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Albany International Reports Third-Quarter 2022 Results

Albany International Corp. (NYSE:AIN) today reported operating results for its third quarter of 2022, which ended September 30, 2022.

"We are pleased to report another strong quarter,” said Albany International President and Chief Executive Officer, Bill Higgins. “Our revenue of $261 million was up year-over-year. Engineered Composites grew third quarter sales nearly 37% compared to the third quarter of 2021 driven by higher LEAP production and the CH53-K helicopter program. The Machine Clothing segment delivered another excellent performance in the quarter. On the bottom line, both segments achieved strong operating income, working hard to overcome inflation and supply chain challenges.

"Third quarter GAAP earnings per share was $0.34 inclusive of a pension settlement charge of $1.03 partially offset by currency gains. Adjusted earnings per share was $1.15 up from $0.83 reported last year," concluded Higgins.

For the third quarter ended September 30, 2022:

  • Net sales were $260.6 million, up 12.1%, or 16.5% after adjusting for currency translation, when compared to the prior year, primarily due to year-over-year growth in sales related to the CH-53K and LEAP programs within the Engineered Composites segment.
  • Gross profit of $100.5 million was 9.2% higher than the $92.0 million reported for the same period of 2021.
  • Selling, Technical, General, and Research (STG&R) expenses were $46.8 million, compared to $47.4 million in the same period of 2021. The decrease was driven by the favorable effect of the revaluation of foreign currency in the Machine Clothing segment.
  • Operating income was $53.6 million, compared to $44.5 million in the prior year, an increase of 20.6%.
  • Certain pension plan liabilities were settled for a plan in the U.S., leading to charges totaling $49.1 million and reducing GAAP earnings per share by $1.20.
  • Effective tax rate for the quarter was -41.9%, driven by the release of residual taxes as a result of the pension settlement; excluding the effect of the pension settlement and related adjustments, the effective tax rate for the quarter was 24.6% or 250 basis points lower than that for the third quarter of 2021, mainly due to favorable discrete tax adjustments in the third quarter of 2022.
  • Net income attributable to the Company was $10.7 million ($0.34 per share), compared to $30.9 million ($0.95 per share) in the third quarter of 2021. Adjusted earnings per share (or Adjusted EPS, a non-GAAP measure) was $1.15 per share in the third quarter of 2022, compared to $0.83 in the same period of last year.
  • Adjusted EBITDA (a non-GAAP measure) was $68.1 million, compared to $60.2 million in the third quarter of 2021, an increase of 13%.

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

Outlook for Full-Year 2022

The Company has updated its guidance for the full year 2022 as follows:

  • Total company revenue of between $990 million and $1.015 billion;
  • Effective income tax rate, including tax adjustments, of 25% to 27%;
  • Total company depreciation and amortization of between $71 and $72 million;
  • Capital expenditures in the range of $75 to $85 million;
  • GAAP earnings per share of between $2.84 and $3.14;
  • Adjusted earnings per share of between $3.50 and $3.80;
  • Total company Adjusted EBITDA of $240 to $255 million;
  • Machine Clothing revenue of $595 to $610 million;
  • Machine Clothing Adjusted EBITDA of between $215 and $225 million;
  • Albany Engineered Composites revenue of between $395 and $405 million; and
  • Albany Engineered Composites Adjusted EBITDA of between $75 and $80 million.

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2022

 

2021

 

2022

 

2021

Net sales

$

260,563

 

 

$

232,442

 

 

$

766,101

 

 

$

689,322

 

Cost of goods sold

 

160,070

 

 

 

140,400

 

 

 

473,411

 

 

 

407,006

 

 

 

 

 

 

 

 

 

Gross profit

 

100,493

 

 

 

92,042

 

 

 

292,690

 

 

 

282,316

 

Selling, general, and administrative expenses

 

36,873

 

 

 

37,696

 

 

 

119,325

 

 

 

116,899

 

Technical and research expenses

 

9,934

 

 

 

9,673

 

 

 

29,984

 

 

 

28,916

 

