CORRECTING and REPLACING Albany International Reports Fourth-Quarter Results

Fourth-quarter Highlights

Net sales were $226.7 million, an increase of 6.4% compared to 2016 (see Table 1).
Net income attributable to the Company was $5.9 million ($0.18 per share), including a net charge of $5.1 million ($0.16 per share) for income tax adjustments resulting primarily from changes in U.S. tax laws. Q4 2016 Net income attributable to the Company was $15.8 million ($0.49 per share), including a net benefit of $2.5 million ($0.08 per share) from income tax adjustments.
Net income attributable to the Company, excluding adjustments (a non-GAAP measure), was $0.44 per share, compared to $0.36 per share in Q4 2016 (see Table 18).
Adjusted EBITDA (a non-GAAP measure) was $43.4 million, compared to $38.3 million in Q4 2016 (see Tables 8 and 9). Q4 2016 Adjusted EBITDA included a charge of $2.5 million related to the theft of cash in Japan.
On February 5, the Company issued a press release announcing that Olivier Jarrault has been named President and Chief Executive Officer to succeed Joseph G. Morone, effective March 2.

On February 5, 2018 Albany International issued a news release reporting fourth-quarter 2017 financial results. Subsequently, the Company determined that fourth-quarter 2017 income tax expense was $10.0 million, rather than the $12.1 million initially reported. This correction also resulted in changes to the originally reported Q4 and full-year 2017 income tax rate, discrete tax expense, and net income attributable to the Company (as reported and excluding adjustments). The correction had no effect on fourth-quarter or full-year 2017 Adjusted EBITDA.

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The corrected release reads:

ALBANY INTERNATIONAL REPORTS FOURTH-QUARTER RESULTS

Fourth-quarter Highlights

Net sales were $226.7 million, an increase of 6.4% compared to 2016 (see Table 1).
Net income attributable to the Company was $5.9 million ($0.18 per share), including a net charge of $5.1 million ($0.16 per share) for income tax adjustments resulting primarily from changes in U.S. tax laws. Q4 2016 Net income attributable to the Company was $15.8 million ($0.49 per share), including a net benefit of $2.5 million ($0.08 per share) from income tax adjustments.
Net income attributable to the Company, excluding adjustments (a non-GAAP measure), was $0.44 per share, compared to $0.36 per share in Q4 2016 (see Table 18).
Adjusted EBITDA (a non-GAAP measure) was $43.4 million, compared to $38.3 million in Q4 2016 (see Tables 8 and 9). Q4 2016 Adjusted EBITDA included a charge of $2.5 million related to the theft of cash in Japan.
On February 5, the Company issued a press release announcing that Olivier Jarrault has been named President and Chief Executive Officer to succeed Joseph G. Morone, effective March 2.

Albany International Corp. (NYSE:AIN) reported that Q4 2017 Net income attributable to the Company was $5.9 million, including a net charge of $5.1 million for income tax adjustments, principally due to the U.S. tax reform enacted in December 2017. Q4 2016 Net income attributable to the Company was $15.8 million, including a net benefit of $2.5 million from income tax adjustments.

Q4 2017 Income before income taxes was $15.1 million, including $3.3 million of restructuring charges and $1.8 million of losses from foreign currency revaluation. Q4 2016 Income before income taxes was $20.8 million, including restructuring charges of $0.7 million and gains of $3.2 million from foreign currency revaluation. Q4 2016 Income before income taxes also included a charge of $2.5 million related to a theft of cash in Japan.

Table 1 summarizes net sales and the effect of changes in currency translation rates:

Table 1

Net SalesThree Months endedDecember 31,

Percent

Impact ofChangesin Currency

PercentChangeexcludingCurrency

(in thousands, excluding percentages)

2017

2016

Change

Translation Rates

Rate Effect

Machine Clothing (MC) $150,263 $144,744 3.8 % $4,382 0.8 % Albany Engineered Composites (AEC) 76,465 68,302 12.0 937 10.6 Total $226,728 $213,046 6.4 % $5,319 3.9 %

In Machine Clothing, continuing declines in the publication grades were more than offset by growth in other grades. The increase in AEC Net sales was primarily due to growth in the 787 fuselage frames, F-35 airframe and CH-53K programs.

Table 2 summarizes Gross profit by segment:

Table 2

Three Months endedDecember 31, 2017

Three Months endedDecember 31, 2016

(in thousands, excluding percentages)

Gross profit

Percent of sales

Gross profit

Percent of sales

Machine Clothing $67,602 45.0 % $67,775 46.8 % Albany Engineered Composites 10,003 13.1 9,792 14.3 Corporate Expenses (219 ) - (235 ) - Total $77,386 34.1 % $77,332 36.3 %

Fourth-quarter MC gross profit as a percentage of sales decreased due to stronger than normal year-end negative effects on capacity utilization. For the full year, MC gross profit as a percentage of sales remained steady at 47.5% in both 2016 and 2017. The decrease in AEC gross profit as a percentage of sales reflects ramp-up inefficiencies which were partially offset by a favorable net adjustment to the estimated profitability of long-term contracts.

