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Albany International Reports Third-Quarter 2023 Results

Albany International Corp. (NYSE:AIN) today reported operating results for its third quarter of 2023, which ended September 30, 2023.

"We are reporting another strong quarter," said President and CEO, Gunnar Kleveland. "Revenue of $281 million, was up $20 million or 7.9% year-over-year primarily due to sales growth in Engineered Composites and one month of Heimbach results in the Machine Clothing segment. Both business segments are continuing to deliver on their long-term plans for profitable growth.

"In Machine Clothing, we closed on our acquisition of Heimbach on August 31 and welcome the Heimbach employees and customers to Albany. We are focused on integrating the operations and expect the acquisition to be accretive to earnings and cash flow in 2025. Machine Clothing delivered excellent results, particularly in light of the macroeconomic conditions in both Europe and China.

"Engineered Composites is executing on its long-term growth strategy delivering top-line growth across commercial, defense and space markets. The new business pipeline is robust, and I am excited about the opportunities it represents.

"Our revised guidance takes into account our year-to-date performance, anticipated market conditions, and the modestly dilutive impact of the Heimbach acquisition," concluded Kleveland.

For the third quarter ended September 30, 2023:

  • Net revenues were $281.1 million, up 7.9%, or 7.1% after adjusting for currency translation, when compared to the prior year. MC's net revenues increased 8.6%, driven by Heimbach Net revenues and, to a lesser extent, higher Net revenues in tissue and packaging grades, offset by lower Net revenues in pulp and engineered fabrics. AEC's Net revenues increased 6.9%, primarily driven by growth on LEAP programs, the Boeing Frames program, and other commercial programs, offset by lower CH-53K sales.
  • Gross profit of $101.8 million was 1.3% higher than the $100.5 million reported for the same period of 2022; overall gross margin declined by more than 200 basis points, driven by lower margins at Heimbach and by an unfavorable shift in program revenue mix at AEC.
  • Selling, Technical, General, and Research (STG&R) expenses were $61.7 million, compared to $46.8 million in the same period of 2022; the increase was driven by executive transition costs, acquisition-related expenses, higher personnel-related costs, and unfavorable changes to currency translation rates.
  • Operating income was $40.1 million, compared to $53.6 million in the prior year, the result of higher STG&R expenses as described.
  • Effective tax rate for the quarter was 25.3%, compared to -41.7% for the third quarter of 2022. The prior year tax rate was driven by the release of residual taxes as a result of the pension settlement at that time; excluding the effect of the pension settlement and related adjustments, the effective tax rate for the third quarter of 2022 was 24.6%.
  • Net income attributable to the Company was $27.1 million ($0.87 per share), compared to $10.7 million ($0.34 per share) in the third quarter of 2022; Adjusted earnings per share (or Adjusted EPS, a non-GAAP measure) was $1.02 per share, compared to $1.15 per share for the same period last year.
  • Adjusted EBITDA (a non-GAAP measure) was $64.7 million, compared to $68.1 million in the third quarter of 2022, a decrease of 4.9%.



    Please see the tables below for a reconciliation of non-GAAP measures to their comparable GAAP measures.

Outlook for Full-Year 2023

The Company has updated its guidance for the full year of 2023 as follows:

  • Total company revenue between $1.100 and $1.130 billion, up $60 million;
  • Effective income tax rate, including tax adjustments, between 32% and 33%, implying an effective tax rate between 28% and 30% for the fourth quarter of 2023;
  • Total company depreciation and amortization approximately $75 million;
  • Capital expenditures in the range of $85 to $95 million;
  • GAAP earnings per share between $3.02 and $3.37, taking into account $0.14 to $0.18 of dilution from the Heimbach acquisition; largely the result of purchase accounting;
  • Adjusted earnings per share between $3.35 and $3.70, up $0.08 per share at the midpoint, and includes $0.02 to $0.06 of dilution from Heimbach;
  • Total company Adjusted EBITDA between $238 and $254 million;
  • Machine Clothing revenue between $660 and $670 million, increasing approximately $50 million, including the estimated contribution from Heimbach;
  • Machine Clothing Adjusted EBITDA between $215 and $225 million, inclusive of approximately $2 million from the Heimbach acquisition;
  • Albany Engineered Composites (AEC) revenue between $440 and $460 million, up $10 million; and
  • Albany Engineered Composites Adjusted EBITDA between $85 and $90 million, up modestly at the midpoint.

