What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-07-30 · 185 added, 230 removed, 135 unchanged (75% of the section changed)

53 unchanged sentences

• Other risks and uncertainties detailed in this report and other periodic reports.

• In the Albany Engineered Composites segment, our exploration and pursuit of strategic alternatives for our structures assembly business may not be successful.

Further information concerning important factors that could cause actual events or results to be materially different from the forward-looking statements can be found in the “Business Environment Overview and Trends” sections of this quarterly report, as well as in the Item 1A-“Risk Factors” section of our most recent Annual Report on Form 10-K.

7 unchanged sentences

AEC competes on the basis of its innovative technology solutions, extensive composite manufacturing capabilities and capacity that enable it to offer high quality specific part and assembly solutions that achieve its customers’ application performance requirements.

AEC has long-term contracts in which the selling price is fixed.

In accounting for those contracts, we estimate the profit margin expected at the completion of the contract and recognize a pro-rata share of that profit during the course of the contract using a cost-to-cost approach.

Changes in estimated contract profitability will affect revenue and gross profit when a change occurs, which could have a favorable or unfavorable effect on revenue and gross profit in any reporting period.

For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known.

Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations, which are treated as period expenses.

Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow.

Also, please refer to the Business Environment Overview and Trends in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.

The Annual Report on Form 10-K, along with the Company's other filings, can be found on the Securities and Exchange Commission's website, www.sec.gov, as well as on the Company's website:

www.albint.com.

Machine Clothing Segment

The MC segment expects revenues to continue to decline for publication grade paper and continued softness in Asia into 2025 and beyond, however, we see an offsetting effect due to growth in demand across Europe for packaging, and to a lesser degree, tissue grade products.

The MC segment's backlog continues to be stable.

MC believes it is well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology.

The MC segment expects revenues to continue to decline for publication grade paper and continued softness in Asia, most significantly in China, in the remainder of 2025 and beyond, however, we see an offsetting effect due to growth in demand across Europe for packaging, and to a lesser degree, tissue grade products.

The MC segment's backlog continues to be stable through the third quarter of 2025.

and manufacturing technology.

Some of the markets in which MC's products are sold are expected to have volume trends that are in line with global GDP.

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The AEC segment continues to ramp-up production levels on commercial, defense, and space programs.

In the first six months of 2025, the Company updated its labor, material input and scrap assumptions and estimates of certain long-term programs that resulted in a negative cumulative change in estimated profitability in the amount of $7.2 million for the second quarter of 2025 and $14.2 million for the six months June 30, 2025.

The negative cumulative change in profitability during the second quarter of 2025 was primarily driven by a few large complex programs, including $8.1 million for various CH-53K programs, $0.8 million on our F-35 program, offset by a gain of $1.6 million on our Gulfstream program and $0.1 million, net gain on all other programs.

The negative cumulative change in profitability during the six months ended June 2025 was driven by $10.1 million for various CH-53K programs, $2.1 million on our F-35 program, and $2.0 million, net on all other programs.

Also, please refer to the Business Environment Overview and Trends in the Management's Discussion and Analysis of

Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.

The Annual Report on Form 10-K, along with the Company's other filings, can be found on the Securities and Exchange Commission's website, www.sec.gov, as well as on the Company's website:

www.albint.com.

During the third quarter of 2025, we recognized a $147.3 million change in estimated profitability associated with the performance of the CH-53K contracts, inclusive of a loss reserve adjustment of $98.0 million, as a result of greater than planned labor content and higher material inputs caused by inflation estimated for the duration of the contract.

This adjustment represents the estimated full loss anticipated over the remaining eight year life of the program, and we are engaging with our CH-53K customer to discuss potential solutions.

In spite of these ongoing discussions, subsequent to the end of the third quarter, we announced that we will commence exploration of alternatives to exit the structures assembly portion of our business, including the CH-53K contract work.

In addition to these events, we also updated our labor, material input and scrap assumptions along with estimates of certain other long-term programs that resulted in additional negative cumulative changes in estimated profitability.

On October 28, 2025, we announced that we are exploring strategic alternatives for our structures assembly business.

These alternatives include a potential sale of all or a part of the business at our Salt Lake City facility and discussions with our customer about contract modifications.

Our exploration of strategic alternatives, including a sale or contract modification, may not result in the identification or consummation of any transaction or contract modification.

In addition, the process of exploring strategic and other alternatives may be disruptive to our operations and we may incur substantial expenses associated with identifying and evaluating potential strategic or other alternatives.

Any potential transaction and the related valuation would be dependent upon a number of factors that may be beyond our control, including, among other factors, potential counterparties, market conditions and industry trends.

Any potential contract modifications would be dependent on negotiations with our customer and other factors that we cannot control.

Further, speculation regarding any developments related to the strategic alternatives process could cause our stock price to fluctuate significantly.

Failure to identify and pursue these strategic alternatives could have a material adverse effect on our business, financial condition, and results of operations.

AEC believes it has the ability to mitigate raw material and supplier costs by entering into long-term supply agreements.

However, in some cases, higher raw material and supplier costs adversely impacted certain firm-fixed price programs resulting in lower program gross margins.

The AEC segment may continue to experience similar issues in further quarters as it ramps up production levels on these key programs.