Table 3 summarizes selling, technical, general and research (STG&R) expenses by segment:

Table 3

Three Months endedDecember 31, 2017

Three Months endedDecember 31, 2016

(in thousands, excluding percentages)

STG&R Expense

Percent of sales

STG&R Expense

Percent of sales

Machine Clothing $30,601 20.4 % $27,679 19.1 % Albany Engineered Composites 8,564 11.2 10,546 15.4 Corporate Expenses 12,386 - 11,554 - Total $51,551 22.7 % $49,779 23.4 %

Gains from the revaluation of nonfunctional-currency assets and liabilities decreased total fourth-quarter STG&R expenses by $0.5 million in 2017 and $2.0 million in 2016. The increase in MC STG&R expenses was primarily due to lower revaluation gains and higher research and development expenses. The decrease in AEC STG&R expenses was due primarily to lower-than-average spending in research and development activities during Q4 2017, and acquisition accounting adjustments that increased STG&R expenses by $0.7 million in Q4 2016.

Table 4 summarizes fourth-quarter expenses associated with internally funded research and development by segment:

Table 4

Research and developmentexpenses by segmentThree Months endedDecember 31,

(in thousands)

2017

2016

Machine Clothing $5,210

$4,188

Albany Engineered Composites 2,506 3,672 Total $7,716 $7,860

Table 5 summarizes fourth-quarter operating income by segment:

Table 5

Operating Income/(loss)Three Months endedDecember 31,

(in thousands)

2017

2016

Machine Clothing $34,584

$39,946

Albany Engineered Composites 585 (1,280 ) Corporate expenses (12,605 ) (11,836 ) Total $22,564 $26,830

Table 6 presents the effect on operating income from restructuring and currency revaluation:

Table 6

Expenses/(gain) in Q4 2017resulting from

Expenses/(gain) in Q4 2016resulting from

(in thousands)

Restructuring

Revaluation

Restructuring

Revaluation

Machine Clothing $2,417 $(524 ) $150

$(2,050

)

Albany Engineered Composites 854 44 526 11 Corporate expenses - 2 47 - Total $3,271 $(478 ) $723 $(2,039 )

Restructuring charges in Q4 2017 were principally related to previously-announced restructuring actions in Europe. Due to the ongoing nature of discussions with the local works council associated with the announced proposal for the restructuring of Machine Clothing operations in France, the Company has not recorded a provision for potential severance and other costs that could be incurred if the restructuring proposal is approved.

Q4 2017 Other income/expense, net, was expense of $3.4 million, including losses related to the revaluation of nonfunctional-currency balances of $2.3 million. Q4 2016 Other income/expense, net, was expense of $2.1 million, including income related to the revaluation of nonfunctional-currency balances of $1.2 million and a charge of $2.5 million related to the theft of cash from the Company’s subsidiary in Japan.

Table 7 summarizes currency revaluation effects on certain financial metrics:

Table 7

Income/(loss) attributableto currency revaluationThree Months ended December 31,

(in thousands)

2017

2016

Operating income $478

$2,039

Other income/(expense), net (2,323 ) 1,170 Total $(1,845 ) $3,209

The Company’s income tax rate based on income from continuing operations was 32.0% for Q4 2017, compared to 35.3% for Q4 2016. Discrete tax items and the effect of a change in the estimated income tax rate increased income tax expense by $5.1 million in Q4 2017, principally due to a charge to reflect the Company’s estimate of the impact of U.S. tax law changes. Discrete tax items and the effect of a change in the estimated income tax rate decreased income tax expense by $2.5 million in Q4 2016.

Tables 8 and 9 provide a reconciliation of operating income and net income to EBITDA and Adjusted EBITDA:

Table 8

Three Months ended December 31, 2017(in thousands)

MachineClothing

AlbanyEngineeredComposites

Corporateexpensesand other

TotalCompany

Operating income/(loss) (GAAP) $34,584 $585 $(12,605 ) $22,564 Interest, taxes, other income/expense - -

(17,406

)

(17,406

) Net income (GAAP) 34,584 585

(30,011

)

5,158

Interest expense, net - - 4,049 4,049 Income tax expense - -

9,985

Depreciation and amortization 8,429 8,920 1,351 18,700 EBITDA (non-GAAP) 43,013 9,505 (14,626 ) 37,892 Restructuring expenses, net 2,417 854 - 3,271 Foreign currency revaluation (gains)/losses (524 ) 44 2,325 1,845 Adjustment to write-off of inventory in a discontinued product line - (355 ) - (355 ) Pretax loss attributable to non-controlling interest in ASC - 746 - 746 Adjusted EBITDA (non-GAAP) $44,906 $10,794 $(12,301 ) $43,399

Table 9

Three Months ended December 31, 2016(in thousands)

