SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: June 30, 1998
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-16214
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ALBANY INTERNATIONAL CORP.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 14-0462060
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1373 Broadway, Albany, New York 12204
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 518-445-2200
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
The registrant had 24,449,084 shares of Class A Common Stock and 5,643,638
shares of Class B Common Stock outstanding as of June 30, 1998.
ALBANY INTERNATIONAL CORP.
INDEX
Page No.
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Part I Financial information
Item 1. Financial Statements
Consolidated statements of income and retained earnings -
three months and six months ended June 30, 1998 and 1997 1
Consolidated balance sheets - June 30, 1998 and December 31, 1997 2
Consolidated statements of cash flows - six months ended June 30, 1998 and 1997 3
Notes to consolidated financial statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9
Part II Other information
Item 4. Submissions of Matters to a Vote of Security Holders 10
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Item 1. Financial Statements
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
$179,628 $181,904 Net sales $355,784 $353,724
101,664 103,218 Cost of goods sold 203,008 203,223
------- ------- ------- -------
77,964 78,686 Gross profit 152,776 150,501
54,792 52,493 Selling, technical and general expenses 106,023 101,986
------ ------ ------- -------
23,172 26,193 Operating income 46,753 48,515
4,876 3,837 Interest expense, net 9,294 7,725
1,114 441 Other expense, net 2,238 1,024
----- --- ----- -----
17,182 21,915 Income before income taxes 35,221 39,766
6,701 8,547 Income taxes 13,736 15,508
----- ----- ------ ------
10,481 13,368 Income before associated companies 21,485 24,258
115 103 Equity in earnings of associated companies 165 96
--- --- --- --
10,596 13,471 Net income 21,650 24,354
253,927 217,549 Retained earnings, beginning of period 246,013 209,875
4,489 3,220 Less dividends 7,629 6,429
----- ----- ----- -----
$260,034 $227,800 Retained earnings, end of period $260,034 $227,800
======== ======== ======== ========
$0.35 $0.44 Net income per share $0.72 $0.79
===== ===== ===== =====
$0.35 $0.43 Diluted net income per share $0.71 $0.78
===== ===== ===== =====
- $0.105 Cash dividends per common share $0.105 $0.21
====== ====== =====
30,160,155 30,817,402 Weighted average number of shares 30,190,477 30,758,739
========== ========== ========== ==========
The accompanying notes are an integral part of the financial
statements.
1
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
June 30, December 31,
1998 1997
---------------- ---------------
ASSETS
Cash and cash equivalents $5,263 $2,546
Accounts receivable, net 177,394 171,886
Inventories:
Finished goods 114,757 106,259
Work in process 43,062 38,904
Raw material and supplies 37,765 35,288
---------------- ---------------
195,584 180,451
Deferred taxes and prepaid expenses 19,015 18,440
---------------- ---------------
Total current assets 397,256 373,323
Property, plant and equipment, net 325,657 321,611
Investments in associated companies 4,235 2,444
Intangibles 56,321 36,080
Deferred taxes 23,099 22,826
Other assets 40,353 40,613
---------------- ---------------
Total assets $846,921 $796,897
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $109,414 $76,095
Accounts payable 25,886 25,786
Accrued liabilities 55,903 56,743
Current maturities of long-term debt 2,613 1,703
Income taxes payable and deferred 10,891 10,113
---------------- ---------------
Total current liabilities 204,707 170,440
Long-term debt 189,581 173,654
Other noncurrent liabilities 78,536 74,075
Deferred taxes and other credits 34,233 35,620
---------------- ---------------
Total liabilities 507,057 453,789
---------------- ---------------
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
25,615,378 in 1998 and 25,375,413 in 1997 26 25
Class B Common Stock, par value $.001 per share;
authorized 25,000,000 shares; issued and
outstanding 5,643,638 in 1998 and 5,615,563 in 1997 6 6
Additional paid in capital 194,822 187,831
Retained earnings 260,034 246,013
Translation adjustments (accumulated other comprehensive income) (89,497) (84,351)
---------------- ---------------
365,391 349,524
Less treasury stock (Class A), at cost (1,166,294 shares
in 1998; 280,680 shares in 1997) 25,527 6,416
---------------- ---------------
Total shareholders' equity 339,864 343,108
---------------- ---------------
Total liabilities and shareholders' equity $846,921 $796,897
================ ===============
The accompanying notes are an integral part of the financial
statements.