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Net revenues

$

281,106

 

$

260,563

 

 

$

824,325

 

 

$

766,101

 

Cost of goods sold

 

179,271

 

 

160,070

 

 

 

520,468

 

 

 

473,411

 

 

 

 

 

 

 

 

 

Gross profit

 

101,835

 

 

100,493

 

 

 

303,857

 

 

 

292,690

 

Selling, general, and administrative expenses

 

51,975

 

 

36,873

 

 

 

147,214

 

 

 

119,325

 

Technical and research expenses

 

9,708

 

 

9,934

 

 

 

30,303

 

 

 

29,984

 

Restructuring expenses, net

 

82

 

 

42

 

 

 

227

 

 

 

268

 

 

 

 

 

 

 

 

 

Operating income

 

40,070

 

 

53,644

 

 

 

126,113

 

 

 

143,113

 

Interest expense/(income), net

 

3,653

 

 

3,794

 

 

 

10,049

 

 

 

11,336

 

Pension settlement expense

 

 

 

49,128

 

 

 

 

 

 

49,128

 

Other (income)/expense, net

 

56

 

 

(6,918

)

 

 

(4,910

)

 

 

(17,891

)

 

 

 

 

 

 

 

 

Income before income taxes

 

36,361

 

 

7,640

 

 

 

120,974

 

 

 

100,540

 

Income tax expense/(benefit)

 

9,207

 

 

(3,183

)

 

 

39,908

 

 

 

22,273

 

 

 

 

 

 

 

 

 

Net income

 

27,154

 

 

10,823

 

 

 

81,066

 

 

 

78,267

 

Net income attributable to the noncontrolling interest

 

45

 

 

129

 

 

 

396

 

 

 

635

 

Net income attributable to the Company

$

27,109

 

$

10,694

 

 

$

80,670

 

 

$

77,632

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Company shareholders - Basic

$

0.87

 

$

0.34

 

 

$

2.59

 

 

$

2.47

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Company shareholders - Diluted

$

0.87

 

$

0.34

 

 

$

2.58

 

 

$

2.46

 

 

 

 

 

 

 

 

 

Shares of the Company used in computing earnings per share:

 

 

 

 

 

 

 

Basic

 

31,185

 

 

31,111

 

 

 

31,163

 

 

 

31,416

 

 

 

 

 

 

 

 

 

Diluted

 

31,283

 

 

31,223

 

 

 

31,256

 

 

 

31,518

 

 

 

 

 

 

 

 

 

Dividends declared per Class A share

$

0.25

 

$

0.21

 

 

$

0.75

 

 

$

0.63

 

ALBANY INTERNATIONAL CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

September 30, 2023

 

December 31, 2022

ASSETS

 

 

 

Cash and cash equivalents

$

171,506

 

 

$

291,776

 

Accounts receivable, net

 

270,487

 

 

 

200,018

 

Contract assets, net

 

165,833

 

 

 

148,695

 

Inventories

 

180,991

 

 

 

139,050

 

Income taxes prepaid and receivable

 

6,402

 

 

 

7,938

 

Prepaid expenses and other current assets

 

61,155

 

 

 

50,962

 

Total current assets

$

856,374

 

 

$

838,439

 

 

 

 

 

Property, plant and equipment, net

 

566,974

 

 

 

445,658

 

Intangibles, net

 

44,636

 

 

 

33,811

 

Goodwill

 

177,398

 

 

 

178,217

 

Deferred income taxes

 

15,284

 

 

 

15,196

 

Noncurrent receivables, net

 

25,300

 

 

 

27,913

 

Other assets

 

104,284

 

 

 

103,021

 

Total assets

$

1,790,250

 

 

$

1,642,255

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

Accounts payable

$

70,105

 

 

$

69,707

 

Accrued liabilities

 

135,343

 

 

 

126,385

 

Current maturities of long-term debt

 

27,246

 

 

 

 

Income taxes payable

 

10,103

 

 

 

15,224

 

Total current liabilities

 

242,797

 

 

 

211,316

 

 

 

 

 

Long-term debt

 

463,339

 

 

 

439,000

 

Other noncurrent liabilities

 

141,620

 

 

 

108,758

 

Deferred taxes and other liabilities

 

20,861

 

 

 

15,638

 

Total liabilities

 

868,617

 

 

 

774,712

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

Preferred stock, par value $5.00 per share; authorized 2,000,000 shares; none issued

 

 

 

 

 

Class A Common Stock, par value $.001 per share; authorized 100,000,000 shares; 40,856,910 issued in 2023 and 40,785,434 in 2022

 

41

 

 

 

41

 

Additional paid in capital

 

446,470

 

 

 

441,540

 

Retained earnings

 

988,602

 

 

 

931,318

 

Accumulated items of other comprehensive income:

 

 

 

Translation adjustments

 

(151,177

)

 

 

(146,851

)

Pension and postretirement liability adjustments

 

(17,389

)

 

 

(15,783

)

Derivative valuation adjustment

 

12,957

 

 

 

17,707

 

Treasury stock (Class A), at cost; 9,661,845 shares in 2023 and 9,674,542 shares in 2022

 

(364,665

)

 

 