MachineClothing

AlbanyEngineeredComposites

Corporateexpensesand other

TotalCompany

Operating income/(loss) (GAAP) $39,946 $(1,280 ) $(11,836 ) $26,830 Interest, taxes, other income/expense - - (10,844 ) (10,844 ) Net income (GAAP) 39,946 (1,280 ) (22,680 ) 15,986 Interest expense, net - - 3,854 3,854 Income tax expense - - 4,841 4,841 Depreciation and amortization 8,583 6,433 1,221 16,237 EBITDA (non-GAAP) 48,529 5,153 (12,764 ) 40,918 Restructuring expenses, net 150 526 47 723 Foreign currency revaluation (gains)/losses (2,050 ) 11 (1,170 ) (3,209 ) Pretax (income) attributable to non-controlling interest in ASC - (160 ) - (160 ) Adjusted EBITDA (non-GAAP) $46,629 $5,530 $(13,887 ) $38,272

Payments for capital expenditures were $22.9 million in Q4 2017, compared to $22.2 million in Q4 2016. Depreciation and amortization was $18.7 million in Q4 2017, compared to $16.2 million in Q4 2016.

CFO Comments

CFO and Treasurer John Cozzolino commented, “During the fourth quarter, the Company amended and extended its revolving credit facility with its existing group of banks. The facility was increased from $550 million to $685 million, the maturity date extended to November 2022, and the leverage ratio limit increased to 3.75 through June 2019 (after which the limit moves back to 3.50). The remaining terms of the new facility are essentially the same as the previous facility. Additionally, during the quarter the Company utilized its credit facility to pay down the remaining $50 million due on the 6.84% notes with Prudential. At the end of the year, borrowings under the new credit facility were $501 million.

“The Company replaced its existing interest rate swaps with new swap agreements during the quarter. The previous swaps, which fixed LIBOR on $300 million of debt at 1.245%, were terminated with the Company receiving about $6 million of proceeds. The new swaps fix LIBOR on $350 million of debt at 2.11% through October 2022. At year end, the effective interest rate for borrowings under the revolving credit facility was 3.40%.

“Cash flow in the fourth quarter was strong due to good operating performance and management of working capital. Cash balances increased about $30 million to a total of $184 million, while total debt increased about $11 million to $516 million as of the end of the year. The combined effect of those two changes resulted in a $20 million decrease in net debt (total debt less cash, see Table 20) to a balance of $332 million as of the end of the year. The Company’s leverage ratio, as defined in our revolving credit facility, was 2.62 at the end of the year, well below our limit of 3.75.

”Payments for capital expenditures in Q4 were about $23 million, bringing the total for the year to approximately $85 million. As several key AEC programs continue to ramp, we continue to expect total Company capital expenditures in 2018 to be in the range of $20 million to $25 million per quarter.

“New tax legislation in the U.S. had a significant mostly non-cash impact on discrete tax expense in Q4. Tax expense of $6 million was recorded to reflect the impact of the mandatory deemed repatriation of offshore earnings, while $1 million was recorded as the result of the revaluation of U.S. net deferred tax assets using the new lower rate of 21%. These charges are based on the Company’s current estimates. The final impact of the new tax legislation may differ materially due to factors such as further refinement of the Company’s calculations, changes in interpretations and assumptions that the Company has made, additional guidance that may be issued by the U.S. Government, and actions the Company may take, among other items. The Company plans to continue its repatriation program and expects that over the long run the new tax legislation will have a beneficial impact on the program.

“The Company’s income tax rate, based on income from continuing operations, decreased to 32% in 2017, compared to 35% in 2016. Cash paid for income taxes was about $3 million in Q4, bringing the full-year total to $24 million. Based on the Company’s current estimate of the mix of earnings in the countries where we do business and including the impact of the lower tax rate in the U.S., we estimate the 2018 tax rate on income from continuing operations to be in the range of 27% to 31%. Cash taxes in 2018 are expected to be in the range of $22 million to $24 million.

“Effective January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, utilizing the cumulative effect method for transitioning to the new standard. As a result, in 2018 the Company will report results under the new standard, and will also provide disclosure of results calculated under the former standard. Although the Company is still finalizing the implementation of this new standard, it is clear that it will have an impact on both businesses.

“For MC, a large portion of revenue will continue to be recognized upon delivery to customers. Revenue associated with certain contracts, however, will be accelerated in situations where the Company satisfies its performance obligation in advance of delivery. Additionally, the Company expects to allocate a small portion of revenue to services to reflect certain situations in which support services are provided to customers. While these changes could increase volatility in quarterly sales, total 2018 MC net sales should not be significantly impacted by this new standard.

“In AEC, the impact of the new standard will vary based on the terms of each customer contract. For most long-term contracts, we expect to record revenue based on costs incurred as compared to units of delivery, which we have used for several of our programs. For contracts previously utilizing the units of delivery method, this change should result in the acceleration of revenue. Additionally, profitability of many long-term contracts will be estimated based on shorter time periods than those used under the former standard. We expect that this change will result in lower reported earnings during the early years of a program, with higher reported earnings once a program is ramped up. Overall for 2018, we do not expect this new standard to have a significant impact on AEC net sales, however due to the effects on the accounting for certain new or existing early-stage programs, 2018 reported earnings could be somewhat lower than they would have been under the former standard.”