2
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
----------------- -----------------
OPERATING ACTIVITIES
Net income $21,650 $24,354
Adjustments to reconcile net cash provided by operating activities:
Equity in earnings of associated companies (165) (96)
Depreciation and amortization 23,412 22,260
Provision for deferred income taxes, other credits and long-term liabilities 2,824 7,833
Increase in cash surrender value of life insurance, net of premiums paid (1,102) (1,032)
Unrealized currency transaction (gains)/losses (311) 1,732
Loss/(gain) on disposition of assets 8 (20)
Shares contributed to ESOP 2,393 2,736
Changes in operating assets and liabilities:
Accounts receivable (1,078) 1,933
Inventories (11,311) (2,053)
Prepaid expenses (416) 1,071
Accounts payable (1,498) (2,962)
Accrued liabilities 1,023 (715)
Income taxes payable 453 (3,561)
Other, net 902 (4,105)
----------------- -----------------
Net cash provided by operating activities 36,784 47,375
----------------- -----------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (21,149) (23,106)
Purchased software (615) (508)
Proceeds from sale of assets 58 66
Acquisitions, net of cash acquired (24,622) -
Investment in associated companies (2,025) -
----------------- -----------------
Net cash used in investing activities (48,353) (23,548)
----------------- -----------------
FINANCING ACTIVITIES
Proceeds from borrowings 104,863 29,083
Principal payments on debt (62,801) (38,133)
Proceeds from options exercised 2,105 3,708
Tax benefit of options exercised 281 626
Purchases of treasury shares (21,383) (1,421)
Dividends paid (6,382) (6,255)
----------------- -----------------
Net cash provided/(used) in financing activities 16,683 (12,392)
----------------- -----------------
Effect of exchange rate changes on cash flows (2,397) (8,594)
----------------- -----------------
Increase in cash and cash equivalents 2,717 2,841
Cash and cash equivalents at beginning of year 2,546 8,034
----------------- -----------------
Cash and cash equivalents at end of period $5,263 $10,875
================= =================
The accompanying notes are an integral part of the financial
statements.
3
ALBANY INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Management Opinion
In the opinion of management the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary for a fair presentation of results for such
periods. The results for any interim period are not necessarily indicative of
results for the full year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These consolidated financial statements
should be read in conjunction with financial statements and notes thereto for
the year ended December 31, 1997.
2. Accounting for Derivatives
Gains or losses on forward exchange contracts that function as an
economic hedge against currency fluctuation effects on future revenue streams
are recorded in "Other expense, net".
Gains or losses on forward exchange contracts that are designated a
hedge of a foreign operation's net assets and/or long-term intercompany loans
are recorded in "Translation adjustments", a separate component of shareholders'
equity. These contracts reduce the risk of currency exposure on foreign currency
net assets and do not exceed the foreign currency amount being hedged. To the
extent the above criteria are not met, or the related assets are sold,
extinguished, or terminated, activity associated with such hedges is recorded in
"Other expense, net".
All open positions on forward exchange contracts are valued at fair
value using the estimated forward rate of a matching contract.
Gains or losses on futures contracts have been recorded in "Other
expense, net". Open positions have been valued at fair value using quoted market
rates.
In late June 1998, the Company entered into interest rate swap
transactions to hedge part of its interest rate exposure. Gains or losses on
these transactions are recorded in "Interest expense, net" and unrealized gains
or losses related to changes in the fair value of the contracts are not
recognized.
In June 1998, Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities", was issued. This Standard
establishes a new model for accounting for derivatives and hedging activities.
All derivatives will be required to be recognized as either assets or
liabilities and measured at fair value. Each hedging relationship must be
designated and accounted for pursuant to this Standard. Since the Company
already records forward exchange and futures contracts at fair value, this
Standard is not expected to have a material effect on the accounting for these
transactions. In accordance with this Standard, interest rate swaps, that hedge
interest rate exposure, will be measured at fair value with the initial asset or
liability recognized in "Other comprehensive income". Actual amounts paid or
received on these contracts will be reclassified from "Other comprehensive
income" to "Interest expense, net". The Company plans to adopt this Standard on
its effective date of January 1, 2000.
3. Other Expense, Net
Included in other expense, net for the six months ended June 30 are:
currency transactions, $0.7 million income in 1998 and 1997; amortization of
debt issuance costs and loan origination fees, $0.3 million in 1998 and $0.4
million in 1997; interest rate protection agreements, $0.7 million income in
1997 and other miscellaneous expenses, none of which are significant, in 1998
and 1997.
