Albany International Corp. (AIN)
Q1 2010 Earnings Call
May 6, 2010 9:00 am ET
Michael Burke – Senior Vice President and Chief Financial Officer
David Pawlick – VP and Controller
Joseph G. Morone – Chief Executive Officer and President
Jason Ursaner – CJS Securities
Ned Borland – Next Generation Research
Paul Mammola – Sidoti & Company
Previous Statements by AIN
» Albany International Q4 2008 Earnings Call Transcript
» Albany International Q4 2007 Earnings Call Transcript
» Albany International Corporation Q2 2008 Earnings Call Transcript
Ladies and gentlemen, thank you for standing by. Welcome to the first quarter earnings call of Albany International. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. At the request of Albany International, this conference call on Thursday, May 6, 2010 will be webcast and recorded.
I would now like to turn the conference over to Senior Vice President and Chief Financial Officer, Michael Burke, for introductory comments.
Thank you, operator, and good morning everyone. Before starting the call with some opening remarks by Joe, just a couple of brief housekeeping items. First thing is please refer to our detailed press release that we issued last night regarding our quarterly financial results and with particular reference to the Safe Harbor notice that’s contained in the text of the release about forward-looking statements. The use of certain non-GAAP financial measures and associated reconciliation of GAAP and for purposes of this conference call, those same statements also apply to our verbal remarks that we’re going to have this morning.
For a full discussion, please refer to today’s earnings release as well as our SEC filings, including our 10-K. Finally, as a reminder and for those new participants listening to our earnings call, following Joe’s brief opening remarks, we’ll go straight to the question-and-answer portion of the call. So with that background, I will now turn the call over to Joe Morone, our Chief Executive Officer of the company.
Joseph G. Morone
Thanks, Michael. Good morning, everyone. That seasonal affect that we talked about in Q4 hit us hard in January. In fact, January was the weakest sales month in memory and that had the effect of dragging down our overall sales in the quarter back to Q1 2009 levels. But apart from January, the trends in the quarter were good. Sales improved sharply as the quarter progressed and orders were strong, both relative to Q1 2009 order levels and relative to Q1 2010 sales levels.
Profitability was strong, again, up several quarters in a row. We’re seeing strong profitability, which certainly gives us confidence that the profitability levels we’re seeing are sustainable. Let me just try to give you a little bit of clarification on how we’re measuring profitability. As we are coming out of recession and as we are pretty much completed with the three-year restructuring program, we have made the deliberate shift back to more traditional measures of profitability.
So we are comparing profitability from year-over-year, so quarter 1 to quarter 1, and our measure of profitability is now EBITDA adjusted only for two items, GAAP-based restructuring and any extraordinary gains or losses in non-operating income from things like sales of buildings or, as was the case in Q1 2009, gain from the buy-back of our bonds. So on that basis, EBITDA only adjusted for GAAP-based restructuring. EBITDA in Q1 2010 was $29 million compared to $16.5 million in Q1 2009.
Now that $29 million EBITDA in Q1 2010 does include about $5 million of costs that are the lingering effect from the restructuring program, idle capacity, equipment relocation, SAP. If we were to go back to the measure of profitability that we’ve used for the past three years, EBITDA adjusted for all of the costs associated with restructuring the performance improvement, then that $29 million in Q1 2010 becomes $34 million, and that $16.5 million in Q1 2009 becomes $25 million, so $34 million versus $29 million against relatively flat sales. So however you slice it, $29 million versus $16.5 million in adjusted EBITDA or $34 million versus $25 million, the old measure of adjusted EBITDA, it’s a strong profitability particularly in the context of flat sales.
Now the one question that Q1 2010 doesn’t answer for us because of that January affect is what’s the new post-recession normal for sales? We think Q2 should give us a pretty good indication of both the sales trends and the order trends. The sales trends in Q2 are not affected by any negative seasonal effects the way the sales are in Q1, and orders by Q2 should be free of any of the inflationary effects that might have affected orders in Q1 because of inventory restocking after the recession at the beginning of the year by our customers. So Q2 should give us a pretty good indication of, at least for the short term, post-recession normal sales. So overall, Q1 was an encouraging quarter and we all think Q2 should give us a much better feel for the post-recession short-term revenue outlook.
With that commentary, let’s turn to your questions.
(Operator instructions) First on the line is Jason Ursaner – CJS Securities.
Jason Ursaner – CJS Securities
First, I just wanted to make sure I’m clear on atypical expenses. If I’m looking at it from an apples to apples comparison, there’s $3.7 million that would have been adjusted in COGS for this year versus $5.1 million for last year or $7 million for last year?
Jason, it’s Dave Pawlick. Last year, the number was $7 million. That also includes some under-utilized capacity in the Asia plant.