Albany International Corporation

11/06/2025 | Press release | Distributed by Public on 11/06/2025 12:29

Quarterly Report for Quarter Ending 2025-09-30 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of operations and financial condition of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes.
Forward-looking Statements
This quarterly report and the documents incorporated or deemed to be incorporated by reference in this quarterly report contain statements concerning our future results and performance and other matters that are "forward-looking" statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The words "believe," "expect," "anticipate," "intend," "estimate," "project," "forecast," "look for," "will," "should," "guidance," "guide" and similar expressions identify forward-looking statements, which generally are not historical in nature. Because forward-looking statements are subject to certain risks and uncertainties, (including, without limitation, those set forth in the Company's most recent Annual Report on Form 10-K or prior Quarterly Reports on Form 10-Q) actual results may differ materially from those expressed or implied by such forward-looking statements.
There are a number of risks, uncertainties, and other important factors that could cause actual results to differ materially from the forward-looking statements, including, but not limited to:
•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;
•Harm caused by changes in our relationships or contracts with suppliers and customers;
•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;
•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;
•In the Albany Engineered Composites segment, the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others;
•In the Albany Engineered Composites segment, risks and uncertainties associated with the successful implementation and ramp up of significant new programs, including the ability to manufacture the products to the detailed specifications required and recover start-up costs and other investments in the programs;
•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;
•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;
•Expectations regarding our ability to attract, motivate, and retain the workforce necessary to execute our business strategy and other goals;
•Adverse impacts from fluctuations in foreign currency exchange rates;
•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;
•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;
•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; and
•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. Although we believe the expectations reflected in our other forward-looking statements are based on reasonable assumptions, it is not possible to foresee or identify all factors that could have a material and negative impact on our future performance. The forward-looking statements included or incorporated by reference in this report are made on the basis of our assumptions and analyses, as of the time the statements are made, in light of our experience and perception of historical conditions, expected future developments, and other factors believed to be appropriate under the circumstances.
Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained or incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based.
Business Environment Overview and Trends
We conduct our business under two reportable segments: Machine Clothing ("MC") and Albany Engineered Composites ("AEC") each rooted in similar materials sciences know-how that forms a common approach to customer value proposition in design and manufacturability. MC competes on the basis of its deep industry knowledge, customer reputation and customer service and global advanced textile manufacturing capabilities, which has enabled it to develop a robust and market leading product offering that can be tailored to customer-specific requirements. 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, 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. 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.
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. 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
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) %
Net Revenues
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.
Gross Profit
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.
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.
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. 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 September 30, Nine months ended September 30,
2025 2024 2025 2024
Effective income tax rate 20.0 % 6.6 % 16.4 % 23.9 %
The Company has operations that constitute a taxable presence in 22 countries outside of the United States. The majority of these countries had income tax rates that were above the United States federal tax rate of 21 percent during the periods reported. The jurisdictional location of earnings is a significant component of our effective tax rate each year. The rate impact of this component is influenced by the specific location of non-U.S. 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.
The tax rate is affected by recurring items, such as the income tax rate in the U.S. and non-U.S. jurisdictions and the mix of pre-tax income earned in those jurisdictions. The tax rate is also affected by U.S. 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 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. While the U.S. has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation. As currently designed, Pillar Two will ultimately apply to our worldwide operations. Although we do not expect these rules to materially increase our global tax costs in 2025, there remains uncertainty as to the final Pillar Two model rules. We will continue to monitor U.S. 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.
Working Capital, Liquidity and Capital Structure
Cash Flow Summary
Nine months ended September 30,
(in thousands)
2025 2024
Net income/(loss) $ (70,957) $ 70,310
Depreciation and amortization 65,480 67,003
Changes in working capital (a) (15,108) 7,700
Changes in other noncurrent liabilities and deferred taxes (26,171) (7,569)
Other operating items 125,528 2,541
Net cash provided by operating activities 78,772 139,985
Net cash used in investing activities (45,566) (61,053)
Net cash used in financing activities
(48,268) (121,773)
Effect of exchange rate changes on cash and cash equivalents 8,089 (3,357)
Decrease in cash and cash equivalents
(6,973) (46,198)
Cash and cash equivalents at beginning of year 115,283 173,420
Cash and cash equivalents at end of period
$ 108,310 $ 127,222
(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, withinvestments 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.
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. 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. 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. Our cash planning strategyincludes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate. While we have been successful in such endeavor to date, there can be no assurance that we will be able to cost effectively repatriate funds in the future. 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
The Company is party to certain off-balance sheet arrangements, including certain guarantees. 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 third quarter of 2025.
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