Albany International Corp. (NYSE:AIN) Q3 2020 Earnings Conference Call October 29, 2020 9:00 AM ET Company Participants John Hobbs - Director of Investor Relations Bill Higgins - President & Chief Executive Officer Stephen Nolan - Chief Financial Officer & Treasurer Conference Call Participants Peter Arment - R.W. Baird Caitlin Dullanty - Bank of America John Franzreb - Sidoti Patrick Baumann - JPMorgan Operator Ladies and gentlemen, thank you for standing by and welcome to the Albany International Third Q ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Class A Common Stock, $0.001 par value per share AIN The New York Stock Exchange (NYSE) Class B Common Stock, $0.001 par value per share AIN The New York Stock Exchange (NYSE) Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT T ...

Albany International Corp. (NYSE:AIN) Q2 2020 Earnings Conference Call July 30, 2020 9:00 AM ET Company Participants John Hobbs – Director, Investor Relations Bill Higgins - President & Chief Executive Officer Stephen Nolan - Chief Financial Officer Conference Call Participants Caitlin Dullanty - Bank of America Dan Flick - Cowen John Franzreb - Sidoti & Company Operator Ladies and gentlemen, thank you everybody for holding and welcome to the Albany International Conference Call -- Second Quarter Conference ...

Part I - Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for H1 2020 show decreased net sales and income, primarily due to the Albany Engineered Composites segment, with stable assets and reduced operating cash flow, following CECL adoption [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20statements%20of%20income) For the six months ended June 30, 2020, net sales decreased to **$461.8 million** from **$525.3 million** in 2019, with net income falling to **$41.5 million** from **$63.2 million**, resulting in diluted EPS of **$1.28** Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | Change (%) | | :--- | :--- | :--- | :--- | | **Net sales** | $461,754 | $525,321 | -12.1% | | **Gross profit** | $192,452 | $196,953 | -2.3% | | **Operating income** | $92,321 | $94,318 | -2.1% | | **Net income attributable to the Company** | $41,463 | $63,244 | -34.4% | | **Diluted EPS** | $1.28 | $1.96 | -34.7% | - Dividends declared per share increased to **$0.38** for the first six months of 2020, compared to **$0.36** for the same period in 2019[6](index=6&type=chunk) [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20balance%20sheets) As of June 30, 2020, total assets were **$1.46 billion**, a slight decrease from **$1.47 billion** at year-end 2019, with cash increasing to **$204.0 million** and total liabilities decreasing to **$755.8 million** Balance Sheet Summary (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | $650,480 | $618,334 | | **Total assets** | $1,461,960 | $1,474,368 | | **Total current liabilities** | $177,202 | $202,719 | | **Total liabilities** | $755,802 | $771,679 | | **Total equity** | $706,158 | $702,689 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20statements%20of%20cash%20flows) For H1 2020, net cash provided by operating activities was **$44.0 million**, a significant decrease from **$83.1 million** in 2019, with net cash used in investing activities at **$22.0 million** Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $44,034 | $83,096 | | **Net cash used in investing activities** | ($22,017) | ($35,453) | | **Net cash used in financing activities** | ($8,224) | ($30,106) | | **Increase in cash and cash equivalents** | $8,497 | $17,478 | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20consolidated%20financial%20statements) Notes detail accounting policies, CECL adoption, segment performance, CirComp acquisition, restructuring, and contingencies, with AEC revenue impacted by the LEAP program - Effective January 1, 2020, the company adopted ASC 326 (CECL), which resulted in a pre-tax increase in credit loss reserves of **$1.8 million** and a **$1.4 million** reduction in Retained Earnings[18](index=18&type=chunk) - The company is a defendant in **3,693** asbestos-related claims as of June 30, 2020. Management believes its insurance coverage of approximately **$140 million** is sufficient for current and future claims and does not anticipate a material adverse effect[73](index=73&type=chunk)[74](index=74&type=chunk) - On November 20, 2019, the Company acquired CirComp GmbH for **$32.4 million**, which is now part of the AEC segment[28](index=28&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **12.1%** decline in H1 2020 consolidated net sales, primarily from AEC due to LEAP program impacts, with MC stable, improved gross margins, and sufficient liquidity [Business Environment Overview and Trends](index=32&type=section&id=Business%20Environment%20Overview%20and%20Trends) MC