Investor Presentation May 31, 2018 www.albint.com AIN #albint
Non-GAAP Items and Forward-Looking Statements This presentation contains the following non-gaap measures: Adjusted EBITDA (in absolute dollars and as a percentage of sales; for each segment, and the Company as a whole); and Net debt. We think such items provide useful information to investors regarding the Company s operational performance. This presentation also may contain statements, estimates, or projections that constitute forwardlooking statements as defined under U.S. federal securities laws. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company s historical experience and our present expectations or projections. We disclaim any obligation to update any information in this presentation to reflect any changes or developments after the date on the cover page. Certain additional disclosures regarding our use of these non-gaap items (including reconciliations to GAAP measures) and forward-looking statements are set forth in the Appendix to this presentation and in our SEC filings, including our most recent annual and quarterly reports. Our use of such items in this presentation is subject to those additional disclosures, which we urge you to read. 2
Albany International Corp. NYSE: AIN $2.0B Market Cap Machine Clothing (paper industry) Two Businesses 23 plants 10 countries 4,400 employees Aerospace Composites 3
Key Metrics $1,000 $800 $600 $400 $200 $0 $200 $160 $120 $80 $40 $0 $779.8 Adjusted EBITDA* ($ million) $168.9 $169.4 Net Sales ($ million) $863.7 2016 2017 YTD Mar. 31 2017 $199.3 $230.0 $43.5 YTD Mar. 31 2018 $50.9 2016 2017 YTD Mar. 31YTD Mar. 31 2017 2018 2016 2017 YTD Mar. 31 2017 YTD Mar. 31 2018 Sales $582.2 $590.4 $142.8 $148.2 Adj. EBITDA* $194.6 $194.8 $48.3 $49.0 2016 2017 YTD Mar. 31 2017 YTD Mar. 31 2018 Sales $197.6 $273.4 $56.5 $81.8 Adj. EBITDA* MC Segment ($ million) AEC Segment ($ million) $16.4 $15.5 $5.2 $13.5 * Non-GAAP measures. See slides 30 and 31 for definition, reconciliation and other information. 4
Two Very Different Businesses Machine Clothing Paper and other process industries Global market leader Mature Stable, strong cash generation Albany Engineered Composites Aerospace Uniquely positioned Tier 2 Emerging Negative cash flow, but intense growth potential 5
... One Investment Proposition A small cap that combines: The cash generation potential of a value stock with $240 $200 $160 $120 $80 $40 $0 MC Adjusted EBITDA ($ million) $198.0 $194.6 $194.8 2015 2016 2017 The revenue potential of a growth stock $600 $500 $400 $300 $200 $100 $0 AEC Revenue Potential ($ million) $273.4 $475-$550 2017 2020 potential 6
Albany Engineered Composites Vision Objective Strategy Establish AEC as the broadest and most capable Tier 2 supplier of advanced composite parts in the aerospace industry $475M - $550M sales, 18%-20% Adjusted EBITDA as a percentage of sales by 2020 Execute on existing contracts Leverage breadth of technology and operational capabilities for additional organic growth Stay open to opportunities to accelerate growth through complementary acquisitions 7
AEC Operations LEAP Plant 1 Rochester 300,000 ft 2 LEAP Plant 2 Commercy 300,000 ft 2 8 Plants 1,250 Employees $17M R&D Salt Lake City 385,000ft² LEAP Plant 2 Commercy 300,000 ft 2 Rochester Building 2 200,000 ft² Salt Lake City 101,000 ft² LEAP Plant 2 Commercy 300,000 ft2 LEAP Plant 3 Querétaro Boerne 135,000 ft 2 8
AEC Technology 3D Woven Composites Through Thickness Reinforcement Simulation Analysis & Design LEAP Plant 2 Commercy 300,000 ft 2 2D Laminated Composites Braiding Automated Material Placement Filament Winding 9
