ALBANY INTERNATIONAL CORP DE

Previous wording

•Across the entire Company, increasing labor, raw material, energy, or logistics 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;

Current wording

•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;

Previous wording

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

Current wording

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

Previous wording

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

Current wording

•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;

Previous wording

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

Current wording

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

Previous wording

•Costly and disruptive legal disputes and settlements;

Current wording

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

Previous wording

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

Current wording

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

Previous wording

•Failure to adequately 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; and

Current wording

•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;

Previous wording

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.

Current wording

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.

Previous wording

The AEC segment continues to ramp-up production levels on commercial, defense, and space programs. In the third quarter of 2024, the Company updated its labor, material input and scrap assumptions and estimates of certain long-term programs that resulted in a negative cumulative change in estimated profitability in the amount of $22.4 million. The negative cumulative change in profitability was primarily driven by a few large complex programs, including $13.3 million for various CH-53K programs, $6.5 million on our Gulfstream program, $2.2 million on our F-35 program, and $0.4 million, net on all other programs.

Current wording

The AEC segment continues to ramp-up production levels on commercial, defense, and space programs. In the first quarter of 2025, the Company updated its labor, material input and scrap assumptions and estimates of certain long-term programs that resulted in a negative cumulative change in estimated profitability in the amount of $7.0 million. The negative cumulative change in profitability was primarily driven by a few large complex programs, including $2.0 million for various CH-53K programs, $1.7 million on our Gulfstream program, $0.9 million on our F-35 program, and $2.4 million, net on all other programs.

Previous wording

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, 2023 and in our Forms 10-Q previously filed with the SEC in 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.

Current wording

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.

Previous wording

AEC's Net revenues were largely in line with the prior year, increasing $0.8 million or 0.7%, primarily driven by growth on certain commercial and space programs, which was partially offset by lower revenues on CH-53K and other defense programs. Changes in currency translation rates had an insignificant effect on Net revenues.

Current wording

AEC's Net revenues decreased 11.0% compared to the first quarter of 2024, primarily driven by demand reductions on certain commercial and space programs, which was partially offset by higher revenues on CH-53K and other programs. Changes in currency translation rates had the effect of decreasing Net revenues $0.5 million.

Previous wording

The decrease in 2024 Gross profit, as compared to the same period last year, was driven by increased cost assumptions that adjusted the expected profitability of certain long-term contracts in the AEC segment. Gross profit as a percentage of revenues was as follows:

Current wording

The decrease in 2025 Gross profit, as compared to the same period last year, was driven by increased cost assumptions that adjusted the expected profitability of certain long-term contracts in the AEC segment. Gross profit as a percentage of revenues by segment was as follows:

Previous wording

•AEC's gross profit margin decreased from 19.7% in 2023 to 1.3% in 2024, driven primarily by cumulative changes in the estimated profitability of long-term contracts, which decreased gross profit by $22.4 million in 2024, as compared to a increase of $0.9 million during the same period last year.

Current wording

•AEC's gross profit margin decreased from 18.8% in 2024 to 14.5% in 2025, driven primarily by cumulative changes in the estimated profitability of long-term contracts, which decreased gross profit by $7.0 million in 2025, as compared to a decrease of $0.9 million during the same period last year.

Previous wording

Consolidated SG&A expenses increased 0.2% as compared to 2023, however, as a percentage of Net revenues, SG&A expenses decreased from 18.5% in 2023 to 17.5% in 2024.

Current wording

Consolidated SG&A expenses decreased 1.9% as compared to the first quarter of 2024, however, as a percentage of Net revenues, SG&A expenses increased from 17.5% in 2024 to 18.6% in 2025.

Previous wording

•MC SG&A expenses increased $5.7 million as compared to 2023, with a $3.9 million increase related to Heimbach, a $1.2 million increase due to changes in currency translation rates, and a $0.6 million increase in professional, consulting, and personnel-related costs.

Current wording

•MC SG&A expenses increased $0.1 million as compared to the first quarter of 2024, with a $3.1 million increase due to changes in currency translation rates, offset by a $3.0 million decrease in travel, service, and personnel-related costs.

Previous wording

•In AEC, SG&A expenses decreased $1.6 million, primarily driven by lower incentive compensation and personnel-related costs.

