified date or as of the date of occurrence of a specified event with none of the attendant rights of a shareholder of such shares except to the extent otherwise provided herein.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) &#147;<u>Performance Phantom Stock Account</u>&#148; shall mean an account for and on behalf of each Participant which the Company shall establish and maintain on its books, for recordkeeping purposes only, and in which it will record the number of shares of Performance Phantom Stock underlying a Final Award determined in respect of a Participant.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) &#147;<u>Performance Target</u>&#148; shall mean the level of performance with respect to a Performance Measure for a Performance Period that would result in a Performance Percentage of 100%.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y) &#147;<u>Plan</u>&#148; shall mean this Albany International Corp. 2011 Performance Phantom Stock Plan, as it may be amended from time to time.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z) &#147;<u>Qualifying Termination</u>&#148; shall mean an Involuntary Termination or a termination of the Participant&#146;s employment by the Participant for Good Reason, in either case within one year following a Change in Control.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa) &#147;<u>Retirement</u>&#148; shall mean a termination of the employment of the Participant, after the Participant has attained 62, for any reason other than death, Disability, Cause or Involuntary Termination.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) &#147;<u>Share Price</u>&#148; shall mean, with respect to any Vesting Date, the average Fair Market Value over a period of 20 consecutive Business Days ending on the fifth Business Day preceding such date; <u>provided that</u>, to the extent any portion of such period shall include one or more Business Days falling within the period of time after an announcement by the Company of quarterly financial results during which Company insiders are generally permitted to engage in transactions involving Company securities (an &#147;<u>Open Window Period</u>&#148;), then such 20-consecutive-Business-Day period shall instead end on the last Business Day immediately preceding such Open Window Period.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc) &#147;<u>Target Award</u>&#148;, with respect to a Performance Period, shall mean the number of shares of Performance Phantom Stock comprising a Participant&#146;s Final Award if the Performance Percentage is 100%.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd) &#147;<u>Vesting Date</u>&#148; shall have the meaning set forth in Section 5(b).</p>
<p style="TEXT-ALIGN: left">3. <u>General</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Effective Date</u>. The Plan shall be effective from and after June 1, 2011, until terminated as provided herein.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Administration</u>. The Committee shall administer the Plan. The Committee shall interpret the Plan and make all decisions with respect to the rights of Participants hereunder; <u>provided</u>, <u>however</u>, that no member of the Committee shall act on any matter in which such member has a particular or special interest.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Eligibility</u>. The persons who shall be eligible to receive awards of Performance Phantom Stock pursuant to the Plan shall be those employees of the Company or any of its subsidiaries who are largely responsible for the management, growth and protection of the business of the Company and any other employees of the Company and who are approved for participation by the Committee.</p>
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<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Indemnification
of the Committee</u>. In addition to such other rights of indemnification as
they may have as directors, as members of the Committee or otherwise, the
members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys&#146; fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with an appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any awards granted hereunder and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his or her duties; <u>provided that </u>within sixty days after institution of
any such action, suit or proceeding, a Committee member shall in writing offer
the Company the opportunity, at its own expense, to handle and defend the
same.</p>
<p style="TEXT-ALIGN: left">4. <u>Grant of Performance Phantom Stock</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Award of Performance Phantom Stock</u>. Subject to the provisions of the Plan, the Committee may from time to time exercise its discretion to award Performance Phantom Stock to eligible employees in such amounts and on such terms as the Committee shall determine.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Performance Periods</u>. In respect of any award of Performance Phantom Stock under the Plan:</p>
<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Within 90 days after the beginning of a Performance Period, and in any case before 25% of the Performance Period has elapsed, the Committee shall establish (a) Performance Measure(s) and Performance Target(s) for such Performance Period and (b) schedules or other objective methods for determining the Performance Percentage(s) to be applied to determine the Final Award.</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The measurement of any Performance Measure(s) may exclude the impact of charges for restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring items, and the cumulative effects of accounting changes, each as defined by generally accepted accounting principles and as identified in the Company&#146;s audited financial statements, including the notes thereto. Any Performance Measure(s) may be used to measure the performance of the Company or a subsidiary as a whole or any business unit of the Company or any subsidiary or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or a published or special index that the Committee, in its sole discretion, deems appropriate.</p>
</blockquote>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Award Agreements</u>. The award of any Performance Phantom Stock shall be evidenced by a written agreement (the &#147;<u>Award Agreement</u>&#148;) executed by the Company and the Participant in accordance with its terms, stating the Target Award, Performance Period, Performance Measure(s) and Performance Target(s) and such other terms and conditions of the award as the Committee may from time to time determine.</p>