(364,923

)

Total Company shareholders' equity

 

914,839

 

 

 

863,049

 

Noncontrolling interest

 

6,794

 

 

 

4,494

 

Total equity

 

921,633

 

 

 

867,543

 

Total liabilities and shareholders' equity

$

1,790,250

 

 

$

1,642,255

 

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

 

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

OPERATING ACTIVITIES

 

 

 

 

Net income

 

$

81,066

 

 

$

78,267

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation

 

 

50,164

 

 

 

46,864

 

Amortization

 

 

4,614

 

 

 

5,044

 

Change in deferred taxes and other liabilities

 

 

(1,264

)

 

 

(15,582

)

Impairment of property, plant, equipment, and inventory

 

 

577

 

 

 

2,610

 

Non-cash interest expense

 

 

1,148

 

 

 

840

 

Non-cash portion of pension settlement expense

 

 

 

 

 

42,657

 

Compensation and benefits paid or payable in Class A Common Stock

 

 

5,189

 

 

 

3,282

 

Provision for credit losses from uncollected receivables and contract assets

 

 

641

 

 

 

885

 

Foreign currency remeasurement (gain) on intercompany loans

 

 

(4,704

)

 

 

(6,629

)

Fair value adjustment on foreign currency options

 

 

581

 

 

 

(409

)

 

 

 

 

 

Changes in operating assets and liabilities that provided/(used) cash, net of impact of business acquisition:

 

 

 

 

Accounts receivable

 

 

(18,172

)

 

 

(20,260

)

Contract assets

 

 

(16,550

)

 

 

(37,201

)

Inventories

 

 

(293

)

 

 

(24,895

)

Prepaid expenses and other current assets

 

 

(3,030

)

 

 

(2,733

)

Income taxes prepaid and receivable

 

 

1,597

 

 

 

(2,179

)

Accounts payable

 

 

(6,661

)

 

 

5,081

 

Accrued liabilities

 

 

(16,454

)

 

 

(12,624

)

Income taxes payable

 

 

(5,810

)

 

 

2,639

 

Noncurrent receivables

 

 

2,276

 

 

 

2,976

 

Other noncurrent liabilities

 

 

(3,602

)

 

 

(5,960

)

Other, net

 

 

2,499

 

 

 

4,634

 

Net cash provided by operating activities

 

 

73,812

 

 

 

67,307

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Purchase of business, net of cash acquired

 

 

(133,470

)

 

 

 

Purchases of property, plant and equipment

 

 

(48,850

)

 

 

(50,948

)

Purchased software

 

 

(276

)

 

 

(1,884

)

Net cash used in investing activities

 

 

(182,596

)

 

 

(52,832

)

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Proceeds from borrowings

 

 

71,249

 

 

 

145,000

 

Principal payments on debt

 

 

(51,479

)

 

 

(48,000

)

Principal payments on finance lease liabilities

 

 

 

 

 

(654

)

Debt acquisition costs

 

 

(4,108

)

 

 

 

Purchase of Treasury shares

 

 

 

 

 

(84,780

)

Taxes paid in lieu of share issuance

 

 

(3,136

)

 

 

(770

)

Proceeds from options exercised

 

 

 

 

 

17

 

Dividends paid

 

 

(23,365

)

 

 

(19,932

)

Net cash used in financing activities

 

 

(10,839

)

 

 

(9,119

)

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(647

)

 

 

(30,910

)

 

 

 

 

 

Decrease in cash and cash equivalents

 

 

(120,270

)

 

 

(25,554

)

Cash and cash equivalents at beginning of period

 

 

291,776

 

 

 

302,036

 

Cash and cash equivalents at end of period

 

$

171,506

 

 

$

276,482

 

The following table presents the reconciliation of Net revenues to net revenues excluding the effect of changes in currency translation rates, a non-GAAP measure:

(in thousands, except percentages)

Net revenues as reported, Q3 2023

Increase due to changes in currency translation rates

Q3 2023 revenues on same basis as Q3 2022 currency translation rates

Net revenues as reported, Q3 2022

% Change compared to Q3 2022, excluding currency rate effects

Machine Clothing

$

166,588

$

662

 

$

165,926

$

153,389

8.2

%

Albany Engineered Composites

 

114,518

 

1,275

 

 

113,243

 

107,174

5.7

%

Consolidated total

$

281,106

$

1,937

 

$

279,169

$

260,563

7.1

%

 

 

 

 

 

 

(in thousands, except percentages)

Net revenues as reported, YTD 2023

(Decrease)/ increase due to changes in currency translation rates

YTD 2023 revenues on same basis as 2022 currency translation rates

Net revenues as reported, YTD 2022

% Change compared to 2022, excluding currency rate effects

Machine Clothing

$

479,027

$

(3,684

)