Consolidated Results of Operations

The following table summarizes our Net revenues by business segment:

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages)

2025 2024 % Change 2025 2024 % Change

Machine Clothing $ 180,926 $ 193,578 (6.5) % $ 355,623 $ 378,795 (6.1) %

Albany Engineered Composites

130,473 138,416 (5.7) % 244,550 266,529 (8.2) %

Total $ 311,399 $ 331,994 (6.2) % $ 600,173 $ 645,324 (7.0) %

The following tables provide a comparison of 2025 Net revenues, excluding currency translation effects, to 2024 Net revenues:

(in thousands, except percentages)

Net revenues as reported, Q2 2025 (Decrease)/ increase due to changes in currency translation rates Q2 2025 revenues on same basis as Q2 2024 currency translation rates Net revenues as reported, Q2 2024 % Change compared to Q2 2024, excluding currency rate effects

Machine Clothing $ 180,926 $ (3,002) $ 177,924 $ 193,578 (8.1) %

Albany Engineered Composites

130,473 (923) 129,550 138,416 (6.4) %

Total $ 311,399 $ (3,925) $ 307,474 $ 331,994 (7.4) %

(in thousands, except percentages)

Net revenues as reported, YTD 2025 (Decrease)/ increase due to changes in currency translation rates YTD 2025 revenues on same basis as 2024 currency translation rates Net revenues as reported, YTD 2024 % Change compared to 2024, excluding currency rate effects

Machine Clothing $ 355,623 $ (509) $ 355,114 $ 378,795 (6.3) %

Albany Engineered Composites

244,550 (437) 244,113 266,529 (8.4) %

Total $ 600,173 $ (946) $ 599,227 $ 645,324 (7.1) %

Overview of Consolidated Results:

The following table summarizes our consolidated Net revenues:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except percentages) 2025 2024 % Change 2025 2024 % Change

Net revenues $ 261,434 $ 298,386 (12.4) % $ 861,607 $ 943,710 (8.7) %

Gross profit/(loss) (49,938) 90,384 (155.3) % 144,055 311,453 (53.7) %

Gross profit/(loss) margin (19.1) % 30.3 % 16.7 % 33.0 %

Operating expenses:

Selling, general and administrative expenses 51,905 52,097 (0.4) % 164,219 162,447 1.1 %

Technical and research expenses 11,467 10,844 5.7 % 35,915 35,369 1.5 %

Restructuring expenses, net 3,197 2,272 40.7 % 9,895 6,584 50.3 %

Total operating expenses 66,569 65,213 2.1 % 210,029 204,400 2.8 %

Total operating expenses as a percentage of net revenues 25.5 % 21.9 % 361 bp 24.4 % 21.7 % 272 bp

Operating income/(loss) (116,507) 25,171 (562.9) % (65,974) 107,053 (161.6) %

Interest expense, net 5,897 2,411 144.6 % 14,702 8,680 69.4 %

Other (income)/expense, net (347) 3,257 (110.7) % 4,170 5,932 (29.7) %

Income/(loss) before income taxes (122,057) 19,503 (725.8) % (84,846) 92,441 (191.8) %

Income tax expense/(benefit) (24,419) 1,282 (2004.8) % (13,889) 22,131 (162.8) %

Reported income tax rate 20.0 % 6.6 % 1,341 bp 16.4 % 23.9 % (753) bp

Net income/(loss) $ (97,638) $ 18,221 (635.9) % $ (70,957) $ 70,310 (200.9) %

Three Month Comparison

Net revenues for the three months ended June 30, 2025 decreased 6.2% compared to the three months ended June 30, 2024, primarily driven by reduced demand in Asia, an unplanned equipment downtime in one of our production facilities within MC and a decrease in Net revenues in AEC due to a reduction in certain commercial and space programs.

MC's Net revenues for the three months ended June 30, 2025 decreased 6.5% compared to the three months ended June 30, 2024 primarily driven by reduced demand in Asia and an unplanned equipment downtime in one of our production facilities.

In addition, changes in currency translation rates had the effect of decreasing Net revenues $3.0 million.

AEC's Net revenues for the three months ended June 30, 2025 decreased 5.7% compared to the three months ended June 30, 2024, primarily driven by reductions on certain commercial and space programs, which was partially offset by higher revenues on CH-53K and other programs.

Changes in currency translation rates had the effect of decreasing Net revenues $0.9 million.

Six Month Comparison

Net revenues for the six months ended June 30, 2025 decreased 7.0% as compared to the six months ended June 30, 2024, primarily driven by reduced demand in Asia, an unplanned equipment downtime in one of our production facilities within MC and a decrease in Net revenues in AEC due to a reduction in certain commercial and space programs.

MC's Net revenues for the six months ended June 30, 2025 decreased 6.1% as compared to the six months ended June 30, 2024, primarily driven by reduced demand in Asia and an unplanned equipment downtime in one of our production facilities.

In addition, changes in currency translation rates had the effect of decreasing Net revenues $0.5 million.

AEC's Net revenues for the six months ended June 30, 2025 decreased 8.2% as compared to the six months ended June 30, 2024, primarily driven by reductions on certain commercial and space programs, which was partially offset by higher revenues on CH-53K and other programs.

Changes in currency translation rates had the effect of decreasing Net revenues $0.4 million.

The following table summarizes Gross profit by business segment:

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages)

2025 2024 2025 2024

Machine Clothing $ 83,759 $ 88,873 $ 163,661 $ 173,528

Albany Engineered Composites

13,748 23,510 30,332 47,541

Total $ 97,507 $ 112,383 $ 193,993 $ 221,069

% of Net revenues 31.3 % 33.9 % 32.3 % 34.3 %

Net revenues for the three months ended September 30, 2025 decreased 12.4% compared to the three months ended September 30, 2024, MC's net revenues declined as a result of reduced demand in Asia, most significantly in China, while sales in all other regions remained stable.

