News Column

Albany International Reports First-Quarter Results

May 5, 2014

First-Quarter Financial Highlights

  • Net sales were $180.3 million, a decrease of 3.4 percent compared to Q1 2013.
  • Adjusted EBITDA for Q1 2014 was $37.8 million, compared to $33.8 million in Q1 2013 (see Tables 6 and 7).
  • Q1 2014 income attributable to the Company was $0.33 per share. These results were reduced by restructuring charges of $0.02 and income tax adjustments of $0.03, and were increased by foreign currency revaluation gains of $0.01 (see Table 8).
  • Q1 2013 income attributable to the Company was $0.37 per share. These results were reduced by restructuring charges of $0.01 and income tax adjustments of $0.01, and were increased by foreign currency revaluation gains of $0.01 and a gain on the sale of a former manufacturing facility of $0.06 (see Table 9).

    ROCHESTER, N.H.--(BUSINESS WIRE)-- Albany International Corp. (NYSE:AIN), a global advanced textiles and materials processing company with core businesses in machine clothing and engineered composites, reported Q1 2014 income attributable to the Company of $10.6 million. These results were reduced by restructuring charges of $1.2 million and income tax adjustments of $1.1 million, and were increased by foreign currency revaluation gains of $0.3 million.

    Q1 2013 income attributable to the Company was $11.5 million. These results were reduced by restructuring charges of $0.6 million and income tax adjustments of $0.2 million, and were increased by foreign currency revaluation gains of $0.7 million and a gain on the sale of a former manufacturing facility of $3.8 million.

    Table 1 summarizes net sales and the effect of changes in currency translation rates:

     

    Table 1

           

    Net Sales

    Three Months ended

    March 31,

       

    Percent

    Change

       

    Impact of

    Changes in

    Currency

    Translation

    Rates

       

    Percent Change

    excluding

    Currency

    Rate Effect

     

    (in thousands)

           

    2014

       

    2013

               
    Machine Clothing (MC)         $164,088     $167,409     -2.0%     $782     -2.5%
    Albany Engineered Composites (AEC)         16,219     19,245     -15.7%     -     -15.7%
    Total         $180,307     $186,654     -3.4%     $782     -3.8%
     



    In Q1 2014, AEC began LEAP production activities in its Rochester, New Hampshire, plant. This shift to larger scale production, together with a related change in invoicing terms, resulted in a build-up of inventory and an associated temporary lag in sales. The full-year outlook for AEC remains unchanged.

    Q1 2014 gross profit was $74.8 million, or 41.5 percent of net sales, compared to $72.8 million, or 39.0 percent of net sales, in the same period of 2013. MC gross profit margin improved from 44.2 percent in 2013 to 45.0 percent in 2014. AEC’s gross profit margin was 8.0 percent in Q1 2014, compared to a gross margin loss in Q1 2013.

    Selling, technical, general, and research (STG&R) expenses were $53.0 million, or 29.4 percent of net sales, in the first quarter of 2014, including losses of $0.2 million related to the revaluation of nonfunctional-currency assets and liabilities. In Q1 2013, STG&R expenses were $49.6 million, or 26.6 percent of net sales, including gains of $0.7 million related to the revaluation of nonfunctional-currency assets and liabilities, and a gain of $3.8 million related to the sale of a former manufacturing facility.

    In the first quarter of 2014, the Company began including in segment expenses all research (see Table 2) and long-term incentive compensation expenses directly attributable to the MC and AEC business segments. On April 10, 2014, the Company filed a Form 8-K to show the effect of this change on previously reported results. Accordingly, all prior period amounts presented in this earnings report and other published financial reports will reflect this change.

    The following table presents research and development expenses by segment:

     

    Table 2

    (in thousands)  

    Research and development

    expenses by segment

    Three Months ended

    March 31,

             

    2014

       

    2013

    Machine Clothing         $4,838     $4,386
    Albany Engineered Composites         2,318     1,940
    Corporate expenses         192     665
    Total         $7,348     $6,991
     



    The following table summarizes first-quarter operating income by segment:

     

    Table 3

            Operating Income/(loss)
    Three Months ended

     

    March 31,

    (in thousands)

           

    2014

       

    2013

    Machine Clothing         $36,142     $37,556
    Albany Engineered Composites         (3,475)     (4,403)
    Corporate expenses         (12,066)     (10,635)
    Total         $20,601     $22,518
     


    Segment operating income was affected by restructuring, currency revaluation, and a 2013 gain on the sale of a building as shown in Table 4 below. Restructuring expense in Q1 2014 was principally related to the ongoing costs associated with restructuring in France.