<p style="TEXT-ALIGN: left">5. <u>Determination and Vesting of Final Award; Establishment of Performance Phantom Stock Account</u>. Unless otherwise provided in the Award Agreement, in respect of any award of Performance Phantom Stock under the Plan:</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) On a date as soon as practicable after the end of the Performance Period, and in no event later than the last day of the first February following the Performance Period (the &#147;<u>Determination Date</u>&#148;), the Committee shall determine the Performance Percentage in accordance with the terms set forth in the Award Agreement and the resulting Final Award to be allocated as of the Determination Date to the Participant&#146;s Performance Phantom Stock Account for the Performance Period. If a Participant&#146;s Final Award is determined by the Committee to be zero, no Performance Phantom Stock will be allocated to his or her Performance Phantom Stock Account and the Participant shall have no further rights under his or her Award Agreement in respect of such Performance Period.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Unless otherwise provided in the Award Agreement and subject to Section 5(c) below, the Final Award shall vest on the following dates (each, a &#147;<u>Vesting Date</u>&#148;) as follows:</p>
<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Twenty percent (20%) of the Final Award shall vest on the Determination Date, subject to the Participant being employed with the Albany Group on such Vesting Date;</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Twenty percent (20%) of the Final Award shall vest on the first anniversary of the Determination Date, subject to the Participant being employed with the Albany Group on such Vesting Date;</p>
</blockquote>
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<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Twenty percent (20%) of the Final Award shall vest on the second anniversary of the Determination Date, subject to the Participant being employed with the Albany Group on such Vesting Date;</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Twenty percent (20%) of the Final Award shall vest on the third anniversary of the Determination Date, subject to the Participant being employed with the Albany Group on such Vesting Date; and</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) Twenty percent (20%) of the Final Award shall vest on the fourth anniversary of the Determination Date, subject to the Participant being employed with the Albany Group on such Vesting Date.</p>
</blockquote>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Special Vesting</u>. Unless otherwise provided in the Award Agreement and except as provided in Section 7, in the event that a Participant&#146;s employment with the Albany Group terminates due to death, Disability, Retirement or Involuntary Termination:</p>
<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) prior to the Determination Date, the Vesting Date for 50% of the Target Award shall be accelerated to the effective date of such termination; and</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) subsequent to the Determination Date, the Vesting Date for 50% of all unvested Performance Phantom Stock credited to such Participant&#146;s Performance Phantom Stock Account shall be accelerated to the effective date of such termination.</p>
</blockquote>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Forfeiture of Performance Phantom Stock</u>. Unless otherwise determined by the Committee at any time at or after the date of grant or as provided in the Award Agreement and except as provided in Section 7, upon the effective date of the termination of a Participant&#146;s employment with the Albany Group, such Participant shall automatically forfeit without consideration or any action being required by any party:</p>
<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the remaining 50% of the Target Award in the event of a termination of a Participant&#146;s employment for a reason and at the time specified in Section 5(c)(i);</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the remaining 50% of unvested Performance Phantom Stock then credited to such Participant&#146;s Performance Phantom Stock Account in the event of a termination of a Participant&#146;s employment for a reason and at the time specified in Section 5(c)(ii);</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) in the event of a termination of a Participant&#146;s employment for any reason not specified in Section 5(c), (A) prior to the Determination Date, 100% of the Target Award and (B) subsequent to the Determination Date, 100% of all unvested Performance Phantom Stock then credited to such Participant&#146;s Performance Phantom Stock Account.</p>
</blockquote>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Optional Terms and Conditions</u>. To the extent not inconsistent with the Plan, the Committee may prescribe such terms and conditions applicable to an award of Performance Phantom Stock as it may in its discretion determine.</p>
<p style="TEXT-ALIGN: left">6. <u>Payment of Performance Phantom Stock</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) As promptly as practicable after each Vesting Date and in no event later than the later of (i) December 31 of the year in which the Vesting Date occurs, and (ii) the 15<sup>th </sup>day of the third month following the Vesting Date, the Company or one of its subsidiaries shall pay to the Participant or the Participant&#146;s Beneficiary, as applicable, an amount in U.S. dollars equal to the product of (i) the number of shares of Performance Phantom Stock vesting on such Vesting Date multiplied by (ii) the Share Price as of such Vesting Date.</p>
<p style="TEXT-ALIGN: left">7. <u>Qualifying Termination</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In the event of a Qualifying Termination, the provisions of this Section 7 shall apply notwithstanding any other provision herein to the contrary. Upon the occurrence of a Qualifying Termination:</p>
<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) prior to the Determination Date, the Vesting Date for 100% of the Target Award shall be accelerated to the effective date of such termination; and</p>
</blockquote>
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<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) subsequent to the Determination Date, the Vesting Date for 100% of all unvested Performance Phantom Stock then credited to such Participant&#146;s Performance Phantom Stock Account shall be accelerated to the effective date of such termination.</p>
</blockquote>