4
Included in other expense, net for the three months ended June 30 are:
currency transactions, $0.3 million income in 1998 and 1997; amortization of
debt issuance costs and loan organization fees, $0.1 million in 1998 and $0.2
million in 1997; interest rate protection agreements, $0.5 million income in
1997 and other miscellaneous expenses, none of which are significant, in 1998
and 1997.
4. Earnings Per Share
In accordance with Financial Accounting Standard No. 128, "Earnings Per
Share", net income per share is computed using the weighted average number of
shares of Class A and Class B Common Stock outstanding during the period.
Diluted net income per share includes the effect of all potentially dilutive
securities.
The amounts used in computing earnings per share, including the effect
on income and the weighted average number of shares of potentially dilutive
securities, are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Three Months Ended
June 30, June 30,
(in thousands) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Income available to common stockholders:
Income available to common stockholders
(No adjustments needed for dilutive securities) $21,650 $24,354 $10,596 $13,471
------- ------- ------- -------
Weighted average number of shares:
Weighted average number of shares used in
net income per share 30,190 30,759 30,160 30,817
Effect of dilutive securities:
Stock options 511 344 612 327
--- --- --- ---
Weighted average number of shares used in
diluted net income per share 30,701 31,103 30,772 31,144
------ ------ ------ ------
Options to purchase 250,000 shares of common stock at $25.5625 per share were
outstanding at June 30, 1998 but were not included in the computation of diluted
net income per share for the six months ended June 30, 1998 because the options'
exercise price was greater than the average market price of the common shares
for that period.
5. Comprehensive Income
Total comprehensive income consists of:
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Three Months Ended
June 30, June 30,
(in thousands) 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $21,650 $24,354 $10,596 $13,471
Other comprehensive loss, before tax:
Foreign currency translation adjustments (5,146) (23,050) (6,226) (6,591)
Income tax related to items of other
comprehensive loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $16,504 $1,304 $4,370 $6,880
- ------------------------------------------------------------------------------------------------------------------------------------
5
6. Income Taxes
The Company's effective tax rate for the six months ended June 30, 1998
and 1997 was 39% and approximates the anticipated effective tax rate for the
full year 1998.
7. Supplementary Cash Flow Information
Interest paid for the six months ended June 30, 1998 and 1997 was $8.6
million and $7.3 million, respectively.
Taxes paid for the six months ended June 30, 1998 and 1997 was $12.5
million and $7.7 million, respectively.
8. Acquisitions
In January 1998, the Company acquired substantially all of the assets
of Burwell Door Systems located in Sydney, Australia for approximately $3.4
million.
In March 1998, the Company purchased all of the outstanding capital
stock of Techniweave, Inc., a specialty fabricator of high performance
textiles and composites. The purchase price was approximately $8.9 million
with $3.3 million paid at closing and $5.6 million deferred for up to ten
years.
In March 1998, the Company purchased all of the outstanding capital
stock of Metco Form Oy, a Finnish supplier of forming fabrics and other
engineered fabrics for pulp mills and other chemical process industries. The
purchase price was approximately $10.9 million.
In April 1998, the Company purchased all of the outstanding capital
stock of M&I Door Systems located in Barrie, Ontario, Canada for approximately
$8.4 million.
All of the above acquisitions were accounted for as purchases and,
accordingly, the Company included in its financial statements the results of
operations of the acquired entities as of the respective acquisition dates.
In March 1998, the Company purchased a 50% interest in SARA (Loading
Bay Specialists, Ltd.), a distributor of high performance industrial doors
located in England for approximately $2.0 million. This investment is being
accounted for on an equity basis and is included in "Investments in Associated
Companies".
9. Stock Dividend
On July 3, 1998, the Company distributed 122,015 shares of Class A
Common Stock and 28,075 shares of Class B Common Stock in connection with a
0.5% stock dividend. As a result of the stock dividend, additional paid-in
capital was increased $4.5 million while retained earnings was decreased $4.5
million as of June 30, 1998. All references in the accompanying financial
statements to the number of common shares and per-share amounts have been
restated to reflect the stock dividend.
6
Item 2. Management's Discussion and Analysis
--------------------------------------------
of Financial Condition and Results of Operations
------------------------------------------------
For the Three and Six Months Ended June 30, 1998
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS:
Net sales decreased to $179.6 million for the three months ended June 30, 1998
as compared to $181.9 million for the three months ended June 30, 1997. The
effect of the stronger U.S. dollar as compared to the second quarter of 1997 was
to decrease net sales by $6.0 million. Acquisitions, as discussed below, added
$5.5 million to second quarter 1998 net sales. Excluding these two factors, 1998
net sales decreased 1.0% as compared to 1997.