Restructuring expenses, net

 

42

 

 

 

187

 

 

 

268

 

 

 

230

 

 

 

 

 

 

 

 

 

Operating income

 

53,644

 

 

 

44,486

 

 

 

143,113

 

 

 

136,271

 

Interest expense, net

 

3,794

 

 

 

3,734

 

 

 

11,336

 

 

 

11,521

 

Pension settlement expense

 

49,128

 

 

 

 

 

 

49,128

 

 

 

 

Aviation Manufacturing Jobs Protection (AMJP) grant

 

 

 

 

(5,832

)

 

 

 

 

 

(5,832

)

Other (income)/expense, net

 

(6,918

)

 

 

2,753

 

 

 

(17,891

)

 

 

4,215

 

 

 

 

 

 

 

 

 

Income before income taxes

 

7,640

 

 

 

43,831

 

 

 

100,540

 

 

 

126,367

 

Income tax expense/(benefit)

 

(3,183

)

 

 

12,889

 

 

 

22,273

 

 

 

36,375

 

 

 

 

 

 

 

 

 

Net income

 

10,823

 

 

 

30,942

 

 

 

78,267

 

 

 

89,992

 

Net income attributable to the noncontrolling interest

 

129

 

 

 

80

 

 

 

635

 

 

 

150

 

Net income attributable to the Company

$

10,694

 

 

$

30,862

 

 

$

77,632

 

 

$

89,842

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Company shareholders - Basic

$

0.34

 

 

$

0.95

 

 

$

2.47

 

 

$

2.78

 

 

 

 

 

 

 

 

 

Earnings per share attributable to Company shareholders - Diluted

$

0.34

 

 

$

0.95

 

 

$

2.46

 

 

$

2.77

 

 

 

 

 

 

 

 

 

Shares of the Company used in computing earnings per share:

 

 

 

 

 

 

 

Basic

 

31,111

 

 

 

32,381

 

 

 

31,416

 

 

 

32,369

 

 

 

 

 

 

 

 

 

Diluted

 

31,223

 

 

 

32,434

 

 

 

31,518

 

 

 

32,424

 

 

 

 

 

 

 

 

 

Dividends declared per share, Class A and Class B

$

0.21

 

 

$

0.20

 

 

$

0.63

 

 

$

0.60

 

ALBANY INTERNATIONAL CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

September 30, 2022

 

December 31, 2021

ASSETS

 

 

 

Cash and cash equivalents

$

276,482

 

 

$

302,036

 

Accounts receivable, net

 

198,847

 

 

 

191,985

 

Contract assets, net

 

148,729

 

 

 

112,546

 

Inventories

 

133,840

 

 

 

117,882

 

Income taxes prepaid and receivable

 

4,055

 

 

 

1,958

 

Prepaid expenses and other current assets

 

46,761

 

 

 

32,394

 

Total current assets

$

808,714

 

 

$

758,801

 

 

 

 

 

Property, plant and equipment, net

 

411,139

 

 

 

436,417

 

Intangibles, net

 

34,306

 

 

 

39,081

 

Goodwill

 

172,820

 

 

 

182,124

 

Deferred income taxes

 

17,954

 

 

 

26,376

 

Noncurrent receivables, net

 

28,770

 

 

 

31,849

 

Other assets

 

98,146

 

 

 

81,416

 

Total assets

$

1,571,849

 

 

$

1,556,064

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

Accounts payable

$

65,378

 

 

$

68,954

 

Accrued liabilities

 

106,831

 

 

 

124,325

 

Current maturities of long-term debt

 

 

 

 

 

Income taxes payable

 

17,328

 

 

 

14,887

 

Total current liabilities

 

189,537

 

 

 

208,166

 

 

 

 

 

Long-term debt

 

447,000

 

 

 

350,000

 

Other noncurrent liabilities

 

103,843

 

 

 

107,794

 

Deferred taxes and other liabilities

 

11,281

 

 

 

12,499

 

Total liabilities

 

751,661

 

 

 

678,459

 

 

 

 

 

