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Albany International Reports Third-Quarter 2021 Results

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Raises 2021 Guidance

Announces $200 Million Share Repurchase Authorization

ROCHESTER, N.H., October 25, 2021--(BUSINESS WIRE)--Albany International Corp. (NYSE:AIN) today reported operating results for its third quarter of 2021, which ended September 30, 2021. Additionally, the company raised its full year financial guidance for 2021. Albany’s Board of Directors authorized a share repurchase program of up to $200 million.

"We are reporting another quarter of solid performance," said Bill Higgins, President and CEO. "Revenues of $232 million increased 9.6%. The Albany team delivered another strong quarter with solid growth in both businesses. Machine Clothing segment sales grew 11% from 2020’s third quarter and sustained excellent operating performance and margins. Engineered composites grew again in the quarter and is well positioned for stronger growth as military and commercial programs, led by single aisle aircraft, kick in.

"We are in excellent financial health with low debt and strong free cash flow. To that end, the Board of Directors has authorized a $200 million share repurchase program expanding the capital allocation options available to us," concluded Higgins.

For the third quarter ended September 30, 2021:

  • Net sales were $232.4 million, up 9.6%, or 8.8% after adjusting for currency translation, when compared to the prior year.

  • Gross profit of $92.0 million was 5.4% higher than the $87.3 million reported for the same period of 2020.

  • Selling, Technical, General, and Research (STG&R) expenses were $47.4 million, compared to $47.8 million in the same period of 2020.

  • Operating income was $44.5 million, compared to $38.8 million in the prior year, an increase of 15%.

  • The effective tax rate was 29.4%, compared to 24.7% for the third quarter of 2020. A higher share of our global profits generated in jurisdictions with higher tax rates combined with less favorable discrete income tax adjustments contributed to the higher tax rate this quarter compared to that for the third-quarter 2020.

  • Net income attributable to the Company was $30.9 million ($0.95 per share), compared to $29.6 million ($0.92 per share) in the third quarter of 2020. Adjusted earnings per share (or Adjusted EPS, a non-GAAP measure) was $0.83 per share, compared to $0.96 per share for the same period of last year.

  • Adjusted EBITDA (a non-GAAP measure) was $60.2 million, compared to $61.8 million in the third quarter of 2020, a decrease of 2.6%.

Please see the tables below for a reconciliation of non-GAAP measures to their comparable GAAP measures. During the third quarter of 2021, the Company was awarded $5.8 million under the U.S. Government's Aviation Manufacturing Jobs Protection Program (AMJP). The adjusted results presented in the tables below exclude the impact of the AMJP award as management does not believe that the award is reflective of ongoing operational performance.

"The results of the third quarter are reflective of the strategic positioning of our businesses and continued excellent operational performance across our operations. We are again raising our guidance for 2021," said Stephen Nolan, Chief Financial Officer. "We recognize there are risks ahead in terms of supply chain constraints and inflationary pressures. However, the Company is very well positioned with excellent customer relationships, a strong and growing business base and in-demand advanced technologies that are expected to drive long-term business growth."

Outlook for Full-Year 2021

Albany International is updating its financial guidance for the full-year 2021:

  • Total company revenue between $900 and $920 million;

  • Effective income tax rate, including tax adjustments, between 28% and 30%;

  • Total company depreciation and amortization of approximately $75 million;

  • Capital expenditures in the range of $40 to $50 million;

  • GAAP earnings per share between $3.23 and $3.38 and Adjusted earnings per share between $3.15 and $3.30;

  • Total company Adjusted EBITDA between $230 to $240 million;

  • Machine Clothing revenue between $600 to $610 million;

  • Machine Clothing Adjusted EBITDA between $215 and $225 million;

  • Albany Engineered Composites (AEC) revenue between $300 to $310 million; and

  • Albany Engineered Composites Adjusted EBITDA between $65 to $70 million.

Share Repurchase Authorization

On October 25, 2021, the Company's Board of Directors authorized the Company to repurchase shares of up to $200 million through open market purchases, privately negotiated transactions or otherwise, and to determine the prices, times and amounts. The program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or terminated at any time at the Company's discretion. The share repurchase program does not have an expiration date. The timing and amount of any share repurchases will be based on the Company’s liquidity, general business and market conditions, debt covenant restrictions and other factors, including alternative investment opportunities and capital structure.

