ALBANY INTERNATIONAL CORP /DE/ 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of operations and financial condition of the Company. MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying Notes. Forward-looking statements This quarterly report and the documents incorporated or deemed to be incorporated by reference in this quarterly report contain statements concerning our future results and performance and other matters that are “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” ”look for,” “will,” “should,” “guidance,” “guide” and similar expressions identify forward-looking statements, which generally are not historical in nature. Because 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 prior Quarterly Reports on Form 10-Q) actual results may differ materially from those expressed or implied by such forward-looking statements. There are a number of risks, uncertainties, and other important factors that could cause actual results to differ materially from the forward-looking statements, including, but not limited to: • Conditions in the industries in which our Machine Clothing and Albany Engineered Composites segments compete, along with the general risks associated with macroeconomic conditions, including continuation of COVID-19 pandemic effects for an extended period of time; • In the Machine Clothing segment, greater than anticipated declines in the demand for publication grades of paper, or lower than anticipated growth in other paper grades; • In the Albany Engineered Composites segment, longer than expected timeframe for the aerospace industry to utilize existing inventories, and unanticipated reductions in demand, delays, technical difficulties, or cancellations in aerospace programs that are expected to generate revenue and drive long-term growth; • Failure to achieve or maintain anticipated profitable growth in our Albany Engineered Composites segment; and • Other risks and uncertainties detailed in this report. Further information concerning important factors that could cause actual events or results to be materially different from the forward-looking statements can be found in “Business Environment Overview and Trends” sections of this quarterly report, as well as in Item 1A-“Risk Factors” section of our most recent Annual Report on Form 10-K. Although we believe the expectations reflected in our other forward-looking statements are based on reasonable assumptions, it is not possible to foresee or identify all factors that could have a material and negative impact on our future performance. The forward-looking statements included or incorporated by reference in this report are made on the basis of our assumptions and analyses, as of the time the statements are made, in light of our experience and perception of historical conditions, expected future developments, and other factors believed to be appropriate under the circumstances. Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained or incorporated by reference in this report to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based. Business Environment Overview and Trends Our reportable segments, Machine Clothing (“MC”) and Albany Engineered Composites (“AEC”), draw on the same advanced textiles and materials processing capabilities, and compete on the basis of product-based advantage that is grounded in those core capabilities. The MC segment is the Company’s long-established core business and primary generator of cash. While it has been negatively impacted by well-documented declines in publication grades in the Company’s traditional markets, there has been some offsetting effect due to growth in demand for packaging and tissue grades, as well as the expansion of paper consumption and production in Asia and South America. We feel we are well-positioned in key markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, 20 Index and continued strength in new product development, technical product support, and manufacturing technology. Some of the markets in which our products are sold are expected to have low levels of growth and we face pricing pressures in all markets. Despite these market pressures on revenue, the MC business retains the potential for maintaining stable earnings in the future. MC has been a significant generator of cash, and we seek to maintain the cash-generating potential of this business by maintaining the low costs that we have achieved through continuous focus on cost-reduction initiatives, and competing vigorously by using our differentiated and technically superior products to reduce our customers’ total cost of operation and improve their paper quality. The AEC segment provides significant longer term growth potential for our Company. Our strategy is to grow by focusing our proprietary 3D-woven technology, as well as our non-3D technology capabilities, on high-value aerospace (both commercial and defense) applications, while at the same time performing successfully on our portfolio of growth programs. AEC (including Albany Safran Composites, LLC (“ASC”), in which our customer SAFRAN Group owns a 10 percent noncontrolling interest) supplies a number of customers in the aerospace industry. AEC’s