is a stable cash generator, while AEC faces significant headwinds from the Boeing 737 MAX grounding and COVID-19, severely impacting LEAP engine demand - The Machine Clothing (MC) segment is the company's core business and primary cash generator, with industry demand stabilized by packaging and tissue grades[82](index=82&type=chunk) - The Albany Engineered Composites (AEC) segment's growth is challenged by the Boeing 737 MAX grounding and reduced air travel, impacting the LEAP engine program. Management expects full-year LEAP revenue to be **less than half of 2019 levels**[83](index=83&type=chunk) [Consolidated Results of Operations](index=34&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated net sales for H1 2020 fell **12.1%** to **$461.8 million**, primarily due to AEC, though gross profit margin improved to **41.7%**, with a **$14.9 million** foreign currency revaluation loss impacting pre-tax income Net Sales by Segment - Six Months Ended June 30 (in thousands) | Segment | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Machine Clothing | $290,035 | $299,349 | (3.1)% | | Albany Engineered Composites | $171,719 | $225,972 | (24.0)% | | **Consolidated total** | **$461,754** | **$525,321** | **(12.1)%** | - Consolidated gross profit as a percentage of sales increased to **41.7%** in H1 2020 from **37.5%** in H1 2019[90](index=90&type=chunk) - For the first six months of 2020, the company recorded a **$14.9 million** loss from the revaluation of nonfunctional currency balances, primarily due to a weaker Mexican peso affecting an intercompany loan[104](index=104&type=chunk) [Segment Results of Operations](index=38&type=section&id=Segment%20Results%20of%20Operations) MC segment's H1 2020 operating income increased to **$103.7 million** with a **53.9%** gross margin, while AEC operating income dropped to **$15.9 million** due to decreased LEAP program sales Machine Clothing Segment Performance - Six Months Ended June 30 (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net sales | $290,035 | $299,349 | | Gross profit | $156,264 | $154,815 | | Operating income | $103,718 | $93,781 | Albany Engineered Composites Segment Performance - Six Months Ended June 30 (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net sales | $171,719 | $225,972 | | Gross profit | $36,188 | $42,138 | | Operating income | $15,922 | $27,254 | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is sourced from operations and a **$685 million** revolving credit facility, with cash from operations decreasing to **$44.0 million** in H1 2020 due to lower AEC profitability, and reduced capital expenditures - Cash flow from operating activities decreased to **$44.0 million** in H1 2020 from **$83.1 million** in H1 2019, mainly due to lower profitability in the AEC LEAP program[130](index=130&type=chunk)[131](index=131&type=chunk) - As of June 30, 2020, the company had **$435 million** of borrowings outstanding under its **$685 million** revolving credit facility, with an additional **$250 million** available to borrow[136](index=136&type=chunk) - Capital expenditures for the first six months of 2020 were **$22.0 million**, down from **$35.5 million** in the same period of 2019[135](index=135&type=chunk) [Non-GAAP Measures](index=43&type=section&id=Non-GAAP%20Measures) The company provides non-GAAP measures like Adjusted EBITDA and Adjusted EPS for core operational insight, with Q2 2020 Adjusted EBITDA at **$73.7 million** and Adjusted EPS at **$1.09**, and net debt at **$231.0 million** Adjusted EBITDA Reconciliation (in thousands) | Period | Adjusted EBITDA (non-GAAP) | | :--- | :--- | | **Three months ended June 30, 2020** | $73,670 | | **Three months ended June 30, 2019** | $72,417 | | **Six months ended June 30, 2020** | $132,805 | | **Six months ended June 30, 2019** | $130,037 | Adjusted Earnings Per Share Reconciliation | Period | EPS (GAAP) | Adjusted EPS (non-GAAP) | | :--- | :--- | :--- | | **Three months ended June 30, 2020** | $1.00 | $1.09 | | **Three months ended June 30, 2019** | $1.05 | $1.09 | | **Six months ended June 30, 2020** | $1.28 | $1.87 | | **Six months ended June 30, 2019** | $1.96 | $1.97 | [Quantitative and Qualitative Disclosures about Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's disclosures regarding its exposure to market risk, such as interest rate and foreign currency fluctuations, are provided as an exhibit to the Form 10-Q - The discussion of the company's exposure to market risk is included as an exhibit to the Form 10-Q[153](index=153&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting, and ongoing CirComp acquisition integration - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective[154](index=154&type=chunk) - No material changes were made to the internal