UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report: November 6, 2023
(Date of earliest event reported)
| (Exact name of registrant as specified in its charter) | ||||||||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S Employer Identification No.) | ||||||
(Address of principal executive offices) | (Zip Code) | ||||
Registrant’s telephone number, including area code 603 -330-5850
None | ||
(Former name or former address, if changed since last report.) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
The New York Stock Exchange ( | ||||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act 1933 (230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (240.12b-2 of this chapter).
¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Item 2.02. Results of Operations and Financial Condition.
On November 6, 2023 Albany International issued a news release reporting third quarter 2023 financial results. The Company will host a webcast to discuss earnings at 10:00 a.m. Eastern Time on Tuesday November 7, 2023. The news release is furnished as Exhibit 99.1 to this report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is being furnished herewith:
99.1 News release dated November 6, 2023 reporting third-quarter 2023 financial results.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ALBANY INTERNATIONAL CORP. | |||||||||||
By: | /s/ Robert D. Starr | ||||||||||
Name: | Robert D. Starr | ||||||||||
Title: | Executive Vice President and Chief Financial Officer | ||||||||||
(Principal Financial Officer) | |||||||||||
Date: November 6, 2023
EXHIBIT INDEX
Exhibit No. | Description | ||||
| 99.1 | |||||
| 104 | Inline XBRL cover page. | ||||
Exhibit 99.1
Albany International Reports Third-Quarter 2023 Results
ROCHESTER, N.H.--(BUSINESS WIRE)--November 6, 2023 — 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.
Contacts
John Hobbs
603-330-5897
john.hobbs@albint.com