largest aerospace customer is the SAFRAN Group and sales to SAFRAN, through ASC, (consisting primarily of fan blades and cases for CFM’s LEAP engine) accounted for approximately 11 percent of the Company’s consolidated Net sales in 2020. AEC, through ASC, also supplies 3D-woven composite fan cases for the GE9X engine. AEC’s current portfolio of non-3D programs includes components for the F-35, fuselage components for the Boeing 787, components for the CH-53K helicopter, vacuum waste tanks for Boeing 7-Series aircraft, and missile bodies for Lockheed Martin’s JASSM air-to-surface missiles. AEC is actively engaged in research to develop new applications in both commercial and defense aircraft engine and airframe markets. In 2020, approximately 46 percent of AEC sales were related to U.S. government contracts or programs. 21 Index Consolidated Results of Operations Net sales The following table summarizes our Net sales by business segment: Three months ended March 31, (in thousands, except percentages) 2021 2020 % Change Machine Clothing $148,206 $136,602 8.5 % Albany Engineered Composites 74,156 99,162 -25.2 % Total $222,362 $235,764 -5.7 % The following tables provide a comparison of 2021 Net sales, excluding the impact of currency translation effects, to 2020 Net sales: (in thousands, except percentages) Net sales as reported, Q1 2021 Increase due to changes in currency translation rates Q1 2021 sales on same basis as Q1 2020 currency translation rates Net sales as reported, Q1 2020 % Change compared to Q1 2020, excluding currency rate effects Machine Clothing $ 148,206 $ 4,861 $ 143,345 $ 136,602 4.9 % Albany Engineered Composites 74,156 1,178 72,978 99,162 -26.4 % Total $ 222,362 $ 6,039 $ 216,323 $ 235,764 -8.2 % Three month comparison • Changes in currency translation rates had the effect of increasing Net sales by $6.0 million during the first quarter of 2021, as compared to 2020, principally due to the stronger euro in 2021. • Excluding the effect of changes in currency translation rates: • Net sales decreased 8.2% compared to the same period in 2020. • Net sales in MC increased 4.9% compared to the first quarter of 2020, principally due to growth in sales for packaging and other grades, which more than offset decreases in sales for publication grades. • Net sales in AEC decreased 26.4% principally due to declines in sales for the LEAP and Boeing 787 programs. Gross Profit The following table summarizes Gross profit by business segment: Three months ended March 31, (in thousands, except percentages) 2021 2020 Machine Clothing $ 76,393 $ 72,652 Albany Engineered Composites 12,153 16,820 Total $ 88,546 $ 89,472 % of Net sales 39.8 % 37.9 % Three month comparison The decrease in 2021 Gross profit, as compared to the same period in 2020, was principally due to the effect of lower Net sales in AEC, partially offset by an increase in Machine Clothing Net sales. Gross profit as a percentage of sales: • Decreased from 53.2% in 2020 to 51.5% in 2021 in Machine Clothing, principally due to an increase in production costs and lower cost absorption. 22 Index • Decreased from 17.0% in 2020 to 16.4% in 2021 in AEC, principally due to changes in the estimated profitability of long-term contracts, which increased Gross profit by $0.9 million in the first quarter of 2020, but had an insignificant effect on gross profit for the same period of 2021. Selling, Technical, General, and Research (STG&R) Selling, Technical, General and Research (STG&R) expenses include; selling, general, administrative, technical and research expenses. The following table summarizes STG&R expenses by business segment: Three months ended March 31, (in thousands, except percentages) 2021 2020 Machine Clothing $ 26,099 $ 24,835 Albany Engineered Composites 9,126 9,197 Corporate expenses 11,451 15,204 Total $ 46,676 $ 49,236 % of Net sales 21.0 % 20.9 % Three month comparison The overall decrease in STG&R expenses in the first quarter of 2021, compared to the same period in 2020, was principally due to the net effect of the following individually significant items: • In MC, STG&R expenses increased due to revaluation of nonfunctional currency assets and liabilities which resulted in a first-quarter gain of $0.5 million in 2021, compared to a gain of $3.7 million in 2020. That effect was partially offset by lower travel costs and effects of cost reduction initiatives in 2020. • In Corporate, STG&R expenses decreased principally due to former CEO termination costs recorded in the first quarter of 2020. Restructuring Expense, net In addition to the items discussed above affecting Gross profit, and STG&R expenses, operating income was affected by restructuring costs of $0.1 million in the first three months of 2021, and $0.6 million for the same period in 2020. The following table summarizes Restructuring expenses, net by business segment: Three months ended March 31, (in thousands) 2021 2020 Machine Clothing $ (69) $ 642 Albany Engineered Composites 89 — Corporate expenses 32 — Total $ 52 $ 642 Machine Clothing restructuring charges or credits in both years principally related to discontinued operations at its production facility in Sélestat, France announced in 2017. The restructuring program was driven by the Company’s need to balance manufacturing capacity with demand. Since 2017, we have recorded $13.9 million of restructuring charges related to this action. 