<p style="TEXT-ALIGN: left">8. <u>Clawback/Recoupment</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything in the Plan to the contrary, the Company will be entitled to the extent permitted or required by applicable law or Company policy as in effect from time to time to include in any Award Agreement the Company&#146;s right to recoup compensation of whatever kind paid by the Company or any of its subsidiaries at any time to a Participant under the Plan.</p>
<p style="TEXT-ALIGN: left">9. <u>Adjustment in Event of Changes in Capitalization</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding any other provision of the Plan, in the event of any change in the outstanding shares of Common Stock by reason of a stock dividend, recapitalization, merger, consolidation, split-up, combination or exchange of shares or the like, the number and class of shares covered by the Performance Phantom Stock and the value of any outstanding Performance Phantom Stock shall be appropriately adjusted by the Committee, whose determination shall be conclusive.</p>
<p style="TEXT-ALIGN: left">10. <u>Funding</u></p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Participant&#146;s Right Unsecured</u>. The Plan shall be unfunded. Amounts payable hereunder shall be paid from the general assets of the Company. The right of any Participant or Beneficiary to receive payment under the provisions of the Plan shall be an unsecured claim against the general assets of the Company, and no provisions contained in the Plan shall be construed to give any Participant or Beneficiary at any time a security interest in the Performance Phantom Stock Account or any other assets of the Company.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Establishment of Trust</u>. The Company may establish a trust pursuant to a trust agreement and make contributions thereto for the purpose of assisting the Company in meeting its obligations in respect of benefits payable under the Plan; <u>provided that</u> the trust fund will be available to pay the claims of any creditor of the Company to whom a distribution may be made in accordance with state and federal bankruptcy laws.</p>
<p style="TEXT-ALIGN: left">11. <u>Miscellaneous</u>.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Non-Transferability</u>. No Performance Phantom Stock shall be assignable or transferable by a Participant, and no other person shall acquire any rights therein other than by will, the laws of descent and distribution, or pursuant to the designation of a Beneficiary pursuant to Section 11(f). The Performance Phantom Stock shall not be pledged, hypothecated, sold, assigned or otherwise disposed of, encumbered or transferred, in whole or in part. Any purported pledge, hypothecation, sale, assignment or other disposition, encumbrance or transfer of a Performance Phantom Stock and any levy of any execution, attachment or similar process upon a Performance Phantom Stock, in whole or in part, shall be null and void and without effect.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Withholding Taxes</u>. Any payments made to a Participant under the Plan shall be net of an amount sufficient to satisfy any U.S. federal, state, local or foreign withholding tax requirements.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>409A Delay</u>. Notwithstanding any provision to the contrary, if, pursuant to the provisions of Section 409A of the Code, any payment is required to be delayed as a result of a <u>Participant</u> being deemed to be a &#147;specified employee&#148; within the meaning of that term under Section 409A(a)(2)(B) of the Code, then any such payments under the Plan shall not be made prior to the earlier of (A) the expiration of the six month period measured from the date of the &#147;separation from service&#148; (as such term is defined in Treasury Regulations issued under Section 409A of the Code) or (B) the date of the Participant&#146;s death. Upon the expiration of such period, all payments under the Plan delayed pursuant to this Section 11(c) shall be paid to the Participant in a lump sum, and any remaining payments due under the Plan shall be paid or provided in accordance with the normal payment dates specified for them herein.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>No Special Employment Rights; No Right to Award</u>.</p>
<blockquote>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Nothing in the Plan or in any Award Agreement entered into pursuant to the Plan shall confer upon any Participant any right with respect to the continuation of his or her employment by or service to the Company or a subsidiary or interfere in any way with the right of the Company or a subsidiary at any time to terminate such employment or provision of</p>
</blockquote>
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<blockquote>
  <p>services or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an award hereunder.</p>
  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) No person shall have any claim or right to receive an award hereunder. The Committee&#146;s granting of an award to a Participant at any time shall neither require the Committee to grant an award to such Participant or any other Participant or other person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person.</p>
</blockquote>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>No Rights of Shareholders</u>. Participants shall have no rights as shareholders of the Company with respect to awards of Performance Phantom Stock.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Designation of Beneficiary</u>. A Participant may at any time designate a Beneficiary. Such designation may be made or changed by the Participant, at any time thereafter, by a written instrument filed with the Committee or by the Participant&#146;s will.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Governing Law; Choice of Forum</u>. The Plan shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflicts of law principles.</p>
<p style="TEXT-ALIGN: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Amendment or Termination</u>. The Plan may be amended or terminated at any time by the Board or by the Committee; <u>provided that</u>, unless otherwise required by law, including without limitation Section 409A of the Code, the rights of a Participant with respect to outstanding Performance Phantom Stock granted prior to such amendment or termination may not be impaired without the consent of such Participant. Except as otherwise permitted by Section 409A of the Code, each award shall remain outstanding and continue in accordance with the terms of the Plan and any applicable Award Agreement.</p>
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<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>e44779ex31_1.htm
<DESCRIPTION>CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
<TEXT>