Net revenues declines in AEC were driven by revenue adjustments to the CH-53K program based on our long-term contract estimates, partially offset by higher activity levels on the LEAP program.

Nine Month Comparison

Net revenues for the nine months ended September 30, 2025 decreased 8.7% as compared to the nine months ended September 30, 2024, MC's net revenues declined as a result of reduced demand in Asia, most significantly in China, an unplanned equipment downtime in one of our production facilities.

Further, full-year sales declines occurred in AEC, as a result of $54.3 million of adjustments to the CH-53K program based on our long-term contract estimates.

Changes in currency translation rates decreased comparative segment net revenues by $4.0 million as compared to the prior year.

AEC revenue declines are partially offset by higher activity levels on the LEAP program.

Three Month Comparison

The decrease in gross profit for the three months ended June 30,2025, as compared to the three months ended June 30, 2024, was driven by increased cost assumptions that adjusted the expected profitability of certain long-term contracts in the AEC segment.

Gross profit as a percentage of revenues by segment was as follows:

• MC's gross profit margin increased slightly from 45.9% in 2024 to 46.3% in 2025.

• AEC's gross profit margin decreased from 17.0% in 2024 to 10.5% in 2025, driven primarily by cumulative changes in the estimated profitability of long-term contracts, which decreased gross profit by $7.0 million in 2025, as compared to a decrease of $5.0 million in 2024.

Six Month Comparison

The decrease in gross profit for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was driven by increased cost assumptions that adjusted the expected profitability of certain long-term contracts in the AEC segment.

Gross profit as a percentage of revenues by segment was as follows:

• MC's gross profit margin has increased slightly over the the prior year, from 45.8% in 2024 to 46.0% in 2025.

• AEC's gross profit margin decreased from 17.8% in 2024 to 12.4% in 2025, driven primarily by cumulative changes in the estimated profitability of long-term contracts, which decreased gross profit by $14.2 million in 2025, as compared to a decrease of $7.6 million during the six months ended June 30, 2024.

The decrease in gross profit for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024, was driven by increased cost assumptions that adjusted the expected profitability of the AEC segment's CH-53K long-term contracts and resulted in the recording of an expected loss provision of $147.3 million.

Nine Month Comparison

The decrease in gross profit for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, was driven by increased cost assumptions that adjusted the expected profitability of certain long-term contracts in the AEC segment resulted in the recording of an expected loss provision of $157.6 million.

Selling, General, and Administrative ("SG&A")

The following table summarizes SG&A expenses by business segment:

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages)

2025 2024 2025 2024

Machine Clothing $ 35,669 $ 30,569 $ 68,550 $ 63,336

Albany Engineered Composites

11,777 12,786 21,903 24,326

Corporate expenses 11,056 12,160 21,861 22,688

$ 58,502 $ 55,515 $ 112,314 $ 110,350

% of Net revenues 18.8 % 16.7 % 18.7 % 17.1 %

Three Month Comparison

Consolidated SG&A expenses increased 5.4% as compared to the three months ended June 30, 2024, as a percentage of Net revenues, SG&A expenses increased from 16.7% in 2024 to 18.8% in 2025.

• MC SG&A expenses increased $5.1 million as compared to the three months ended June 30, 2024, primarily resulting from increases in unrealized gains and losses arising from the remeasurement of monetary assets and liabilities denominated in non-functional currencies (changes in currency translation rates), consulting costs and impacts of general inflationary pressures, offset by lower personnel-related costs.

• In AEC, SG&A expenses decreased $1.0 million, compared to the three months ended June 30, 2024 primarily driven by lower incentive compensation and personnel-related costs.

• Corporate SG&A expenses decreased $1.1 million, compared to the three months ended June 30, 2024 principally due to lower incentive compensation and personnel-related costs, offset by a increase in professional fees.

Six Month Comparison

Consolidated SG&A expenses increased 1.8% as compared to the six months ended June 30, 2024, as a percentage of Net revenues, SG&A expenses increased from 17.1% in 2024 to 18.7% in 2025.

• MC SG&A expenses increased $5.2 million as compared to the six months ended June 30, 2024, primarily resulting from increases in unrealized gains and losses arising from the remeasurement of monetary assets and liabilities denominated in non-functional currencies (changes in currency translation rates), consulting costs and impacts of general inflationary pressures, offset by lower personnel-related costs.

• In AEC, SG&A expenses decreased $2.4 million, compared to the six months ended June 30, 2024 primarily driven by lower incentive compensation and personnel-related costs.

• Corporate SG&A expenses decreased marginally $0.8 million, compared to the six months ended June 30, 2024 principally due lower incentive compensation and personnel-related costs, offset by a increase in professional fees and information technology costs.

Technical and Research

The following table summarizes technical and research expenses by business segment:

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages)

2025 2024 2025 2024

Machine Clothing $ 7,373 $ 7,504 $ 14,616 $ 15,024

Albany Engineered Composites

4,125 4,356 7,799 9,501

Corporate expenses 1,054 0 2,033 —

$ 12,552 $ 11,860 $ 24,448 $ 24,525

% of Net revenues 4.0 % 3.6 % 4.1 % 3.8 %

Three Month Comparison

Consolidated Technical and research expenses increased 5.8% as compared to the three months ended June 30, 2024 and as a percentage of Net revenues increased from 3.6% in 2024 to 4.0% in 2025.

• MC Technical and research expenses decreased by $0.1 million as compared to the three months ended June 30, 2024 due to higher personnel and development related costs, offset by allocated costs to Corporate.

• AEC Technical and research expenses decreased by $0.2 million as compared to the three months ended June 30, 2024, due to increases in research material and labor costs, offset by allocated costs to Corporate.