23 Index Operating Income The following table summarizes operating income/(loss) by business segment: Three months ended March 31, (in thousands) 2021 2020 Machine Clothing $ 50,363 $ 47,175 Albany Engineered Composites 2,938 7,623 Corporate expenses (11,483) (15,204) Total $ 41,818 $ 39,594 Other Earnings Items Three months ended March 31, (in thousands) 2021 2020 Interest expense, net $ 3,569 $ 3,977 Other expense/(income), net 600 15,569 Income tax expense 10,040 12,454 Net income/(loss) attributable to the noncontrolling interest 27 (1,515) Interest Expense, net Year-to-date 2021 Interest expense, net, was lower as compared to 2020, principally due to lower average debt. See the Capital Resources section for further discussion of borrowings and interest rates. Other (income)/expense, net Three month comparison The decrease in Other (income)/expense, net included the following individually significant items: • For the first quarter of each year, revaluation of nonfunctional currency cash and intercompany balances resulted in a loss of $0.2 million in 2021, compared to a loss of $14.8 million in 2020. The loss in 2020 principally resulted from an intercompany demand loan payable by a Mexican subsidiary. Income Tax The Company has operations, which constitute a taxable presence in 18 countries outside of the United States. The majority of these countries had income tax rates that are above the United States federal tax rate of 21 percent during the periods reported. The jurisdictional location of earnings is a significant component of our effective tax rate each year. The rate impact of this component is influenced by the specific location of non-U.S. earnings and the level of our total earnings. From period to period, the jurisdictional mix of earnings can vary as a result of operating fluctuations in the normal course of business, as well as the extent and location of other income and expense items, such as pension settlement and restructuring charges. Three month comparison The Company’s effective tax rates for the first quarter of 2021 and 2020 were 26.7% and 62.1%, respectively. The tax rate is affected by recurring items, such as the income tax rate in the U.S. and non-U.S. jurisdictions and the mix of income earned in those jurisdictions. The tax rate is also affected by U.S. tax costs on foreign earnings, and by discrete items that may occur in any given year but are not consistent from year to year. It should be noted that the effective tax rate for the first quarter of 2020 was significantly affected by a non-recurring tax adjustment due to non-deductible foreign exchange losses, as illustrated in the table below. 24 Index Significant items that impacted the effective tax rate in the first quarter of 2021 and 2020 included the following (percentages reflect the effect of each item as a percentage of income before income taxes): Three months ended March 31, 2021 2020 (in thousands, except percentages) Tax amount % Tax amount % Continuing operations (excluding discrete items) $ 11,332 30.1 % $ 7,309 36.5 % Provision for/resolution of tax audits and contingencies, net 278 0.7 % (244) (1.2) % Adjustments to prior period tax liabilities (1,443) (3.8) % (112) (0.6) % Out-of-period adjustments — — % 1,830 9.1 % Tax effect of non-deductible foreign exchange loss on intercompany loan — — % 3,668 18.3 % Other adjustments (127) (0.3) % 3 0.0 % Effective tax rate $ 10,040 26.7 % $ 12,454 62.1 % For more information on income tax, see Note 6 to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference. Segment Results of Operations Machine Clothing Segment Machine Clothing is our primary business segment and accounted for 67% of our consolidated revenues during the first three months of 2021. MC products are purchased primarily by manufacturers of paper and paperboard. We feel we are well-positioned in these markets, with high-quality, low-cost production in growth markets, substantially lower fixed costs in mature markets, and continued strength in new product development, technical product support, and manufacturing technology. Recent technological advances in paper machine clothing, while contributing to the papermaking efficiency of customers, have lengthened the useful life of many of our products and had an adverse impact on overall paper machine clothing demand. Additionally, we face pricing pressures in all of our markets. The Company’s manufacturing and product platforms position us well to meet these shifting demands across product grades and geographic regions. Our strategy for meeting these challenges continues to be to grow share in all markets, with new products and technology, and to maintain our manufacturing footprint to align with global demand, while we offset the effects of inflation through continuous productivity improvement. We have incurred significant restructuring charges in recent years as we reduced MC manufacturing capacity and administrative positions in various countries. Review of Operations Three months ended March 31, (in thousands, except percentages) 2021 2020 Net sales $ 148,206 $ 136,602 Gross profit 76,393 72,652 % of Net sales 51.5 % 53.2 % STG&R expenses 26,099 24,835 Operating income 50,363 47,175 Net Sales Three month comparison • Net sales increased by 8.5%. • Changes in currency translation rates had the effect of increasing first-quarter 2021 sales by $4.9 million compared to the same period in 2020. That currency translation effect was principally due to the stronger euro in the first quarter of 2021, compared to 2020. 