What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2025-11-06 · 140 added, 220 removed, 100 unchanged (78% of the section changed)

8 unchanged sentences

• Conditions in the industries in which our Machine Clothing and Albany Engineered Composites segments compete, along with the general risks associated with macroeconomic conditions, including higher interest rates, inflationary pressures, or the effects of another pandemic, for an extended period of time;

• Some of the Company’s competitors in the Machine Clothing segment have the capability to make and sell paper machines and papermaking equipment as well as other engineered fabrics;

• Machine Clothing and Albany Engineered Composites segments are subject to significant risks related to the potential manufacture and sale of defective or non-conforming products;

• Deterioration of global economic conditions could have an adverse impact on the Company's segments and overall business and results of operations;

• In the Albany Engineered Composites segment, new and unique risks introduced by the U.S.

Government's Department of Defense ("DoD") Cybersecurity Maturity Model Certification ("CMMC") program;

• Across the entire Company, increasing labor, raw material, energy, or logistics and costs due to supply chain constraints and inflationary pressures.

These challenges have only increased as a result of the ongoing Russia-Ukraine war and the conflict in the Middle East;

• We may be unable to maintain effective systems of internal controls while consolidating dispersed corporate functions to our corporate headquarters in New Hampshire;

• Our ability to attract and retain business and employees may depend on our reputation in the marketplace;

• Across both segments, potential port strikes could cause additional disruptions to our supply chain;

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• In the Machine Clothing segment, greater than anticipated declines in the demand for publication grades of paper, or lower than anticipated growth in other paper grades;

• In the Albany Engineered Composites segment, longer-than-expected timeframe for the aerospace industry to utilize existing inventories, unanticipated reductions in demand, delays, technical difficulties, and cancellations in aerospace programs that are expected to generate revenue and drive long-term growth;

• Inability of our Machine Clothing or Albany Engineered Composite segments to create additional production capacity in a timely manner or the occurrence of other manufacturing or supply difficulties (including as a result of geopolitical crises, natural disaster, public health crises and epidemics/pandemics, regulatory or otherwise);

• Changes in geopolitical conditions impacting countries where the Company does or intends to do business, including the effects of the implementation of trade tariffs on imported goods;

• In the Albany Engineered Composites segment, longer-than-expected timeframe for the aerospace industry to utilize existing inventories, and unanticipated reductions in demand, delays, technical difficulties or cancellations in aerospace programs that are expected to generate revenue and drive long-term growth;

• Inability of our Machine Clothing or Albany Engineered Composites segments to create additional production capacity in a timely manner or the occurrence of other manufacturing or supply difficulties (including as a result of geopolitical crises, natural disaster, public health crises and epidemics/pandemics, regulatory or otherwise);

• Changes in geopolitical conditions impacting countries where the Company does or intends to do business;

• Failure to achieve or maintain anticipated profitable growth;

• The Company's insurance coverage may be inadequate to cover significant risk exposures;

• Failure to achieve our strategic initiatives and other goals, including, but not limited to, our sustainability goals;

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• In the Albany Engineered Composites segment, risks associated with changes in estimates and assumptions that could result in a decline in program gross margins or turn a profitable program into a loss program;

• Assets classified as held for sale may be sold for proceeds lower than currently estimated, or not sold within expected terms or timing;

• Adverse impacts from inflation, an economic slowdown or recession and by disruption in capital and credit markets that might impede our access to credit, increase our borrowing costs and impair the financial soundness of our customers and suppliers;

• Proposed tariffs that may significantly and adversely impact our results of operations;

• Expectations regarding our ability to attract, motivate, and retain the workforce necessary to execute our business strategy and other goals;

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• Harm caused by customer purchase reductions, payment defaults or contract non-renewal;

• In the Albany Engineered Composites segment, future funding and compliance risks associated with our contracts with government entities, OEM customers or prime contractors on contracts with government entities;

• Costly and disruptive legal disputes and settlements and the Company's ability to provide adequate insurance coverage;

• Potential adverse outcomes from current or future patent infringement claims could materially affect our business operations and financial condition;