• Corporate expenses in the three months ended June 30, 2025 relate primarily to new business ventures initiatives and allocated costs from MC and AEC in 2025.

Six Month Comparison

Consolidated Technical and research expenses remained relatively flat and increased by 0.3% compared to the six months ended June 30, 2024 and as a percentage of Net revenues increased from 3.8% in 2024 to 4.1% in 2025.

• MC Technical and research expenses decreased $0.4 million as compared to the six months ended June 30, 2024 primarily due to increased allocated costs to Corporate.

• AEC Technical and research expenses decreased $1.7 million as compared to the six months ended June 30, 2024, due to decreases in research material and labor costs and increased allocated costs to Corporate.

• Corporate expenses in the six months ended June 30, 2025 relate primarily to new business ventures initiatives and allocated costs from MC and AEC in 2025.

Consolidated SG&A expenses decreased $0.2 million or 0.4% as compared to the three months ended September 30, 2024, primarily due to increased integration costs incurred in the prior year associated with the Heimbach acquisition.

Nine Month Comparison

Consolidated SG&A expenses increased $1.8 million or 1.1% as compared to the nine months ended September 30, 2024, primarily resulting from increases in global information services costs to improve security and employee productivity.

Technical and Research Expenses

Three and Nine Month Comparison

Consolidated Technical and research expenses increased by $0.6 million as compared to the three and nine months ended September 30, 2024, primarily due to new business ventures initiatives in 2025.

Restructuring Expense, net

In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, Operating income was affected by Restructuring expense, net, of $4.2 million in the three months ended June 30, 2025, compared to $2.1 million in the three months ended June 30, 2024;

and $6.7 million in the six months ended June 30, 2025, compared to $4.3 million in the six months ended June 30, 2024.

The following table summarizes Restructuring expenses, net by business segment:

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages) 2025 2024 2025 2024

Machine Clothing $ 3,015 $ 1,066 $ 4,362 $ 1,087

Albany Engineered Composites 520 922 1,688 3,110

Corporate expenses 648 115 648 115

Consolidated total $ 4,183 $ 2,103 $ 6,698 $ 4,312

At MC, restructuring actions were taken in 2025 and 2024 to cease operations at five facilities.

For the three month ended June 30, 2025, these actions related to workforce reductions.

For the three month ended June 30, 2024, these actions related to workforce reductions and inventory write-off costs.

For the six month ended June 30, 2025, these actions related to workforce reductions, fixed asset impairments and related costs and inventory write-off costs of $6.1 million offset by a $1.8 million pension curtailment gain.

For the six month ended June 30, 2024 these actions related to workforce reductions and write-off of inventory of $1.1 million.

At AEC, restructuring activities were related to reorganizational costs as well as a reduction in the workforce within AEC, which resulted in restructuring expenses of $0.5 million for the three months ended June 30, 2025 and $0.9 million for the three months ended June 30, 2024.

For the six months ended June 30, 2025 and June 30, 2024, restructuring expenses were related to reductions in workforce and totaled $1.7 million and $3.1 million, respectively.

Operating Income

The following table summarizes operating income/(loss) by business segment:

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages) 2025 2024 2025 2024

Machine Clothing $ 37,702 $ 49,734 $ 76,133 $ 94,081

Albany Engineered Composites (2,674) 5,446 (1,058) 10,604

Corporate expenses (12,758) (12,275) (24,542) (22,803)

Total $ 22,270 $ 42,905 $ 50,533 $ 81,882

% of Net revenues 7.2 % 12.9 % 8.4 % 12.7 %

Changes in operating income were primarily attributable to the drivers noted above.

Other Earnings Items

Three months ended June 30, Six months ended June 30,

(in thousands) 2025 2024 2025 2024

Interest expense, net $ 5,150 $ 2,950 $ 8,805 $ 6,269

Other (income)/expense, net 3,534 5,657 4,517 2,675

Income tax expense 4,254 9,578 10,530 20,849

Net income attributable to the noncontrolling interest

149 96 143 174

Three Month Comparison

Restructuring expense of $3.2 million in the three months ended September 30, 2025 were $0.9 million higher than expenses of $2.3 million in the three months ended September 30, 2024.

Restructuring actions for the three month period are primarily a result of workforce reorganizational costs.

Nine Month Comparison

Restructuring expense, net, of $9.9 million in the nine months ended September 30, 2025, increased by $3.3 million compared to $6.6 million in the nine months ended September 30, 2024.

The change in restructuring actions for the nine month period are a result of workforce reductions, reorganizational costs, fixed asset impairments, and inventory write-off costs, offset by a pension curtailment gain.

Interest Expense, net

Interest expense, net, increased over the prior year primarily due to higher average debt balances, in part offset by a larger amount of interest income earned on cash equivalents during the current year.

Financial Instruments in the Notes to Consolidated Financial Statements for further discussion of borrowings and interest rates.

Other (Income)/Expense, net

Other (income)/expense, net, included foreign currency related transactions, which resulted in losses of $5.7 million and $8.8 million in the three and six months ended June 30, 2025, as compared to losses of $0.2 million and gains of $1.1 million in the same period last year.

These changes were the result of unrealized losses on intercompany loans.

In addition, changes in the fair value of derivative instruments included gains of $0.7 million and $3.3 million in the three and six months ended March 31, 2025, as compared to losses of $4.4 million and $4.3 million for the three and six months ended June 30, 2024, driven by currency rate movements, most notably the Brazilian Real and Mexican Peso.