Current wording

•In AEC, SG&A expenses decreased $1.4 million, compared to the first quarter of 2024 primarily driven by lower incentive compensation and personnel-related costs.

Previous wording

Consolidated Technical and research expenses increased 11.7% as compared to 2023 and as a percentage of Net revenues increased from 3.5% in 2023 to 3.6% in 2024.

Current wording

Consolidated Technical and research expenses decreased 6.1% as compared to the first quarter of 2024 and as a percentage of Net revenues increased from 4.0% in 2024 to 4.1% in 2025.

Previous wording

In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, Operating income was affected by Restructuring expense, net, of $2.3 million in the three months ended September 30, 2024, compared to $0.1 million in in the same period of 2023; and $6.6 million in the nine months ended September 30, 2024, compared to $0.2 million in the same period in 2023.

Current wording

In addition to the items discussed above affecting Gross profit, SG&A and Technical and research expenses, Operating income was affected by Restructuring expense, net, of $2.5 million in the three months ended March 31, 2025, compared to $2.2 million in the first quarter of 2024.

Previous wording

At MC, restructuring actions were taken in the second and third quarters of 2024 to cease operations at the Company's MC forming fabric manufacturing facility in Chungju, South Korea, and at the Company's Heimbach engineered fabric manufacturing facility in Rochdale, UK. This was the principal driver of $3.3 million in Restructuring expenses, net for the first nine months of 2024 related to workforce reductions, fixed asset impairments and related costs, as well as charges of $1.3 million in Costs of goods sold for the write-off of inventory. We expect to incur additional restructuring expenses related to these actions throughout the remainder of the year.

Current wording

At MC, restructuring actions were taken in 2024 and 2025 to cease operations at several facilities, including at the Company's MC forming fabric manufacturing facility in Chungju, South Korea, at the Company's Heimbach engineered fabric manufacturing facility in Rochdale, UK, at the Company's Heimbach paper machine clothing facility in Olten, Switzerland and at the Company's MC manufacturing facility in Ballo, Italy. These actions drove $3.3 million of restructuring charges during the first three months of 2025, of which $3.1 million in restructuring expenses related to workforce reductions, fixed asset impairments and related costs, as well as related charges of $0.2 million in Cost of goods sold for the write-off of inventory, offset by a $1.8 million pension curtailment gain. We expect to incur additional restructuring expenses related to these actions throughout the remainder of the year.

Previous wording

At AEC, restructuring activities were related to reductions in the workforce at various AEC locations, which resulted in restructuring expenses of $3.1 million for the first nine months of 2024.

Current wording

At AEC, restructuring activities were related to reorganizational costs as well as a reduction in the workforce within AEC, which resulted in restructuring expenses of $1.2 million and $2.2 million for the first three months of 2025 and 2024, respectively.

Previous wording

Interest expense/(income), net, decreased over the prior year primarily due to lower average debt balances, in part offset by less interest income earned on cash equivalents during the current year. See Note 14. Financial Instruments in the Notes to Consolidated Financial Statements for further discussion of borrowings and interest rates.

Current wording

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. See Note 14. Financial Instruments in the Notes to Consolidated Financial Statements for further discussion of borrowings and interest rates.

Previous wording

Other (income)/expense, net, included foreign currency related transactions, which resulted in losses of $1.8 million and $0.7 million in the three and nine months ended September 30, 2024, respectively, as compared to losses of $0.5 million and gains of $3.6 million in the same periods last year. In addition, changes in the fair value of derivative instruments included gains of $0.5 million and losses of $3.8 million in the three and nine months ended September 30, 2024, as compared to losses of $0.7 million and $0.6 million in the same period last year, driven by currency rate movements, most notably the Brazilian Real and Mexican Peso. Net periodic pension and postretirement costs, other than service costs, were $0.7 million and $2.0 million in the three and nine months ended September 30, 2024, respectively, as compared to benefits of $0.1 million and $0.3 million in the same period last year. Other (income)/expense, net, also included net losses of $0.7 million from the divestiture of assets related to Heimbach during the nine months ended September 30, 2024, as well as bank fees, amortization of debt issuance costs, and rental income.

Current wording

Other (income)/expense, net, included foreign currency related transactions, which resulted in losses of $3.2 million in the three months ended March 31, 2025, as compared to losses of $1.3 million in the same period last year. In addition, changes in the fair value of derivative instruments included gains of $2.5 million in the three months ended March 31, 2025, as compared to gains of $0.1 million in the same period last year, driven by currency rate movements, most notably the Brazilian Real and Mexican Peso.