CEO Comments

CEO Joseph Morone said, “Q4 2017 was another good quarter for Albany International. Although charges associated with the new tax law contributed to a sharp drop in net income, both businesses performed well in Q4, resulting in solid growth in total Company sales and Adjusted EBITDA, and strong cash flow. MC and AEC both reached the high-end of their projected outlooks for full-year 2017, and expect continued strong performance in 2018.

“Q4 sales in MC were once again stable compared to Q4 2016, as market trends of the previous eight quarters persisted. A roughly 10% decline in publication grades sales was offset by stable or incrementally growing sales in other grades. Publication grade sales declined to approximately 23% of total sales compared to 25% in Q4 2016. Prices were stable, although pricing pressure remained intense, particularly in Asia. New product performance was once again strong across the board, and we are greatly encouraged by advances in the new technology platform across multiple segments and product lines. The only anomaly in the quarter was a drop in gross margin due to higher than normal end-of-year underutilization of capacity. We expect gross margin to bounce back in 2018 to the full-year average of the past two years.

“For the full-year 2017, sales excluding currency, gross margin, operating income and Adjusted EBITDA were virtually identical to 2016, with gross margin at 47.5% and Adjusted EBITDA again at the high end of our expected range of $180 million to $195 million.

“After a decade of steady year-over-year sales declines due to the collapse of the publication grades, we view the stability of MC sales over the past two years as an indicator of an important, structural change. Although publication grade sales are likely to continue to erode at a 5% to 10% annual rate and to cause periodic volatility when large numbers of publication machines are shut down in a short period of time, the publication grades have become a small enough part of MC’s sales mix that under normal economic conditions, incremental growth in the other grades should usually be sufficient to offset those declines. The last two years suggest it may now be appropriate to think of MC for the long-term as a stable business with some potential for small increases in sales volume during strong economic conditions, rather than as a gradually deteriorating business fighting a market in structural decline.

“We expect full-year 2018 to be comparable to full-year 2017, and thus for MC to again perform in the upper half of our expected range. While growing inflationary pressures and a weakening U.S. dollar could lead to some regression away from the very high end of our normal range for Adjusted EBITDA, a strong order backlog, healthy economic conditions around the world, and continued strong product performance should lead to another good year for MC in 2018.

“AEC also had a good quarter and full year. Sales grew by 12% compared to a strong Q4 2016, and 38% compared to full-year 2016. The year-over-year Q4 increase was driven primarily by growth in the 787 fuselage frames, F-35 airframe, and CH-53K programs in Salt Lake City along with the new program for engine parts in Boerne. LEAP, which accounted for 44% of sales, was flat compared to an especially strong Q4 2016. Compared to Q3 2017, LEAP grew by 30%, and compared to full-year 2016, LEAP grew by 40%.

“All of AEC’s ramping programs made progress on quality and deliveries, and the two new plants in Querétaro Mexico are on schedule. The first of these two plants produced and shipped its first LEAP fan blades late in Q4. We continue to see upward pressure on demand for the LEAP program, while demand on all of AEC’s other ramping programs is either stable or facing incremental upward pressure.

“AEC Q4 2017 operating income improved to slightly above break-even. As expected, Gross profit was hurt by ramp-up inefficiencies in Q4, but the negative impact was offset by a favorable net adjustment to estimated profitability of long-term contracts. As a result, Adjusted EBITDA as a percent of sales improved to 14% compared to 11% in Q3 2017, and 8% in Q4 2016. As discussed earlier in this release in the CFO commentary, future AEC profit margins will be affected by the change in revenue recognition standards that went into effect on January 1 of this year. But holding revenue recognition standards constant, the trend toward incrementally improving profit margins should continue through 2018 and 2019, as the rate of hiring, training and new equipment installation begins to slow and operating efficiencies advance.

“In new business development, we continue to make progress on three fronts: opportunities with our current customers on existing platforms, opportunities on new platforms, and longer-term opportunities still in development. We have made enough progress on each of these fronts to revise our estimate of revenue potential for 2020. In 2016, following the acquisition of our Salt Lake City operation, we stated that AEC had the potential to grow to $450 million in revenue by 2020. In mid-year 2017, we revised that potential upward to $450 million to $500 million. We now think $475 million to $550 million is a reasonable estimate. This assumes both existing contracts and contracts that we believe we are more likely than not to win. We continue to expect 18% to 20% EBITDA as a percent of sales by 2020 (again, holding revenue recognition standards constant).

“As for our outlook for 2018, we expect 20% to 30% growth in full-year sales, driven primarily by the ramp-ups in LEAP, 787 fuselage frames, and F-35 programs, and holding revenue recognition standards constant, continued steady, incremental improvement in Adjusted EBITDA as a percent of sales.