Other (income)/expense, net, also included net gains of $1.6 million from the divestiture of Arcari during the three and six months ended June 30, 2025 along with amortization of debt issuance costs, and other non-operating expenses.

Other (income)/expense, net, included foreign currency related transactions which resulted in gains of $1.1 million and losses of $7.8 million in the three and nine months ended September 30, 2025, as compared to losses of $1.8 million and $0.7 million in the same periods last year.

These changes were primarily the result of unrealized losses and gains on intercompany loans.

In addition, changes in the fair value of derivative instruments included gains of $0.1 million and $3.4 million in the three and nine months ended September 30, 2025, as compared to gains of $0.5 million and losses of $3.8 million for the three and nine months ended September 30, 2024.

Unrealized gains and losses on both derivative instruments and intercompany loans were driven by currency rate movements, most notably the Brazilian Real and Mexican Peso.

Other (income)/expense, net also included a gain of $1.6 million from the divestiture of Arcari during the nine months ended September 30, 2025.

Effective Income Tax Rate

Three months ended June 30, Six months ended June 30,

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

5 unchanged sentences

earnings and the level of our total earnings.

From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges.

From period to period, the jurisdictional mix of earnings can vary as a result of operating

fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges.

The tax rate is affected by recurring items, such as the income tax rate in the U.S.

2 unchanged sentences

tax costs on foreign pre-tax earnings, and by discrete items that may occur in any given year but are not consistent from year to year.

The Company’s effective tax rate for the second quarter of 2025 was 31.3%, higher compared to 27.9% for the same period in 2024, mainly due to favorable discrete tax adjustments in the prior period exceeding favorable discrete tax adjustments in the current period.

The Company’s effective tax rate for the third quarter of 2025 was 20.0%, compared to 6.6% for the same period in 2024, mainly due to favorable discrete tax adjustments in the prior period exceeding favorable discrete tax adjustments in the current period.

For more information, see Note 7, Income Taxes, in the Notes to the Consolidated Financial Statements.

8 unchanged sentences

Segment Results of Operations

Segment Revenues and Gross Profit:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except percentages) 2025 2024 % Change 2025 2024 % Change

Segment net revenues

Machine Clothing $ 174,950 $ 183,033 (4.4) % $ 530,573 $ 561,828 (5.6) %

Albany Engineered Composites $ 86,484 $ 115,353 (25.0) % $ 331,034 $ 381,882 (13.3) %

Consolidated total $ 261,434 $ 298,386 (12.4) % $ 861,607 $ 943,710 (8.7) %

Segment Gross profit

Machine Clothing $ 82,070 $ 88,921 (7.7) % $ 245,731 $ 262,449 (6.4) %

Albany Engineered Composites $ (132,008) $ 1,463 (9123.1) % $ (101,676) $ 49,004 (307.5) %

Consolidated total $ (49,938) $ 90,384 (155.3) % $ 144,055 $ 311,453 (53.7) %

Segment Gross profit margin

% of Segment net revenues - MC 46.9 % 48.6 % 46.3 % 46.7 %

% of Segment net revenues - AEC (152.6) % 1.3 % (30.7) % 12.8 %

% of Consolidated net revenues (19.1) % 30.3 % 16.7 % 33.0 %

Machine Clothing Segment

The MC segment accounted for 58% and 59% of our consolidated revenues during the three and six months ended June 30, 2025.

A summary of selected financial results for MC is as follows:

Review of Operations

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages)

2025 2024 2025 2024

Net revenues $ 180,926 $ 193,578 $ 355,623 $ 378,795

83,759 88,873 163,661 173,528

% of Net revenues 46.3 % 45.9 % 46.0 % 45.8 %

SG&A expenses

35,669 30,569 68,550 63,336

Technical and research expenses

7,373 7,504 14,616 15,024

Operating income 37,702 49,734 76,133 94,081

For the three months ended June 30, 2025, Net revenues decreased $12.7 million or 6.5% as compared to the three months ended June 30, 2024, driven by reduced demand in Asia, and an unplanned equipment downtime in one of our production facilities.

In addition, changes in currency translation rates had the effect of decreasing Net revenues $(3.0) million.

For the six months ended June 30, 2025, Net revenues decreased $23.2 million or 6.1% as compared to the six months ended June 30, 2024, driven by reduced demand in Asia, and an unplanned equipment downtime in one of our production facilities.

In addition, changes in currency translation rates had the effect of decreasing Net revenues $0.5 million.

For the three months ended June 30, 2025, Gross profit decreased by $5.1 million primarily the result of lower revenues during the second quarter of 2025, however the gross profit margin increased to 46.3% compared to 45.9% for the three months ended June 30, 2024.

For the six months ended June 30, 2025, Gross profit decreased by $9.9 million primarily the result of lower revenues during the six months of 2025, however, the gross profit margin increased 46.0% compared to 45.8% for the six months ended June 30, 2024.

Operating Income

For the three months ended June 30, 2025, Operating income decreased as compared to the first three months of 2024, decreasing $12.0 million or 24.2%.

The weaker Gross profit performance was slightly offset by lower Technical and Research expenses.

SG&A expenses increased $5.1 million as compared to 2024, primarily due to increases in unrealized gains and losses arising from the remeasurement of monetary assets and liabilities denominated in non-functional currencies (changes in currency translation rates), consulting costs and impacts of general inflationary pressures, offset by lower personnel-related costs.

Technical and research expenses decreased $0.1 million as compared to 2024 due to lower personnel and development costs, along with an increase in allocated costs to Corporate.

For the six months ended June 30, 2025, Operating income decreased as compared to the first six months of 2024, decreasing $17.9 million.