$

482,711

$

459,121

5.1

%

Albany Engineered Composites

 

345,298

 

851

 

 

344,447

 

306,980

12.2

%

Consolidated total

$

824,325

$

(2,833

)

$

827,158

$

766,101

8.0

%

The following table presents Gross profit and Gross profit margin:

(in thousands, except percentages)

Gross profit,

Q3 2023

Gross profit margin,

Q3 2023

Gross profit,

Q3 2022

Gross profit margin,

Q3 2022

Machine Clothing

$

79,257

47.6

%

$

79,232

51.7

%

Albany Engineered Composites

 

22,578

19.7

%

 

21,261

19.8

%

Consolidated total

$

101,835

36.2

%

$

100,493

38.6

%

 

 

 

 

 

(in thousands, except percentages)

Gross profit,

YTD 2023

Gross profit margin,

YTD 2023

Gross profit,

YTD 2022

Gross profit margin,

YTD 2022

Machine Clothing

$

238,031

49.7

%

$

237,434

51.7

%

Albany Engineered Composites

 

65,826

19.1

%

 

55,256

18.0

%

Consolidated total

$

303,857

36.9

%

$

292,690

38.2

%

A reconciliation from Net income/(loss) (GAAP) to Adjusted EBITDA (non-GAAP) for the current-year and comparable prior-year periods has been calculated as follows:

Three months ended September 30, 2023

(in thousands)

Machine Clothing

Albany Engineered

Composites

Corporate expenses

and other

Total Company

Net income/(loss) (GAAP)

$

50,710

 

$

9,374

 

$

(32,930

)

$

27,154

 

Interest expense/(income), net

 

 

 

 

 

3,653

 

 

3,653

 

Income tax expense

 

 

 

 

 

9,207

 

 

9,207

 

Depreciation and amortization expense

 

5,976

 

 

12,510

 

 

975

 

 

19,461

 

EBITDA (non-GAAP)

 

56,686

 

 

21,884

 

 

(19,095

)

 

59,475

 

Restructuring expenses, net

 

82

 

 

 

 

 

 

82

 

Foreign currency revaluation (gains)/losses (a)

 

(656

)

 

19

 

 

516

 

 

(121

)

CEO transition expenses

 

 

 

 

 

2,052

 

 

2,052

 

Inventory step-up impacting Cost of goods sold

 

1,370

 

 

 

 

 

 

1,370

 

Acquisition/integration costs

 

 

 

273

 

 

1,642

 

 

1,915

 

Pre-tax (income) attributable to noncontrolling interest

 

 

 

(73

)

 

 

 

(73

)

Adjusted EBITDA (non-GAAP)

$

57,482

 

$

22,103

 

$

(14,885

)

$

64,700

 

Adjusted EBITDA margin (Adjusted EBITDA divided by Net revenues) (non-GAAP)

 

34.5

%

 

19.3

%

 

 

 

23.0

%

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2022

(in thousands)

Machine Clothing

Albany Engineered

Composites

Corporate expenses

and other

Total Company

Net income/(loss) (GAAP)

$

57,247

 

$

9,958

 

$

(56,382

)

$

10,823

 

Interest expense/(income), net

 

 

 

 

 

3,794

 

 

3,794

 

Income tax benefit

 

 

 

 

 

(3,183

)

 

(3,183

)

Depreciation and amortization expense

 

4,913

 

 

11,303

 

 

818

 

 

17,034

 

EBITDA (non-GAAP)

 

62,160

 

 

21,261

 

 

(54,953

)

 

28,468

 

Restructuring expenses, net

 

42

 

 

 

 

 

 

42

 

Foreign currency revaluation (gains)/losses (a)

 

(2,931

)

 

122

 

 

(6,633

)

 

(9,442

)

Dissolution of business relationships in Russia

 

(214

)

 

 

 

 

 

(214

)

Pension settlement expense

 

 

 

 

 

49,128

 

 

49,128

 

Acquisition/integration costs

 

 

 

255

 

 

 

 

255

 

Pre-tax (income) attributable to noncontrolling interest

 

 

 

(176

)

 

 

 

(176

)

Adjusted EBITDA (non-GAAP)

$

59,057

 

$

21,462

 

$

(12,458

)

$

68,061

 

Adjusted EBITDA margin (Adjusted EBITDA divided by Net revenues) (non-GAAP)

 

38.5

%

 

20.0

%

 

 

 

26.1

%

Nine months ended September 30, 2023

(in thousands)

Machine Clothing

Albany Engineered

Composites

Corporate expenses

and other

Total Company

Net income/(loss) (GAAP)

$

153,400

 

$

27,460

 

$

(99,794

)

$

81,066

 

Interest expense/(income), net

 

 

 

 

 

10,049

 

 

10,049

 

Income tax expense

 

 

 

 

 

39,908

 

 