     

    Table 4

            Expenses/(gain) in Q1 2014     Expenses/(gain) in Q1 2013
    resulting from resulting from

     

    (in thousands)

           

    Restructuring

       

    Revaluation

       

    Restructuring

       

    Revaluation

       

    Building gain

    Machine Clothing         $862     $152     $193     ( $743)     $ -
    Albany Engineered Composites         320     38     443     -     -
    Corporate expenses         -     -     -     2     (3,763)
    Total         $1,182     $190     $636     ($741)     ($3,763)
     



    Q1 2014 Other income/expense, net, was income of $0.5 million, including gains related to the revaluation of nonfunctional-currency balances of $0.5 million. Q1 2013 Other income/expense, net, was expense of $0.7 million.

    The following table summarizes currency revaluation effects on certain financial metrics:

     

    Table 5

            Income/(loss) attributable
    to currency revaluation
    Three Months ended

     

    March 31,

    (in thousands)

           

    2014

     

    2013

    Operating income         ($190)   $741
    Other income/(expense), net         505   (9)
    Total         $315   $732
     


    The Company’s income tax rate, excluding tax adjustments, was 35.0 percent for Q1 2014, compared to 34.0 percent for the same period of 2013. Discrete tax charges increased income tax expense by $1.1 million in 2014 and $0.2 million in 2013.

    The following tables summarize Adjusted EBITDA:

     

    Table 6

    Three Months ended March 31, 2014

     

    (in thousands)

           

     

    Machine

    Clothing

       

    Albany

    Engineered

    Composites

       

    Corporate

    expenses

    and other

       

     

    Total

    Company

    Net income         $36,142     ($3,475)     ($21,974)     $10,693
    Interest expense, net         -     -     2,918     2,918
    Income tax expense         -     -     7,457     7,457
    Depreciation and amortization         11,455     2,322     2,131     15,908
    EBITDA         47,597     (1,153)     (9,468)     36,976
    Restructuring and other, net         862     320     -     1,182
    Foreign currency revaluation losses/(gains)         152     38     (505)     (315)

    Pretax income attributable to noncontrolling

    interest in ASC

            -     (59)     -     (59)
    Adjusted EBITDA         $48,611     ($854)     ($9,973)     $37,784
     
     

    Table 7

    Three Months ended March 31, 2013

     

    (in thousands)

           

     

    Machine

    Clothing

       

    Albany

    Engineered

    Composites

       

    Corporate

    expenses

    and other

       

     

    Total

    Company

    Net income         $37,556     ($4,403)     ($21,642)     $11,511
    Interest expense, net         -     -     4,025     4,025
    Income tax expense         -     -     6,248     6,248
    Depreciation and amortization         11,870     1,731     2,273     15,874
    EBITDA         49,426     (2,672)     (9,096)     37,658
    Restructuring and other, net         193     443     -     636
    Foreign currency revaluation (gains)/losses         (743)     -     11     (732)
    Gain on sale of former manufacturing facility         -     -     (3,763)     (3,763)
    Adjusted EBITDA         $48,876     ($2,229)     ($12,848)     $33,799
     


    Capital spending for equipment and software was $14.9 million for Q1 2014, including $6.0 million for the Albany Engineered Composites segment. Depreciation and amortization was $15.9 million for Q1 2014.

    CFO Comments

    CFO and Treasurer John Cozzolino commented, “Despite the improved EBITDA during the quarter, net debt increased about $12 million compared to the end of 2013, and was $94 million at the end of Q1 2014 (see Table 11). The Company’s leverage ratio this quarter, as defined in our primary debt agreements, was 1.75. Net debt increased primarily due to cash outflows for previously accrued incentive compensation and restructuring liabilities. Assuming no significant change in expected earnings, net debt should improve throughout the rest of the year. The Company continues to expect full-year capital expenditure spending of $65 to $75 million. Cash paid for income taxes was about $7 million during the quarter and is expected to total approximately $15 million this year.”

    CEO Comments

    President and Chief Executive Officer Joe Morone, said, “In Q1 2014, Machine Clothing rebounded and AEC continued to progress. Total Company Adjusted EBITDA improved by approximately 12 percent, both year-over-year and sequentially. The only notable anomaly in the Q1 results was a temporary decline in AEC sales. This was due to an expected timing effect, resulting from a shift of invoicing terms for the LEAP program. We expect a surge in the demand for LEAP parts later in the year for engine tests, and we continue to expect full-year revenue to be roughly 10 percent ahead of last year.