The weaker Gross profit performance was impacted by higher SG&A expenses which increased $5.2 million as compared to 2024, primarily due to increases in unrealized gains and losses arising from the remeasurement of monetary assets and liabilities denominated in non-functional currencies (changes in currency translation rates), consulting costs and impacts of general inflationary pressures, offset by lower personnel-related costs.

Technical and research expenses decreased $0.4 million as compared to 2024 due to lower personnel and

development costs, along with an increase in allocated costs to Corporate.

In addition, Restructuring expenses increased $0.6 million related to recent announcements to cease operations at multiple manufacturing facilities, further reducing Operating income.

Three Month Comparison

For the three months ended September 30, 2025, MC segment net revenues decreased $8.1 million or 4.4% as compared to the three months ended September 30, 2024, driven by reduced demand in Asia, particularly in China while all other regions remained stable.

In addition, changes in currency translation rates had the effect of decreasing segment net revenues $2.6 million.

For the three months ended September 30, 2025, MC segment gross profit decreased by $6.9 million, primarily the result of lower revenues during the third quarter of 2025 as the gross profit margin decreased to 46.9% compared to 48.6% for the three months ended September 30, 2024.

Gross margin was primarily impacted by lower Asia sales volume partially offset by the benefits of ongoing footprint optimization initiatives.

Going forward, we will continue to execute our plan of rationalizing production across our network of facilities in order to realize productivity movements.

Nine Month Comparison

For the nine months ended September 30, 2025, MC segment net revenues decreased $31.3 million or 5.6% as compared to the nine months ended September 30, 2024, driven by reduced demand in Asia, particularly in China,

and an unplanned equipment downtime in one of our production facilities.

In addition, changes in currency translation rates decreased comparative segment net revenues by $3.1 million as compared to the prior year.

For the nine months ended September 30, 2025, MC segment gross profit decreased by $16.7 million, primarily the result of lower revenues during the nine months of 2025 and unplanned equipment downtime in one of our facilities.

Albany Engineered Composites ("AEC") Segment

The AEC segment accounted for 42% and 41% of our consolidated revenues during the three and six months ended June 30, 2025, respectively.

A summary of selected financial results for AEC is as follows:

Review of Operations

Three months ended June 30, Six months ended June 30,

(in thousands, except percentages)

2025 2024 2025 2024

Net revenues $ 130,473 $ 138,416 $ 244,550 $ 266,529

13,748 23,510 30,332 47,541

% of Net revenues 10.5 % 17.0 % 12.4 % 17.8 %

SG&A expenses

11,777 12,786 21,903 24,326

Technical and research expenses

4,125 4,356 7,799 9,501

Operating income (2,674) 5,446 (1,058) 10,604

For the three months ended June 30, 2025, Net revenues decreased $7.9 million or 5.7% as compared to the three months ended June 30, 2024.

This decrease is primarily driven by reductions on certain commercial and space programs, which was partially offset by higher revenues on CH-53K and other programs.

Changes in currency translation rates had the effect of decreasing Net revenues $0.9 million.

For the six months ended June 30, 2025, Net revenues decreased $22.0 million or 8.2% as compared to the six months ended June 30, 2024.

This decrease is primarily driven by reductions on certain commercial and space programs, which was partially offset by higher revenues on CH-53K and other programs.

Changes in currency translation rates had the effect of decreasing Net revenues $0.4 million

AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement.

Revenue earned under these arrangements accounted for approximately 34 percent and 40 pe rcent of segment revenue for the first six months of 2025 and 2024, respectively.

In addition, AEC has long-term contracts in which the selling price is fixed.

Changes in estimated contract profitability will affect revenue and gross profit when the change occurs, which could have a significant favorable or unfavorable effect on revenue and gross profit in any reporting period.

For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known.

Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations, which are treated as period expenses.

Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow.

For the three months ended June 30, 2025, gross profit decreased $9.8 million as compared to the three months ended June 30, 2024, and as a percentage of revenues decreased from 17.0% in 2024 to 10.5% in 2025.

This decrease in gross profit was driven primarily by changes in the estimated profitability of long-term contracts, which decreased gross profit by $7.0 million in 2025 due to increased cost assumptions.

For the three months ended June 30, 2024, adjustments in the estimated profitability of long-term contracts decreased gross profit $5.0 million.

For the six months ended June 30, 2025, gross profit decreased $17.2 million as compared to the six months ended June 30, 2024, and as a percentage of revenues decreased from 17.8% in 2024 to 12.4% in 2025.

This decrease in gross profit was driven primarily by changes in the estimated profitability of long-term contracts, which decreased gross profit by $14.2 million in 2025 due to increased cost assumptions.

For the six months ended June 30, 2024, adjustments in the estimated profitability of long-term contracts decreased gross profit $7.6 million.

Operating Income

For the three months ended June 30, 2025, Operating income decreased $8.1 million, principally due to reduced gross profit as noted above.

This was offset by a decrease in SG&A expenses of $1.0 million, primarily driven by decreased incentive compensation and personnel-related costs.

Technical and research expenses decreased $0.2 million compared to the three months ended June 30, 2024, attributable to decreases in research and material costs, combined with allocations to Corporate.

Further, restructuring expenses decreased $0.4 million compared to the three months ended June 30, 2024.

For the six months ended June 30, 2025, Operating income decreased $11.7 million, principally due to reduced gross profit as noted above.

This was offset by a decrease in SG&A expenses of $2.4 million, primarily driven by decreased incentive compensation and personnel-related costs.

Technical and research expenses decreased $1.7 million compared to the six months ended June 30, 2024, attributable to decreases in research and material costs, combined with allocations to Corporate.