39,908

 

Depreciation and amortization expense

 

15,682

 

 

36,246

 

 

2,850

 

 

54,778

 

EBITDA (non-GAAP)

 

169,082

 

 

63,706

 

 

(46,987

)

 

185,801

 

Restructuring expenses, net

 

227

 

 

 

 

 

 

227

 

Foreign currency revaluation (gains)/losses (a)

 

1,870

 

 

19

 

 

(3,609

)

 

(1,720

)

CEO transition expenses

 

 

 

 

 

2,052

 

 

2,052

 

Inventory step-up impacting Cost of goods sold

 

1,370

 

 

 

 

 

 

1,370

 

Acquisition/integration costs

 

 

 

813

 

 

2,005

 

 

2,818

 

Pre-tax (income) attributable to noncontrolling interest

 

 

 

(474

)

 

 

 

(474

)

Adjusted EBITDA (non-GAAP)

$

172,549

 

$

64,064

 

$

(46,539

)

$

190,074

 

Adjusted EBITDA margin (Adjusted EBITDA divided by Net revenues-non-GAAP)

 

36.0

%

 

18.6

%

 

 

 

23.1

%

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2022

(in thousands)

Machine Clothing

Albany Engineered

Composites

Corporate expenses

and other

Total Company

Net income/(loss) (GAAP)

$

161,752

 

$

20,688

 

$

(104,173

)

$

78,267

 

Interest expense/(income), net

 

 

 

 

 

11,336

 

 

11,336

 

Income tax expense

 

 

 

 

 

22,273

 

 

22,273

 

Depreciation and amortization expense

 

14,716

 

 

34,792

 

 

2,400

 

 

51,908

 

EBITDA (non-GAAP)

 

176,468

 

 

55,480

 

 

(68,164

)

 

163,784

 

Restructuring expenses, net

 

255

 

 

 

 

13

 

 

268

 

Foreign currency revaluation (gains)/losses (a)

 

(3,690

)

 

755

 

 

(17,644

)

 

(20,579

)

Dissolution of business relationships in Russia

 

1,573

 

 

 

 

781

 

 

2,354

 

Pension settlement expense

 

 

 

 

 

49,128

 

 

49,128

 

Acquisition/integration costs

 

 

 

806

 

 

 

 

806

 

Pre-tax (income) attributable to noncontrolling interest

 

 

 

(633

)

 

 

 

(633

)

Adjusted EBITDA (non-GAAP)

$

174,606

 

$

56,408

 

$

(35,886

)

$

195,128

 

Adjusted EBITDA margin (Adjusted EBITDA divided by Net revenues-non-GAAP)

 

38.0

%

 

18.4

%

 

 

 

25.5

%

Per share impact of the adjustments to earnings per share are as follows:

Three months ended September 30, 2023

(in thousands, except per share amounts)

Pre tax

Amounts

Tax

Effect

After tax

Effect

Per share

Effect

Restructuring expenses, net

$

82

 

$

21

 

$

61

 

$

0.00

 

Foreign currency revaluation (gains)/losses (a)

 

(121

)

 

(35

)

 

(86

)

 

0.00

 

CEO transition expenses

 

2,052

 

 

 

 

2,052

 

 

0.07

 

Inventory step-up impacting Cost of goods sold

 

1,370

 

 

411

 

 

959

 

 

0.03

 

Acquisition/integration costs

 

1,915

 

 

476

 

 

1,439

 

 

0.05

 

 

 

 

 

 

Three months ended September 30, 2022

(in thousands, except per share amounts)

Pre tax

Amounts

Tax

Effect

After tax

Effect

Per share

Effect

Restructuring expenses, net

$

42

 

$

6

 

$

36

 

$

0.00

 

Foreign currency revaluation (gains)/losses (a)

 

(9,442

)

 

(2,694

)

 

(6,748

)

 

(0.22

)

Dissolution of business relationships in Russia

 

(214

)

 

(18

)

 

(196

)

 

(0.01

)

Pension settlement expense

 

49,128

 

 

11,947

 

 

37,181

 

 

1.20

 

Tax impact of stranded OCI benefit from Tax Cuts and Job Act (TCJA) for pension liability (b)

 

 

 

5,217

 

 

(5,217

)

 

(0.17

)

Acquisition/integration costs

 

255

 

 

77

 

 

178

 

 

0.01

 

 

 

 

 

 

Nine months ended September 30, 2023

(in thousands, except per share amounts)

Pre tax

Amounts

Tax

Effect

After tax

Effect

Per share

Effect

Restructuring expenses, net

$

227

 

$

68

 

$

159

 

$

0.01

 

Foreign currency revaluation (gains)/losses (a)

 

(1,720

)

 

(504

)

 

(1,216

)

 

(0.04

)

CEO transition expenses

 

2,052

 