control over financial reporting during the last fiscal quarter. The integration of internal controls for the CirComp acquisition is ongoing and expected to be completed in 2020[155](index=155&type=chunk) Part II - Other Information [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 17 of the financial statements for information on legal proceedings, which primarily details ongoing asbestos-related litigation - Information regarding legal proceedings is incorporated by reference from Note 17 of the financial statements, which discusses asbestos litigation[156](index=156&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) The company highlights the significant negative impacts of the COVID-19 pandemic as a key risk, including demand declines, severe aerospace disruption, supply chain issues, and increased credit risk - The COVID-19 pandemic is a major risk, causing demand declines for MC products (especially publication paper grades) and significantly impacting the AEC segment due to the downturn in commercial air travel[157](index=157&type=chunk)[158](index=158&type=chunk) - Other pandemic-related risks include supply chain disruptions, adverse foreign currency fluctuations, increased credit risk, and the potential for significant impairment charges on noncurrent assets like goodwill[158](index=158&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company made no purchases of its Class A Common Stock during Q2 2020, with an existing authorization to purchase up to **2 million** shares - No share purchases were made in Q2 2020. An authorization to purchase up to **2 million** shares of Class A Common Stock remains in effect[159](index=159&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications, disclosures about market risks, and XBRL data files - Exhibits filed include CEO/CFO certifications (**31.2, 32.1**), quantitative and qualitative disclosures about market risks (**99.1**), and various XBRL documents (**101 series**)[160](index=160&type=chunk)

Albany International Corp. (NYSE:AIN) Q1 2020 Earnings Conference Call April 30, 2020 9:00 AM ET Company Participants John Hobbs - Director of IR William Higgins - President and CEO Stephen Nolan - CFO and Treasurer Conference Call Participants Peter Arment - Baird Caitlin Dullanty - Bank of America Gautam Khanna - Cowen Pete Skibitski - Alembic Global Patrick Baumann - JPMorgan Operator Ladies and gentlemen, thank you for standing by, and welcome to the Albany International First Quarter 2020 Earnings Call ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 1-10026 ALBANY INTERNATIONAL CORP. (Exact name of registrant as specified in its charter) Delaware 14-0462060 (State or ...

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Albany International Corp. operates through two primary segments: Machine Clothing (MC), supplying consumable belts, and Albany Engineered Composites (AEC), providing advanced composite structures for aerospace - The company operates in two business segments: Machine Clothing (MC) and Albany Engineered Composites (AEC)[8](index=8&type=chunk) - The MC segment is the world's largest manufacturer of paper machine clothing, with approximately twice the sales of its nearest competitor[8](index=8&type=chunk) - The AEC segment's largest customer is the SAFRAN Group, with sales for the LEAP engine program accounting for about **22% of the company's consolidated net sales in 2019**[8](index=8&type=chunk) Net Sales by Segment (2017-2019, in thousands) | Segment | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Machine Clothing | $601,254 | $611,858 | $590,357 | | Albany Engineered Composites | $452,878 | $370,621 | $273,360 | | **Consolidated Total** | **$1,054,132** | **$982,479** | **$863,717** | [International Operations](index=5&type=section&id=International%20Operations) The company maintains a significant global manufacturing presence, exposing it to various international trade and financial risks - The Machine Clothing segment has manufacturing facilities in Brazil, Canada, China, France, Italy, Mexico, South Korea, Sweden, the UK, and the US[10](index=10&type=chunk) - The AEC segment has manufacturing facilities in the US, France, Mexico, and Germany[10](index=10&type=chunk) [Working Capital, Customers, Seasonality, and Backlog](index=6&type=section&id=Working%20Capital%2C%20Customers%2C%20Seasonality%2C%20and%20Backlog) Working capital is influenced by competitive payment terms, while AEC backlog decreased in 2019 due to the Boeing 737 MAX grounding Segment Backlog (as of Dec 31, in millions) | Segment | 2019 | 2018 | | :--- | :--- | :--- | | Machine Clothing (MC) | $165.6 | $170.5 | | Albany Engineered Composites (AEC) | $288.1 | $393.3 | - The decrease in AEC's backlog reflects the impact of the Boeing 737 MAX