“In sum, this was another good quarter and year for Albany, with stable year-over-year performance on both top and bottom lines in MC, continued strong growth and incremental improvements in profitability in AEC, and an outlook for both businesses of continued strong performance in 2018.”

About Albany International Corp.

Albany International is a global advanced textiles and materials processing company, with two core businesses. Machine Clothing is the world’s leading producer of custom-designed fabrics and belts essential to production in the paper, nonwovens, and other process industries. Albany Engineered Composites is a rapidly growing supplier of highly engineered composite parts for the aerospace industry. Albany International is headquartered in Rochester, New Hampshire, operates 22 plants in 10 countries, employs 4,400 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.

This release contains certain non-GAAP metrics, including: percent change in net sales excluding currency rate effects (for each segment and the Company as a whole); EBITDA and Adjusted EBITDA (for each segment and the Company as a whole, represented in dollars or as a percentage of net sales); net debt; and net income per share attributable to the Company, excluding adjustments. Such items are provided because management believes that, when reconciled from the GAAP items to which they relate, they provide additional useful information to investors regarding the Company’s operational performance.

Presenting increases or decreases in sales, after currency effects are excluded, can give management and investors insight into underlying sales trends. EBITDA, or net income with interest, taxes, depreciation, and amortization added back, is a common indicator of financial performance used, among other things, to analyze and compare core profitability between companies and industries because it eliminates effects due to differences in financing, asset bases and taxes. An understanding of the impact in a particular quarter of specific restructuring costs, acquisition expenses, currency revaluation, inventory write-offs associated with discontinued businesses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect. Restructuring expenses in the MC segment, while frequent in recent years, are reflective of significant reductions in manufacturing capacity and associated headcount in response to shifting markets, and not of the profitability of the business going forward as restructured. Net debt is, in the opinion of the Company, helpful to investors wishing to understand what the Company’s debt position would be if all available cash were applied to pay down indebtedness. EBITDA, Adjusted EBITDA and net income per share attributable to the Company, excluding adjustments, are performance measures that relate to the Company’s continuing operations.

Percent changes in net sales, 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. That amount is then compared to the U.S. dollar amount reported in the current period. The Company calculates EBITDA by removing the following from Net income: Interest expense net, Income tax expense, Depreciation and amortization. Adjusted EBITDA is calculated by: adding to EBITDA costs associated with restructuring, inventory write-offs associated with discontinued businesses and pension settlement charges; adding (or subtracting) revaluation losses (or gains); subtracting (or adding) gains (or losses) from the sale of buildings or investments; subtracting insurance recovery gains in excess of previously recorded losses; subtracting (or adding) Income (or loss) attributable to the non-controlling interest in Albany Safran Composites (ASC); and adding expenses related to the Company’s acquisition of Harris Corporation’s composite aerostructures division. Adjusted EBITDA may also be presented as a percentage of net sales by dividing it by net sales. Net income per share attributable to the Company, excluding adjustments, is calculated by adding to (or subtracting from) net income attributable to the Company per share, on an after-tax basis: restructuring charges; inventory write-offs associated with discontinued businesses; discrete tax charges (or gains) and the effect of changes in the income tax rate; foreign currency revaluation losses (or gains); acquisition expenses; and losses (or gains) from the sale of investments.

EBITDA, Adjusted EBITDA, and net income per share attributable to the Company, excluding adjustments, as defined by the Company, may not be similar to similarly named measures of other companies. Such measures are not considered measurements under GAAP, and should be considered in addition to, but not as substitutes for, the information contained in the Company’s statements of income.

The Company discloses certain income and expense items on a per-share basis. The Company believes that such disclosures provide important insight into underlying quarterly earnings and are financial performance metrics commonly used by investors. The Company calculates the quarterly per-share amount for items included in continuing operations by using the income tax rate based on income from continuing operations and the weighted-average number of shares outstanding for each period. Year-to-date earnings per-share effects are determined by adding the amounts calculated at each reporting period.

Tables 10 and 11 contain full-year Net sales and Gross profit by segment:

Table 10

Net SalesYears endedDecember 31,

Percent

Impact ofChangesin Currency

PercentChangeexcludingCurrency

(in thousands, excluding percentages)

2017

2016

Change

Translation Rates

Rate Effect

Machine Clothing (MC) $590,357 $582,190 1.4 % $3,071 0.9 % Albany Engineered Composites (AEC) 273,360 197,649 38.3 674 38.0 Total $863,717 $779,839 10.8 % $3,745 10.3 %

Table 11

Year endedDecember 31, 2017

Year endedDecember 31, 2016

(in thousands, excluding percentages)

Gross profit

Percent of sales

Gross profit

Percent of sales

Machine Clothing $280,683 47.5 % $276,402

47.5

Albany Engineered Composites 15,875 5.8 25,121 12.7 Corporate Expenses (778 ) - (955 ) - Total $295,780 34.2 % $300,568 38.5 %

Tables 12 and 13 contain full-year Adjusted EBITDA by segment:

