ROCHESTER, N.H.–(BUSINESS WIRE)–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.