• Costs associated with defending or settling intellectual property disputes could be significant;

• Increasing operational and compliance costs associated with increasing environmental, social and governance regulatory requirements, as well as the risk of noncompliance;

• Costly and disruptive legal disputes and settlements;

• Future levels of indebtedness and capital expenditures;

• Impairment of goodwill and other intangible assets;

• Adverse impacts from changes in tax legislation or challenges to our tax positions;

• Cybersecurity incidents or significant computer system compromises or data breaches to our information technology systems, processes, sites and cloud-based providers;

• Disruptions or challenges arising from the implementation or upgrading of new information technology systems;

• Rapid advancements in artificial intelligence may introduce unforeseen regulatory, ethical, and operational challenges;

• Integration of AI technologies may involve data privacy, security, and compliance risks;

• Evolving legal frameworks around AI and IP protection could impact our competitive position and innovation strategies;

• Significant changes in critical estimates and assumptions related to pension and other post-retirement benefit costs and liabilities;

• Cybersecurity incidents or significant computer system compromises or data breaches;

• Significant problems with information systems or networks;

• Failure to adequately integrate acquired companies into our business systems and processes within the expected timeframe or, failure to or delayed realization of anticipated benefits of the acquisition could adversely impact the Company’s business, financial condition and results of operations;

• Failure to adequately protect our proprietary technology or intellectual property, which would allow competitors or others to take advantage of our research and development efforts;

• Impacts on our stock price and trading volume if securities or industry analysis do not publish research or publish inaccurate or unfavorable research about our business, or by future sales of shares by our existing stockholders and the impact of any changes in cash dividend payments;

• The impact of shareholder activism on our operations, strategy, and overall performance;

• Failure to successfully integrate the Heimbach Group companies into our business systems and processes within the expected timeframe or, failure to or delayed realization of anticipated benefits of the acquisition could adversely impact the Company’s business, financial condition and results of operations;

• 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.

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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, 2025.

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www.albint.com.

Global, economic, and political conditions, changes in raw material and commodity prices and supply, labor availability and costs, inflation, interest rates, potential changes in U.S.

government policy positions, including changes in Department of Defense policies or priorities, geopolitical conflicts and strained international relations, U.S.

tax law changes, foreign currency exchange rates, sanctions, tariffs, energy costs and supply, and the impact from natural disasters and weather conditions create uncertainties that could impact our businesses.

Machine Clothing Segment

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.

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 continues to deliver resilient performance, with several areas performing well despite uneven market dynamics.

In Asia, softer demand—across Paper Machine Clothing & Engineered Fabrics—continues to contribute to regional pressure.

Packaging and Tissue continue to perform well, supported by growth across most regions.

Looking ahead to the remainder of 2026, we expect Packaging and Tissue to remain positive contributors, with sales in Europe and the Americas holding broadly stable, while Asia’s trajectory remains uncertain.

Publication grades remained under structural pressure, and the MC segment expects publication grade paper demand to continue declining through 2026 and beyond, offset by growing demand for tissue grade products.

We believe the MC segment 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.

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

MC continues to face pricing pressures in all markets.

Despite these market pressures on revenue growth, the MC segment is expected to improve earnings in the future through cost controls and manufacturing productivity efficiencies.

Despite pricing and demand pressures on revenue growth, the MC segment is expected to improve earnings in the future through technological innovations, manufacturing productivity efficiencies and cost controls.

The MC segment has been a significant generator of operating cash inflows for the Company.

The Company seeks to maintain the cash-generating potential of this business by vigorously using our differentiated and technically superior products to reduce our customers’ total cost of operation while improving their paper quality, and by maintaining lower costs through a continued focus on cost-reduction initiatives and strategic investment.

Albany Engineered Composites Segment

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

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.

The AEC segment's strategy is to continue to build on its global brand by leveraging its industry leading performance to drive future growth through technology differentiation.

This includes continued investment in AEC's proprietary 3D-woven technology to accelerate solutions that can be offered across a set of broader applications;

and by leveraging the AEC's non-3D technology capabilities and capacity, on high-value aerospace (both commercial and defense) applications, and other emerging markets such as space and advanced air mobility ("AAM").