Table 12

Year ended December 31, 2017(in thousands)

MachineClothing

AlbanyEngineeredComposites*

Corporateexpensesand other

TotalCompany

Operating income/(loss) (GAAP) $153,936 $(31,657 ) $(46,128 ) $76,151 Interest, taxes, other income/expense - -

(43,566

)

(43,566

) Net income (GAAP) 153,936 (31,657 )

(89,694

)

32,585

Interest expense, net - - 17,091 17,091 Income tax expense - -

22,123

Depreciation and amortization 33,527 33,533 4,896 71,956 EBITDA (non-GAAP) 187,463 1,876 (45,584 ) 143,755 Restructuring expenses, net 3,429 10,062 - 13,491 Foreign currency revaluation losses 3,903 214 4,644 8,761 Write-off of inventory in a discontinued product line - 2,800 - 2,800 Pretax loss attributable to non-controlling interest in ASC - 567 - 567 Adjusted EBITDA (non-GAAP) $194,795 $15,519 $(40,940 ) $169,374

* Includes Q2 charge of $15.8 million related to revisions in the estimated profitability of two long-term contracts.

Table 13

Year ended December 31, 2016(in thousands)

MachineClothing

AlbanyEngineeredComposites

Corporateexpensesand other

TotalCompany

Operating income/(loss) (GAAP) $152,529 $(15,363 ) $(45,390 ) $91,776 Interest, taxes, other income/expense - - (38,964 ) (38,964 ) Net income (GAAP) 152,529 (15,363 ) (84,354 ) 52,812 Interest expense, net - - 13,464 13,464 Income tax expense - - 25,454 25,454 Depreciation and amortization 36,428 24,211 6,822 67,461 EBITDA (non-GAAP) 188,957 8,848 (38,614 ) 159,191 Restructuring expenses, net 6,069 2,314 (7 ) 8,376 Foreign currency revaluation losses/(gains) (404 ) 16 (3,525 ) (3,913 ) Acquisition expenses - 5,367 - 5,367 Pretax (income) attributable to non-controlling interest in ASC - (125 ) - (125 ) Adjusted EBITDA (non-GAAP) $194,622 $16,420 $(42,146 ) $168,896

Tables 14 through 17 contain Q4 and full-year calculations of per share effects of certain income and expense items:

Table 14

Three Months ended December 31, 2017(in thousands, except per share amounts)

Pretaxamounts

Tax Effect

After-taxEffect

Per ShareEffect

Restructuring expenses, net $3,271

$1,047

$2,224

$0.07 Foreign currency revaluation losses 1,845

590

1,255

0.04 Reduction in write-off of inventory in a discontinued product line 355 131 224 0.01 Favorable effect of change in income tax rate -

1,742

0.05

Net discrete income tax charge -

6,883

0.21

Table 15

Three Months ended December 31, 2016(in thousands, except per share amounts)

Pretaxamounts

Tax Effect

After-taxEffect

Per Share Effect

Restructuring expenses, net $723 $255 $468 $0.01 Foreign currency revaluation gains 3,209 1,133 2,076 0.06 Expenses related to integration of acquired business 762 290 472 0.01 Loss due to theft 2,506 877 1,629 0.05 Favorable effect of change in income tax rate - 1,278 1,278 0.04 Net discrete income tax benefit - 1,243 1,243 0.04

Table 16

Year ended December 31, 2017(in thousands, except per share amounts)

Pretaxamounts

Tax Effect

After-taxEffect

Per ShareEffect

Restructuring expenses, net $13,491

$4,768

$8,723

$0.27 Foreign currency revaluation losses 8,761

3,107

5,654

0.18 Write-off of inventory in a discontinued product line 2,800 1,036 1,764 0.05 Net discrete income tax charge -

4,602

0.14

Charge for revision to estimated profitability of AEC contracts 15,821 5,854 9,967 0.31

Table 17

Year ended December 31, 2016(in thousands, except per share amounts)

Pretaxamounts

Tax Effect

After-taxEffect

Per Share Effect

Restructuring expenses, net $8,376 $3,220 $5,156 $0.16 Foreign currency revaluation gains 3,913 1,389 2,524 0.07 Acquisition expenses 5,367 1,933 3,434 0.11 Loss due to theft 2,506 877 1,629 0.05 Net discrete income tax benefit - 2,175 2,175 0.07

Table 18 contains the calculation of net income per share attributable to the Company, excluding adjustments:

Table 18

Three Months endedDecember 31,

Years endedDecember 31,

Per share amounts (Basic)

2017

2016

2017

2016

Net income/(loss) attributable to the Company, reported (GAAP)

$0.18

$0.49

$1.03*

$1.64 Adjustments: Restructuring charges 0.07 0.01 0.27 0.16 Discrete tax adjustments and effect of change in income tax rate

0.16

(0.08 )