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; 40,785,434 issued in 2022 and 40,760,577 in 2021

 

41

 

 

 

41

 

Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; none issued and outstanding in 2022 and 104 in 2021

 

 

 

 

 

Additional paid in capital

 

440,295

 

 

 

436,996

 

Retained earnings

 

920,966

 

 

 

863,057

 

Accumulated items of other comprehensive income:

 

 

 

Translation adjustments

 

(185,721

)

 

 

(105,880

)

Pension and postretirement liability adjustments

 

(12,613

)

 

 

(38,490

)

Derivative valuation adjustment

 

17,961

 

 

 

(1,614

)

Treasury stock (Class A), at cost; 9,674,542 shares in 2022 and 8,665,090 in 2021

 

(364,923

)

 

 

(280,143

)

Total Company shareholders' equity

 

816,006

 

 

 

873,967

 

Noncontrolling interest

 

4,182

 

 

 

3,638

 

Total equity

 

820,188

 

 

 

877,605

 

Total liabilities and shareholders' equity

$

1,571,849

 

 

$

1,556,064

 

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2022

 

2021

 

2022

 

2021

OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net income

$

10,823

 

 

$

30,942

 

 

$

78,267

 

 

$

89,992

 

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

 

 

 

 

 

 

 

Depreciation

 

15,588

 

 

 

15,925

 

 

 

46,864

 

 

 

48,485

 

Amortization

 

1,446

 

 

 

2,289

 

 

 

5,044

 

 

 

6,862

 

Change in deferred taxes and other liabilities

 

(18,178

)

 

 

1,606

 

 

 

(15,582

)

 

 

7,022

 

Impairment of property, plant, equipment, and inventory

 

(52

)

 

 

25

 

 

 

2,610

 

 

 

563

 

Non-cash interest expense

 

279

 

 

 

283

 

 

 

840

 

 

 

593

 

Non-cash portion of pension settlement expense

 

42,657

 

 

 

 

 

 

42,657

 

 

 

 

Compensation and benefits paid or payable in Class A Common Stock

 

835

 

 

 

606

 

 

 

3,282

 

 

 

2,232

 

Provision/(recovery) for credit losses from uncollected receivables and contract assets

 

(441

)

 

 

(1,075

)

 

 

885

 

 

 

(1,158

)

Foreign currency remeasurement (gain)/loss on intercompany loans

 

(5,369

)

 

 

480

 

 

 

(6,629

)

 

 

(551

)

Fair value adjustment on foreign currency options

 

(28

)

 

 

29

 

 

 

(409

)

 

 

169

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities that provided/(used) cash:

 

 

 

 

 

 

 

Accounts receivable

 

(5,853

)

 

 

(10,927

)

 

 

(20,260

)

 

 

(14,292

)

Contract assets

 

(13,333

)

 

 

(3,473

)

 

 

(37,201

)

 

 

22,170

 

Inventories

 

(3,760

)

 

 

546

 

 

 

(24,895

)

 

 

(9,838

)

Prepaid expenses and other current assets

 

1,741

 

 

 

3,949

 

 

 

(2,733

)

 

 

2,444

 

Income taxes prepaid and receivable

 

(2,119

)

 

 

2,717

 

 

 

(2,179

)

 

 

2,408

 

Accounts payable

 

(2,395

)

 

 

(296

)

 

 

5,081

 

 

 

4,312

 

Accrued liabilities

 

(879

)

 

 

5,112

 

 

 

(12,624

)

 

 

(12,311

)

Income taxes payable

 

10,378

 

 

 

2,871

 

 

 

2,639

 

 

 

(1,085

)

Noncurrent receivables

 

1,112

 

 

 

1,245

 

 

 

2,976

 

 

 

2,832

 

Other noncurrent liabilities

 

(2,708

)

 

 

(1,319

)

 

 

(5,960

)

 

 

(5,582

)

Other, net

 

(150

)

 

 

1,324

 

 

 

4,634

 

 

 

3,232

 

Net cash provided by operating activities

 

29,594

 

