Albany International(US:AIN)2021-10-27 00:56Financial Data and Key Metrics Changes - The company reported GAAP EPS of $0.95 and adjusted EPS of $0.83 on revenue of $232 million, an increase of nearly 10% from Q3 last year [6][7] - Total company net sales were $203.4 million, a 9.6% increase compared to $212 million in the same quarter last year, with an 8.8% increase when adjusted for currency translation effects [15] - Gross profit for the company was $92 million, an increase of over 5% from the comparable period last year, but overall gross margin decreased by 160 basis points from 41.2% to 39.5% of net sales [18][19] Business Line Data and Key Metrics Changes - Machine Clothing segment grew sales by 11% compared to Q3 last year, with net sales up 9.9% year-over-year after adjusting for currency translation effects [7][15] - Engineered Composites delivered top-line growth of nearly 7%, primarily driven by growth on LEAP and CH-53K programs, with net sales growing by 6.7% after adjusting for currency translation effects [7][16] - AEC segment's gross margin declined from 21.6% to 16.1% of net sales due to a change in program mix and lower fixed cost absorption [19][20] Market Data and Key Metrics Changes - Demand in Machine Clothing's end markets has been resilient, particularly strong in packaging in the Americas, while tissue markets have shown mixed results [11] - International travel bookings are showing positive signs as borders reopen, although no near-term pickup in wide-body production demand is expected [8][9] - The company noted significant logistics challenges and price inflation on various raw materials and wages, with expectations that inflationary pressures will continue [12][30] Company Strategy and Development Direction - The company is focused on organic growth investments and acquisitions that fit its strategy to build on technology leadership and market positions [13][14] - A $200 million share repurchase program has been authorized to return capital to shareholders while maintaining a focus on value creation [14][27] - The company is optimistic about long-term secular trends in its markets, leveraging its global footprint and product development capabilities [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the gradual recovery of commercial aerospace, particularly in narrow-body aircraft demand [8][9] - Concerns were raised about the slow recovery of the Boeing 787 program and the impact of inflationary pressures on future margins [22][30] - The company is raising its revenue guidance for the Machine Clothing segment to between $600 million and $610 million, reflecting strong demand [29][35] Other Important Information - The company has a healthy balance sheet with low debt and strong free cash flow generation of over $40 million in the quarter [7][25] - The effective income tax rate for the quarter was 29.4%, higher than the previous year's 24.7% due to a higher share of global profits in jurisdictions with higher tax rates [22][23] Q&A Session Summary Question: Can you help us think through the revenue and cash recognition related to the MAX destock? - Management clarified that contract assets include more than just LEAP-1B, and the growth in contract assets is driven by other programs like F-35 and CH-53K [39][41] Question: How do you see the EBITDA guidance range for the rest of the year? - Management indicated they are trending towards the upper end of the guidance range but are cautious as it is early in the quarter [42][43] Question: What are the mechanisms in place to pass through cost increases in Engineered Composites? - Management explained that cost-plus contracts with SAFRAN allow for the pass-through of cost increases, while fixed-price contracts have limited protection [48][50] Question: Are there any inventory destocking challenges with the F-35 program? - Management stated they do not foresee significant destocking challenges but are managing revenue pressure and production levels [56][58] Question: Can you quantify the destocking for the 787 and F-35 programs? - Management provided estimates of destocking impacts, indicating a significant reduction in 787 revenue and a smaller reduction for F-35 [72][73]