Previous wording

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 2024 was 6.6%, lower compared to 25.3% for the same period in 2023, mainly due to favorable discrete tax adjustments in the current period exceeding favorable discrete tax adjustments in the prior period. The favorable discrete benefits in the third quarter of 2024 were partially offset by an unfavorable change in the jurisdictional mix of earnings compared to the prior period. For the nine months ended September 30, 2024, the Company's effective tax rate was 23.9%, lower compared to 33.0% for the same period in 2023, mainly due to favorable discrete tax adjustments in the current period compared to unfavorable discrete tax adjustments in the prior period, partially offset by an unfavorable change in the jurisdictional mix of earnings compared to the prior period. For more information, see Note 6, Income Taxes, in the Notes to the Consolidated Financial Statements.

Current wording

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 first quarter of 2025 was 26.6%, lower compared to 29.2% for the same period in 2024, mainly due to favorable discrete tax adjustments in the current period exceeding favorable discrete tax adjustments in the prior period. For more information, see Note 6, Income Taxes, in the Notes to the Consolidated Financial Statements.

Previous wording

The MC segment accounted for 61% and 60% of our consolidated revenues during the three and nine months ended September 30, 2024, respectively. A summary of selected financial results for MC is as follows:

Current wording

The MC segment accounted for 60% of our consolidated revenues during the three months ended March 31, 2025. A summary of selected financial results for MC is as follows:

Previous wording

For the three months ended September 30, 2024, Operating income was largely in line with the prior year, increasing $0.8 million or 1.5%. The strong Gross profit performance was largely offset by increased SG&A and Technical and Research expenses, primarily at Heimbach locations. SG&A expenses increased $5.7 million as compared to 2023, with a $3.9 million increase related to Heimbach, a $1.2 million increase due to changes in currency translation rates, and a $0.6 million increase in professional, consulting, and personnel-related costs. Technical and research expenses increased $1.0 million as compared to 2023 due to the addition of Heimbach. In addition, Restructuring expenses increased $2.2 million related to recent announcements to cease operations at multiple manufacturing facilities, further reducing Operating income.

Current wording

For the three months ended March 31, 2025, Operating income decreased as compared to the first three months of 2024, decreasing $5.9 million or 13.3%. The weaker Gross profit performance was slightly offset by lower Technical and Research expenses. SG&A expenses increased $0.1 million as compared to 2024, with a $3.1 million increase due to changes in currency translation rates, offset by a $3.0 million decrease in travel, service, and personnel-related costs. Technical and research expenses decreased $0.3 million as compared to 2024 due to lower personnel and development costs, along with an increase in allocated costs to Corporate. In addition, Restructuring expenses increased $1.3 million related to recent announcements to cease operations at multiple manufacturing facilities, further reducing Operating income.

Previous wording

The AEC segment accounted for 39% and 40% of our consolidated revenues during the three and nine months ended September 30, 2024, respectively. A summary of selected financial results for AEC is as follows:

Current wording

The AEC segment accounted for 40% of our consolidated revenues during the three months ended March 31, 2025, respectively. A summary of selected financial results for AEC is as follows:

Previous wording

For the three months ended September 30, 2024, Net revenues increased 0.7% as compared to the prior year, primarily driven by growth on certain commercial and space programs, which was partially offset by lower revenues on CH-53K and other defense programs. Changes in currency translation rates had an insignificant effect on Net revenues.

Current wording

For the three months ended March 31, 2025, Net revenues decreased 14.0 million or 11.0% as compared to the first quarter of 2024. This decrease is primarily driven by demand reductions on certain commercial and space programs, which was partially offset by higher revenues on CH-53K and other programs. Changes in currency translation rates had the effect of Net revenues $0.5 million.

Previous wording

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 40 percent of segment revenue for the first nine months of 2024 and 2023.

Current wording

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 32 percent and 36 percent of segment revenue for the first three months of 2025 and 2024, respectively.

Previous wording

For the three months ended September 30, 2024, Gross profit decreased $21.1 million as compared to the same period last year, and as a percentage of revenues decreased from 19.7% in 2023 to 1.3% in 2024. This decrease in Gross profit was driven primarily by changes in the estimated profitability of long-term contracts, which decreased gross profit by $22.4 million in 2024 due to increased cost assumptions as well as the impact of suspended production at a key customer. For the 2023 year, adjustments in the estimated profitability of long-term contracts increased Gross profit $0.9 million.

