Albany International Reports First-Quarter FY19 Results

Albany International Reports Double-Digit Net Sales Growth

Albany International Reports Profitability Growth in Both Segments

ROCHESTER, N.H.–(BUSINESS WIRE)–Albany International Corp. (NYSE:AIN) today reported operating results
for its Fiscal Year 2019 (FY19) first quarter, which ended March 31,
2019.

“Once again, the Company has delivered a very strong quarter, with
double-digit year-over-year growth in Net sales,” said Albany
International President and Chief Executive Officer Olivier Jarrault.
“Our aerospace businesses continue to ramp up toward full-rate
production, with particular continued progress on the LEAP, Boeing 787,
and CH-53K programs. At the same time, the operating income margin in
our Engineered Composites segment has more than tripled from the level
it was a year ago.

“In the Machine Clothing segment, we delivered another solid quarter,
with year-over-year revenue growth, particularly in tissue and packaging
grades globally and in the North America market across all major grades,
and with strong operating margins.

“Having now completed one year with Albany, I have seen the Company
continue to strengthen across all areas of the business. We have
introduced a relentless focus on operational excellence and productivity
improvements, through the deployment of a standardized, disciplined
operating system, which benefits our customers and creates value for our
shareholders. The progress we have made in the first quarter puts us in
a strong position to deliver on our expectations, both for the balance
of this year and in the years to come.”

For the first quarter ended March 31, 2019:

  • Net sales were $251.4 million, an increase of 12.4% compared to the
    prior-year, reflecting growth in both operating segments. Excluding
    the impact of currency translation effects, net sales increased 15.2%.
  • Gross profit was $91.8 million, up from $77.8 million last year, an
    increase of 18%, driven by both the increase in net sales and gross
    margin expansion in both operating segments.
  • Operating income was $40.1 million, compared to $17.0 million in the
    prior year, an increase of 135.8%, driven by higher gross profit,
    lower restructuring expenses, and lower SG&A.
  • Tax rate was 20.3%, compared to 29.9% last year. The reduction was
    primarily due to $3.4 million of favorable income tax adjustments in
    Q1 2019, compared to $0.3M last year.
  • Net income attributable to the Company was $29.2 million ($0.90 per
    share), compared to $7.7 million ($0.24 per share) in Q1 2018.
    Adjusted earnings per share (or Adjusted EPS, a non-GAAP measure) was
    $0.87 per share, compared to $0.47 per share in Q1 2018.
  • Adjusted EBITDA (a non-GAAP measure) was $57.6 million, compared to
    $47.1 million in Q1 2018, representing an increase of 22.3%.

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

“Albany International continues to deliver in line with our
expectations,” said Albany International Chief Financial Officer and
Treasurer Stephen Nolan. “I knew before I joined the Company that it had
a strong portfolio of businesses, with leading positions in their
respective markets. Since arriving here, I have been even more impressed
with the people I have encountered. It is these people who have
delivered the strong results we reported today.

“In addition to the solid revenue and profit delivered in the quarter,
our working capital management initiatives resulted in significantly
improved year-over-year performance in cash generation: net cash from
operating activities generated in the quarter was $24.6 million,
compared to a use of $18.9 million in the prior year.”

Outlook for Fiscal Year 2019

“On our last call, to report our year-end FY18 results, I provided
initial segment guidance for the full year FY19,” said Jarrault. “With
one quarter behind us, we are confident in reaffirming that segment
guidance for the year. We are also at this time providing guidance
around additional corporate financial measures to help investors better
understand our expectations for the full year.”

Albany International financial guidance for FY19, including financial
metrics for which guidance has not previously been provided, is as
follows:

  • Revenue of between $1.05 and $1.08 billion;
  • Effective income tax rate, including tax adjustments recorded this
    quarter, of 27% to 29%;
  • Capital expenditures of between $20 and $25 million per quarter;
  • Depreciation and amortization of between $70 and $75 million;
  • Earnings per share of between $3.08 and $3.38 and Adjusted earnings
    per share of between $3.05 and $3.35;
  • Adjusted EBITDA, after incorporating both prior segment guidance and
    corporate expenses, of between $225 and $240 million.
 

ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(in
thousands, except per share amounts)
(unaudited)

     
Three Months Ended
March 31,
2019 2018
 
Net sales $ 251,373 $ 223,603
Cost of goods sold   159,602     145,821
 
Gross profit 91,771 77,782
Selling, general, and administrative expenses 40,945 41,888
Technical and research expenses 10,249 10,317
Restructuring expenses, net   484     8,573
 
Operating income 40,093 17,004
Interest expense, net 4,417 4,288
Other (income)/expense, net   (1,208 )   1,452
 
Income before income taxes 36,884 11,264
Income tax expense   7,476     3,365
 
Net income 29,408 7,899
Net income attributable to the noncontrolling interest   218     237
Net income attributable to the Company $ 29,190   $ 7,662
 
Earnings per share attributable to Company shareholders – Basic $ 0.90 $ 0.24
 
Earnings per share attributable to Company shareholders – Diluted $ 0.90 $ 0.24
 
Shares of the Company used in computing earnings per share:
Basic 32,272 32,220
 
Diluted 32,285 32,236
 
Dividends declared per share, Class A and Class B $ 0.18 $ 0.17
 
   
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in
thousands, except share data)
(unaudited)
   

March 31,
2019

December 31,
2018

ASSETS
Cash and cash equivalents $ 187,385 $ 197,755
Accounts receivable, net 234,127 223,176
Contract assets 57,869 57,447
Inventories 102,379 85,904
Income taxes prepaid and receivable 6,818 7,473
Prepaid expenses and other current assets   23,696     21,294  
Total current assets 612,274 593,049
 
Property, plant and equipment, net 460,520 462,055
Intangibles, net 47,646 49,206
Goodwill 163,438 164,382
Deferred income taxes 63,736 62,622
Noncurrent receivables 45,354 45,061
Other assets   50,313     41,617  
Total assets $ 1,443,281   $ 1,417,992  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable $ 74,050 $ 52,246
Accrued liabilities 122,342 129,030
Current maturities of long-term debt 19 1,224
Income taxes payable   8,387     6,806  
Total current liabilities 204,798 189,306
 
Long-term debt 491,022 523,707
Other noncurrent liabilities 112,726 88,277
Deferred taxes and other liabilities   8,328     8,422  
Total liabilities   816,874     809,712  
 
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; issued 37,478,402 in 2019 and 37,450,329 in
2018

37 37

Class B Common Stock, par value $.001 per share; authorized
25,000,000 shares; issued and outstanding 3,233,998 in 2019 and
2018

3 3
Additional paid in capital 430,052 430,555
Retained earnings 613,057 589,645
Accumulated items of other comprehensive income:
Translation adjustments (116,630 ) (115,976 )
Pension and postretirement liability adjustments (48,596 ) (47,109 )
Derivative valuation adjustment 1,846 4,697

Treasury stock (Class A), at cost; 8,418,620 shares in 2019 and in
2018

  (256,603 )   (256,603 )
Total Company shareholders’ equity 623,166 605,249
Noncontrolling interest   3,241     3,031  
Total equity   626,407     608,280  
Total liabilities and shareholders’ equity $ 1,443,281   $ 1,417,992  
 
 

ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH
FLOW
(in thousands)
(unaudited)

       
Three Months Ended
March 31,
2019 2018

OPERATING ACTIVITIES

Net income

$ 29,408 $ 7,899

Adjustments to reconcile net income to net cash provided by/(used
in) operating activities:

Depreciation 15,642 18,302

Amortization

2,314 2,646
Change in deferred taxes and other liabilities (1,065 ) (2,028 )
Provision for write-off of property, plant and equipment 386 271
Non-cash interest expense 151
Compensation and benefits paid or payable in Class A Common Stock (547 ) 289
Fair value adjustment on foreign currency option 37
 