AEC Growth Potential Program Area Type Composite Technology 2020 $ potential* Upside after 2020 LEAP Civil, Engine 3D RTM $210-230M Volume CH-53K Military, Airframe 2D $35-45M Ramp, Foreign Sales Boeing 797 Civil, Engine, Airframe 3D, 2D NA 2025 EIS? F-35 Military, Airframe 2D $65-70M Spares Other Engines (eg, GE 9x fan case, F-35 LiftFan vanes) Boeing 787 Fuselage Frames Civil, Military 3D, 2D $55-75M New Wins, Existing Engines Civil, Airframe 2D $50-60M New Platforms Lockheed Missiles Military, Airframe Braiding $15-20M New Variants Other Airframe (eg, Waste Tanks, Evacuation Slide Packs) Civil, Airframe Filament Winding, 2D $20-25M 797 New DOD Platforms Land, Sea, Air, Space 3D $0-10M New Wins, New Platforms Diversification Auto, Armor, Other 3D, braiding $0-5M R&D Progress *existing contracts only 10
The LEAP Engine CFM Single-Aisle = ~70% of all new aircraft* CFM (GE + Safran) = ~70% of engines for single-aisle aircraft LEAP is the new CFM engine AIN is exclusive, life-ofprogram supplier of composite cases and blades for LEAP * Boeing Current Market Outlook, 2017 11
The LEAP Engine Millions Annual AEC Revenue Potential $220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 CFM Backlog: ~14,300 engines Share: o 100% Boeing 737Max o ~60% Airbus A320neo o 100% Comac C919 $0 2013 2014 2015 2016 2017 2018 2019 2020 12
AEC Major Programs, Airframes 787 Forward Fuselage Frames F-35 Joint Strike Fighter Airframe CH-53K Airframe Tail Rotor Plyon Horizontal Stabilizer Bull Nose Access Cover Sponsons Forward Fuselage Frames Wing Skins Blade Seal Ramp: 2016 2019 Boeing 787-9 and -10 $50-60M/year potential by 2021 Ramp: 2018 2020 228 parts across CTOL, STOVL, CV $60-70M/year potential by 2020 Ramp: 2019 2023 $35-45M/year potential by 2020 $>100M/year potential by full production 13
AEC Growth Potential $ Millions 600 500 $475M - $550M 400 300 $273M 200 100 0 2017 2020 potential engine airframe 14
Machine Clothing Consumable High value-added High switching costs Low threat of product substitutes 15
Paper Machine Clothing FORMING PRESSING DRYING PROCESS BELTS Shoe Press Belt, Transbelt Consumable Product # Fabrics Average Life Forming 2 45-60 Days Pressing 4 40-50 Days Drying 8 6-18 Months Belts 2 8-16 Months 16
Paper Production, Global Million Tons World Demand % CH 2016 2017 2018 2019 2020 2021 2022 410 0.5 415 1.2 421 1.6 428 1.8 437 2.0 443 1.4 441-0.5 Operating Rate 0.87 0.87 0.87 0.87 0.88 0.88 0.87 North America Production %CH 82-0.9 82-0.1 83 1.1 84 1.5 85 0.6 85 0.6 85-0.8 Western Europe Production %CH 84-0.7 85 0.4 84-0.1 85 0.1 85 0.4 85 0.3 83-2.1 China Production %CH 111 1.7 113 1.4 116 2.4 119 2.6 122 2.5 124 2.1 125 0.6 Other Far East (x Japan) Production %CH 50 1.0 51 2.6 53 2.9 54 3.1 55 3.8 57 2.2 58 0.2 Latin America Production %CH 22-0.8 22 1.1 22 2.6 23 3.1 24 3.8 25 3.0 25 0.1 2017 RISI, Inc. All Rights Reserved. 17
World Demand for Paper Average Annual Growth Rates 1993-2002 2003-2012 2013-2022 2015 2016 2017 2018 World GDP 3.2 4.0 3.3 3.1 3.0 3.4 3.6 Total Paper 2.9 1.9 1.0 0.5 0.8 1.0 1.6 Printing and Writing Papers 3.3 0.7-1.6-2.3-2.1-1.8-1.4 Newsprint 1.3-1.9-5.3-8.7-4.6-6.1-4.3 Tissue 4.0 3.4 3.5 4.0 4.0 3.4 3.5 Containerboard 4.0 3.7 2.5 2.7 2.6 2.8 3.2 Other Paper 1.6 2.2 1.8 1.4 1.0 1.8 2.3 ~78% AIN sales 2017 RISI, Inc. All Rights Reserved. 18
Albany Machine Clothing Market leader ~ 30% global share, 2x next largest competitor Broadest product line, geographic reach Overexposed to growth grades, regions #1 supplier to top papermakers, every region Deepest talent Technology leader, rich R&D pipeline Global footprint aligned with market High-quality, low-cost production in growth markets Reduced fixed costs in mature markets Strong field presence in all regions Annual Adj. EBITDA potential, $180M - $195M (upper half of range in current currency environment) All Other Competitors Global PMC Market Share Albany, approx. 30% Next Largest Competitor, est. 15% 19
... One Investment Proposition A small cap that combines: The cash generation potential of a value stock with The revenue potential of a growth stock $240 $200 $160 $120 $80 $40 $0 $600 $500 $400 $300 $200 $100 $0 MC Adjusted EBITDA ($ million) $198.0 $194.6 $194.8 2015 2016 2017 AEC Revenue Potential ($ million) $273.4 $475-$550 2017 2020 potential 20
Appendix 21