    “Both businesses performed well and in line with expectations. In MC, the all-important containerboard market rebounded and our North American MC business followed suit. In the rest of the world, sales and orders remained steady, as they have for the last five quarters. Performance with our key customers in each region of the world was especially strong. Gross margin rose to 45 percent, reflecting seasonally strong plant utilization coupled with the impact of last year’s European restructuring.

    “AEC continued to advance on all fronts. CFM has now won more than 6,000 orders for the LEAP engine, an unprecedented order volume for a new engine program, let alone one that is still more than two years away from entry into service. Our fan blades and fan cases are performing well in the LEAP engine test program, and both LEAP plants continue to make steady progress toward the production ramp-up. And in R&D, we continue to build momentum toward the development of new applications on both the engine and airframe.

    “Our outlook remains unchanged. For MC, we expect Q2 to be comparable to Q1. For the remainder of the year, the primary risk factor in MC, both upside and down, continues to be the health of the global economy. Because of seasonal effects, the second half of the year in MC tends to be weaker than the first; the severity of those seasonal effects hinges on macroeconomic conditions. For AEC, we expect sales in the next three quarters to be substantially stronger than Q1 sales, as we deliver parts for LEAP engine tests and as two Rolls-Royce programs in our Texas operation begin to transition from development to production. We still expect full-year AEC revenue to be roughly 10 percent higher than 2013 revenue.

    “In sum, both businesses performed well in Q1, and barring any macroeconomic disruptions, both are on track for strong full-year performance consistent with both our short- and long-term expectations.”

    The Company plans a webcast to discuss first-quarter 2014 financial results on Tuesday, May 6, 2014, at 9:00 a.m. Eastern Time. For access, go to www.albint.com.

    About Albany International Corp.

    Albany International is a global advanced textiles and materials processing company, with two core businesses. Machine Clothing is the world’s leading producer of custom-designed fabrics and belts essential to production in the paper, nonwovens, and other process industries. Albany Engineered Composites is a rapidly growing supplier of highly engineered composite parts for the aerospace industry. Albany International is headquartered in Rochester, New Hampshire, operates 20 plants in 11 countries, employs 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.

    This release contains certain items, such as earnings before interest, taxes, depreciation and amortization (EBITDA), Adjusted EBITDA, sales excluding currency effects, income tax rate exclusive of income tax adjustments, net debt, net income attributable to the Company, excluding adjustments (on an absolute and per-share basis), and certain income and expense items on a per-share basis that could be considered non-GAAP financial measures. Such items are provided because management believes that, when presented together with the GAAP items to which they relate, they provide additional useful information to investors regarding the Company’s operational performance. Presenting increases or decreases in sales, after currency effects are excluded, can give management and investors insight into underlying sales trends. An understanding of the impact in a particular quarter of specific restructuring costs, or other gains and losses, on operating income or EBITDA can give management and investors additional insight into quarterly performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect. All non-GAAP financial measures in this release relate to the Company’s continuing operations.

    The effect of changes in currency translation rates is calculated by converting amounts reported in local currencies into U.S. dollars at the exchange rate of a prior period. That amount is then compared to the U.S. dollar amount reported in the current period. The Company calculates Income tax adjustments by adding discrete tax items to the effect of a change in tax rate for the reporting period. The Company calculates its income tax rate, exclusive of income tax adjustments, by removing income tax adjustments from total Income tax expense, then dividing that result by Income before income taxes. The Company calculates EBITDA by removing the following from Net income: Interest expense net, Income tax expense, Depreciation and amortization, and Income or loss from Discontinued Operations. Adjusted EBITDA is calculated by adding to EBITDA, costs associated with restructuring and pension settlement charges, adding or subtracting revaluation losses or gains, subtracting building sale gains, and subtracting Income attributable to the noncontrolling interest in ASC. The Company believes that EBITDA and Adjusted EBITDA provide useful information to investors because they provide an indication of the strength and performance of the Company's ongoing business operations, including its ability to fund discretionary spending such as capital expenditures and strategic investments, as well as its ability to incur and service debt. While depreciation and amortization are operating costs under GAAP, they are non-cash expenses equal to current period allocation of costs associated with capital and other long-lived investments made in prior periods. While restructuring expenses, foreign currency revaluation losses or gains, pension settlement charges, and building sale gains have an impact on the Company's net income, removing them from EBITDA can provide, in the opinion of the Company, a better measure of operating performance. EBITDA is also a calculation commonly used by investors and analysts to evaluate and compare the periodic and future operating performance and value of companies. EBITDA, as defined by the Company, may not be similar to EBITDA measures of other companies. Such EBITDA measures may not be 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 per-share amount for items included in continuing operations by using the effective tax rate utilized for the most recent reporting period, the full-year tax rate for the comparable period of the prior year, and the weighted average number of shares outstanding for each period.