The AEC segment provides longer-term growth potential for the Company as it ramps current production programs and captures new commercial and defense opportunities.

The AEC segment (including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group owns a 10% noncontrolling interest) supplies a number of customers in the aerospace industry.

AEC’s largest aerospace customer is the SAFRAN Group ("SAFRAN") and sales to SAFRAN, through ASC, (consisting primarily of fan blades and cases for CFM International’s LEAP engine) accounted for approximately 15% of the Company’s consolidated Net revenues in 2025.

The AEC segment, through ASC, also supplies 3D-woven composite fan cases for the GE9X engine.

Outside of ASC, the AEC segment also supplies 3D-woven composite vanes for the F-35 Liftfan.

The AEC segment's current portfolio of non-3D programs includes components for the CH-53K helicopter, components for the F-35, missile bodies for Lockheed Martin’s JASSM air-to-surface missiles, fuselage components for the Boeing 787 aircraft, vacuum waste tanks for Boeing commercial aircraft and components and structures for other commercial, defense, and space and AAM programs.

In 2025, approximately 35% of AEC net revenues were related to U.S.

government contracts or programs.

The AEC segment is dependent on global supply chains and has experienced disruptions in recent years.

In addition, higher inflation levels increased material costs, higher labor rates and other supplier costs that have impacted the AEC segment’s results of operations.

The AEC segment attempts 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.

In addition, as the AEC segment ramps-up larger complex programs, such as those associated with the CH-53 program, it continues to face challenges in staffing and training its workforce to support production rates, which has impacted operational productivity, particularly at its Salt Lake City facility, and contributed to increased labor and scrap costs.

During the fourth quarter of 2025, we announced that we will commence a strategic review of the Amelia Earhart Drive facility in Salt Lake City.

This review is expected to be completed by the end of 2026, and management expects the review to result in a sale of the facility, including the CH-53K contract work.

As of December 31, 2025, we determined that the assets and liabilities of this group meet the held-for-sale criteria, and they have been classified as such within

our consolidated balance sheets for all periods presented.

Upon classification as held for sale, the Company ceased depreciation and amortization of the related long-lived assets in accordance with applicable accounting guidance.

Consolidated Results of Operations

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 and Gross Profit

The following table summarizes our Consolidated Net revenues and Gross profit:

Three Months Ended March 31,

(in thousands, except percentages) 2026 2025

Net revenues $ 311,333 $ 288,774

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 %

Gross profit 99,794 96,486

Gross profit margin 32.1 % 33.4 %

Net revenues for the three months ended March 31, 2026 increased 7.8% as compared to the three months ended March 31, 2025 primarily due to higher volume in the AEC segment partially offset by softness in the US region and temporary production interruptions in the MC business.

Additionally, changes in currency translation rates increased comparative segment net revenues by $9.3 million as compared to the prior year.

The increase in gross profit for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025, was driven by the increased sales volume in AEC.

Despite the favorable change to gross profit, increased production costs resulting from changes in the product mix within the MC business are the primary driver for the slight gross profit margin decrease to 32.1% from 33.4% for the three months ended March 31, 2026 and March 31, 2025, respectively.

Operating Expenses

The following table summarizes Consolidated Operating expenses by classification:

Three Months Ended March 31,

(in thousands, except percentages) 2026 2025

Selling, general and administrative expenses $ 58,299 $ 53,812

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Total operating expenses $ 74,421 $ 68,223

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 %

Total operating expenses as a % of net revenues 23.9 % 23.6 %

Consolidated Selling, general and administrative ("SG&A") expenses increased $4.5 million or 8.3% as compared to the three months ended March 31, 2025.

The overall changes are primarily the result of higher personnel costs as well as costs incurred related to the strategic review of the Amelia Earhart Drive facility.

Consolidated Technical and research expenses increased by $1.1 million as compared to the three months ended March 31, 2025, primarily due to new business ventures initiatives in 2026.