 

 

52,859

 

 

 

67,307

 

 

 

148,499

 

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(15,289

)

 

 

(8,918

)

 

 

(50,948

)

 

 

(31,754

)

Purchased software

 

(1,518

)

 

 

(106

)

 

 

(1,884

)

 

 

(394

)

Net cash used in investing activities

 

(16,807

)

 

 

(9,024

)

 

 

(52,832

)

 

 

(32,148

)

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

Proceeds from borrowings

 

10,000

 

 

 

 

 

 

145,000

 

 

 

8,000

 

Principal payments on debt

 

(48,000

)

 

 

 

 

 

(48,000

)

 

 

(56,009

)

Principal payments on finance lease liabilities

 

 

 

 

(363

)

 

 

(654

)

 

 

(1,067

)

Purchase of Treasury shares

 

 

 

 

 

 

 

(84,780

)

 

 

 

Taxes paid in lieu of share issuance

 

 

 

 

 

 

 

(770

)

 

 

(998

)

Proceeds from options exercised

 

10

 

 

 

4

 

 

 

17

 

 

 

153

 

Dividends paid

 

(6,533

)

 

 

(6,476

)

 

 

(19,932

)

 

 

(19,418

)

Net cash used in financing activities

 

(44,523

)

 

 

(6,835

)

 

 

(9,119

)

 

 

(69,339

)

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(12,652

)

 

 

(4,113

)

 

 

(30,910

)

 

 

(2,111

)

 

 

 

 

 

 

 

 

(Decrease)/increase in cash and cash equivalents

 

(44,388

)

 

 

32,887

 

 

 

(25,554

)

 

 

44,901

 

Cash and cash equivalents at beginning of period

 

320,870

 

 

 

253,330

 

 

 

302,036

 

 

 

241,316

 

Cash and cash equivalents at end of period

$

276,482

 

 

$

286,217

 

 

$

276,482

 

 

$

286,217

 

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

(in thousands, except percentages)

Net sales as reported, Q3 2022

Decrease due to changes in currency translation rates

Q3 2022 sales on same basis as Q3 2021 currency translation rates

Net sales as reported, Q3 2021

% Change compared to Q3 2021, excluding currency rate effects

Machine Clothing

$

153,389

$

(6,570

)

$

159,959

$

154,171

3.8

%

Albany Engineered Composites

 

107,174

 

(3,637

)

 

110,811

 

78,271

41.6

%

Consolidated total

$

260,563

$

(10,207

)

$

270,770

$

232,442

16.5

%

 

 

 

 

 

 

(in thousands, except percentages)

Net sales as reported, YTD 2022

Decrease due to changes in currency translation rates

YTD 2022 sales on same basis as 2021 currency translation rates

Net sales as reported, YTD 2021

% Change compared to 2021, excluding currency rate effects

Machine Clothing

$

459,121

$

(14,545

)

$

473,666

$

462,298

2.5

%

Albany Engineered Composites

 

306,980

 

(5,631

)

 

312,611

 

227,024

37.7

%

Consolidated total

$

766,101

$

(20,176

)

$

786,277

$

689,322

14.1

%

The following table presents Gross profit and Gross profit margin:

(in thousands, except percentages)

Gross profit, Q3 2022

Gross profit margin, Q3 2022

Gross profit, Q3 2021

Gross profit margin, Q3 2021

Machine Clothing

$

79,232

51.7

%

$

79,437

51.5

%

Albany Engineered Composites

 

21,261

19.8

%

 

12,605

16.1

%

Consolidated total

$

100,493

38.6

%

$

92,042

39.6

%

(in thousands, except percentages)

Gross profit, YTD 2022

Gross profit margin, YTD 2022

Gross profit, YTD 2021

Gross profit margin, YTD 2021

Machine Clothing

$

237,434

51.7

%

$

240,427

52.0

%

Albany Engineered Composites

 

55,256

18.0

%

 

41,889

18.5

%

Consolidated total

$

292,690

38.2

%

$

282,316

41.0

%

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, 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, net