25 Index • Excluding the effect of changes in currency translation rates, Net sales in MC increased 4.9% compared to the first quarter of 2020, as growth in sales for packaging and other grades more than offset declines in publication grades. Gross Profit Three month comparison • The increase in MC Gross profit was principally due to higher sales as noted above, partially offset by a decrease in gross profit percentage that was principally due to an increase in production costs and lower cost absorption compared to 2020. Operating Income Three month comparison The increase in Operating income was principally due to the net effect of higher sales, partially offset by higher STG&R expenses. Albany Engineered Composites Segment The Albany Engineered Composites (AEC) segment, including Albany Safran Composites, LLC (ASC), in which our customer SAFRAN Group owns a 10 percent noncontrolling interest, provides highly engineered advanced composite structures to customers primarily in the aerospace (both commercial and defense) industry. AEC’s largest program relates to CFM International’s LEAP engine. AEC, through ASC, is the exclusive supplier of advanced composite fan blades and cases for this program under a long-term supply contract. The LEAP engine is used on the Airbus A320neo and Boeing 737 MAX family of jets. Other significant AEC programs include components for the F-35, fuselage frames for the Boeing 787, components for the CH53-K helicopter, and the fan case for the GE9X engine. Review of Operations Three months ended March 31, (in thousands, except percentages) 2021 2020 Net sales $ 74,156 $ 99,162 Gross profit 12,153 16,820 % of Net sales 16.4 % 17.0 % STG&R expenses 9,126 9,197 Operating income 2,938 7,623 Net Sales Three month comparison The decrease in Net sales was principally due to lower sales in the LEAP and Boeing 787 programs, partially offset by growth on the F-35 and CH-53K platforms. Gross Profit Three month comparison The decrease in Gross profit of $4.7 million was principally due to the decrease in Net sales. Adjustments in the estimated profitability of long-term contracts increased operating income by $0.9 million for the first quarter of 2020, compared to an insignificant effect for the first quarter of 2021. Long-term contracts 26 Index AEC has contracts with certain customers, including its contract for the LEAP program, where revenue is determined by a cost-plus-fee agreement. Revenue earned under these arrangements accounted for approximately 40 percent of segment revenue for each of the first three months of 2021 and 2020. LEAP engines are currently used on the Boeing 737 MAX, Airbus A320neo and COMAC aircraft. In addition, AEC has long-term contracts in which the selling price is fixed. In accounting for those contracts, we estimate the profit margin expected at the completion of the contract and recognize a pro-rata share of that profit during the course of the contract using a cost-to-cost approach. Changes in estimated contract profitability will affect revenue and gross profit when the change occurs, which could have a significant favorable or unfavorable effect on revenue and gross profit in any reporting period. For contracts with anticipated losses, a provision for the entire amount of the estimated remaining loss is charged against income in the period in which the loss becomes known. Contract losses are determined considering all direct and indirect contract costs, exclusive of any selling, general or administrative cost allocations, which are treated as period expenses. Expected losses on projects include losses on contract options that are probable of exercise, excluding profitable options that often follow. Operating Income Three month comparison The decrease in Operating income of $4.7 million in the first quarter of 2021 was principally due to the decrease in Net sales, as described above. Liquidity and Capital Resources Cash Flow Summary Three months ended March 31, (in thousands) 2021 2020 Net income $ 27,609 $ 7,594 Depreciation and amortization 18,882 18,070 Changes in working capital (a) (5,992) (48,102) Changes in other noncurrent liabilities and deferred taxes 2,345 5,757 Other operating items (9,158) 10,043 Net cash provided by/(used in) operating activities 33,686 (6,638) Net cash used in investing activities (12,536) (12,805) Net cash (used in)/provided by financing activities (21,694) 54,231 Effect of exchange rate changes on cash and cash equivalents (2,901) (7,648) (Decrease)/increase in cash and cash equivalents (3,445) 27,140 Cash and cash equivalents at beginning of year 241,316 195,540 Cash and cash