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Net sales

$

232,442

$

211,999

$

689,322

$

673,753

Cost of goods sold

140,400

124,697

407,006

393,999

Gross profit

92,042

87,302

282,316

279,754

Selling, general, and administrative expenses

37,696

39,518

116,899

118,167

Technical and research expenses

9,673

8,301

28,916

26,304

Restructuring expenses, net

187

710

230

4,189

Operating income

44,486

38,773

136,271

131,094

Interest expense, net

3,734

2,242

11,521

10,042

Aviation Manufacturing Jobs Protection (AMJP) grant

(5,832

)

(5,832

)

Other expense/(income), net

2,753

(2,745

)

4,215

13,915

Income before income taxes

43,831

39,276

126,367

107,137

Income tax expense

12,889

9,686

36,375

37,504

Net income

30,942

29,590

89,992

69,633

Net income/(loss) attributable to the noncontrolling interest

80

1

150

(1,419

)

Net income attributable to the Company

$

30,862

$

29,589

$

89,842

$

71,052

Earnings per share attributable to Company shareholders - Basic

$

0.95

$

0.92

$

2.78

$

2.20

Earnings per share attributable to Company shareholders - Diluted

$

0.95

$

0.91

$

2.77

$

2.20

Shares of the Company used in computing earnings per share:

Basic

32,381

32,337

32,369

32,326

Diluted

32,434

32,344

32,424

32,333

Dividends declared per share, Class A and Class B

$

0.20

$

0.19

$

0.60

$

0.57

ALBANY INTERNATIONAL CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

September 30, 2021

December 31, 2020

ASSETS

Cash and cash equivalents

$

286,217

$

241,316

Accounts receivable, net

199,124

188,423

Contract assets, net

115,924

139,289

Inventories

118,129

110,478

Income taxes prepaid and receivable

3,509

5,940

Prepaid expenses and other current assets

29,021

31,830

Total current assets

$

751,924

$

717,276

Property, plant and equipment, net

426,806

448,554

Intangibles, net

41,020

46,869

Goodwill

183,568

187,553

Deferred income taxes

30,538

38,757

Noncurrent receivables, net

33,471

36,265

Other assets

72,916

74,662

Total assets

$

1,540,243

$

1,549,936

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable

$

54,397

$

49,173

Accrued liabilities

112,481

125,459

Current maturities of long-term debt

9

Income taxes payable

14,623

16,222

Total current liabilities

181,501

190,863

Long-term debt

350,000

398,000

Other noncurrent liabilities

117,057

130,424

Deferred taxes and other liabilities

11,352

10,784

Total liabilities

659,910

730,071

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; 40,759,527 issued in 2021 and 39,115,405 in 2020

41

39

Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 1,154 in 2021 and 1,617,998 in 2020

2

Additional paid in capital

436,079

433,696

Retained earnings

841,162

770,746

Accumulated items of other comprehensive income:

Translation adjustments

(100,327

)

(83,203

)

Pension and postretirement liability adjustments

(39,059

)

(39,661

)

Derivative valuation adjustment

(5,525

)

(9,544

)

Treasury stock (Class A), at cost; 8,379,804 shares in 2021 and 8,391,011 in 2020

(255,768

)

(256,009

)

Total Company shareholders' equity

876,603

816,066

Noncontrolling interest

3,730

3,799

Total equity

880,333

819,865

Total liabilities and shareholders' equity

$

1,540,243

$

1,549,936

ALBANY INTERNATIONAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

OPERATING ACTIVITIES

Net income

$

30,942

$

29,590

$

89,992

$

69,633

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

Depreciation

15,925

16,285

48,485

47,289

Amortization

2,289

1,997

6,862

7,017

Change in deferred taxes and other liabilities

1,606

3,074

7,022

12,434

Impairment of property, plant and equipment

25

303

563

536

Non-cash interest expense

283

(309

)

593

(138

)

Compensation and benefits paid or payable in Class A Common Stock

606

80

2,232

596

Provision for credit losses from uncollected receivables and contract assets

(1,075

)

(105

)

(1,158

)

1,664

Foreign currency remeasurement loss/(gain) on intercompany loans

480

169

(551

)

15,750

Fair value adjustment on foreign currency options

29

(64

)

169

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

Accounts receivable

(10,927

)

(2,048

)

(14,292

)

6,069

Contract assets

(3,473

)

(7,923

)

22,170

(27,932

)

Inventories

546

4,585

(9,838

)

(20,043

)

Prepaid expenses and other current assets

3,949

(4,532

)

2,444

(6,989

)