Further, restructuring expenses decreased $1.4 million compared to the six months ended June 30, 2024.

Three Month Comparison

For the three months ended September 30, 2025, segment net revenues decreased $28.9 million or 25.0% as compared to the three months ended September 30, 2024.

This decrease is primarily driven by $46.0 million of revenue adjustments to the CH-53K program based on our long-term contract estimates.

These reductions are partially offset by higher activity levels in the LEAP program.

AEC is party to contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement.

Revenue earned under these arrangements accounted for approximately 50 percent and 33 percent of segment revenue for the three months ended September 30, 2025 and September 30, 2024, respectively.

For the three months ended September 30, 2025, segment gross profit decreased $133.5 million as compared to the three months ended September 30, 2024.

This decrease in gross profit was driven primarily by approximately $147.3 million of increased life of contract cost assumptions surrounding the estimated profitability of our CH-53K long-term contracts.

For the three months ended September 30, 2024, adjustments in the estimated profitability of long-term contracts decreased segment gross profit $13.3 million.

Subsequent to quarter end, the Company announced that it has initiated a strategic review of its structures assembly business, including the CH-53K program and its production site.

The strategic review may include a potential sale of all or part of the site.

Nine Month Comparison

For the nine months ended September 30, 2025, segment net revenues decreased $50.8 million or 13.3% as compared to the nine months ended September 30, 2024.

This decrease is primarily driven by $54.3 million of revenue adjustments to the CH-53K program based on our long-term contract estimates.

These reductions are partially offset by higher activity levels in the LEAP program.

AEC is party to contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement.

Revenue earned under these arrangements accounted for approximately 37 percent and 40 percent of segment revenue for the first nine months of 2025 and 2024, respectively.

For the nine months ended September 30, 2025, segment gross profit decreased $150.7 million as compared to the nine months ended September 30, 2024.

This decrease in gross profit was driven primarily by changes in the estimated profitability of our CH-53K and other long-term contracts, including the recognition of an estimated loss reserve on CH-53K, which decreased gross profit by $157.6 million and $13.3 million in 2025 and 2024, respectively due to increased material, labor, and overhead cost assumptions.

For the nine months ended September 30, 2024, adjustments in the estimated profitability of long-term contracts decreased segment gross profit $28.3 million.

Segment Operating Expenses, Segment Operating Income/(loss):

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except percentages) 2025 2024 % Change 2025 2024 % Change

Segment selling, general and administrative expenses

Machine Clothing $ 30,291 $ 32,048 (5.5) % $ 98,841 $ 95,384 3.6 %

% of Segment net revenues 17.3 % 17.5 % (20) bp 18.6 % 17.0 % 165 bp

Albany Engineered Composites $ 12,218 $ 11,923 2.5 % $ 34,121 $ 36,249 (5.9) %

% of Segment net revenues 14.1 % 10.3 % 379 bp 10.3 % 9.5 % 82 bp

Corporate $ 9,396 $ 8,126 15.6 % $ 31,257 $ 30,814 1.4 %

% of Consolidated net revenues 3.6 % 2.7 % 87 bp 3.6 % 3.3 % 36 bp

Consolidated total selling, general and administrative expenses $ 51,905 $ 52,097 (0.4) % $ 164,219 $ 162,447 1.1 %

Segment technical and research expenses

Machine Clothing $ 6,716 $ 7,042 (4.6) % $ 21,332 $ 22,066 (3.3) %

% of Segment net revenues 3.8 % 3.8 % (1) bp 4.0 % 3.9 % 9 bp

Albany Engineered Composites $ 3,673 $ 3,802 (3.4) % $ 11,472 $ 13,303 (13.8) %

% of Segment net revenues 4.2 % 3.3 % 95 bp 3.5 % 3.5 % (2) bp

Corporate $ 1,078 $ 0 — % $ 3,111 $ 0 — %

% of Consolidated net revenues 0.4 % — % 41 bp 0.4 % — % 36 bp

Consolidated total technical and research expenses $ 11,467 $ 10,844 5.7 % $ 35,915 $ 35,369 1.5 %

Segment restructuring expenses, net

Machine Clothing $ 1,960 $ 2,207 (11.2) % $ 6,322 $ 3,294 91.9 %

% of Segment net revenues 1.1 % 1.2 % (9) bp 1.2 % 0.6 % 61 bp

Albany Engineered Composites $ 113 $ 34 232.4 % $ 1,801 $ 3,144 (42.7) %

% of Segment net revenues 0.1 % — % 10 bp 0.5 % 0.8 % (28) bp

Corporate $ 1,124 $ 31 3525.8 % $ 1,772 $ 146 1113.7 %

% of Consolidated net revenues 0.4 % — % 42 bp 0.2 % — % 19 bp

Consolidated total restructuring expenses, net $ 3,197 $ 2,272 40.7 % $ 9,895 $ 6,584 50.3 %

Segment Operating income/(loss)

Machine Clothing $ 43,103 $ 47,624 (9.5) % $ 119,236 $ 141,705 (15.9) %

Albany Engineered Composites $ (148,012) $ (14,296) 935.3 % $ (149,070) $ (3,692) 3937.6 %

Corporate expenses $ (11,598) $ (8,157) 42.2 % $ (36,140) $ (30,960) 16.7 %

Segment Operating income $ (116,507) $ 25,171 (562.9) % $ (65,974) $ 107,053 (161.6) %

Machine Clothing Segment

Three Month Comparison

For the three months ended September 30, 2025, segment operating income decreased as compared to the three months ended September 30, 2024, decreasing $4.5 million or 9.5%.