 

 

 

2,052

 

 

0.07

 

Withholding tax related to internal restructuring

 

 

 

(3,026

)

 

3,026

 

 

0.10

 

Inventory step-up impacting Cost of goods sold

 

1,370

 

 

411

 

 

959

 

 

0.03

 

Acquisition/integration costs

 

2,818

 

 

725

 

 

2,093

 

 

0.07

 

 

 

 

 

 

Nine months ended September 30, 2022

(in thousands, except per share amounts)

Pre tax

Amounts

Tax

Effect

After tax

Effect

Per share

Effect

Restructuring expenses, net

$

268

 

$

75

 

$

193

 

$

0.01

 

Foreign currency revaluation (gains)/losses (a)

 

(20,579

)

 

(5,829

)

 

(14,750

)

 

(0.47

)

Dissolution of business relationships in Russia

 

2,354

 

 

314

 

 

2,040

 

 

0.06

 

Pension settlement expense

 

49,128

 

 

11,947

 

 

37,181

 

 

1.20

 

Tax impact of stranded OCI benefit from TCJA for pension liability (b)

 

 

 

5,217

 

 

(5,217

)

 

(0.17

)

Acquisition/integration costs

 

806

 

 

241

 

 

565

 

 

0.03

 

 

 

 

 

 

The following table provides a reconciliation of Earnings per share to Adjusted Earnings per share:

 

Three months ended September 30,

Nine months ended September 30,

Per share amounts (Basic)

2023

2022

2023

2022

Earnings per share (GAAP)

$

0.87

$

0.34

 

$

2.59

 

$

2.47

 

Adjustments, after tax:

 

 

 

 

Restructuring expenses, net

 

 

 

 

0.01

 

 

0.01

 

Foreign currency revaluation (gains)/losses (a)

 

 

(0.22

)

 

(0.04

)

 

(0.47

)

Dissolution of business relationships in Russia

 

 

(0.01

)

 

 

 

0.06

 

Pension settlement charge

 

 

1.20

 

 

 

 

1.20

 

Tax impact of stranded OCI benefit from Tax Cuts and Job Act (TCJA) for pension liability (b)

 

 

(0.17

)

 

 

 

(0.17

)

CEO transition expenses

 

0.07

 

 

 

0.07

 

 

 

Withholding tax related to internal restructuring

 

 

 

 

0.10

 

 

 

Inventory step-up impacting Cost of goods sold

 

0.03

 

 

 

0.03

 

 

 

Acquisition/integration costs

 

0.05

 

0.01

 

 

0.07

 

 

0.03

 

Adjusted Earnings per share (non-GAAP)

$

1.02

$

1.15

 

$

2.83

 

$

3.13

 

The calculations of net debt are as follows:

(in thousands)

September 30, 2023

December 31, 2022

September 30, 2022

Current maturities of long-term debt

$

27,246

$

$

Long-term debt

 

463,339

 

439,000

 

447,000

Total debt

 

490,585

 

439,000

 

447,000

Cash and cash equivalents

 

171,506

 

291,776

 

276,482

Net debt (non-GAAP)

$

319,079

$

147,224

$

170,518

 

 

 

 

The calculation of net leverage ratio as of September 30, 2023 is as follows:

Total Company

 

Twelve months ended

Nine months ended

Trailing twelve months ended

(in thousands)

December 31, 2022

September 30, 2022

September 30, 2023

September 30, 2023 (non-GAAP) (c)

Net income/(loss) (GAAP)

$

96,508

 

$

78,267

 

$

81,066

 

$

99,307

 

Interest expense/(income), net

 

14,000

 

 

11,336

 

 

10,049

 

 

12,713

 

Income tax expense

 

35,472

 

 

22,273

 

 

39,908

 

 

53,107

 

Depreciation and amortization expense

 

69,049

 

 

51,908

 

 

54,778

 

 

71,919

 

EBITDA (non-GAAP)

 

215,029

 

 

163,784

 

 

185,801

 

 

237,046

 

Restructuring expenses, net

 

106

 

 

268

 

 

227

 

 

65

 

Foreign currency revaluation (gains)/losses (a)

 

(9,829

)

 

(20,579

)

 

(1,720

)

 

9,030

 

Dissolution of business relationships in Russia

 

2,275

 

 

2,354

 

 

 

 

(79

)

CEO transition expenses

 

 

 

 

 

2,052

 

 

2,052

 

Inventory step-up impacting Cost of goods sold

 

 

 

 

 

1,370

 

 

1,370

 

Pension settlement expense

 

49,128

 

 

49,128

 

 

 

 

 

IP address sales

 

(3,420

)

 

 

 

 

 

(3,420

)

Acquisition/integration costs

 

1,057

 

 

806

 

 

2,818

 

 

3,069

 

Pre-tax (income) attributable to noncontrolling interest

 

(817

)

 

(633

)

 

(474

)

 

(658

)

Adjusted EBITDA (non-GAAP)

$

253,529

 

$

195,128

 

$

190,074

 

$

248,475

 

(in thousands, except for net leverage ratio)

September 30, 2023

Net debt (non-GAAP)

$

319,079

Trailing twelve months Adjusted EBITDA (non-GAAP)

 

248,475

Net leverage ratio (non-GAAP)

 

1.28

 

 

 

 

 

 

 

(a) Foreign currency revaluation (gains)/losses represent unrealized gains and losses arising from the remeasurement of monetary assets and liabilities denominated in non-functional currencies on the balance sheet date.