Income taxes prepaid and receivable

2,717

(454

)

2,408

(662

)

Accounts payable

(296

)

(5,108

)

4,312

(15,491

)

Accrued liabilities

5,112

2,838

(12,311

)

(8,063

)

Income taxes payable

2,871

1,786

(1,085

)

3,741

Noncurrent receivables

1,245

(228

)

2,832

169

Other noncurrent liabilities

(1,319

)

111

(5,582

)

(413

)

Other, net

1,324

(388

)

3,232

(1,474

)

Net cash provided by operating activities

52,859

39,659

148,499

83,693

INVESTING ACTIVITIES

Purchases of property, plant and equipment

(8,918

)

(9,349

)

(31,754

)

(31,320

)

Purchased software

(106

)

(109

)

(394

)

(155

)

Net cash used in investing activities

(9,024

)

(9,458

)

(32,148

)

(31,475

)

FINANCING ACTIVITIES

Proceeds from borrowings

8,000

70,000

Principal payments on debt

(17,005

)

(56,009

)

(76,016

)

Principal payments on finance lease liabilities

(363

)

(335

)

(1,067

)

(6,798

)

Taxes paid in lieu of share issuance

(998

)

(490

)

Proceeds from options exercised

4

5

153

25

Dividends paid

(6,476

)

(6,144

)

(19,418

)

(18,424

)

Net cash used in financing activities

(6,835

)

(23,479

)

(69,339

)

(31,703

)

Effect of exchange rate changes on cash and cash equivalents

(4,113

)

4,545

(2,111

)

(751

)

Increase in cash and cash equivalents

32,887

11,267

44,901

19,764

Cash and cash equivalents at beginning of period

253,330

204,037

241,316

195,540

Cash and cash equivalents at end of period

$

286,217

$

215,304

$

286,217

$

215,304

Financial tables and reconciliation of non-GAAP measures to comparable GAAP measures

The following tables present Net sales and the effect of changes in currency translation rates:

(in thousands, except percentages)

Net sales as
reported, Q3 2021

Increase due to
changes in currency
translation rates

Q3 2021 sales
on same basis
as Q3 2020 currency
translation rates

Net sales as
reported, Q3 2020

% Change compared
to Q3 2020, excluding
currency rate effects

Machine Clothing

$

154,171

$

1,688

$

152,483

$

138,747

9.9

%

Albany Engineered Composites

78,271

90

78,181

73,252

6.7

%

Consolidated total

$

232,442

$

1,778

$

230,664

$

211,999

8.8

%

(in thousands, except percentages)

Net sales as
reported, YTD 2021

Increase due to
changes in currency
translation rates

YTD 2021 sales
on same basis
as 2020 currency
translation rates

Net sales as
reported, YTD 2020

% Change compared
to 2020, excluding
currency rate effects

Machine Clothing

$

462,298

$

11,829

$

450,469

$

428,782

5.1

%

Albany Engineered Composites

227,024

2,356

224,668

244,971

(8.3

)%

Consolidated total

$

689,322

$

14,185

$

675,137

$

673,753

0.2

%

The following tables present Gross profit and Gross profit margin:

(in thousands, except percentages)

Gross profit,
Q3 2021

Gross profit margin,
Q3 2021

Gross profit,
Q3 2020

Gross profit margin,
Q3 2020

Machine Clothing

$

79,437

51.5

%

$

71,471

51.5

%

Albany Engineered Composites

12,605

16.1

%

15,831

21.6

%

Consolidated total

$

92,042

39.6

%

$

87,302

41.2

%

(in thousands, except percentages)

Gross profit,
YTD 2021

Gross profit margin,
YTD 2021

Gross profit,
YTD 2020

Gross profit margin,
YTD 2020

Machine Clothing

$

240,427

52.0

%

$

227,734

53.1

%

Albany Engineered Composites

41,889

18.5

%

52,020

21.2

%

Consolidated total

$

282,316

41.0

%

$

279,754

41.5

%

A reconciliation from operating 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, 2021

(in thousands)

Machine Clothing

Albany Engineered

Composites

Corporate expenses

and other

Total Company

Operating income/(loss) (GAAP)

$

55,467

$

2,917

$

(13,898

)

$

44,486

Interest, taxes, other income/(expense)

(13,544

)

(13,544

)

Net income/(loss) (GAAP)

55,467

2,917

(27,442

)

30,942

Interest expense, net

3,734

3,734

Income tax expense

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

...

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