0.14

(0.07 ) Foreign currency revaluation losses/(gains) 0.04 (0.06 ) 0.18 (0.07 ) Write-off of inventory in a discontinued product line (0.01 ) - 0.05 - Acquisition expenses - - - 0.11 Net income attributable to the Company, excluding adjustments (non-GAAP)

$0.44

$0.36

$1.67

$1.77

* Includes Q2 charge of $0.31 per share for revisions in estimated profitability of two AEC contracts

Table 19 contains the calculation AEC Adjusted EBITDA as a percentage of sales:

Table 19

Adjusted EBITDA as a percentage of net sales

Three months ended

December 31,

September 30,

June 30,

March 31,

December 31,

(in thousands, except percentages)

2017

2016

Adjusted EBITDA (non-GAAP)

$10,794

$8,125

$(8,586)*

$5,188

$5,530

Net sales (GAAP) $76,465 $71,447

$68,999

$56,450 $68,302 Adjusted EBITDA as a percentage of net sales 14.1% 11.4% (12.4)% 9.2% 8.1%

* Includes charge of $15.8 million in Q2 2017 for revisions in estimated profitability of two AEC contracts.

Table 20 contains the calculation of net debt:

Table 20

(in thousands)

December 31,2017

September 30,2017

June 30,2017

March 31,2017

December 31,2016

Notes and loans payable $262 $186 $249 $274 $312 Current maturities of long-term debt 1,799 51,765 51,732 51,699 51,666 Long-term debt 514,120 453,578 444,030 428,477 432,918 Total debt 516,181 505,529 496,011 480,450 484,896 Cash and cash equivalents 183,727 153,465 138,792 143,333 181,742 Net debt $332,454 $352,064 $357,219 $337,117 $303,154

Table 21 contains the reconciliation of MC 2018 projected Adjusted EBITDA to MC 2018 projected net income:

Table 21

Machine Clothing Full-Year 2018 Outlook(in millions)

Normaltarget rangefor full-year

Net income (non-GAAP) $147 - $162 Depreciation and amortization 33 EBITDA (non-GAAP) $180 - $195 Restructuring expenses * Foreign currency revaluation losses * Adjusted EBITDA (non-GAAP) $180 - $195

* Due to the uncertainty of these items, management is currently unable to project restructuring expenses and foreign currency revaluation gains/losses for 2018.

This press release may contain statements, estimates, 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,” and similar expressions identify forward-looking statements, which generally are not historical in nature. 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) that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections.

Forward-looking statements in this release or in the webcast include, without limitation, statements about macroeconomic, geopolitical and paper-industry trends and conditions during 2018 and in future years; expectations in 2018 and in future periods of sales, EBITDA, Adjusted EBITDA (both in dollars and as a percentage of net sales), 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 sales 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; the impact of the new revenue recognition standard on financial results for each business segment and for the Company as a whole; the impact of the U.S. tax legislation passed in Q4 2017; the timing and impact of the proposed restructuring in France; 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.

ALBANY INTERNATIONAL CORP.CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share amounts)(unaudited) Three Months EndedDecember 31, Years EndedDecember 31, 2017 2016 2017 2016 $226,728 $213,046 Net sales $863,717 $779,839 149,342 135,714 Cost of goods sold 567,937 479,271 77,386 77,332 Gross profit 295,780 300,568 41,165 39,115 Selling, general, and administrative expenses 164,964 160,112 10,386 10,664 Technical and research expenses 41,174 40,304 3,271 723 Restructuring expenses, net 13,491 8,376 22,564 26,830 Operating income 76,151 91,776 4,049 3,854 Interest expense, net 17,091 13,464 3,372 2,149 Other expense, net 4,352 46 15,143 20,827 Income before income taxes 54,708 78,266 9,985 4,841 Income tax expense 22,123 25,454 5,158 15,986 Net income 32,585 52,812 (728 ) 190 Net income/(loss) attributable to the noncontrolling interest (526 ) 79 $5,886 $15,796 Net income attributable to the Company $33,111 $52,733 $0.18 $0.49 Earnings per share attributable to Company shareholders - Basic $1.03 $1.64 $0.18 $0.49 Earnings per share attributable to Company shareholders - Diluted $1.03 $1.64 Shares of the Company used in computing earnings per share: 32,196 32,107 Basic 32,169 32,086 32,218 32,145 Diluted 32,199 32,125 $0.17 $0.17 Dividends declared per share, Class A and Class B $0.68 $0.68 ALBANY INTERNATIONAL CORP.CONSOLIDATED BALANCE SHEETS(in thousands, except share data)(unaudited) December 31,2017 December 31,2016 ASSETS Cash and cash equivalents $183,727 $181,742 Accounts receivable, net 202,675 171,193 Inventories 136,519 133,906 Income taxes prepaid and receivable 6,266 5,213 Prepaid expenses and other current assets 17,020 9,251 Total current assets 546,207 501,305 Property, plant and equipment, net 451,802 422,564 Intangibles, net 55,441 66,454 Goodwill 166,796 160,375 Income taxes receivable and deferred 68,648 68,865 Contract receivables 32,811 14,045 Other assets 39,493 29,825 Total assets $1,361,198 $1,263,433 LIABILITIES AND SHAREHOLDERS' EQUITY Notes and loans payable $262 $312 Accounts payable 44,899 43,305 Accrued liabilities 105,914 95,195 Current maturities of long-term debt 1,799 51,666 Income taxes payable 8,643 9,531 Total current liabilities 161,517 200,009 Long-term debt 514,120 432,918 Other noncurrent liabilities 101,555 106,827 Deferred taxes and other liabilities 10,991 12,389 Total liabilities 788,183 752,143 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; issued 37,395,753 in 2017 and 37,319,266 in 2016