grounding[11](index=11&type=chunk) - Approximately **95% of AEC backlog** and all of MC backlog is expected to be invoiced within the next 12 months[11](index=11&type=chunk) [Research and Development and Technology](index=6&type=section&id=Research%20and%20Development%20and%20Technology) The company invests in R&D to maintain technological leadership, utilizing proprietary technologies and protecting intellectual property Company-Funded Research Expenses (in millions) | Year | Amount | | :--- | :--- | | 2019 | $26.9 | | 2018 | $29.8 | | 2017 | $30.7 | - The company's active intellectual property portfolio contains over **2,400 patents**, with approximately **250 new patents granted each year**[15](index=15&type=chunk) [Competition](index=7&type=section&id=Competition) The company holds an estimated 30% global market share in MC, competing on technology and price, while AEC competes on performance and price - The company estimates its worldwide market share in paper machine clothing was approximately **30% in 2019**[17](index=17&type=chunk) - The two largest competitors in the MC segment each have a market share approximately half of Albany's[17](index=17&type=chunk) - In the AEC market, the primary competitive factors are product performance and price, with a key focus on achieving lower weight to improve fuel efficiency[19](index=19&type=chunk) [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse material risks, including industry pressures, program delays, supply chain disruptions, and legal proceedings [Industry and Market Risks](index=10&type=section&id=Industry%20and%20Market%20Risks) The company is exposed to risks from paper industry consolidation and declining demand for certain paper grades, impacting the MC segment - Consolidation in the paper industry and the decline in demand for newsprint and printing paper due to digital media negatively impact the MC segment[25](index=25&type=chunk) - The grounding of the Boeing 737 MAX aircraft poses a risk to the AEC segment, as it could lead to decreased demand for LEAP engines and the company's components for them[25](index=25&type=chunk) [AEC Segment-Specific Risks](index=10&type=section&id=AEC%20Segment-Specific%20Risks) The AEC segment faces significant execution risks on new programs, financial risks from long-term contracts, and reliance on MC for funding - AEC faces execution risk related to the ramp-up of key programs, including components for the F-35, Boeing 787, and CH-53K helicopter[25](index=25&type=chunk) - Long-term, fixed-price contracts pose risks related to inaccurate cost estimates, which can reduce profitability or lead to losses. A charge of **$15.8 million** was recorded in Q2 2017 due to revised profitability estimates on the BR725 and A380 programs[28](index=28&type=chunk) - AEC's growth is dependent on the MC segment's ability to generate cash to fund necessary investments in equipment and development[27](index=27&type=chunk) [Customer and Supplier Risks](index=13&type=section&id=Customer%20and%20Supplier%20Risks) The company faces significant customer concentration, particularly with Safran for AEC, and supply constraints due to limited raw material suppliers - One customer, Safran, accounted for about **50% of AEC's Net sales in 2019**, creating significant customer concentration risk[34](index=34&type=chunk) - The top ten customers in the MC segment accounted for a significant portion of its Net sales in 2019[34](index=34&type=chunk) - There are a limited number of suppliers for key raw materials in both segments, such as polymer fiber for MC and carbon fiber/resin for AEC, creating potential for supply disruptions[35](index=35&type=chunk) [Operational and Financial Risks](index=14&type=section&id=Operational%20and%20Financial%20Risks) Operational risks include business interruptions and cybersecurity threats, while financial risks stem from currency fluctuations, inflation, and debt obligations - Production of key AEC programs like LEAP, F-35, and Boeing 787 components is concentrated in a few facilities, increasing risk from natural disasters[38](index=38&type=chunk) - As of December 31, 2019, the company had **$424 million in outstanding long-term debt**, with a leverage ratio of **1.35 to 1**[43](index=43&type=chunk) - As of December 31, 2019, net liabilities under defined benefit pension plans were **$15.5 million**, and the liability for unfunded postretirement welfare benefits was **$54.4 million**[44](index=44&type=chunk) [Corporate and Shareholder Risks](index=18&type=section&id=Corporate%20and%20Shareholder%20Risks) The Standish Family's significant voting power influences company affairs, and future dividend payments are not guaranteed - The Standish Family holds shares entitling them to approximately **34.5% of the combined stockholder votes**, giving them considerable influence over management and corporate transactions[51](index=51&type=chunk) - The company may not pay cash dividends in the future, and the ability to do so depends on financial position, results of operations, and other factors determined by the board[52](index=52&type=chunk) [Item 2. Properties](index=20&type=section&id=Item%202.