Current wording

For the three months ended March 31, 2025, Gross profit decreased $7.4 million as compared to the same period last year, and as a percentage of revenues decreased from 18.8% in 2024 to 14.5% in 2025. This decrease in Gross profit was driven primarily by changes in the estimated profitability of long-term contracts, which decreased gross profit by $7.0 million in 2025 due to increased cost assumptions. For the three months ended March 31, 2024, adjustments in the estimated profitability of long-term contracts decreased Gross profit $0.9 million.

Previous wording

For the three months ended September 30, 2024, Operating income decreased $19.7 million, principally due to reduced Gross profit as noted above. This was partially offset by a decrease in SG&A expenses of $1.6 million, primarily driven by decreased incentive compensation and personnel-related costs. Technical and research expenses and Restructuring expenses remained largely in line with the prior year.

Current wording

For the three months ended March 31, 2025, Operating income decreased $3.5 million, principally due to reduced Gross profit as noted above. This was offset by a decrease in SG&A expenses of $1.4 million, primarily driven by decreased incentive compensation and personnel-related costs. Technical and research expenses decreased $1.5 million compared to the first quarter of 2024, attributable to decreases in research and material costs, combined with allocations to Corporate. Restructuring expenses decreased $1.0 million compared to the same period in the prior year.

Previous wording

Net cash used in financing activities was $121.8 million for the first nine months of 2024 as compared to $10.8 million for the first nine months of 2023. The significant increase in net cash used during 2024 was due to increased principal payments on debt and increased dividends paid to shareholders.

Current wording

Net cash provided in financing activities was $15.1 million for the first three months of 2025 as compared to net cash used of $28.1 million for the first three months of 2024. The increase in net cash provided during 2025 was due to increased borrowings from the revolving credit facility and lesser principal payments on debt, partially offset by an increase in share repurchases.

Previous wording

We finance our business activities principally with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below. Our subsidiaries outside of the United States may also maintain working capital lines with local banks.

Current wording

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

Previous wording

Under our $800 million unsecured committed Amended Credit Agreement, $360.0 million of borrowings were outstanding as of September 30, 2024. In addition, we have borrowings outstanding at our Heimbach subsidiary of $2.2 million, of which $0.6 million was considered current.

Current wording

Under our $800 million unsecured committed Amended Credit Agreement, $416.4 million of borrowings were outstanding as of March 31, 2025. In addition, we have borrowings outstanding at our Heimbach subsidiary that are considered immaterial in the aggregate.

Previous wording

As of September 30, 2024, we had cash and cash equivalents of $127.2 million and available borrowings under our Amended Credit Agreement of $440.0 million, for a total liquidity of approximately $567.2 million. We believe cash flows from operations and the availability of funds under our Amended Credit Agreement will be adequate to fund our operations and business needs over the next twelve months. For more information on credit agreements, see Note 14. Financial Instruments in the Notes to Consolidated Financial Statements.

Current wording

As of March 31, 2025, we had cash and cash equivalents of $119.4 million and available borrowings under our Amended Credit Agreement of $383.6 million, for a total liquidity of approximately $503.0 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. For more information on credit agreements, see Note 14. Financial Instruments in the Notes to Consolidated Financial Statements.

Previous wording

As of September 30, 2024, $106.5 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 $120.0 million, as of September 30, 2024 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. 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.

Current wording

As of March 31, 2025, $88.4 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 March 31, 2025 and are intended to remain indefinitely invested in foreign operations. Our cash planning strategy includes repatriating current earnings in excess of working capital requirements from certain countries in which our subsidiaries operate. 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.

Previous wording

We have also returned cash to shareholders through dividends and share repurchases. During the first nine months of 2024, we paid $24.4 million in dividends and had no share repurchases.

Current wording

We have also returned cash to shareholders through dividends and share repurchases. During the first three months of 2025, we paid $8.4 million in dividends and repurchased 925,443 shares for a total cost of $69.2 million.

Previous wording

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 $12 million. There were no material changes in the Company’s off-balance sheet arrangements during 2024.

Current wording

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 first quarter of 2025.