     

    Table 8

    Quarter ended March 31, 2014

    (in thousands, except per share amounts)        

    Pre-tax

    amounts

       

    Tax

    Effect

       

    After-tax

    Effect

       

    Shares

    Outstanding

       

    Per Share

    Effect

    Restructuring and other, net         $1,182     $414     $768     31,786     $0.02
    Foreign currency revaluation gains         315     110     205     31,786     0.01
    Net discrete income tax charge         -     1,104     1,104     31,786     0.03
     
     

    Table 9

    Quarter ended March 31, 2013

    (in thousands, except per share amounts)        

    Pre-tax

    amounts

       

    Tax

    Effect

       

    After-tax

    Effect

       

    Shares

    Outstanding

       

    Per Share

    Effect

    Restructuring and other, net         $636     $310     $326     31,496     $0.01
    Foreign currency revaluation gains         732     357     375     31,496     0.01
    Gain on sale of former manufacturing facility         3,763     1,836     1,927     31,496     0.06
    Net discrete income tax charge         -     210     210     31,496     0.01
     



    The following table contains the calculation of net income per share attributable to the Company, excluding adjustments:

     

    Table 10

     
            Three Months ended
    Per share amounts (Basic) March 31,
             

    2014

       

    2013

    Net income attributable to the Company, reported         $0.33     $0.37
    Adjustments:                
    Restructuring charges         $0.02     $0.01
    Income tax adjustments         $0.03     $0.01
    Foreign currency revaluation gains         ($0.01)     ($0.01)
    Gain on the sale of a former manufacturing facility         -     ($0.06)
    Net income attributable to the Company, excluding adjustments         $0.37     $0.32
     


    The following table contains the calculation of net debt:

     

    Table 11

    (in thousands)        

    March 31,

    2014

       

    December 31,

    2013

       

    December 31,

    2012

       

    December 31,

    2011

    Notes and loans payable         $797     $625     $586     $424
    Current maturities of long-term debt         2,514     3,764     83,276     1,263
    Long-term debt         299,108     300,111     235,877     373,125
    Total debt         302,419     304,500     319,739     374,812
    Cash         208,379     222,666     190,718     118,909
    Net debt         $94,040     $81,834     $129,021     $255,903
     


    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” and similar expressions identify forward-looking statements, which generally are not historical in nature. 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) that could cause actual results to differmaterially from the Company’s historical experience and our present expectations or projections.

    Forward-looking statements in this release or in the webcast include, without limitation, statements about economic and paper industry trends and conditions during 2014 and in future years; sales, EBITDA, Adjusted EBITDA and operating income expectations in 2014 and in future periods 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 AEC sales growth potential; 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 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.

     
    ALBANY INTERNATIONAL CORP.
    CONSOLIDATED STATEMENTS OF INCOME
    (in thousands, except per share data)
    (unaudited)
     
              Three Months Ended
    March 31,
     
    2014       2013
     
    Net sales $180,307$186,654
    Cost of goods sold 105,498 113,885
     
    Gross profit 74,809 72,769
    Selling, general, and administrative expenses 39,157 36,553
    Technical, product engineering, and research expenses 13,869 13,062
    Restructuring and other, net 1,182 636
     
    Operating income 20,601 22,518
    Interest expense, net 2,918 4,025
    Other (income)/expenses, net (467) 734
     
    Income before income taxes 18,150 17,759
    Income tax expense 7,457 6,248
     
    Income from continuing operations 10,693 11,511
     
    (Loss)/income from operations of discontinued business - -
    Gain/(loss) on sale of discontinued business - -
    Income tax (benefit)/expense on discontinued operations - -
    (Loss)/income from discontinued operations - -
    Net income 10,693 11,511
    Net Income attributable to the noncontrolling interest 72 -
    Net income attributable to the Company $10,621$11,511
     
    Earnings per share attributable to Company shareholders - Basic
    Income from continuing operations $0.33$0.37
    Discontinued operations 0.00 0.00
    Net income attributable to the Company $0.33$0.37
     
    Earnings per share attributable to Company shareholders - Diluted
    Income from continuing operations $0.33$0.36
    Discontinued operations 0.00 0.00
    Net income attributable to the Company $0.33$0.36
     
    Shares of the Company used in computing earnings per share:
    Basic 31,786 31,496
    Diluted 32,051 31,782
     