 

 

 

 

 

3,794

 

 

3,794

 

Income tax expense/(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 sales) (non-GAAP)

 

38.5

%

 

20.0

%

 

 

 

26.1

%

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2021

(in thousands)

Machine Clothing

Albany Engineered

Composites

Corporate expenses

and other

Total Company

Net income/(loss) (GAAP)

$

55,467

 

$

2,917

 

$

(27,442

)

$

30,942

 

Interest expense, net

 

 

 

 

 

3,734

 

 

3,734

 

Income tax expense

 

 

 

 

 

12,889

 

 

12,889

 

Depreciation and amortization expense

 

5,014

 

 

12,265

 

 

935

 

 

18,214

 

EBITDA (non-GAAP)

 

60,481

 

 

15,182

 

 

(9,884

)

 

65,779

 

Restructuring expenses, net

 

251

 

 

(81

)

 

17

 

 

187

 

Foreign currency revaluation (gains)/losses (a)

 

(1,571

)

 

31

 

 

472

 

 

(1,068

)

AMJP grant

 

 

 

963

 

 

(5,832

)

 

(4,869

)

Acquisition/integration costs

 

 

 

297

 

 

 

 

297

 

Pre-tax (income) attributable to noncontrolling interest

 

 

 

(95

)

 

 

 

(95

)

Adjusted EBITDA (non-GAAP)

$

59,161

 

$

16,297

 

$

(15,227

)

$

60,231

 

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

 

38.4

%

 

20.8

%

 

 

 

25.9

%

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, 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 sales-non-GAAP)

 

38.0

%

 

18.4

%

 

 

 

25.5

%

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2021

(in thousands)

Machine Clothing

Albany Engineered

Composites

Corporate expenses

and other

Total Company

Net income/(loss) (GAAP)

$

161,731

 

$

13,019

 

$

(84,758

)

$

89,992

 

Interest expense, net

 

 

 

 

 

11,521

 

 

11,521

 

Income tax expense

 

 

 

 

 

36,375

 

 

36,375

 

Depreciation and amortization expense

 

15,272

 

 

37,326

 

 

2,749

 

 

55,347

 

EBITDA (non-GAAP)

 

177,003

 

 

50,345

 

 

(34,113

)

 

193,235

 

Restructuring expenses, net

 

193

 

 

(40

)

 

77

 

 

230

 

Foreign currency revaluation (gains)/losses (a)

 

(156

)

 

363

 

 

813

 

 

1,020

 

AMJP grant

 

 

 

963

 

 

(5,832

)

 

(4,869

)

Acquisition/integration costs

 

 

 

911

 

 

 

 

911

 

Pre-tax (income) attributable to noncontrolling interest

 

 

 

(206

)

 

 

 

(206

)

Adjusted EBITDA (non-GAAP)

$

177,040

 

$

52,336

 

$

(39,055

)

$

190,321

 

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

 

38.3

%

 

23.1

%

 

 

 

27.6

%

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

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

 

 

 

 

 

 

Three months ended September 30, 2021

(in thousands, except per share amounts)

Pre tax

Amounts

Tax

Effect

After tax

Effect

Per share

Effect

Restructuring expenses, net

$

187

 

$

55

 

$

132

 

$

0.00

 

Foreign currency revaluation (gains)/losses (a)

 

(1,068

)

 

(314

)

 

(754

)

 

(0.02

)

AMJP grant

 

(4,869

)

 

(1,446

)

 

(3,423

)

 

(0.11

)

Acquisition/integration costs

 

297

 

 

89

 

 

208

 

 

0.01

 

 

 

 

 

 

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

 

 

 

 

 

 

Nine months ended September 30, 2021

(in thousands, except per share amounts)

Pre tax

Amounts

Tax

Effect

After tax

Effect

Per share

Effect

Restructuring expenses, net

$

230

 

$

67

 

$

163

 

$

0.00

 

Foreign currency revaluation (gains)/losses (a)

 

1,020

 

 

332

 

 

688

 

 

0.02

 