Restructuring expenses, net, of $3.2 million in the three months ended March 31, 2026, increased by $0.7 million compared to $2.5 million in the three months ended March 31, 2025.

The change in restructuring actions for the three month period are a result of workforce reductions and global production consolidation activities.

Operating Income

See the Segment Results of Operations section of this Management Discussion and Analysis of Financial Condition and Results of Operations for significant drivers of Operating income/(loss) for each business segment.

Other Earnings Items

Three Months Ended March 31,

(in thousands, except percentages) 2026 2025

Interest expense/(income), net $ 5,467 $ 3,655

Other (income)/expense, net (3,193) 983

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 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 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")

Three Month Comparison

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

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.

Income tax expense 7,650 6,276

Net income/(loss) attributable to the noncontrolling interest 168 (6)

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.

Interest expense, net, increased over the prior year primarily due to higher average debt balances as well as a lower amount of interest income earned on cash equivalents during the current year.

Other (Income)/Expense, net

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.

Other (income)/expense, net, included foreign currency related transactions which resulted in gains of $(2.2) million in the three months ended March 31, 2026, as compared to losses of $3.2 million in the same period last year.

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

In addition, changes in the fair value of derivative instruments included gains of $1.2 million in the three months ended March 31, 2026, as compared to gains of $2.5 million for the three months ended March 31, 2025.

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.

See Note 6, Other (Income)/Expense, net, in the Notes to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.

Effective Income Tax Rate

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

2025 2024 2025 2024

Three months ended March 31,

Effective income tax rate 33.1 % 26.6 %

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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.

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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 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.

The Company’s effective tax rate for the first quarter of 2026 was 33.1%, compared to 26.6% for the same period in 2025, mainly due to favorable discrete tax adjustments in the prior period.

For more information, see Note 7, Income Taxes, in the Notes to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference.

The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15 percent intended to be effective on January 1, 2024.

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and global legislative action related to Pillar Two for potential impacts.

On July 4, 2025, the One Big Beautiful Bill (OBBB) Act, which includes a broad range of tax reform provisions, was signed into law in the United States and we continue to assess its impact.

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

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

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.

The MC segment accounted for 53.3% of our consolidated revenues for the three months ended March 31, 2026.

A summary of MC's selected financial results is as follows:

Three Months Ended March 31,

(in thousands, except percentages) 2026 2025

Net revenues $ 165,952 $ 174,697

Gross profit 75,062 79,902

% of net revenues 45.2 % 45.7 %

SG&A expenses 33,249 32,881

Technical and research expenses 7,185 7,243

Restructuring expenses, net 2,676 1,347

Operating income 31,952 38,431

% of net revenues 19.3 % 22.0 %

Net revenues for the three months ended March 31, 2026 decreased 5.0% as compared to the three months ended March 31, 2025, driven by reduced sales volume in the US region, primarily due to temporary production interruptions, including scheduled maintenance at certain plants.

This decline is slightly offset by a strong performance within the European market, particularly related to the Engineered Fabrics program.

Further, changes in currency translation rates had the effect of increasing Net revenues by $6.1 million for the three months ended March 31, 2026, as compared to this period in 2025.

Gross profit for the three months ended March 31, 2026 decreased by $4.8 million as compared to the three months ended March 31, 2025, primarily driven by the volume declines noted above;

with gross profit margin also decreasing slightly from 45.7% to 45.2% in the three months ended March 31, 2025 and 2026, respectively.

Operating Income

Operating income for the three months ended March 31, 2026 decreased $6.5 million or 16.9% as compared to the three months ended March 31, 2025, primarily as a result of gross profit declines and restructuring costs.

Incremental restructuring expenses were primarily a result of manufacturing footprint optimization in connection with the Heimbach acquisition.

Albany Engineered Composites Segment

The AEC segment accounted for 46.7% of our consolidated net revenues for the three months ended March 31, 2026.

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 33% and 35% of segment revenue for the three months ended March 31, 2026 and 2025, 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.