Net sales for the six months ended June 30, 1998 increased slightly to $355.8
million as compared to $353.7 million for the same period in 1997. The effect of
the stronger U.S. dollar as compared to the first six months of 1997 was to
decrease net sales by $13.5 million. 1998 acquisitions added $6.8 million to net
sales. Excluding these two factors, 1998 net sales increased 2.5% as compared to
1997.
Geographically, net sales for the six months ended June 30, 1998, as compared to
the same period in 1997, increased in the United States and decreased in Canada.
Net sales in Canada were impacted by the effect of the stronger U.S. dollar and
a weather related shutdown that closed manufacturing operations for about two
weeks in January 1998. Asian sales were lower in 1998, as compared to 1997.
European sales increased in local currencies and were flat in U.S. dollars.
Gross profit was 43.4% of net sales for the three months ended June 30, 1998 as
compared to 43.3% for the same period in 1997 bringing the six month result to
42.9% for 1998 as compared to 42.5% for 1997. Year to date variable costs as a
percent of net sales decreased to 33.2% in 1998 from 33.5% for the same period
in 1997. Excluding the effect of the stronger U.S. dollar, 1998 acquisitions and
the start-up of the Company's new Korean plant, as discussed below, variable
costs as a percent of net sales were 32.4% in 1998.
Selling, technical, general and research expenses increased 1.8%, excluding 1998
acquisitions and the new Korean plant, for the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997. Excluding the additional effect
of translation of non-U.S. currencies into fewer U.S. dollars, these expenses
increased 4.8% as compared to 1997. This increase was principally due to higher
wages and benefit costs and the unfavorable change in the remeasurement of
foreign currency transactions incurred principally in Sweden and France.
Operating income as a percentage of net sales decreased to 13.1% for the six
months ended June 30, 1998 from 13.7% for the comparable period in 1997 due to
items discussed above. Excluding the effect of the stronger U.S. dollar, 1998
acquisitions and the new Korean plant, operating income as a percentage of net
sales was 13.9% in 1998.
7
Interest expense increased $1.6 million for the six months ended June 30, 1998
as compared to the same period in 1997. This increase was due to higher total
debt during 1998 as a result of acquisitions and the Company's purchase of
1,281,300 shares of its own stock since November 1997.
The tax rate for the six months ended June 30, 1998 and 1997 was 39.0% and
approximates the anticipated effective rate for the full year 1998.
In late 1997, the Company finished the construction of a new paper machine
clothing plant located in Chungju, South Korea for a total cost of approximately
$22 million. The first shipments to customers were made in February 1998.
In January 1998, the Company acquired substantially all of the assets of Burwell
Door Systems located in Sydney, Australia for approximately $3.4 million.
In March 1998, the Company purchased all of the outstanding capital stock of
Techniweave, Inc., a specialty fabricator of high performance textiles and
composites. The purchase price was approximately $8.9 million with $3.3 million
paid at closing and $5.6 million deferred for up to ten years.
In March 1998, the Company purchased all of the outstanding capital stock of
Metco Form Oy, a Finnish supplier of forming fabrics and other engineered
fabrics for pulp mills and other chemical process industries. The purchase price
was approximately $10.9 million.
In April 1998, the Company purchased all of the outstanding capital stock of M&I
Door Systems located in Barrie, Ontario, Canada for approximately $8.4 million.
All of the above acquisitions were accounted for as purchases and, accordingly,
the Company included in its financial statements the results of operations of
the acquired entities as of the respective acquisition dates. Management does
not expect these acquisitions to have a significant impact on 1998 operating
results.
In March 1998, the Company purchased a 50% interest in SARA (Loading Bay
Specialists, Ltd.), a distributor of high performance industrial doors located
in England for approximately $2.0 million. This investment is being accounted
for on an equity basis and is included in "Investments in Associated Companies".
Reasons for the changes in operating results for the three month period ended
June 30, 1998 as compared to the corresponding period in 1997 are similar to
those which affected the six month comparisons, except where specifically noted.
LIQUIDITY AND CAPITAL RESOURCES:
Accounts receivable increased $5.5 million since December 31, 1997. Excluding
the effect of the stronger U.S. dollar, acquisitions and the new Korean plant,
accounts receivable increased $5.1 million. Inventories increased $15.1 million
during the six months ended June 30, 1998. Excluding the factors noted above,
inventories increased $10.2 million and are expected to decrease during the
second half of 1998.