AMJP grant

 

(4,869

)

 

(1,446

)

 

(3,423

)

 

(0.11

)

Acquisition/integration costs

 

911

 

 

273

 

 

638

 

 

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)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Earnings per share (GAAP)

$

0.34

 

$

0.95

 

$

2.47

 

$

2.78

 

Adjustments, after tax:

 

 

 

 

Restructuring expenses, net

 

 

 

 

 

0.01

 

 

 

Foreign currency revaluation (gains)/losses (a)

 

(0.22

)

 

(0.02

)

 

(0.47

)

 

0.02

 

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

)

 

 

AMJP grant

 

 

 

(0.11

)

 

 

 

(0.11

)

Acquisition/ integration costs

 

0.01

 

 

0.01

 

 

0.03

 

 

0.03

 

Adjusted Earnings per share (non-GAAP)

$

1.15

 

$

0.83

 

$

3.13

 

$

2.72

 

(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.

The calculations of net debt are as follows:

(in thousands)

September 30, 2022

June 30, 2022

March 31, 2022

December 31, 2021

Current maturities of long-term debt

$

$

$

$

Long-term debt

 

447,000

 

485,000

 

427,000

 

350,000

Total debt

 

447,000

 

485,000

 

427,000

 

350,000

Cash and cash equivalents

 

276,482

 

320,870

 

307,415

 

302,036

Net debt (non-GAAP)

$

170,518

$

164,130

$

119,585

$

47,964

 

 

 

 

 

The calculation of net leverage ratio as of September 30, 2022 is as follows:

Total Company

 

Twelve months ended

Nine months ended

Trailing twelve months ended

(in thousands)

December 31, 2021

September 30, 2021

September 30, 2022

September 30, 2022 (non-GAAP) (c)

Net income/(loss) (GAAP)

$

118,768

 

$

89,992

 

$

78,267

 

$

107,043

 

Interest expense, net

 

14,891

 

 

11,521

 

 

11,336

 

 

14,706

 

Income tax expense

 

47,163

 

 

36,375

 

 

22,273

 

 

33,061

 

Depreciation and amortization expense

 

74,255

 

 

55,347

 

 

51,908

 

 

70,816

 

EBITDA (non-GAAP)

 

255,077

 

 

193,235

 

 

163,784

 

 

225,626

 

Restructuring expenses, net

 

1,331

 

 

230

 

 

268

 

 

1,369

 

Foreign currency revaluation (gains)/losses (a)

 

(1,442

)

 

1,020

 

 

(20,579

)

 

(23,041

)

Aviation Manufacturing Job Protection (AMJP) grant

 

(4,731

)

 

(4,869

)

 

 

 

138

 

Dissolution of business relationships in Russia

 

 

 

 

 

2,354

 

 

2,354

 

Pension settlement expense

 

 

 

 

 

49,128

 

 

49,128

 

Acquisition/integration costs

 

1,166

 

 

911

 

 

806

 

 

1,061

 

Pre-tax (income) attributable to noncontrolling interest

 

(510

)

 

(206

)

 

(633

)

 

(937

)

Adjusted EBITDA (non-GAAP)

$

250,891

 

$

190,321

 

$

195,128

 

$

255,698

 

(in thousands, except for net leverage ratio)

September 30, 2022

Net debt (non-GAAP)

$

170,518

Trailing twelve months Adjusted EBITDA (non-GAAP)

 

255,698

Net leverage ratio (non-GAAP)

 

0.67

 

 

(c) Calculated as amounts incurred during the twelve months ended December 31, 2021, less those incurred during the nine months ended September 30, 2021, plus those incurred during the nine months ended September 30, 2022.