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

Accounts receivable (11,624 ) (25,089 )

Contract assets

(481 ) 2,116
Inventories (16,662 ) (11,753 )
Prepaid expenses and other current assets (2,804 ) (4,063 )
Income taxes prepaid and receivable 674 102
Accounts payable 21,750 (2,538 )
Accrued liabilities (11,095 ) (1,227 )
Income taxes payable 1,506 (3,431 )
Noncurrent receivables (294 ) (2,527 )
Other noncurrent liabilities (1,679 ) (377 )
Other, net   (1,014 )   2,424  
Net cash provided by/(used in) operating activities   24,566     (18,947 )
 

INVESTING ACTIVITIES

Purchases of property, plant and equipment (20,798 ) (15,771 )
Purchased software   (22 )   (29 )
Net cash used in investing activities   (20,820 )   (15,800 )
 

FINANCING ACTIVITIES

Proceeds from borrowings 20,000 13,011
Principal payments on debt (28,004 ) (8,490 )
Principal payments on finance lease liabilities (400 )
Taxes paid in lieu of share issuance (971 ) (1,652 )
Proceeds from options exercised 44 147
Dividends paid   (5,808 )   (5,474 )

Net cash used in financing activities

  (15,139 )   (2,458 )
 

Effect of exchange rate changes on cash and cash equivalents

  1,023     4,904  
 

Decrease in cash and cash equivalents

(10,370 )

 

(32,301 )

Cash and cash equivalents at beginning of period

  197,755     183,727  

Cash and cash equivalents at end of period

$ 187,385   $ 151,426  
 

Reconciliation of non-GAAP measures to comparable
GAAP measures

The following table presents Net sales and the effect of changes in
currency translation rates:

                               
(in $ thousands, except percentages)    

Net Sales,
as reported,
Q1 2019

   

Decrease
due to
changes in
currency
translation
rates

   

Q1 2019
sales on
same basis
as
Q1 2018

currency
translation
rates

   

Net sales
as reported,
Q1 2018

   

% Change
compared to
Q1 2018,
excluding
currency
rate
effects

Machine Clothing     $ 144,334     $ 4,241     $ 148,575     $ 141,773     4.8 %
Albany Engineered Composites       107,039       1,887       108,926       81,830     33.1 %
Total     $ 251,373     $ 6,128     $ 257,501     $ 223,603     15.2 %
 

Adjusted EBITDA for the current-year and comparable prior-year periods
has been calculated as follows:

                         
Three months ended March 31, 2019                        
(in $ thousands)    

Machine
Clothing

   

Albany
Engineered
Composites

   

Corporate
Expenses
and Other

   

Total
Company

Operating income/(loss) (GAAP)     $ 44,243     $ 9,522     ($13,672 )     $ 40,093
Interest, taxes, and other income/(expense)                     (10,685 )       (10,685 )
Net income/(loss) (GAAP) 44,243 9,522 (24,357 ) 29,408
Interest expense, net 4,417 4,417
Income tax expense 7,476 7,476
Depreciation and amortization expense       5,919         10,902       1,135         17,956  
EBITDA (non-GAAP) 50,162 20,424 (11,329 ) 59,257
Restructuring expenses, net 401 83 484
Foreign currency revaluation (gains)/losses (32 ) 235 (2,036 ) (1,833 )
Pre-tax (income) attributable to non-controlling interest               (290 )             (290 )
Adjusted EBITDA (non-GAAP)     $ 50,531       $ 20,452       ($13,365 )     $ 57,618  
Adjusted EBITDA margin (Adjusted EBITDA divided by Net sales –
non-GAAP)
     

35.0

%

     

19.1

%

   

       

22.9

%

 
                         
Three months ended March 31, 2018                        
(in $ thousands)    