%20Properties) The company operates approximately 5.6 million square feet of manufacturing facilities globally, with adequate capacity for anticipated 2020 production - The company's operating facilities total approximately **2.0 million square feet in the U.S.** and **3.6 million square feet internationally**[55](index=55&type=chunk) - The majority of the company's facility space, both in the U.S. and internationally, is owned rather than leased[55](index=55&type=chunk) Part II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=21&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A Common Stock trades on the NYSE, with a 5-year cumulative total return outperforming benchmarks, and an unused 2 million share repurchase authorization Quarterly Cash Dividends and Class A Stock Prices (2019) | Quarter Ended | Cash Dividends per Share | High Price | Low Price | | :--- | :--- | :--- | :--- | | March 31 | $0.18 | $78.45 | $60.82 | | June 30 | $0.18 | $82.91 | $69.29 | | September 30 | $0.18 | $91.51 | $78.41 | | December 31 | $0.19 | $90.30 | $75.92 | - The company's 5-year cumulative total return of **214.02%** outperformed the Russell 2000 (**148.49%**) and a custom peer group (**185.25%**)[60](index=60&type=chunk)[62](index=62&type=chunk) - A board authorization from August 2006 to purchase up to **2 million shares** of Class A Common Stock remains active, with no shares purchased under it to date[63](index=63&type=chunk) [Item 6. Selected Financial Data](index=23&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides a five-year summary of key financial data, including net sales, operating income, net income, EPS, total assets, and long-term debt Selected Financial Data (2015-2019, in thousands) | Metric | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $1,054,132 | $982,479 | $863,717 | $779,839 | $709,868 | | **Operating income** | $193,576 | $137,408 | $78,676 | $94,132 | $67,128 | | **Net income attributable to the Company** | $132,398 | $82,891 | $33,111 | $52,733 | $57,279 | | **Diluted EPS** | $4.10 | $2.57 | $1.03 | $1.64 | $1.79 | | **Total assets** | $1,474,368 | $1,417,992 | $1,361,198 | $1,263,433 | $1,009,562 | | **Long-term debt** | $424,009 | $523,707 | $514,120 | $432,918 | $265,080 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting MC as a cash generator and AEC as a growth driver, with consolidated net sales up 7.3% in 2019 and strong operating cash flow [Business Environment Overview and Trends](index=24&type=section&id=Business%20Environment%20Overview%20and%20Trends) The MC segment serves as a stable cash generator, while the AEC segment drives growth through high-value aerospace applications like the CFM LEAP engine - The MC segment is the company's long-established core business and primary cash generator, focusing on growth in packaging and tissue grades to offset declines in publication grades[74](index=74&type=chunk) - The AEC segment provides significant growth potential, with its largest program being the supply of fan blades and cases for CFM's LEAP engine[74](index=74&type=chunk) [Consolidated Results of Operations](index=25&type=section&id=Consolidated%20Results%20of%20Operations) Consolidated net sales increased 7.3% in 2019, driven by AEC growth, leading to improved gross profit and operating income, with a 25.2% effective tax rate Consolidated Net Sales (2018 vs. 2019, in thousands) | Metric | 2019 | 2018 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $1,054,132 | $982,479 | 7.3% | - Excluding currency effects, 2019 consolidated net sales increased **8.8%**, with AEC sales growing **23.4%** while MC sales were flat[77](index=77&type=chunk) Consolidated Gross Profit (2018 vs. 2019, in thousands) | Metric | 2019 | 2018 | % of Net Sales (2019) | % of Net Sales (2018) | | :--- | :--- | :--- | :--- | :--- | | **Gross Profit** | $397,701 | $349,749 | 37.7% | 35.6% | Consolidated Operating Income (2018 vs. 2019, in thousands) | Metric | 2019 | 2018 | | :--- | :--- | | **Operating Income** | $193,576 | $137,408 | [Segment Results of Operations](index=30&type=section&id=Segment%20Results%20of%20Operations) MC operating income increased due to lower costs, while AEC operating income surged from sales growth and favorable contract adjustments Machine Clothing (MC) Segment Performance (in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net sales | $601,254 | $611,858 | | Gross profit | $309,641 | $297,416 | | Operating income | $191,965 | $169,836 | Albany Engineered Composites (AEC) Segment Performance (in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net sales | $452,878 | $370,621 | | Gross profit | $88,060 | $52,550 | | Operating income/(loss) | $55,520 | $16,647 | - AEC operating income in 2019 was favorably impacted by a net **$10.8 million** adjustment to the estimated profitability of long-term contracts, compared to a negative adjustment of **$2.0 million** in 2018[129](index=129&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company demonstrated strong liquidity in 2019, with operating cash flow increasing to $200.4 million, enabling debt reduction and maintaining significant credit availability Cash Flow Summary (in thousands) | Activity | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $200,352 | $132,485 | $64,216 | | Net cash used in investing activities | ($98,748) | ($82,886) | ($87,637) | | Net cash (used in)/provided by financing activities | ($100,307) | ($27,258) | $12,867 | - Capital expenditures totaled **$68.0 million in 2019**, down from **$82.9 million in 2018**[137](index=137&type=chunk) - As of Dec 31, 2019, the company had **$424 million in borrowings outstanding** under its **$685 million credit facility** and was in compliance with all debt covenants[138](index=138&type=chunk) [Non-GAAP Measures](index=39&type=section&id=Non-GAAP%20Measures) The company provides non-GAAP metrics like Adjusted EBITDA and Adjusted EPS to offer additional insight into core operational performance, showing improvements in 2019 Adjusted EBITDA Reconciliation (Consolidated, in thousands) | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Net income (GAAP)** | $133,383 | $83,019 | $32,585 | | Interest, taxes, depr. & amort. | $132,545 | $129,388 | $111,170 | | **EBITDA (non-GAAP)** | $265,928 | $212,407 | $143,755 | | Restructuring, revaluation, & other adjustments | ($494) | $16,526 | $25,619 | | **Adjusted EBITDA (non-GAAP)** | **$265,434** | **$228,933** | **$169,374** | Adjusted EPS Reconciliation | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Earnings per share (GAAP)** | $4.10 | $2.57 | $1.03 | | Adjustments, after tax | $0.01 | $0.37 | $0.50 | | **Adjusted earnings per share (non-GAAP)** | **$4.11** | **$2.94** | **$1.53** | Net Debt Calculation (in thousands) | As of December 31, | 2019 | 2018 | | :--- | :--- | :--- | | Total debt | $424,029 | $524,931 | | Less: Cash and cash equivalents | $195,540 | $197,755 | | **Net debt** | **$228,489** | **$327,176** | [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from foreign currency and interest rates, which it manages using financial instruments - The company is subject to foreign currency risk on approximately **$570.2 million of net assets** in non-U.S. operations. A hypothetical **10% adverse change** in exchange rates could cause a **$57.0 million loss** in fair value[162](index=162&type=chunk) - The company has **$74.0 million in variable rate debt**. A **one percentage point increase** in interest rates would increase annual interest expense by **$0.7 million**[163](index=163&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=44&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2017-2019 and the independent auditor's unqualified report [Report of Independent Registered Public Accounting Firm](index=44&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting, identifying critical audit matters related to revenue recognition - The independent auditor, KPMG LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting[166](index=166&type=chunk)[171](index=171&type=chunk) - Critical audit matters included evaluating cost estimates for AEC's long-term contracts and the timing of revenue recognition for the MC segment's point-in-time sales[170](index=170&type=chunk) [Consolidated Financial Statements](index=49&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show 2019 net sales of $1.054 billion, net income of $132.4 million, diluted EPS of $4.10, and total assets of $1.474 billion Key Financial Statement Highlights (Year Ended Dec 31, 2019, in thousands) | Metric | Amount | | :--- | :--- | | Net Sales | $1,054,132 | | Gross Profit | $397,701 | | Operating Income | $193,576 | | Net Income Attributable to Company | $132,398 | | **Balance Sheet (as of Dec 31, 2019)** | | | Total Assets | $1,474,368 | | Total Liabilities | $771,679 | | Total Equity | $702,689 | [Notes to Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail critical accounting policies, segment data, pension liabilities, and legal contingencies, including the 2019 acquisition of CirComp GmbH - The company adopted ASC 606 (Revenue) in 2018 and ASC 842 (Leases) in 2019, with both adoptions impacting the financial