The tables below provide a reconciliation of forecasted full-year 2022 Adjusted EBITDA and Adjusted EPS (non-GAAP measures) to the comparable GAAP measures:

Forecast of Full Year 2022 Adjusted EBITDA

Machine Clothing

 

AEC

(in millions)

Low

High

 

Low

High

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

$

198

 

$

207

 

 

$

27

 

$

31

 

Income attributable to the noncontrolling interest

 

 

 

 

 

 

1

 

 

1

 

Interest expense, net

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

19

 

 

20

 

 

 

46

 

 

47

 

EBITDA (non-GAAP)

 

217

 

 

227

 

 

 

74

 

 

79

 

Restructuring expenses, net (e)

 

 

 

 

 

 

 

 

 

Foreign currency revaluation (gains)/losses (e)

 

(4

)

 

(4

)

 

 

1

 

 

1

 

Acquisition/integration costs (e)

 

 

 

 

 

 

1

 

 

1

 

Dissolution of business relationships in Russia

 

2

 

 

2

 

 

 

 

 

 

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

 

 

 

 

 

 

(1

)

 

(1

)

Adjusted EBITDA (non-GAAP)

$

215

 

$

225

 

 

$

75

 

$

80

 

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

 

 

 

 

 

 

 

 

 

 

 

Forecast of Full Year 2022 Adjusted EBITDA

Total Company

 

 

 

(in millions)

Low

High

 

 

 

Net income attributable to the Company (GAAP)

$

90

 

$

99

 

 

 

 

Income attributable to the noncontrolling interest

 

1

 

 

1

 

 

 

 

Interest expense, net

 

15

 

 

16

 

 

 

 

Income tax expense

 

33

 

 

37

 

 

 

 

Depreciation and amortization

 

71

 

 

72

 

 

 

 

EBITDA (non-GAAP)

 

210

 

 

225

 

 

 

 

Restructuring expenses, net (e)

 

 

 

 

 

 

 

Foreign currency revaluation (gains)/losses (e)

 

(21

)

 

(21

)

 

 

 

Acquisition/integration costs (e)

 

1

 

 

1

 

 

 

 

Pension settlement expense

 

49

 

 

49

 

 

 

 

Dissolution of business relationships in Russia

 

2

 

 

2

 

 

 

 

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

 

(1

)

 

(1

)

 

 

 

Adjusted EBITDA (non-GAAP)

$

240

 

$

255

 

  

 

 

 

 

 

 

 

Total Company

 

 

 

Forecast of Full Year 2022 Earnings per share (basic) (f)

Low

High

 

 

 

Net income attributable to the Company (GAAP)

$

2.84

 

$

3.14

 

 

 

 

Restructuring expenses, net (e)

 

0.01

 

 

0.01

 

 

 

 

Foreign currency revaluation (gains)/losses (e)

 

(0.47

)

 

(0.47

)

 

 

 

Dissolution of business relationships in Russia

 

0.06

 

 

0.06

 

 

 

 

Pension settlement expense

 

1.20

 

 

1.20

 

 

 

 

Tax impact of stranded OCI benefit from TCJA for pension liability

 

(0.17

)

 

(0.17

)

 

 

 

Acquisition/integration costs (e)

 

0.03

 

 

0.03

 

 

 

 

Adjusted Earnings per share (non-GAAP)

$

3.50

 

$

3.80

 

 

 

 

 

 

 

 

 

 

(e) Due to the uncertainty of these items, we are unable to forecast these items for 2022

(f) Calculations based on weighted average shares outstanding estimate of approximately 31.5 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 custom-designed, consumable fabrics and process belts essential for the manufacture of all grades of paper products. Albany Engineered Composites is a growing designer and manufacturer of advanced materials-based engineered components for demanding aerospace applications, supporting both commercial and military platforms. Albany International is headquartered in Rochester, New Hampshire, operates 23 facilities in 11 countries, employs approximately 4,100 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 sales and percent change in net sales, 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 sales and change in Net sales, after currency effects are excluded, provides management and investors insight into underlying sales trends. Net sales, or percent changes in net sales, 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 sales.

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, the ongoing COVID-19 pandemic and the Russia-Ukraine military conflicts; paper-industry trends and conditions during 2022 and in future years; expectations in 2022 and in future periods of sales, EBITDA, Adjusted EBITDA (both in dollars and as a percentage of net sales), 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 sales 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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