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<p style="TEXT-ALIGN: center"><b>EXHIBIT (31.1)</b><br>

<b>CERTIFICATION PURSUANT TO</b><br>

<b>RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,</b><br>

<b>AS ADOPTED PURSUANT TO</b><br>

<b>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</b></p>
<p style="TEXT-ALIGN: left">I, Joseph G. Morone, certify that:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

  <tr>

    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign=top>
    <td width="5%">1.</td>
    <td colspan=2>I have reviewed this report on Form 10-Q of Albany International Corp.;</td>
  </tr>
  <tr valign=top>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>2.</p>
      </td>
    <td colspan=2>
      <p>Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;</p>
      </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>3.</p>
    </td>
    <td colspan=2>
      <p>Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;</p>
    </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>4.</p>
    </td>
    <td colspan=2>
      <p>The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a&#150;15(e) and 15d&#150;15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a&#150;15(f) and 15d&#150;15(f)) for the registrant and have:</p>
    </td>
  </tr>

  <tr>

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left width="5%">(a)</td>
    <td align=left>Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(b)</td>
    <td align=left>Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(c)</td>
    <td align=left>Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(d)</td>
    <td align=left>Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>5.</p>
    </td>
    <td colspan=2>
      <p>The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):</p>
    </td>
  </tr>

  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(a)</td>
    <td align=left>All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(b)</td>
    <td align=left>Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.</td>
  </tr>


</table>


<p style="TEXT-ALIGN: left">Date: August 9, 2011</p>
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  <tr valign=bottom>
    <td align=left width="50%">&nbsp;</td>
    <td align=left width="1%">By&nbsp; </td>
    <td align=left> /s/ Joseph G. Morone</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=1>

</td>
  </tr>





  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Joseph G. Morone <br>
      President and Chief Executive Officer <br>
      (Principal Executive Officer)</td>
  </tr>
</table>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>e44779ex31_2.htm
<DESCRIPTION>CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
<TEXT>

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<p style="TEXT-ALIGN: center"><b>EXHIBIT (31.2)</b><br>