The Company's current debt structure provides approximately $160 million in
committed and available unused debt capacity with financial institutions.
Management believes that this debt capacity, in combination with informal
commitments and expected free cash flows, should be sufficient to meet operating
requirements and for business opportunities and most acquisitions which support
corporate strategies.
8
Capital expenditures for the six months ended June 30, 1998, including leases to
the extent they are required to be capitalized, were $21.1 million as compared
to $23.1 million for the same period last year. The Company anticipates that
capital expenditures, including leases, will be approximately $45 million for
the full year and will continue to finance these expenditures with cash from
operations and existing credit facilities.
A cash dividend of $.105 per share, which was declared for the fourth quarter
of 1997, was paid in the first quarter of 1998. The Company also declared a cash
dividend of $.105 per share for the first quarter of 1998, which was paid in the
second quarter of this year. On July 3, 1998, the Company distributed 122,015
shares of Class A Common Stock and 28,075 shares of Class B Common Stock in
connection with a 0.5% stock dividend. As a result of the stock dividend,
additional paid-in capital was increased $4.5 million while retained earnings
was decreased $4.5 million as of June 30, 1998. All references in the
accompanying financial statements to the number of common shares and per-share
amounts have been restated to reflect the stock dividend.
In June 1998, Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities", was issued. This Standard establishes a new
model for accounting for derivatives and hedging activities. All derivatives
will be required to be recognized as either assets or liabilities and measured
at fair value. Each hedging relationship must be designated and accounted for
pursuant to this Standard. Since the Company already records forward exchange
and futures contracts at fair value, this Standard is not expected to have a
material effect on the accounting for these transactions. In accordance with
this Standard, interest rate swaps, that hedge interest rate exposure, will be
measured at fair value with the initial asset or liability recognized in "Other
comprehensive income". Actual amounts paid or received on these contracts will
be reclassified from "Other comprehensive income" to "Interest expense, net".
The Company plans to adopt this Standard on its effective date of January 1,
2000.
9
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
At the annual meeting of shareholders held on May 12, 1998 items subject to a
vote of security holders were the election of eight directors, the approval of
the 1998 Stock Option Plan and the election of auditors.
In the vote for the election of eight members of the Board of Directors of the
Company, the number of votes cast for, and the number of votes withheld from,
each of the nominees were as follows:
Nominee Number of Votes For Number of Votes Withheld Broker Nonvotes
Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- -------
Francis L. McKone 19,773,787 56,155,630 609,664 - - -
Frank R. Schmeler 19,773,587 56,155,630 609,864 - - -
Thomas R. Beecher, Jr. 19,772,688 56,155,630 610,763 - - -
Charles B. Buchanan 19,772,987 56,155,630 610,464 - - -
Dr. Joseph G. Morone 19,772,533 56,155,630 610,917 - - -
Christine L. Standish 19,682,108 56,155,630 701,342 - - -
Allan Stenshamn 19,773,008 56,155,630 610,442 - - -
Barbara P. Wright 19,773,362 56,155,630 610,088 - - -
In the vote for the approval of the 1998 Stock Option Plan, the number of votes
cast for, the number cast against, and the number of votes abstaining with
respect to such resolution were as follows:
Number of Votes For Number of Votes Against Number of Votes Abstaining Broker Nonvotes
Class A Class B Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- ------- ------- -------
14,646,485 56,155,630 5,609,207 - 82,197 - - -
In the vote on the motion to appoint the firm of PricewaterhouseCoopers L.L.P.
as the Company's auditor for 1998, the number of votes cast for, the number cast
against, and the number of votes abstaining with respect to such resolution were
as follows:
Number of Votes For Number of Votes Against Number of Votes Abstaining Broker Nonvotes
Class A Class B Class A Class B Class A Class B Class A Class B
------- ------- ------- ------- ------- ------- ------- -------
20,001,092 56,155,630 9,651 - 372,707 - - -
10
Item 5. Other Information
- ------- -----------------
The following statement is provided pursuant to Rule 14a-5 promulgated by the
Securities and Exchange Commission under Securities Exchange Act of 1934, as
amended: Proxies solicited by the Company for the Company's 1999 Annual Meeting
of Shareholders will be voted in the discretion of the persons voting such
proxies with respect to all proposals presented by shareholders for
consideration at such meeting after February 10, 1999.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
No reports on Form 8-K were filed during the quarter ended June 30, 1998.