statements[183](index=183&type=chunk)[196](index=196&type=chunk) - On November 20, 2019, the company acquired CirComp GmbH for **$32.4 million**, adding **$17.3 million in goodwill** and **$10.0 million in amortizable intangible assets**[271](index=271&type=chunk)[310](index=310&type=chunk) - The company is a defendant in **3,708 asbestos-related claims** as of December 31, 2019. It anticipates that the ultimate resolution will not have a material adverse effect due to meritorious defenses and approximately **$140 million of remaining insurance coverage**[294](index=294&type=chunk)[295](index=295&type=chunk) [Item 9A. Controls and Procedures](index=107&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, having remediated prior material weaknesses - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[319](index=319&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2019, based on the COSO 2013 framework[322](index=322&type=chunk) - Material weaknesses identified in 2018 related to controls over certain point-in-time revenue transactions were successfully remediated as of December 31, 2019[323](index=323&type=chunk)[324](index=324&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=110&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section incorporates information from the 2020 Proxy Statement, noting the appointment of A. William Higgins as President and CEO on January 20, 2020 - On January 20, 2020, A. William Higgins was appointed President and Chief Executive Officer, succeeding Olivier M. Jarrault[328](index=328&type=chunk) - Information regarding directors, the audit committee financial expert, and the code of ethics is incorporated by reference from the 2020 Proxy Statement[327](index=327&type=chunk)[328](index=328&type=chunk) [Item 11. Executive Compensation](index=110&type=section&id=Item%2011.%20Executive%20Compensation) All information regarding executive and director compensation is incorporated by reference from the company's 2020 Proxy Statement - Detailed information on executive and director compensation is incorporated by reference from the 2020 Proxy Statement[329](index=329&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=111&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference, with a table detailing equity compensation plans and securities available for future issuance Equity Compensation Plan Information (as of Dec 31, 2019) | Plan Category | Securities to be Issued Upon Exercise (a) | Weighted Avg. Exercise Price (b) | Securities Remaining for Future Issuance (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 11,950 | $18.93 | 1,115,472 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **11,950** | **$18.93** | **1,115,472** | [Item 13. Certain Relationships, Related Transactions and Director Independence](index=112&type=section&id=Item%2013.%20Certain%20Relationships%2C%20Related%20Transactions%20and%20Director%20Independence) All information concerning related party transactions and director independence is incorporated by reference from the 2020 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2020 Proxy Statement[333](index=333&type=chunk) [Item 14. Principal Accountant Fees and Services](index=112&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) All information regarding principal accountant fees and services is incorporated by reference from the 2020 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2020 Proxy Statement[334](index=334&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=113&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including corporate documents, compensation plans, and required certifications - Lists key corporate documents such as the Certificate of Incorporation, Bylaws, and the **$685 Million Five-Year Revolving Credit Facility Agreement**[335](index=335&type=chunk) - Includes various executive compensation and incentive plan documents, such as the 2011 and 2017 Incentive Plans, severance agreements, and employment agreements for key executives[335](index=335&type=chunk)[336](index=336&type=chunk) - Contains required filings such as CEO/CFO certifications (Rules 13a-14(a) and 13a-14(b)), consent of the independent registered public accounting firm, and a list of company subsidiaries[336](index=336&type=chunk)

Albany International Corp. (NYSE:AIN) Q4 2019 Results Conference Call February 11, 2020 9:00 AM ET Company Participants John Hobbs - Director of Investor Relations William Higgins - President and Chief Executive Officer Stephen Nolan - Chief Financial Officer and Treasurer Conference Call Participants John Franzreb - Sidoti & Company Kristine Liwag - Bank of America Merrill Lynch Pete Skibitski - Alembic Global Advisors Peter Arment - Robert W. Baird Gautam Khanna - Cowen & Company Operator Ladies and gentl ...