<b>CERTIFICATION PURSUANT TO</b><br>

<b>RULE 13A-14 OF THE SECURITIES EXCHANGE ACT OF 1934,</b><br>

<b>AS ADOPTED PURSUANT TO</b><br>

<b>SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002</b></p>
<p style="TEXT-ALIGN: left">I, John B. Cozzolino, certify that:</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellspacing=0 cellpadding="0" border=0 width="100%">

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    <td></td>
    <td></td>
    <td></td>
  </tr>
  <tr valign=top>
    <td width="5%">1.</td>
    <td colspan=2>I have reviewed this report on Form 10-Q of Albany International Corp.;</td>
  </tr>
  <tr valign=top>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>2.</p>
    </td>
    <td colspan=2>
      <p>Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;</p>
    </td>
  </tr>

  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>3.</p>
    </td>
    <td colspan=2>
      <p>Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;</p>
    </td>
  </tr>

  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>4.</p>
    </td>
    <td colspan=2>
      <p>The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a&#150;15(e) and 15d&#150;15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a&#150;15(f) and 15d&#150;15(f)) for the registrant and have:</p>
    </td>
  </tr>

  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left width="5%">(a)</td>
    <td align=left>Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(b)</td>
    <td align=left>Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(c)</td>
    <td align=left>Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(d)</td>
    <td align=left>Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td>
      <p>5.</p>
    </td>
    <td colspan=2>
      <p>The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):</p>
    </td>
  </tr>

  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(a)</td>
    <td align=left>All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and</td>
  </tr>



  <tr valign="top">

    <td colspan=3>&nbsp;</td>
  </tr>

  <tr valign=top>

    <td align=left>&nbsp;</td>
    <td align=left>(b)</td>
    <td align=left>Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.</td>
  </tr>


</table>
<br>

<p style="TEXT-ALIGN: left">Date: August 9, 2011</p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Arial'" cellpadding="0" cellspacing=0 border=0 width="100%">

  <tr valign=bottom>
    <td align=left width="50%">&nbsp;</td>
    <td align=left width="1%">By&nbsp;</td>
    <td align=left> /s/ John B. Cozzolino</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>
      <hr noshade size=1>

</td>
  </tr>





  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>John B. Cozzolino<br>

Chief Financial Officer and Treasurer<br>

(Principal Financial Officer)</td>
  </tr>
</table>


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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>e44779ex32_1.htm
<DESCRIPTION>CERTIFICATION
<TEXT>

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<p style="TEXT-ALIGN: center"><b>EXHIBIT (32.1)</b><br>

<b>CERTIFICATION PURSUANT TO</b><br>

<b>18 U.S.C. SECTION 1350,</b><br>

<b>AS ADOPTED PURSUANT TO</b><br>

<b>SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</b></p>
<p style="TEXT-ALIGN: left">In connection with the Quarterly Report of Albany International Corp. (the Company) on Form 10-Q for the period ending June 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the Report), Joseph G. Morone, President and Chief Executive Officer, and John B. Cozzolino, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. &#167; 1350, as adopted pursuant to &#167; 906 of the Sarbanes-Oxley Act of 2002, that:</p>
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  <tr>

    <td valign=top nowrap width="2%">(1)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and </td>
  </tr>
  <tr>
    <td valign=top nowrap width="2%">&nbsp;</td>
    <td width="98%">&nbsp;</td>
  </tr>

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    <td valign=top nowrap width="2%">(2)&nbsp; &nbsp; &nbsp; </td>
    <td width="98%">The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. </td>
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<p style="TEXT-ALIGN: left">Date: August 9, 2011</p>
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    <td align=left width="50%">&nbsp;</td>
    <td align=left width="1%">By&nbsp;</td>
    <td align=left> /s/ Joseph G. Morone</td>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
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  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>Joseph G. Morone <br>
      President and Chief Executive Officer <br>
      (Principal Executive Officer)</td>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>

  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
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  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>By</td>
    <td align=left> /s/ John B. Cozzolino</td>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>
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</td>
  </tr>





  <tr valign=bottom>
    <td align=left>&nbsp;</td>
    <td align=left>&nbsp;</td>
    <td align=left>John B. Cozzolino <br>
      Chief Financial Officer and Treasurer <br>
      (Principal Financial Officer)</td>
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<TYPE>EX-99.1
<SEQUENCE>6
<FILENAME>e44779ex99_1.htm
<DESCRIPTION>QUANTITATIVE AND QUALITATIVE DISCLOSURES
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<p style="text-align: center;"> <b>EXHIBIT (99.1)</b><br>