(b) Our Adjusted EPS excluded the benefit from the reclassification of stranded income tax effects caused by the TCJA associated with the US pension plan liability that was eliminated in September 2022, a one-time event that would not recur in the future. Such stranded income tax effect represented a one-time benefit that distorted the effective tax rate for the quarter and year-to-date ended September 30, 2022, and would not be indicative of ongoing or expected future income tax rate at the Company. Management believes excluding pension settlement expense and its income tax impact, including the stranded income tax effects, from its Adjusted EBITDA and Adjusted EPS for the quarter and year-to-date ended September 30, 2022 would provide investors a transparent view and enhanced ability to better assess the Company’s ongoing operational and financial performance.

(c) Calculated as amounts incurred during the twelve months ended December 31, 2022, less those incurred during the nine months ended September 30, 2022, plus those incurred during the nine months ended September 30, 2023.

 

 

 

 

 

The tables below provide a reconciliation of forecasted full-year 2023 Adjusted EBITDA and Adjusted EPS (non-GAAP measures) to the comparable GAAP measures.

Forecast of Full Year 2023 Adjusted EBITDA

Machine Clothing

 

AEC

(in millions)

Low

High

 

Low

High

Net income attributable to the Company (GAAP) (d)

$

185

 

$

195

 

 

$

36

$

40

Income attributable to the noncontrolling interest

 

 

 

 

 

 

 

Interest expense/(income), net

 

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

Depreciation and amortization

 

23

 

 

23

 

 

 

48

 

49

EBITDA (non-GAAP)

 

208

 

 

218

 

 

 

84

 

89

Restructuring expenses, net (e)

 

 

 

 

 

 

 

Foreign currency revaluation (gains)/losses (e)

 

2

 

 

2

 

 

 

 

Acquisition/integration costs (e)

 

 

 

 

 

 

1

 

1

Cost of goods sold adjustment due to acquisition

 

5

 

 

5

 

 

 

 

Pre-tax (income)/loss attributable to non-controlling interest

 

 

 

 

 

 

 

Adjusted EBITDA (non-GAAP)

$

215

 

$

225

 

 

$

85

$

90

(d) Interest, Other income/expense and Income taxes are not allocated to the business segments

 

 

 

 

 

 

 

Forecast of Full Year 2023 Adjusted EBITDA

Total Company

 

 

 

(in millions)

Low

High

 

 

 

Net income attributable to the Company (GAAP)

$

95

 

$

105

 

 

 

 

Income attributable to the noncontrolling interest

 

 

 

 

 

 

 

Interest expense/(income), net

 

14

 

 

14

 

 

 

 

Income tax expense

 

46

 

 

52

 

 

 

 

Depreciation and amortization

 

75

 

 

75

 

 

 

 

EBITDA (non-GAAP)

 

230

 

 

246

 

 

 

 

Restructuring expenses, net (e)

 

 

 

 

 

 

 

Foreign currency revaluation (gains)/losses (e)

 

(2

)

 

(2

)

 

 

 

Acquisition/integration costs (e)

 

3

 

 

3

 

 

 

 

CEO transition expenses

 

2

 

 

2

 

 

 

 

Inventory step-up impacting Cost of goods sold

 

5

 

 

5

 

 

 

 

Pre-tax (income)/loss attributable to non-controlling interest

 

 

 

 

 

 

 

Adjusted EBITDA (non-GAAP)

$

238

 

$

254

 

 

 

 

 

 

 

 

 

 

 

Total Company

 

 

 

Forecast of Full Year 2023 Earnings per share (basic) (f)

Low

High

 

 

 

Net income attributable to the Company (GAAP)

$

3.02

 

$

3.37

 

 

 

 

Restructuring expenses, net (e)

 

0.01

 

 

0.01

 

 

 

 

Foreign currency revaluation (gains)/losses (e)

 

(0.04

)

 

(0.04

)

 

 

 

Withholding tax related to internal restructuring

 

0.10

 

 

0.10

 

 

 

 

CEO transition expenses

 

0.07

 

 

0.07

 

 

 

 

Inventory step-up impacting Cost of goods sold

 

0.12

 

 

0.12

 

 

 

 

Acquisition/integration costs (e)

 

0.07

 

 

0.07

 

 

 

 

Adjusted Earnings per share (non-GAAP)

$

3.35

 

$

3.70

 

 

 

 

 

 

 

 

 

 

(e) Due to the uncertainty of these items, we are unable to forecast these items for 2023

(f) Calculations based on weighted average shares outstanding estimate of approximately 31.2 million

About Albany International Corp.