Financial Data and Key Metrics - Total company net sales increased by 8% YoY, or 9% excluding currency translation effects [6] - Operating income grew by over 36% YoY, and adjusted EBITDA increased by almost 14% [6] - Gross profit for the company was $104.1 million, up 12.7% YoY, with gross margin increasing by 170 basis points to 38.4% [16] - Net income attributable to the company was $40.0 million, up 44.2% YoY, with EPS at $1.24 compared to $0.86 last year [19] - Adjusted EBITDA grew 13.9% YoY to $71.4 million [20] Business Line Performance Engineered Composites (AEC) - Net sales grew by 27% YoY, or 28% excluding currency effects [11] - Adjusted EBITDA margin for AEC was 23.9%, well ahead of expectations [12] - AEC benefited from a favorable net change in the estimated profitability of long-term contracts, contributing $3.3 million in incremental profits [21][22] - Production of LEAP components is running ahead of deliveries, contributing to overperformance in 2019 [7][8] Machine Clothing (MC) - Net sales declined by 2.6% YoY on a currency-neutral basis, driven by declines in publication and pulp grades, partially offset by growth in packaging and tissue grades [14][16] - Gross margin improved to 52.4% from 50% YoY, driven by reduced depreciation, favorable mix, and material savings [14][16] - MC adjusted EBITDA was $55.8 million, or 36.9% of net sales, down slightly from $57.8 million last year [20] Market Performance - North America saw mid-single-digit revenue growth in MC, while Europe and Asia Pacific experienced declines [10] - Softness in the pulp and paper market is expected to impact MC revenues in North America in future periods [10][29] Strategic Direction and Industry Competition - The company is focused on operational excellence, new business development, and advanced technology to drive future success in AEC [13] - In MC, the company maintains a competitive advantage through scale, continuous improvement initiatives, and superior customer service [15] - The company is closely monitoring the Boeing 737 MAX situation, which could create top-line pressure for AEC if the slowdown extends into 2020 [13][28] Management Commentary on Operating Environment and Future Outlook - The company expects full-year 2019 revenue of $1.04 billion to $1.06 billion, with adjusted EBITDA of $250 million to $260 million [27] - For 2020, the company anticipates headwinds, including potential softness in MC revenues due to economic slowdowns and the impact of the Boeing 737 MAX situation [28][29] - The company remains optimistic about long-term growth opportunities, particularly in AEC [31] Other Important Information - Total debt decreased by $58 million to $424 million, with a leverage ratio of 1.42 under the credit agreement [23] - Capital expenditures in Q3 were $14 million, with investments focused on supporting AEC ramp-ups [23] Q&A Session Summary Question: LEAP-1B Accounting and Inventory Build - The company is recognizing revenue and profit on LEAP components produced but not yet delivered, leading to a build in contract assets rather than inventory [32][34] - Inventory build is limited to a few weeks and is managed in coordination with Safran [32][33] Question: Cost-Plus Incentive Fee Contract Structure for LEAP - The cost-plus fee structure mitigates financial downside, with fixed costs recoverable and gross profit rates remaining stable [41][42] - Incentive fees can increase gross profit rates as production costs decrease [42] Question: Boeing 787 Production Rate Cut - The company does not expect a major impact from the Boeing 787 production rate cut, as the program represents a small portion of total revenue [46] Question: F-35 Program and Capex - The company has sufficient capacity to meet F-35 production demands without significant additional capex [48] Question: Machine Clothing Margins and Market Softness - MC margins improved due to favorable mix, material savings, and productivity gains, but the company remains cautious about potential softness in North America [52][53] - The company expects continued erosion in publication grade PMC sales, offset by growth in packaging and tissue grades [54] Question: Long-Term Contract Revisions - The $3.3 million favorable revision in Q3 was driven by strong operational performance and spans multiple programs [61][63] Question: LEAP Production Rates - LEAP production rates are driven by Safran's demand, with production running ahead of deliveries but expected to decrease in Q4 [65][66] Question: M&A Pipeline - The company is exploring inorganic growth opportunities but is cautious about valuations, targeting double-digit IRR and strong synergies [70][72]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 1-10026 ALBANY INTERNATIONAL CORP. (Exact name of registrant as specified in its charter) Delaware 14-0462060 (State or ...