<b>MARKET RISK SENSITIVITY &#150; AS OF DECEMBER 31, 2010</b></p>
<p style="text-align: left;"> We have market risk with respect to foreign currency exchange rates and interest rates. The market risk is the potential loss arising from adverse changes in these rates as discussed below.</p>
<p style="text-align: left;"> <b>Foreign Currency Exchange Rate Risk</b></p>


<p style="text-align: left;"> We have manufacturing plants and sales
transactions worldwide and therefore are 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
transactions. To manage this risk, we periodically enter into forward exchange
contracts either to hedge the net assets of a foreign investment or to provide
an economic hedge against future cash flows. The total net assets of non-U.S.
operations and long-term intercompany loans denominated in nonfunctional
currencies subject to potential loss amount to approximately &#36;643.0 million.
The potential loss in fair value resulting from a hypothetical 10% adverse
change in quoted foreign currency exchange rates amounts to &#36;64.3 million.
Furthermore, related to foreign currency transactions, we have exposure to
nonfunctional currency balances totaling &#36;109.9 million. This amount
includes, on an absolute basis, exposures to foreign currency assets and
liabilities. On a net basis, we had approximately &#36;58.2 million of foreign
currency liabilities as of December 31, 2010. As currency rates change, these
nonfunctional currency balances are revalued, and the corresponding adjustment
is recorded in the income statement. A hypothetical change of 10% in currency
rates could result in an adjustment to the income statement of approximately
&#36;5.8 million. Actual results may differ.</p>
<p style="text-align: left;"> <b>Interest Rate Risk</b></p>
<p style="text-align: left;"> We are exposed to interest rate fluctuations with respect to our variable rate debt, depending on general economic conditions.</p>
<p style="text-align: left;"> On December 31, 2010, we had the following variable rate debt:</p>
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    <td width=338></td>
    <td width=162></td>
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    <td width="338">
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    <td width="162">
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    <td align=left width="338"> <b>(in thousands, except interest rates)</b></td>
    <td align=left width="162">&nbsp; </td>
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    <td width="338">
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</td>
    <td width="162">
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    <td align=left width="338"> <b>Short-term debt</b></td>
    <td align=left width="162">&nbsp; </td>
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  <tr valign="bottom">
    <td align=left width="338">&nbsp;</td>
    <td align=right width="162">&nbsp;</td>
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    <td align=left width="338"> Notes payable, end of period interest rate of 2.94%</td>
    <td align=right width="162">&#36;1,587</td>
  </tr>
  <tr valign="bottom">
    <td align=left width="338">&nbsp;</td>
    <td align=left width="162">&nbsp;</td>
  </tr>

  <tr valign="bottom">

    <td align=left width="338"> <b>Long-term debt</b></td>
    <td align=left width="162">&nbsp; </td>
  </tr>
  <tr valign="bottom">
    <td align=left width="338">&nbsp;</td>
    <td align=right width="162">&nbsp;</td>
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    <td align=left width="338"> Credit agreement with borrowings outstanding, net of &#36;105.0 million fixed rate portion, at an end of period interest rate of 2.77% in 2010, due in 2015</td>
    <td align=right width="162"> 132,000</td>
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  <tr valign="bottom">

    <td align=left width="338">&nbsp; </td>
    <td align=left width="162">&nbsp; </td>
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    <td align=left width="338"> Various notes and mortgages relative to operations principally outside the United States, at an average end of period rate of 3.04% in 2010, due in varying amounts through 2021</td>
    <td align=right width="162"> 10,185</td>
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    <td colspan=2>
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    <td align=left width="338"> Total</td>
    <td align=right width="162">&#36;143,772</td>
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    <td colspan=2>
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</td>
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<p style="text-align: left;"> Assuming borrowings were outstanding for an entire year, an increase/decrease of one percentage point in weighted average interest rates would increase/decrease interest expense by &#36;1.4 million. To manage interest rate risk, we will periodically enter into interest rate swap agreements to effectively fix the interest rates on variable debt to a specific rate for a period of time.</p>
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