A summary of AEC's selected financial results is as follows:

Three Months Ended March 31,

(in thousands, except percentages) 2026 2025

Net revenues $ 145,381 $ 114,077

Gross profit 24,732 16,584

% of net revenues 17.0 % 14.5 %

SG&A expenses 11,586 10,126

Technical and research expenses 4,548 3,674

Restructuring expenses, net — 1,168

Operating income 8,598 1,616

% of net revenues 5.9 % 1.4 %

Net revenues for the three months ended March 31, 2026 increased 27.4%, primarily driven by higher activity levels on various programs including ASC, GE LEAP Platforms, and B787 Frames, as well as lower unfavorable long-term contract adjustments.

Further, changes in currency translation rates had the effect of increasing Net revenues by $3.1 million for the three months ended March 31, 2026, as compared to this period in 2025.

Gross profit for the three months ended March 31, 2026 increased $8.1 million as compared to the three months ended March 31, 2025, and Gross profit margin increased from 14.5% to 17.0% in the three months ended March 31, 2025 and 2026, respectively.

The change was driven primarily by increases in revenue, as well as performance improvements on various programs, resulting in lower unfavorable EAC adjustments.

Operating Income/(Loss)

Operating income for the three months ended March 31, 2026 increased $7.0 million as compared to the three months ended March 31, 2025, principally due to favorable changes to Gross profit as noted above and the conclusion of restructuring activities from 2025.

This was slightly offset by an increase in SG&A expenses of $1.5 million from the prior period, driven by personnel-related costs.

Additionally, Technical and research expenses increased $0.9 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, driven by increased consulting costs to assist with continued innovation within the segment.

Working Capital, Liquidity and Capital Structure

Cash Flow Summary

Nine months ended September 30,

Three months ended March 31,

(in thousands)

6 unchanged sentences

Net cash used in investing activities (9,290) (15,597)

Net cash used in financing activities

(48,268) (121,773)

Net cash provided by financing activities 13,769 15,091

Effect of exchange rate changes on cash and cash equivalents 85 2,458

Decrease in cash and cash equivalents

(6,973) (46,198)

Increase in cash and cash equivalents 10,207 4,071

Cash and cash equivalents at beginning of year 112,350 115,283

2 unchanged sentences

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

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

Net cash provided by operating activities during the three months ended March 31, 2026 was $5.6 million, compared to $2.1 million in the three months ended March 31, 2025.

The increase was primarily driven by improved working capital management primarily driven by favorable cash collection activities at AEC.

Net cash used in investing activities included capital expenditures totaling $9.3 million and $15.6 million for the three months ended March 31, 2026 and March 31, 2025, respectively, with continued maintenance capital and capital designed to improve operating efficiencies across the Company.

Net cash provided by financing activities was $13.8 million for the three months ended March 31, 2026 as compared to net cash used of $15.1 million for the three months ended March 31, 2025.

During 2026, we had net borrowings of $23.0 million as compared to $94.0 million of borrowings in the prior year, which were offset by share repurchases of $69.2 million.

Additionally, the Company has returned cash to shareholders through dividends of $7.9 million in the first three months of 2026.

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.

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.

As of March 31, 2026, $476.5 million of borrowings were outstanding under our $800 million unsecured committed Amended Credit Agreement.

As of March 31, 2026, we had cash and cash equivalents of $122.6 million and borrowing capacity under our Amended Credit Agreement of $323.5 million, for a total liquidity of approximately $446.0 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.

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

As of March 31, 2026, $101.2 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 September 30, 2025 and are intended to remain indefinitely invested in foreign operations.

were in excess of $158.9 million , as of March 31, 2026 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.

1 unchanged sentence

Repatriating such cash from certain jurisdictions, which is currently considered to be indefinitely reinvested in foreign operations, may also result in additional taxes.

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

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.

This change impacts approximately 100 employees, will take place over the next year and a half, and will cost an estimated $7.0 million over that period related to retention, relocation, severance, and professional costs.

Off-Balance Sheet Arrangements

1 unchanged sentence

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 $11 million.

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

There were no material changes in the Company’s off-balance sheet arrangements during the first quarter of 2026.

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