The weaker segment gross profit performance was offset by technical and research expenses and SG&A expenses decreasing by $2.1 million, primarily a result of cost containment and the realization of Heimbach integration synergies.

Nine Month Comparison

For the nine months ended September 30, 2025, segment operating income decreased $22.5 million as compared to the first nine months of 2024.

The weaker segment operating income performance was impacted by lower gross profit in the current year, as well as general inflationary pressures.

This change was slightly offset by a decrease in Heimbach integration costs that occurred in the first nine months of 2024, as this did not recur in 2025.

Albany Engineered Composites ("AEC") Segment

Three Month Comparison

For the three months ended September 30, 2025, segment operating income decreased $133.7 million, principally due to contract loss reserve charges associated with the CH-53K program.

Nine Month Comparison

For the nine months ended September 30, 2025, segment operating income/(loss) decreased $145.4 million, principally due to reduced segment gross profit as noted above, offset by a decrease in compensation and personnel-related SG&A expenses and lower restructuring charges.

Working Capital, Liquidity and Capital Structure

Cash Flow Summary

Six months ended June 30,

Nine months ended September 30,

(in thousands)

Net income $ 26,681 $ 52,089

Net income/(loss) $ (70,957) $ 70,310

Depreciation and amortization 65,480 67,003

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(a) Includes Accounts receivable, Contract assets, Inventories, Accounts payable, and Accrued liabilities.

Net cash provided by operating activities during the six months ended June 30, 2025 was $34.8 million, compared to $93.0 million in the six months ended June 30, 2024.

The decrease was primarily driven by a reduction in the gross profit of both segments, resulting in a lower net income compared to the first six months of 2024 and an increase in working capital.

Net cash used in investing activities included capital expenditures totaling $30.5 million and $46.6 million for the first six months ended June 30, 2025 and June 30, 2024, respectively, with investments focused on aerospace program support, continued maintenance capex and capital designed to improve operating efficiencies across the Company.

Net cash used in financing activities was $24.5 million for the six months ended June 30, 2025 as compared to net cash used of $98.2 million for the six months ended June 30, 2024.

Net cash provided by operating activities during the nine months ended September 30, 2025 was $78.8 million, compared to $140.0 million in the nine months ended September 30, 2024.

The decrease was primarily driven by a reduction in the gross profit of both segments along with an inventory build in AEC early in the year in anticipation of production ramp.

Non-cash adjustments to the CH-53K programs, including loss reserves of $98.0 million, are a component of other operating items within net cash provided by operating activities.

Net cash used in investing activities included capital expenditures totaling $48.8 million and $62.1 million for the nine months ended September 30, 2025 and September 30, 2024, respectively, with investments focused on aerospace program support, continued maintenance capex and capital designed to improve operating efficiencies across the Company.

Net cash used in financing activities was $48.3 million for the nine months ended September 30, 2025 as compared to net cash used of $121.8 million for the nine months ended September 30, 2024.

During 2025, we had net borrowings of $150.0 million as compared to net repayments of $94.6 million in the prior year.

Additionally, the Company repurchased $120.4 million of share repurchases and paid dividends of $16.7 million in the first six months of 2025.

Additionally, the Company repurchased $171.0 million of share repurchases and paid dividends of $24.7 million in the first nine months of 2025.

Liquidity and Capital Structure

We finance our business activities principally with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below.

Under our $800 million unsecured committed Amended Credit Agreement, $444.7 million of borrowings were outstanding as of June 30, 2025.

As of June 30, 2025, we had cash and cash equivalents of $106.7 million and borrowing capacity under our Amended Credit Agreement of $355.3 million, for a total liquidity of approximately $462.0 million.

As of September 30, 2025, $480.6 million of borrowings were outstanding under our $800 million unsecured committed Amended Credit Agreement.

As of September 30, 2025, we had cash and cash equivalents of $108.3 million and borrowing capacity under our Amended Credit Agreement of $319.4 million, for a total liquidity of approximately $427.7 million.

We believe cash flows from operations and the availability of funds under our Amended Credit Agreement will be adequate to fund our operations and business needs over the next twelve months.

For more information on credit agreements, see Note 15.

Financial Instruments in the Notes to Consolidated Financial Statements.

As of June 30, 2025, $85.3 million of our total cash and cash equivalents were held by non-U.S.

As of September 30, 2025, $88.7 million of our total cash and cash equivalents were held by non-U.S.

subsidiaries.

The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the U.S.

were in excess of $140.0 million, as of June 30, 2025 and are intended to remain indefinitely invested in foreign operations.

were in excess of $140.0 million , as of September 30, 2025 and are intended to remain indefinitely invested in foreign operations.

Our cash planning strategy includes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate.

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We have also returned cash to shareholders through dividends and share repurchases.

During the six months ended June 30, 2025, we paid $16.7 million in dividends and repurchased 1,670,858 shares for a total cost i ncluding excise taxes and fees of $120.4 million.

During the nine months ended September 30, 2025, we paid $24.7 million in dividends and repurchased 2,480,769 shares for a total cost of $171.0 million, including excise taxes and fees.

Earlier this year, the Company announced that it will be consolidating its corporate headquarters in Portsmouth, NH.

3 unchanged sentences

The Company provides financial assurance, such as payment guarantee and letters of credit and surety bonds, primarily to support workers’ compensation programs and customs clearance, of less than $10 million.

There were no material changes in the Company’s off-balance sheet arrangements during the second quarter of 2025.

There were no material changes in the Company’s off-balance sheet arrangements during the third quarter of 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis