ALBANY INTERNATIONAL CORP /DE/ 10-Q

Item 3. Quantitative and Qualitative Disclosures about Market Risk We are exposed to changes in both foreign currency exchange rates and interest rates. From time to time, the Company enters into derivative agreements to manage these risks. The market risk is the potential loss arising from adverse changes in these rates as discussed below. Foreign Currency Exchange Rate Risk We have manufacturing plants and sales transactions worldwide and, therefore, are subject to foreign currency risk. Our operational results can be materially impacted depending on the volatility and magnitude of foreign rate changes. 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 approximate ly $599.9 million. The potential loss in fair value resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates amounts to $59.9 million. Furthermore, related to foreign currency transactions, we have exposure to various nonfunctional currency balances totaling $170.4 million. This amount includes, on an absolute basis, exposures to assets and liabilities held in currencies other than our local entities’ functional currencies. On a net basis, we had $41.0 million of foreign currency assets as of September 30, 2025. 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 $4.1 million. Actual results ma y differ from these estimates. Interest Rate Risk We are exposed to interest rate fluctuations with respect to our variable rate debt, depending on general economic conditions. On September 30, 2025, we had the following unhedged variable rate debt: (in thousands, except interest rates) Long-term debt: Credit agreement borrowings outstanding (due in 2028): USD borrowings (end of period all-in interest rate of 6.0%) 250,000 EUR borrowings (end of period all-in interest rate of 3.5%) 52,815 Foreign bank debt 0 Total $ 302,815 Assuming borrowings were outstanding for an entire year, an increase of one percentage point in weighted average interest rates would increase interest expense by $3.0 million. To manage interest rate risk, we may 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. See Note 15. Financial Instruments in the Notes to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.