37 37

Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 3,233,998 in 2017 and 2016

3 3 Additional paid in capital 428,423 425,953 Retained earnings 534,082 522,855 Accumulated items of other comprehensive income: Translation adjustments (87,318 ) (133,298 ) Pension and postretirement liability adjustments (50,536 ) (51,719 ) Derivative valuation adjustment 1,953 828

Treasury stock (Class A), at cost 8,431,335 shares in 2017 and 8,443,444 shares in 2016

(256,876 ) (257,136 ) Total Company shareholders' equity 569,768 507,523 Noncontrolling interest 3,247 3,767 Total equity 573,015 511,290 Total liabilities and shareholders' equity $1,361,198 $1,263,433 ALBANY INTERNATIONAL CORP.CONSOLIDATED STATEMENTS OF CASH FLOW(in thousands)(unaudited) Three Months EndedDecember 31, Years endedDecember 31, 2017 2016 2017 2016 OPERATING ACTIVITIES $5,158 $15,986 Net income $32,585 $52,812 Adjustments to reconcile net income to net cash provided by operating activities: 16,150 13,370 Depreciation 61,517 58,106 2,550 2,867 Amortization 10,439 9,355 (7,623 ) (222 ) Change in other noncurrent liabilities (10,145 ) (5,232 ) 9,356 6,663 Change in deferred taxes and other liabilities (1,264 ) 5,889 954 1,369 Provision for write-off of property, plant and equipment 2,870 2,778 26 211 Non-cash interest expense 660 564 268 551 Compensation and benefits paid or payable in Class A Common Stock 2,133 2,433 - - Write-off of intangible assets in a discontinued product line 4,149 - - 51 Write-off of pension liability adjustment due to settlement - 51 Changes in operating assets and liabilities that (used)/provided cash, net of impact of business acquisition: (2,078 ) (6,205 ) Accounts receivable (21,859 ) (12,697 ) 20,300 366 Inventories 3,090 (12,520 ) (4,322 ) 707 Prepaid expenses and other current assets (7,489 ) (2,595 ) 1,876 (3,943 ) Income taxes prepaid and receivable (941 ) (2,206 ) 5,614 3,652 Accounts payable 2,910 2,108 778 5,048 Accrued liabilities 5,303 1,312 (3,763 ) (2,601 ) Income taxes payable (799 ) 1,398 (3,123 ) (14,045 ) Contract receivables (18,766 ) (14,045 ) (2,120 ) 3,900 Other, net (2,677 ) (6,571 ) 40,001 27,725 Net cash provided by operating activities 61,716 80,940 INVESTING ACTIVITIES - - Purchase of business, net of cash acquired - (187,000 ) (21,286 ) (21,215 ) Purchases of property, plant and equipment (83,010 ) (71,244 ) (1,589 ) (986 ) Purchased software (2,127 ) (2,248 ) - 517 Proceeds from sale or involuntary conversion of assets - 6,939 (22,875 ) (21,684 ) Net cash used in investing activities (85,137 ) (253,553 ) FINANCING ACTIVITIES 69,999 3,112 Proceeds from borrowings 115,334 235,907 (59,336 ) (10,661 ) Principal payments on debt (84,047 ) (34,356 ) (2,130 ) - Debt acquisition costs (2,130 ) (1,771 ) 6,346 - Cash received/(paid) to settle swap agreements 6,346 (5,175 ) - - Taxes paid in lieu of share issuance (1,364 ) (1,272 ) 66 63 Proceeds from options exercised 597 517 (5,473 ) (5,458 ) Dividends paid (21,869 ) (21,812 ) 9,472 (12,944 ) Net cash provided by/(used in) financing activities 12,867 172,038 3,664 (7,525 ) Effect of exchange rate changes on cash and cash equivalents 12,539 (2,796 ) 30,262 (14,428 ) Increase/(decrease) in cash and cash equivalents 1,985

(3,371 ) 153,465 196,170 Cash and cash equivalents at beginning of period 181,742 185,113 $183,727 $181,742 Cash and cash equivalents at end of period $183,727 $181,742

View source version on businesswire.com: http://www.businesswire.com/news/home/20180205005932/en/

Albany International Corp.InvestorsJohn Cozzolino, 518-445-2281john.cozzolino@albint.comorMediaHeather Kralik, 801-505-7001heather.kralik@albint.com

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