Exhibit No. Description
----------- -----------
10(m)(vi). 1998 Stock Option Plan
11. Schedule of computation of net income per share and
diluted net income per share
27. Financial data schedule
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALBANY INTERNATIONAL CORP.
--------------------------
(Registrant)
Date: August 10, 1998
by /s/Michael C. Nahl
---------------------
Michael C. Nahl
Sr. Vice President and
Chief Financial Officer
EXHIBIT 10(m)(vi)
1998 Stock Option Plan
ALBANY INTERNATIONAL CORP.
1998 Stock Option Plan
1. Purpose.
This plan ("the 1998 Plan") is intended as an incentive to officers and
other key employees of Albany International Corp. ("the Company") and its
subsidiaries to encourage them to remain in the employ of the Company and its
subsidiaries by affording them a greater interest in the success of the Company
and its subsidiaries.
2. Administration.
The 1998 Plan shall be administered by the Committee (as herein
defined). Subject to the provisions of the 1998 Plan, the Committee shall have
authority, within its absolute discretion:
(a) to grant options for shares of Class A Common Stock of the
Company under the 1998 Plan; provided, that the maximum number of
shares of Class A Common Stock with respect to which any optionee may
be granted options during any calendar year shall not exceed 100,000;
(b) to determine which of the officers and other key employees
of the Company and its subsidiaries shall be granted options;
(c) to determine the time or times when options shall be
granted and the number of shares to be subject to each option;
(d) to determine the option price of the Class A Common Stock
subject to each option, which shall not be less than 100% of the fair
market value of the Class A Common Stock on the date of granting of an
option;
(e) to determine the fair market value of the Class A Common
Stock on the date of the granting of an option;
(f) to determine the term of each option, which shall not
continue for more than twenty years from the date of granting of the
option, and to accelerate the expiration of the term of an option;
(g) to determine the time or times when each option shall be
exercisable and to accelerate at any time the time or times when an
outstanding option shall be exercisable;
(h) to accept, as full or partial payment of the option
price and/or any taxes to be withheld by the Company upon exercise of
any option, shares of Class A Common Stock tendered by the optionee or
requested by the optionee to be withheld from the shares to
to be delivered upon such exercise, and to determine the value of the
shares so tendered or withheld;
(i) to determine, to the extent permitted by law, the status
under the Internal Revenue Code of any option granted under the 1998
Plan, including, without limitation, whether the option shall be
treated as an Incentive Stock Option;
(j) to determine the effect on any option of the termination
of the employment of the optionee and of any conduct or activity of the
optionee;
(k) to determine the extent to which options granted under the
1998 Plan shall be assignable or transferable;
(l) to prescribe from time to time the form or forms of the
instruments evidencing options granted under the 1998 Plan;
(m) to adopt, amend and rescind from time to time such rules
and regulations as it, in its absolute discretion, may deem to be
advisable in connection with administration of the 1998 Plan;
(n) to construe and interpret the 1998 Plan, instruments
evidencing options granted under the 1998 Plan and rules and
regulations adopted by the Committee with respect to the 1998 Plan; and
(o) to make all other determinations which the Committee, in
its absolute discretion, deems necessary or desirable at any time with
respect to the administration of the 1998 Plan.
All decisions, determinations and interpretations of the Committee shall be
final and binding on all optionees and on any other persons claiming rights
under this Plan or with respect to any option granted hereunder.
As used herein, the term "the Committee" shall mean the Board of
Directors or such Committee of the Board of Directors as the Board of Directors
may from time to time designate for this purpose.
3. Shares Subject to the 1998 Plan.
Subject to Article 4 hereof, the aggregate number of shares for which
options may be granted under the 1998 Plan shall be (a) 500,000 shares of Class
A Common Stock of the Company as presently constituted plus (b) such additional
number of shares as the Board of Directors of the Company shall, from time to
time subsequent to January 1, 1999 and during the term of the 1998 Plan,
determine; provided that the number of shares so added by the Board of Directors
shall not exceed, in any one calendar year, 500,000 shares of Class A Common
Stock as presently constituted; and provided, further, that the total number of
shares then available for the grant of options pursuant to the 1998 Plan shall
not exceed 1,000,000 at any time.
2
If any options granted under the 1998 Plan shall expire,
terminate or be surrendered, in whole or in part, the number of shares as to
which such options shall not have been exercised shall thereupon again become
available for option hereunder.
Shares of Class A Common Stock to be issued upon exercise of options
granted under the 1998 Plan may be either authorized but unissued shares or
issued shares reacquired in any manner by the Company, as the Board of Directors
may from time to time determine.