Machine
Clothing

   

Albany
Engineered
Composites

   

Corporate
Expenses
and Other

   

Total
Company

Operating income/(loss) (GAAP)     $ 26,942     $ 2,275     ($12,213 )     $ 17,004
Interest, taxes, and other income/(expense)                     (9,105 )       (9,105 )
Net income/(loss) (GAAP) 26,942 2,275 (21,318 ) 7,899
Interest expense, net 4,288 4,288
Income tax expense 3,365 3,365
Depreciation and amortization expense       8,362         11,156       1,430         20,948  
EBITDA (non-GAAP) 35,304 13,431 (12,235 ) 36,500
Restructuring expenses, net 8,352 221 8,573
Foreign currency revaluation (gains)/losses 1,517 186 687 2,390
Pre-tax (income) attributable to non-controlling interest               (343 )             (343 )
Adjusted EBITDA (non-GAAP)     $ 45,173       $ 13,495       ($11,548 )     $ 47,120  
Adjusted EBITDA margin (Adjusted EBITDA divided by Net sales –
non-GAAP)
     

31.9

%

     

16.5

%

   

       

21.1

%

 

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

                             
Three months ended March 31, 2019                            
(in $ thousands, except per share amounts)        

Pre-Tax
Amount

    Tax Effect    

After-Tax
Amount

   

Per Share
Amount

Restructuring expenses, net         $ 484     $ 142     $ 342     $ 0.01
Foreign currency revaluation (gains)/losses          

(1,833

)

      (539 )       (1,294 )       (0.04 )
                             
Three months ended March 31, 2018                            
(in $ thousands, except per share amounts)        

Pre-Tax
Amount

    Tax Effect    

After-Tax
Amount

   

Per Share
Amount

Restructuring expenses, net         $ 8,573     $ 2,786     $ 5,787     $ 0.18
Foreign currency revaluation (gains)/losses           2,390       777       1,613       0.05
 

Resulting first quarter Adjusted EPS was as follows:

           
         

Three months ended
March 31,

Per Share Amounts (Basic)         2019     2018
Earnings per share (GAAP)         $ 0.90     $ 0.24
Restructuring expenses, net (after-tax) 0.01 0.18
Foreign currency revaluation (gains)/losses (after-tax)           (0.04 )       0.05
Adjusted Earnings per share         $ 0.87       $ 0.47
 

The tables below provide a reconciliation of forecasted full-year 2019
Adjusted EBITDA and Adjusted EPS (non-GAAP measures) to the comparable
GAAP measures:

                 
Forecast of Full Year 2019 Adjusted EBITDA         Total Company     Machine Clothing
(in $ millions)         Low     High     Low     High
Net income attributable to the Company (GAAP)         $ 99     $ 109     $ 173     $ 181
Interest expense, net 17 16
Income tax expense 40 41
Depreciation and amortization           70         75         22       24
EBITDA (non-GAAP) 226 241 195 205
Restructuring expenses, net (a) 1 1
Foreign currency revaluation (gains)/losses (a) (2 ) (2 )
Pre-tax (income) attributable to non-controlling interest                                
Adjusted EBITDA (non-GAAP)         $ 225       $ 240         195       205
 
                         
Forecast of Full Year 2019
Adjusted Earnings Per Share
Per Share Amounts – Basic (b)         Low     High
Earnings per share (GAAP) $ 3.08 $ 3.38
Restructuring expenses, net (a) 0.01 0.01
Foreign currency revaluation (gains)/losses (a)           (0.04 )       (0.04 )
Adjusted Earnings per share (non-GAAP)         $ 3.05       $ 3.35  
 

(a) Due to the uncertainty of these items, full year forecast is
estimated as equal to actual results for Q1, 2019

(b) Calculations based on shares outstanding estimate of 32.3
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 felts used in the
manufacture of all grades of paper products. Albany Engineered
Composites is a rapidly 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 22
plants in 10 countries, employs 4,400 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, including: net
sales, and percent change in net sales, excluding the impact of currency
translation effects (for each segment and on a consolidated basis);
EBITDA and Adjusted EBITDA (for each segment and on a consolidated
basis, represented in dollars or as a percentage of net sales); Net debt
and changes in Net debt; and Adjusted earnings per share (or Adjusted
EPS). Such items are provided because management believes that they
provide additional useful information to investors regarding the
Company’s operational performance.

