Albany International Reports Fourth-Quarter 2023 Results

Albany International Corp. (NYSE:AIN) today reported operating results for its full year and fourth quarter of 2023, which ended December 31, 2023.

"In 2023, our business remained focused on operational execution and delivered outstanding financial performance," said Gunnar Kleveland, President and Chief Executive Officer. "I am pleased to report record revenues of $1.15 billion in 2023, up 11% from last year. GAAP EPS grew in the mid-teens, and Adjusted EPS of $4.06, was up 4.9% from last year. Importantly the company delivered 2023 free cash flow of $64 million, up significantly from the $32 million generated in 2022.

"Fourth quarter results were particularly strong with outstanding contributions from both of our business segments," continued Kleveland. "Our first full quarter of Heimbach integration is complete, and we are on track to deliver on the promise of that acquisition. Meanwhile, our core Machine Clothing operations grew fourth quarter revenue and expanded profit margins despite soft business conditions in Europe. The Engineered Composites segment continues to grow. We have completed another year of growth on our commercial programs, and recent program wins were also important drivers of year-over-year revenue and profit growth in the business. We are well positioned for another strong year in 2024."

For the fourth-quarter ended December 31, 2023:

• Net revenues were $323.6 million, up 20.4%, or 19.6% after adjusting for currency translation, when compared to the prior year, primarily driven by Heimbach's contribution during the fourth quarter and growth in the Engineered Composites segment.
• Gross profit of $119.9 million was 23.5% higher than the $97.1 million reported for the same period of 2022, mainly due to higher net revenues from the Machine Clothing segment due to the addition of Heimbach and higher net revenues from new programs and commercial programs in the Engineered Composites segment.
• Selling, General, and Administrative expenses were $67.7 million, compared to $49.4 million in the same period of 2022. The increase was due to the addition of Heimbach.
• Operating income was $41.8 million, compared to $37.9 million in the prior year, an increase of 10.2%.
• The effective tax rate for the quarter was 22.6% compared to a 42.0% effective tax rate in the fourth quarter of 2022. Favorable discrete tax items in 2023 vs. unfavorable discrete tax items in 2022 and a shift in taxable income to lower-rate jurisdictions resulted in a lower effective tax rate for the fourth quarter of 2023.
• Net income attributable to the Company was $30.5 million ($0.97 per share), compared to $18.1 million ($0.58 per share) in the fourth quarter of 2022. Adjusted Diluted earnings per share (or Adjusted EPS, a non-GAAP measure) was $1.22 per share, compared to $0.75 per share for the same period of last year.
• Adjusted EBITDA (a non-GAAP measure) was $75.0 million, compared to $58.4 million in the fourth quarter of 2022, an increase of 28.5%.

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

"We are on sound financial footing as we enter 2024," said Robert Starr, Chief Financial Officer. "Our businesses continue to deliver outstanding execution that will help sustain solid results and generate healthy cash flow this year. We will continue to invest thoughtfully to drive long-term growth."

Outlook for the Full-Year 2024

Albany International's initial financial guidance for the full-year 2024:

• Total company revenue between $1.26 and $1.33 billion;
• Effective income tax rate between 29% and 31%;
• Capital expenditures in the range of $90 to $95 million;
• Diluted earnings per share between $3.55 and $4.05.
  
  This includes:
  • Higher pension expense due to the expiration of the prior service cost benefit (approximately $0.09 per share);
  • Higher Depreciation and Amortization due to the recording of Heimbach-acquired assets at fair value (approximately $0.08 per share); and
  • Higher interest expense resulting from the termination of interest rate swaps in the fourth quarter of 2024 (approximately $0.06 per share, assuming the current interest rate environment).
• Total company Adjusted EBITDA between $260 to $290 million;
• Machine Clothing revenue between $760 to $790 million;
• Machine Clothing Adjusted EBITDA between $230 and $250 million;
• Albany Engineered Composites (AEC) revenue between $500 to $540 million; and
• Albany Engineered Composites Adjusted EBITDA between $97 to $107 million.

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

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

The following tables present Gross profit and Gross profit margin:

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:

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

The following table provides a reconciliation of Earnings per share to Adjusted Diluted Earnings per share:

The calculations of net debt are as follows:

The calculation of net leverage ratio as of December 31, 2023 is as follows:

The tables below provide a reconciliation of initial outlook for the full-year 2024 Adjusted EBITDA and Adjusted EPS (non-GAAP measures) to the comparable GAAP measures:

About Albany International Corp.

Albany International is a leading developer and manufacturer of engineered components, using advanced materials processing and automation capabilities, with two core businesses.

• Machine Clothing is the world’s leading producer of custom-designed, consumable belts essential for the manufacture of paper, paperboard, tissue and towel, pulp, non-wovens and a variety of other industrial applications.
• Albany Engineered Composites is a growing designer and manufacturer of advanced materials-based engineered components for demanding aerospace applications, supporting both commercial and military platforms.

Albany International is headquartered in Rochester, New Hampshire, operates 32 facilities in 14 countries, employs approximately 5,600 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 Diluted 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 diluted 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.

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