    Dividends per share $0.15$0.14
     


     
    ALBANY INTERNATIONAL CORP.
    CONSOLIDATED BALANCE SHEETS
    (in thousands, except share data)
    (unaudited)
     
            March 31,       December 31,
    2014 2013
    ASSETS
    Cash and cash equivalents $208,379$222,666
    Accounts receivable, net 152,373 163,547
    Inventories 121,410 112,739
    Deferred income taxes 13,864 13,873
    Prepaid expenses and other current assets 11,868 9,659
    Total current assets 507,894 522,484
     
    Property, plant and equipment, net 415,344 418,830
    Intangibles 559 616
    Goodwill 78,944 78,890
    Income taxes receivable and deferred 116,205 119,612
    Other assets 27,565 26,456
    Total assets $1,146,511$1,166,888
     
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Notes and loans payable $797$625
    Accounts payable 35,134 36,397
    Accrued liabilities 99,473 112,331
    Current maturities of long-term debt 2,514 3,764
    Income taxes payable and deferred 3,678 5,391
    Total current liabilities 141,596 158,508
     
    Long-term debt 299,108 300,111
    Other noncurrent liabilities 102,720 106,014
    Deferred taxes and other credits 53,707 54,476
    Total liabilities 597,131 619,109
     
    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
    37,049,339 in 2014 and 36,996,227 in 2013 37 37
    Class B Common Stock, par value $.001 per share;
    authorized 25,000,000 shares; issued and
    outstanding 3,236,098 in 2014 and 2013 3 3
    Additional paid in capital 417,434 416,728
    Retained earnings 440,446 434,598
    Accumulated items of other comprehensive income:
    Translation adjustments (5,737) (138)
    Pension and postretirement liability adjustments (47,881) (48,383)
    Derivative valuation adjustment (905) (977)
    Treasury stock (Class A), at cost 8,463,635 shares
    in 2014 and 2013 (257,571) (257,571)
    Total Company shareholders' equity 545,826 544,297
    Noncontrolling interest 3,554 3,482
    Total equity 549,380 547,779
    Total liabilities and shareholders' equity $1,146,511$1,166,888
     


     
    ALBANY INTERNATIONAL CORP.
    CONSOLIDATED STATEMENTS OF CASH FLOW
    (in thousands)
    (unaudited)
     
              Three Months Ended
    March 31,
     
    2014     2013
    OPERATING ACTIVITIES
    Net income $10,693$11,511
     
    Adjustments to reconcile net income to net cash provided by /(used in) operating activities:
    Depreciation 14,107 14,211
    Amortization 1,801 1,663
    Change in long-term liabilities, deferred taxes and other credits (214) 3,873
    Provision for write-off of property, plant and equipment 1 44
    (Gain) on disposition of assets - (3,763)
    Excess tax benefit of options exercised (39) (352)
    Compensation and benefits paid or payable in Class A Common Stock 542 (698)
     
    Changes in operating assets and liabilities, net of business divestitures:
    Accounts receivable 10,964 (1,723)
    Inventories (8,996) (2,988)
    Prepaid expenses and other current assets (2,148) (3,577)
    Income taxes prepaid and receivable 21 152
    Accounts payable (1,294) 547
    Accrued liabilities (12,849) (8,983)
    Income taxes payable (1,710) (5,318)
    Other, net (2,031) (438)
    Net cash provided by operating activities 8,848 4,161
     
    INVESTING ACTIVITIES
    Purchases of property, plant and equipment (14,603) (13,188)
    Purchased software (294) (93)
    Proceeds from sale of assets - 6,268
    Net cash (used in)/provided by investing activities (14,897) (7,013)
     
    FINANCING ACTIVITIES
    Proceeds from borrowings 4,435 46,868
    Principal payments on debt (6,516) (32,183)
    Proceeds from options exercised 126 1,964
    Excess tax benefit of options exercised 39 352
    Debt acquisition costs - (1,563)
    Dividends paid (4,765) -
    Net cash (used in)/provided by financing activities (6,681) 15,438
     
    Effect of exchange rate changes on cash and cash equivalents (1,557) (3,471)
     
    (Decrease)/increase in cash and cash equivalents (14,287) 9,115
    Cash and cash equivalents at beginning of period 222,666 190,718
    Cash and cash equivalents at end of period $208,379$199,833
     





    Albany International Corp.

    Investors

    John Cozzolino, 518-445-2281

    john.cozzolino@albint.com

    or

    Media

    Susan Siegel, 603-330-5866

    susan.siegel@albint.com


    Source: Albany International Corp.


  • For more stories on investments and markets, please see HispanicBusiness' Finance Channel



    Source: Business Wire