Cash proceeds received upon the exercise of options granted under the
1998 Plan shall be added to the general funds of the Company and may be used for
any corporate purpose.
4. Recapitalizations, etc.
Notwithstanding any other provision of the 1998 Plan, in the event of
any change in the outstanding common stock of the Company by reason of a stock
dividend, recapitalization, merger, consolidation, split-up, combination or
exchange of shares or the like, the aggregate number and class of shares for
which options may be granted under the 1998 Plan, the number and class of shares
subject to each outstanding option and the option prices may be (but are not
required to be) appropriately adjusted by the Committee, whose determination
shall be conclusive. No fractional shares shall be issued under the 1998 Plan
and any fractional shares resulting from computations pursuant to this Article 4
shall be eliminated from the option.
5. Indemnification of Committee.
In addition to such other rights of indemnification as they may have as
directors, as members of the Committee or otherwise, the members of the
Committee shall be indemnified by the Company against the reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with an appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the 1998 Plan or any option
granted hereunder and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member is liable
for negligence or misconduct in the performance of his or her duties, provided
that within sixty days after institution of any such action, suit or proceeding,
a Committee member shall in writing offer the Company the opportunity, at its
own expense, to handle and defend the same.
6. Amendment and Termination of the 1998 Plan.
No option shall be granted under the 1998 Plan subsequent to December
31, 2008. The Board of Directors of the Company may, at any time, suspend or
terminate the 1998 Plan or make changes in or additions to it as the Board of
Directors deems advisable; provided, however, that, except as provided in
Article 4 hereof, the Board of Directors may not, without approval by a majority
of the votes entitled to be cast by shares of common stock of the Company
present and entitled to be cast at a meeting of stockholders of the Company,
materially increase the aggregate number of shares for which options may be
granted under the 1998 Plan or increase the maximum number of shares of Class A
Common Stock with respect to which any optionee may be granted options during
any calendar year.
3
7. Shareholder Approval.
The 1998 Plan shall not become effective unless and until it has been
approved by a majority of the votes entitled to be cast by shares of common
stock of the Company present or represented and entitled to be cast at the first
meeting of stockholders of the Company held after approval of the 1998 Plan by
the Board of Directors of the Company.
4
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE AND DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
For the three months For the six months
ended June 30, ended June 30,
1998 (1) 1997 (1) 1998 (1) 1997 (1)
-------------- -------------- ---------- -----------
Net Income $10,596 $13,471 $21,650 $24,354
============== ============== ========== ===========
Weighted average number of shares 30,160,155 30,817,402 30,190,477 30,758,739
Effect of potentially dilutive securities:
Stock options (2) 611,725 326,889 511,334 343,768
-------------- -------------- ---------- -----------
Weighted average number shares,
including the effect of potentially dilutive securities 30,771,880 31,144,291 30,701,811 31,102,507
============== ============== ========== ===========
Net income per share $0.35 $0.44 $0.72 $0.79
============== ============== ========== ===========
Diluted net income per share $0.35 $0.43 $0.71 $0.78
============== ============== ========== ===========
Calculation of Weighted Average Number of Shares (3):
Weighted Average Shares
-------------------------------------------------------
For the three months For the six months
Days ended June 30, ended June 30,
Shares ------------------
Activity Outstanding (1) Year to Date Quarter 1998 1997 1998 1997
- ------------------------------------------------------------------------ -------------- -------------- ---------- -----------
1997
Beginning balance 30,616,948 1 169,154
Options - 200 shares 30,617,149 1 169,156