2D Laminated Composites Sheets of fiber pre-impregnated with resin ( prepreg ) cut on machine into plies Plies are individually layered onto a tool ( lay-up ) Lay-up is vacuum-bagged to tool and put into an autoclave to cure 22
3D Woven RTM Composites Thousands of individually controlled fibers, Woven in three dimensions into a near net-shape preform, Which is trimmed and formed, And into which resin is injected and then cured in a net-shaped tool. 23
3D Woven RTM Composites The weight-savings of 2D Laminated composites PLUS Greater impact resistance More complex shapes No delamination Use of high-temp fibers 24
3D Weaving 25
3D Weaving Proprietary Capabilities Manufacturing Process Woven Structures Manufacturing Equipment Software 3D Weaving Contour, Steered Weaving 3D Woven RTM, Resin Infusion Fiber Insertion 3D, 2D/3D hybrid, T Forms, 3D spiraled cones, Pi preforms, etc. Loom designs Loom operating systems Loom take-up, harness configuration, etc Thru thickness fiber insertion CAD/CAM CAE 26
The Safran-Albany Partnership Joint R&D General Collaboration Agreement Mutual exclusivity on engines to 2025 Long-term Supply Agreement Life of LEAP program Co-located in Rochester and Commercy Albany Safran Composites AEC subsidiary dedicated to Safran Mutual exclusivity for all Safran applications Rights to AEC IP 10% Safran ownership Initial Valuation, $280M Safran Buy-out Option if and only if AIN is sold to a competitor or fails to perform 2000 2018 18 Years of Joint Effort 27
AIN Consolidated Capital Structure ($ millions) Dec. 31, 2017 Mar. 31, 2018 Ratios: - Debt to Total Invested Capital 47.4% 46.7% - Debt to Total Market Capital 20.7% 21.0% Data: Total Debt 516.2 520.7 Shareholder's Equity (Book) 573.0 595.1 Total Invested Capital 1,089.2 1,115.8 Closing Stock Price at Period End 61.45 60.80 Outstanding Shares at Period End 32.2 32.2 Market Value of Equity 1,978.7 1,957.8 Total Market Equity plus Debt 2,494.9 2,478.5 Less: Cash 183.7 151.4 Enterprise Value 2,311.2 2,327.1 28
AIN Consolidated Financial Capacity As of 3/31/18: Matures Rate $685m Revolving Credit November 2022 L+ 150 bps $179m UNdrawn 27.5 bps $151m Total Available Cash 29
Non-GAAP Reconciliation Total Adjusted EBITDA* and Net Debt $ millions Total Company 2016 2017 YTD Mar. 31 2017 YTD Mar. 31 2018 Net income $52.8 $32.6 $11.0 $10.5 Interest expense, net 13.5 17.1 4.3 4.3 Income tax expense/ (benefit) 25.4 22.1 6.5 4.6 Depreciation and amortization 67.5 72.0 17.3 20.9 Restructuring 8.4 13.5 2.7 8.6 Currency revaluation (gain)/ loss Write-off of inventory in a discontinued product line (4.0) 8.8 1.9 2.4-2.8 - - Acquisition expenses 5.4 - - - (Income)/ loss attributable to noncontrolling interest in ASC (0.1) 0.5 (0.2) (0.4) Adjusted EBITDA $168.9 $169.4 $43.5 $50.9 $ millions Notes and loans payable Current maturities of long-term debt Long-term debt Dec. 31 2016 Dec. 31 2017 Mar. 31 2018 $0.3 $0.3 $0.2 51.7 1.8 1.8 432.9 514.1 518.7 Total debt 484.9 516.2 520.7 Cash 181.7 183.7 151.4 Net debt $303.2 $332.5 $369.3 * From continuing operations 30
Non-GAAP Reconciliation Segment-Adjusted EBITDA* Machine Clothing AEC Corporate expenses and Other $ millions 2016 2017 YTD Mar. 31 2017 YTD Mar. 31 2018 2016 2017 YTD Mar. 31 2017 YTD Mar. 31 2018 2016 2017 YTD Mar. 31 2017 YTD Mar. 31 2018 Net income $152.5 $153.9 $38.3 $30.8 ($15.4) ($31.7) ($5.1) $2.3 ($84.4) ($89.6) ($22.2) ($22.6) Interest expense, net - - - - - - - - 13.5 17.1 4.3 4.3 Income tax expense/ (benefit) Depreciation and amortization - - - - - - - - 25.4 22.1 6.6 4.6 36.4 33.5 8.3 8.3 24.2 33.5 7.8 11.1 6.8 4.9 1.2 1.5 Restructuring 6.1 3.4 0.1 8.4 2.3 10.1 2.6 0.2 - - - - Currency revaluation (gain)/ loss Write-off of inventory in a discontinued product line (0.4) 4.0 1.6 1.5-0.3 0.1 0.2 (3.4) 4.6 0.1 0.7 - - - - - 2.8 - - - - - - Acquisition expenses - - - - 5.4 - - - - - - - (Income)/ loss attributable to noncontrolling interest in ASC - - - - (0.1) 0.5 (0.2) (0.3) - - - - Adjusted EBITDA $194.6 $194.8 $48.3 $49.0 $16.4 $15.5 $5.2 $13.5 ($42.1) ($40.9) ($10.0) ($11.5) * From continuing operations 31