Albany International is a leading developer and manufacturer of engineered components, using advanced materials processing and automation capabilities, with two core businesses. Machine Clothing is the world’s leading producer of fabrics and process belts used in the manufacture of all grades of paper products. Albany Engineered Composites is a growing designer and manufacturer of advanced materials-based engineered components for jet engine and airframe applications, supporting both commercial and military platforms. Albany International is headquartered in Rochester, New Hampshire, operates 32 plants in 14 countries, employs approximately 5,400 people worldwide, and is listed on the New York Stock Exchange (Symbol AIN). Additional information about the Company and its products and services can be found at www.albint.com.

Non-GAAP Measures

This release, including the conference call commentary associated with this release, contains certain non-GAAP measures, that should not be considered in isolation or as a substitute for the related GAAP measures. Such non-GAAP measures include net revenues and percent change in net revenues, excluding the impact of currency translation effects; EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin; Net debt; Net leverage ratio; and Adjusted earnings per share (or Adjusted EPS). Management believes that these non-GAAP measures provide additional useful information to investors regarding the Company’s operational performance.

Presenting Net revenues and change in Net revenues, after currency effects are excluded, provides management and investors insight into underlying revenues trends. Net revenues, or percent changes in net revenues, excluding currency rate effects, are calculated by converting amounts reported in local currencies into U.S. dollars at the exchange rate of a prior period. These amounts are then compared to the U.S. dollar amount as reported in the current period.

EBITDA (calculated as net income excluding interest, income taxes, depreciation and amortization), Adjusted EBITDA, and Adjusted EPS are performance measures that relate to the Company’s continuing operations. The Company defines Adjusted EBITDA as EBITDA excluding costs or benefits that are not reflective of the Company’s ongoing or expected future operational performance. Such excluded costs or benefits do not consist of normal, recurring cash items necessary to generate revenues or operate our business. Adjusted EBITDA margin represents Adjusted EBITDA expressed as a percentage of net revenues.

The Company defines Adjusted EPS as basic earnings per share (GAAP), adjusted by the after tax per share amount of costs or benefits not reflective of the Company’s ongoing or expected future operational performance. The income tax effects are calculated using the applicable statutory income tax rate of the jurisdictions where such costs or benefits were incurred or the effective tax rate applicable to total company results.

The Company’s Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted EPS may not be comparable to similarly titled measures of other companies.

Net debt aids investors in understanding the Company’s debt position if all available cash were applied to pay down indebtedness.

Net leverage ratio informs the investors of the Company's financial leverage at the end of the reporting period, providing an indicator of the Company's ability to repay its debt.

We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Forward-Looking Statements

This press release may contain statements, estimates, guidance or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “should,” “look for,” “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 Quarterly Report on Form 10-Q), actual results may differ materially from those expressed or implied by such forward-looking statements.

Forward-looking statements in this release or in the webcast include, without limitation, statements about macroeconomic conditions, including inflationary cost pressures, as well as global events, which include but are not limited to geopolitical events; paper-industry trends and conditions during 2023 and in future years; expectations in 2023 and in future periods of revenues, EBITDA, Adjusted EBITDA (both in dollars and as a percentage of net revenues), Adjusted EPS, income, gross profit, gross margin, cash flows and other financial items in each of the Company’s businesses, and for the Company as a whole; the timing and impact of production and development programs in the Company’s AEC business segment and the revenues growth potential of key AEC programs, as well as AEC as a whole; the amount and timing of capital expenditures, future tax rates and cash paid for taxes, depreciation and amortization; future debt and net debt levels and debt covenant ratios; and changes in currency rates and their impact on future revaluation gains and losses. Furthermore, a change in any one or more of the foregoing factors could have a material effect on the Company’s financial results in any period. Such statements are based on current expectations, and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Statements expressing management’s assessments of the growth potential of its businesses, or referring to earlier assessments of such potential, are not intended as forecasts of actual future growth, and should not be relied on as such. While management believes such assessments to have a reasonable basis, such assessments are, by their nature, inherently uncertain. This release and earlier releases set forth a number of assumptions regarding these assessments, including historical results, independent forecasts regarding the markets in which these businesses operate, and the timing and magnitude of orders for our customers’ products. Historical growth rates are no guarantee of future growth, and such independent forecasts and assumptions could prove materially incorrect in some cases.

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