Albany International(US:AIN)2021-04-26 16:00Part I Financial Information Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Q1 2021, showing net sales of $222.4 million and net income of $27.6 million Consolidated Statements of Income (Q1 2021 vs Q1 2020) | Financial Metric | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Net sales | $222.4 | $235.8 | | Gross profit | $88.5 | $89.5 | | Operating income | $41.8 | $39.6 | | Net income attributable to the Company | $27.6 | $9.1 | | Diluted Earnings per share | $0.85 | $0.28 | Consolidated Balance Sheets (As of March 31, 2021) | Balance Sheet Item | March 31, 2021 (in millions) | December 31, 2020 (in millions) | | :--- | :--- | :--- | | Total current assets | $704.4 | $717.3 | | Total assets | $1,512.2 | $1,549.9 | | Total current liabilities | $167.0 | $190.9 | | Total liabilities | $686.0 | $730.1 | | Total equity | $826.2 | $819.9 | Consolidated Statements of Cash Flows (Q1 2021 vs Q1 2020) | Cash Flow Activity | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $33.7 | ($6.6) | | Net cash used in investing activities | ($12.5) | ($12.8) | | Net cash (used in)/provided by financing activities | ($21.7) | $54.2 | | (Decrease)/increase in cash and cash equivalents | ($3.4) | $27.1 | Notes to Consolidated Financial Statements Detailed notes explain accounting policies, segment performance, minimal restructuring, and ongoing asbestos litigation with sufficient insurance coverage Segment Performance (Q1 2021 vs Q1 2020) | Segment | Net Sales (Q1 2021, in millions) | Net Sales (Q1 2020, in millions) | Operating Income (Q1 2021, in millions) | Operating Income (Q1 2020, in millions) | | :--- | :--- | :--- | :--- | :--- | | Machine Clothing | $148.2 | $136.6 | $50.4 | $47.2 | | Albany Engineered Composites | $74.2 | $99.2 | $2.9 | $7.6 | - Restructuring costs were minimal in Q1 2021 at $0.05 million, compared to $0.64 million in Q1 2020. The 2020 charges were principally related to the discontinued operations at the MC production facility in Sélestat, France3536 - The company is a defendant in asbestos-related lawsuits, with 3,617 claims pending as of March 31, 2021. The total cost to resolve all claims to date is $10.4 million, almost 100% of which was paid by its insurance carrier. The company has approximately $140 million of remaining insurance coverage for current and future claims7071 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 performance, noting a 5.7% sales decrease, increased operating income, improved liquidity, and better non-GAAP measures - The Machine Clothing (MC) segment is the company's core business and primary cash generator, while the Albany Engineered Composites (AEC) segment offers significant long-term growth potential, particularly in aerospace applications7981 Net Sales Change by Segment (Q1 2021 vs Q1 2020) | Segment | As Reported % Change | % Change (Excluding Currency Effects) | | :--- | :--- | :--- | | Machine Clothing | +8.5% | +4.9% | | Albany Engineered Composites | -25.2% | -26.4% | | Total | -5.7% | -8.2% | Non-GAAP Performance Measures (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Adjusted EBITDA | $60.7 | $59.1 | | Adjusted EPS | $0.87 | $0.78 | Consolidated Results of Operations Q1 2021 consolidated net sales decreased 5.7% to $222.4 million, with improved gross profit margin and lower STG&R expenses, leading to higher net income - Excluding currency effects, net sales decreased 8.2% YoY. MC sales grew 4.9% due to demand for packaging grades, while AEC sales fell 26.4% due to declines in the LEAP and Boeing 787 programs86 - STG&R expenses decreased from $49.2 million to $46.7 million, largely because Q1 2020 included termination costs for the former CEO9192 - The effective tax rate for Q1 2021 was 26.7%, a sharp decrease from 62.1% in Q1 2020. The prior year's rate was significantly impacted by a non-deductible foreign exchange loss on an intercompany loan101103 Segment Results of Operations MC segment sales grew 8.5% to $148.2 million, while AEC segment sales declined 25.2% to $74.2 million due to aerospace program impacts Machine Clothing Segment Performance (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Net sales | $148.2 | $136.6 | | Gross profit | $76.4 | $72.7 | | Operating income | $50.4 | $47.2 | Albany Engineered Composites Segment Performance (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Net sales | $74.2 | $99.2 | | Gross profit | $12.2 | $16.8 | | Operating income | $2.9 | $7.6 | Liquidity and Capital Resources The company's financial position is solid, with operating cash flow improving to $33.7 million and $316 million available on its credit facility - Net cash provided by operating activities was $33.7 million in Q1 2021, a significant improvement from the $6.6 million used in Q1 2020116117 - As of March 31, 2021, the company had $237.9 million in cash and cash equivalents, with $209.0 million held by foreign subsidiaries117 Net Debt Calculation | (in millions) | March 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total debt | $384.0 | $398.0 | | Cash and cash equivalents | $237.9 | $241.3 | | Net debt (non-GAAP) | $146.1 | $156.7 | Item 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to an exhibit for detailed discussion of the company's exposure to market risks, including interest rate and foreign currency fluctuations - The company's discussion of its exposure to market risk is included as an exhibit to the Form 10-Q130 Item 4. Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures are effective for timely and accurate reporting131 - No material changes to the company's internal control over financial reporting were identified during the first quarter of 2021131 Part II Other Information Item 1. Legal Proceedings This item incorporates by reference Note 16 of the financial statements, detailing the company's ongoing asbestos-related litigation - Information regarding legal proceedings, primarily asbestos litigation, is detailed in Note 16 of the Consolidated Financial Statements133 Item 1A. Risk Factors No material changes to risk factors have occurred since the company's Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes in risk factors since the company's 2020 Annual Report on Form 10-K134 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No share repurchases occurred in Q1 2021, with an authorization to purchase up to 2 million shares of Class A Common Stock remaining - No share repurchases were made during the first quarter of 2021. The company remains authorized to purchase up to 2 million shares of its Class A Common Stock135 Other Items (Defaults, Mine Safety, Other Info, Exhibits) This section confirms no defaults on senior securities, no mine safety disclosures, and no other material information, along with a list of exhibits - The company reported no defaults upon senior securities, no mine safety disclosures, and no other material information for the period135