Albany International Announces Anticipated Charge for Revisions in Estimated Contract Profitability
July 13 2017 - 4:00PM
Business Wire
Sets Q2 Earnings Release and Webcast
Dates
Albany International Corp. (NYSE:AIN) announced today that it
expects to record a second-quarter pre-tax charge of approximately
$16 million associated with revisions in the estimated
profitability of two contracts in the Albany Engineered Composites
segment (AEC). The charge is principally due to second-quarter 2017
downward revisions of estimated customer demand for the components
manufactured by AEC related to the two contracts.
As previously disclosed, AEC has a contract for the manufacture
of composite components for the Rolls-Royce BR 725 engine, which
powers Gulfstream’s G-650 business jet. The contract obligates AEC
to supply these components for the life of the BR 725 program.
During the second quarter of 2017, the Company revised its
estimate of the profitability of this contract and determined that
an additional charge of approximately $10 million should be
recorded as a provision for anticipated losses through the end of
the program. The charge is driven primarily by a reduction in the
estimated future demand for these components. The Company
previously recorded a charge of $14 million in the second quarter
of 2015 for this program, including $11 million for the write-off
of development costs for nonrecurring engineering and tooling, and
$3 million for anticipated future losses.
AEC’s subsidiary, Albany Aerospace Composites LLC, has a
contract for the manufacture of composite struts for the Airbus
A380, under which it is obligated to supply composite wing box
struts through 2020 and floor beam struts through 2023. During the
second quarter of 2017, the Company revised its estimate of the
profitability of this contract and determined that a charge of
approximately $6 million should be recorded as a provision for
anticipated losses through contract completion. The revision is
driven by a decrease in estimated demand for these components
during the contract term, as well as by program inefficiencies.
The estimated total charge of $16 million for both contracts
will be included in Cost of goods sold for the AEC segment.
CEO Joseph Morone said, “Unlike AEC’s key growth and legacy
programs, these two programs are exposed to the weakest segments in
the commercial aerospace market – business jets and super
wide-bodies. We do not consider either program to be strategic or
material to AEC’s growth prospects. Their combined revenue in Q1
2017 was $1.1 million. We are meeting customer expectations in both
programs, but because of very challenging legacy contracts, we lost
money on both in Q1 2017 and had been expecting both programs to
continue to lose money for several more years before turning
profitable. Because of the new and significant reductions in
estimated customer demand for these two programs, coupled with
changes in our estimates of their costs, we now project that both
programs will lose money over the life of their contracts. As a
result, we are required to record the total projected losses over
the life of these two contracts in the current quarter.
“In our first quarter earnings release, I said that AEC was on
track for full-year revenue growth between 25% and 35%, coupled
with gradually improving Adjusted EBITDA as a percentage of sales.
I also said that there is more upside than downside risk to our
current estimate of $450 million to $500 million revenue potential
by 2020, as well as potential for substantial growth beyond 2020.
While the recording of these projected future losses will obviously
have a material impact on Q2 results, our outlook for AEC– both in
2017 and beyond – remains unchanged.”
The Company will release second-quarter 2017 financial results
after the close of the market on August 1, 2017, and it will host a
webcast to discuss earnings at 9:00 a.m. Eastern Time on August 2,
2017. Interested parties are invited to listen to the webcast via
the Company’s Investor Relations website at www.albint.com. A
replay of the webcast will be available on the website at
approximately noon Eastern Time on August 2.
This 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,” “would,”
“should” 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
Albany’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 Albany’s historical experience and our present expectations or
projections. Forward-looking statements in this release include,
without limitation, statements about estimated contract
profitability and the likelihood, amount, and timing of other cash
and noncash charges. Such statements are based on current
expectations, and Albany undertakes no obligation to publicly
update or revise any forward-looking statements.
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170713006212/en/
Albany International Corp.InvestorsJohn Cozzolino,
518-445-2281john.cozzolino@albint.comorMediaHeather Kralik,
801-505-7001heather.kralik@albint.com
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