equivalents at end of period $ 237,871 $ 222,680 (a) Includes Accounts receivable, Contract assets, Inventories, Accounts payable, and Accrued liabilities. Operating activities Cash flow provided by operating activities was $33.7 million in the first three months of 2021, compared to cash flow used by operating activities of $6.6 million in the first three months of 2020. The improvement in cash provided by operating activities in 2021 was due to improved working capital cash flows in AEC and an increase in Net income. Cash paid for income taxes was $15.7 million and $9.6 million for the first three months of 2021 and 2020, respectively. The increase is primarily due to an increase in corporate income tax payments in Brazil, China and Switzerland related to prior year tax liabilities. At March 31, 2021, we had $237.9 million of cash and cash equivalents, of which $209.0 million was held by subsidiaries outside of the United States. 27 Index Investing and Financing Activities Capital expenditures for the first three months were $12.5 million in 2021 and $12.8 million in 2020. Dividends have been declared each quarter since the fourth quarter of 2001. Decisions with respect to whether a dividend will be paid, and the amount of the dividend, are made by the Board of Directors each quarter. Future cash dividends will also depend on debt covenants and on the Board’s assessment of our ability to generate sufficient cash flows. Capital Resources We finance our business activities primarily with cash generated from operations and borrowings, largely through our revolving credit agreement as discussed below. Our subsidiaries outside of the United States may also maintain working capital lines with local banks, but borrowings under such local facilities tend to be insignificant. The majority of our cash balance at March 31, 2021 was held by non-U.S. subsidiaries. Based on cash on hand and credit facilities, we anticipate that the Company has sufficient capital resources to operate for the foreseeable future. We were in compliance with all debt covenants as of March 31, 2021. On October 27, 2020, we entered into a $700 million unsecured Four-Year Revolving Credit Facility Agreement (the “Credit Agreement”) which amended and restated the prior amended and restated $685 million Five-Year Revolving Credit Facility Agreement, which we had entered into on November 7, 2017 (the “Prior Agreement”). Under the Credit Agreement, $384 million of borrowings were outstanding as of March 31, 2021. The applicable interest rate for borrowings was LIBOR plus a spread, based on our leverage ratio at the time of borrowing. At the time of the last borrowing on March 31, 2021, the spread was 1.625%. The spread was based on a pricing grid, which ranged from 1.500% to 2.000%, based on our leverage ratio. Based on our maximum leverage ratio and our Consolidated EBITDA, and without modification to any other credit agreements, as of March 31, 2021, we would have been able to borrow an additional $316 million under the Agreement. For more information, see Note 14 to the Consolidated Financial Statements in Item 1, which is incorporated herein by reference. Off-Balance Sheet Arrangements As of March 31, 2021, we have no off-balance sheet arrangements required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K. Recent Accounting Pronouncements The information set forth under Note 18 contained in Item 1, “Notes to Consolidated Financial Statements”, which is incorporated herein by reference. Non-GAAP Measures This Form 10-Q contains certain non-GAAP measures, including: Net sales, and percent change in Net sales, excluding the impact of currency translation effects (for each segment and on a consolidated basis); EBITDA and Adjusted EBITDA (for each segment and on a consolidated basis, represented in dollars or as a percentage of net sales); Net debt; and Adjusted earnings per share (or Adjusted EPS). Such items are provided because management believes that they provide additional useful information to investors regarding the Company’s operational performance. Presenting Net sales and increases or decreases in Net sales, after currency effects are excluded, can give management and investors insight into underlying sales trends. EBITDA, Adjusted EBITDA and Adjusted EPS are performance measures that relate to the Company’s continuing operations. 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, former CEO termination costs, acquisition/integrations costs, currency revaluation, pension settlement/curtailment charges, 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, 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. 