Options - 3,600 shares 30,620,767 3 507,527
Options - 10,000 shares 30,630,817 1 169,231
Options - 900 shares 30,631,722 1 169,236
Options - 5,000 shares 30,636,747 19 3,216,012
Treasury shares - 57,500 30,578,959 3 506,834
Options - 37,300 shares 30,616,446 1 169,152
ESOP shares - 12,002 30,628,508 3 507,655
Options - 20,000 shares 30,648,608 4 677,317
Options - 5,000 shares 30,653,633 5 846,785
Options - 27,000 shares 30,680,768 1 169,507
Options - 1,400 shares 30,682,175 1 169,515
Options - 28,600 shares 30,710,918 4 678,694
Options - 10,000 shares 30,720,968 10 1,697,291
ESOP shares - 58,773 30,780,035 31 5,271,719
ESOP shares - 12,126 30,792,221 2 1 338,376 340,246
Options - 1,800 shares 30,794,030 19 19 6,429,523 3,232,522
Directors shares - 2,922 30,796,967 9 9 3,045,854 1,531,341
ESOP shares - 12,380 30,809,409 1 1 338,565 170,218
Treasury shares - 4,400 30,804,987 30 30 10,155,490 5,105,799
ESOP shares - 12,193 30,817,241 9 9 3,047,859 1,532,349
Options - 2,500 shares 30,819,753 3 3 1,016,036 510,825
Options - 17,900 shares 30,837,743 1 1 338,876 170,374
Options - 10,200 shares 30,847,994 5 5 1,694,945 852,155
Options - 8,700 shares 30,856,737 1 1 339,085 170,479
Options - 19,200 shares 30,876,033 6 6 2,035,782 1,023,515
Options - 5,000 shares 30,881,058 1 1 339,352 170,614
Options - 14,000 shares 30,895,128 4 4 1,358,028 682,765
ESOP shares - 11,243 30,906,427 1 1 339,631 170,754
-------------- -----------
Totals 30,817,402 30,758,739
============== ===========
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE AND DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
1998
Beginning balance 30,863,847 8 1,364,148
Treasury shares - 5,000 30,858,822 6 1,022,944
Options - 2,500 shares 30,861,335 1 170,505
Treasury shares - 411,100 30,448,179 7 1,177,554
Treasury shares - 400,000 30,046,179 7 1,162,007
Treasury shares - 13.700 30,032,411 1 165,925
ESOP shares - 12,783 30,045,258 25 4,149,897
Treasury shares - 26,000 30,019,128 3 497,555
ESOP shares - 41,378 30,060,713 13 2,159,057
Options - 600 shares 30,061,316 5 830,423
Options - 20,000 shares 30,081,416 9 1,495,761
Options - 8,000 shares 30,089,456 4 664,960
Options - 9,500 shares and
ESOP shares - 10,011 30,109,064 2 1 330,869 332,697
Options - 4,400 shares 30,113,486 1 1 330,917 166,373
Options - 8,000 shares 30,121,526 3 3 993,017 499,252
Options - 16,600 shares 30,138,209 15 15 4,967,837 2,497,642
Options - 1,600 shares 30,139,817 3 3 993,620 499,555
Options - 5,400 shares 30,145,244 4 4 1,325,066 666,193
Options - 1,500 shares 30,146,752 2 2 662,566 333,113
ESOP shares - 10,443 30,157,247 1 1 331,398 166,615
Options - 500 shares 30,157,750 10 10 3,314,038 1,666,174
Options - 7,400 shares 30,165,187 4 4 1,325,942 666,634
Directors shares - 2,004 30,167,201 4 4 1,326,031 666,678
Options - 600 shares 30,167,804 1 1 331,514 166,673
Options - 3,000 shares 30,170,819 2 2 663,095 333,379
Options - 1,200 shares 30,172,025 5 5 1,657,804 833,481
Options - 600 shares 30,172,628 4 4 1,326,269 666,798
ESOP shares - 9,096 30,181,769 3 3 995,003 500,250
Options - 10,000 shares 30,191,819 2 2 663,556 333,611
Options - 10,000 shares 30,201,869 3 3 995,666 500,583
Options - 2,500 shares 30,204,382 1 1 331,916 166,875
Options - 500 shares 30,204,884 9 9 2,987,296 1,501,900
Options - 3,000 shares 30,207,899 1 1 331,955 166,894
Treasury shares - 6,900 30,200,965 3 3 995,636 500,568
Options - 550 shares 30,201,517 3 3 995,654 500,578
Treasury shares - 120,000 30,080,917 5 5 1,652,798 830,965
ESOP shares - 11,371 30,092,722 1 1 330,689 166,258
--------------- -----------
Totals 30,160,155 30,190,477
=============== ===========
(1) Includes Class A and Class B Common Stock
(2) Incremental shares of unexercised options are calculated based on the
average price of the Company's stock for the respective period. The
calculation includes all options that are dilutive to earnings per share.
(3) Weighted average number of shares have been retroactively restated to
reflect the .5% stock dividend issued on July 3, 1998. Each change in the
total share balance is comprised of the transaction noted plus the
retroactive effect of the stock dividend.
5
1,000
6-MOS
DEC-31-1998
JUN-30-1998
5,263
0
182,829
5,435
195,584
397,256
644,557
318,900
846,921
204,707
189,581
0
0
32
339,832
846,921
355,784
355,784
203,008
308,820
2,238
211
9,294
35,221
13,736
21,650
0
0
0
21,650
0.72
0.71