Presenting Net sales and increases or decreases in Net sales, after
currency effects are excluded, can give 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, Adjusted EBITDA and Adjusted EPS are performance measures
that relate to the Company’s continuing operations. EBITDA, or net
income with interest, taxes, depreciation, and amortization added back,
is a common indicator of financial performance used, among other things,
to analyze and compare core profitability between companies and
industries because it eliminates effects due to differences in
financing, asset bases and taxes. The Company calculates EBITDA by
removing the following from Net income: Interest expense net, Income tax
expense, Depreciation and amortization. Adjusted EBITDA is calculated
by: adding to EBITDA costs associated with restructuring, and inventory
write-offs associated with discontinued businesses; charges and credits
related to pension plan settlements; adding (or subtracting) revaluation
losses (or gains); subtracting (or adding) gains (or losses) from the
sale of buildings or investments; subtracting insurance recovery gains
in excess of previously recorded losses; and subtracting (or adding)
Income (or loss) attributable to the non-controlling interest in Albany
Safran Composites (ASC). Adjusted EBITDA may also be presented as a
percentage of net sales by dividing it by net sales. An understanding of
the impact in a particular quarter of specific restructuring costs,
currency revaluation, inventory write-offs associated with discontinued
businesses, or other gains and losses, on net income (absolute as well
as on a per-share basis), operating income or EBITDA can give management
and investors additional insight into core financial performance,
especially when compared to quarters in which such items had a greater
or lesser effect, or no effect. Restructuring expenses in the MC
segment, while frequent in recent years, are reflective of significant
reductions in manufacturing capacity and associated headcount in
response to shifting markets, and not of the profitability of the
business going forward as restructured. Adjusted earnings per share
(Adjusted EPS) is calculated by adding to (or subtracting from) net
income attributable to the Company per share, on an after-tax basis:
restructuring charges; charges and credits related to pension plan
settlements and curtailments; inventory write-offs associated with
discontinued businesses; foreign currency revaluation losses (or gains);
acquisition expenses; and losses (or gains) from the sale of investments.

EBITDA, Adjusted EBITDA, and Adjusted EPS, as defined by the Company,
may not be similar to similarly named measures of other companies. Such
measures are not considered measurements under GAAP, and should be
considered in addition to, but not as substitutes for, the information
contained in the Company’s statements of income.

The Company discloses certain income and expense items on a per-share
basis. The Company believes that such disclosures provide important
insight into underlying quarterly earnings and are financial performance
metrics commonly used by investors. The Company calculates the quarterly
per-share amount for items included in continuing operations by using
the income tax rate based on income from continuing operations
and
the weighted-average number of shares outstanding for each period.
Year-to-date earnings per-share effects are determined by adding the
amounts calculated at each reporting period.

Net debt is, in the opinion of the Company, helpful to investors
wishing to understand what the Company’s debt position would be if all
available cash were applied to pay down indebtedness. The Company
calculates Net debt by subtracting Cash and cash equivalents from Total
debt.
Total debt is calculated by adding Long-term debt, Current
maturities of long-term debt, and Notes and loans payable, if any.

Forward-Looking Statements

This press release may contain statements, estimates, 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,” 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 and paper-industry
trends and conditions during 2019 and in future years; expectations in
2019 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.

Contacts

Investor contact:
Stephen Nolan
518-445-2281
[email protected]

Media
contact:

Heather Kralik
801-505-7001
[email protected]

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