28 Index Net sales, or 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. These amounts are then compared to the U.S. dollar amount as reported in the current period. The Company calculates EBITDA by removing the following from Net income: Interest expense net, Income tax expense, and Depreciation and amortization expense. Adjusted EBITDA is calculated by: adding to EBITDA costs associated with restructuring, former CEO termination costs, and inventory write-offs associated with discontinued businesses; adding charges and credits related to pension plan settlements and curtailments; adding (or subtracting) revaluation losses (or gains); subtracting (or adding) gains (or losses) from the sale of buildings or investments; adding acquisition/integration costs and subtracting (or adding) Income (or loss) attributable to the non-controlling interest in Albany Safran Composites (ASC). Adjusted earnings per share (Adjusted EPS) is calculated by adding to (or subtracting from) net income attributable to the Company per share, on an after-tax basis: restructuring charges; former CEO severance costs; inventory write-offs associated with discontinued businesses; charges and credits related to pension settlements and curtailments; foreign currency revaluation losses (or gains); and acquisition-related expenses. EBITDA, Adjusted EBITDA, and Adjusted earnings per share 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 following tables show the calculation of EBITDA and Adjusted EBITDA: Three months ended March 31, 2021 (in thousands) Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Operating income/(loss) (GAAP) $ 50,363 $ 2,938 $ (11,483) $ 41,818 Interest, taxes, other income/(expense) — — (14,209) (14,209) Net income/(loss) (GAAP) 50,363 2,938 (25,692) 27,609 Interest expense, net — — 3,569 3,569 Income tax expense — — 10,040 10,040 Depreciation and amortization expense 5,122 12,865 895 18,882 EBITDA (non-GAAP) 55,485 15,803 (11,188) 60,100 Restructuring expenses, net (69) 89 32 52 Foreign currency revaluation (gains)/losses (492) 575 167 250 Acquisition/integration costs — 314 — 314 Pre-tax (income) attributable to noncontrolling interest — (46) — (46) Adjusted EBITDA (non-GAAP) $ 54,924 $ 16,735 $ (10,989) $ 60,670 29 Index Three months ended March 31, 2020 (in thousands) Machine Clothing Albany Engineered Composites Corporate expenses and other Total Company Operating income/(loss) (GAAP) $ 47,175 $ 7,623 $ (15,204) $ 39,594 Interest, taxes, other income/(expense) — — (32,000) (32,000) Net income/(loss) (GAAP) 47,175 7,623 (47,204) 7,594 Interest expense, net — — 3,977 3,977 Income tax expense — — 12,454 12,454 Depreciation and amortization expense 5,087 11,985 998 18,070 EBITDA (non-GAAP) 52,262 19,608 (29,775) 42,095 Restructuring expenses, net 642 — — 642 Foreign currency revaluation (gains)/losses (3,661) 697 14,830 11,866 Former CEO termination costs — — 2,742 2,742 Acquisition/integration costs — 298 — 298 Pre-tax expense attributable to noncontrolling interest — 1,492 — 1,492 Adjusted EBITDA (non-GAAP) $ 49,243 $ 22,095 $ (12,203) $ 59,135 The Company discloses certain income and expense items on a per-share basis. The Company believes that such disclosures provide important insight into the 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 either the tax rates in specific countries or the estimated tax rate applied to total company results. The after-tax amount is then divided by 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. The following tables show the earnings per share effect of certain income and expense items: Three months ended March 31, 2021 (in thousands, except per share amounts) Pre tax Amounts Tax Effect After tax Effect Per share Effect Restructuring expenses, net $ 52 $ 15 $ 37 $ 0.00 Foreign currency revaluation (gains)/losses 250 (135) 385 0.01 Acquisition/integration costs 314 94 220 0.01 Three months ended March 31, 2020 (in thousands, except per share amounts) Pre tax Amounts Tax Effect After tax Effect Per share Effect Restructuring expenses, net $ 642 $ 192 $ 450 $ 0.01 Foreign currency revaluation (gains)/losses (a) 11,866 (1,545) 13,411 0.42 Former CEO termination costs 2,742 713 2,029 0.06 Acquisition/integration costs 298 89 209 0.01 (a) In Q1 2020, the company incurred losses of approximately $17 million in jurisdictions where it cannot record a benefit from the losses, which results in an unusual relationship between the pre-tax and after-tax amounts. 30 Index The following table contains the calculation of Adjusted EPS: Three months ended March 31, Per share amounts (Basic) 2021 2020 Earnings per share (GAAP) $ 0.85 $ 0.28 Adjustments, after tax: Restructuring expenses, net — 0.01 Foreign currency revaluation (gains)/losses 0.01 0.42 Former CEO termination costs — 0.06 Acquisition/integration costs 0.01 0.01 Adjusted Earnings per share (non-GAAP) $ 0.87 $ 0.78 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. The Company calculates Net debt by subtracting Cash and cash equivalents from Total debt. Total debt is calculated by adding Long-term debt, Current maturities of long-term debt, and Notes and loans payable, if any. The following table contains the calculation of net debt: (in thousands) March 31, 2021 December 31, 2020 March 31, 2020 Current maturities of long-term debt $ 2 $ 9 $ 20 Long-term debt 384,000 398,000 491,002 Total debt 384,002 398,009 491,022 Cash and cash equivalents 237,871 241,316 222,680 Net debt (non GAAP) $ 146,131 $ 156,693 $ 268,342 Item 3. Quantitative and Qualitative Disclosures about Market Risk For discussion of our exposure to market risk, refer to “Quantitative and Qualitative Disclosures about Market Risk”, which is included as an exhibit to this Form 10-Q.