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:  September 30, 1994
                                           ------------------
                                       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
                                                 -------

                           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
- ----------------------------------------             -----
(Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code         518-445-2200
                                                          -------------



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 24,344,566 shares of Class A Common Stock and 5,653,251
shares of Class B Common Stock outstanding as of September 30, 1994.



                                   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:  November 7, 1994



                              by /s/ Michael C. Nahl
                                 -------------------
                                 Michael C. Nahl
                                 Sr. Vice President and
                                 Chief Financial Officer



                                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 nine months ended September 30, 1994
           and 1993                                                         1

           Consolidated balance sheets - September 30, 1994 and
           December 31, 1993                                                2

           Consolidated statements of cash flows - nine months ended
           September 30, 1994 and 1993                                      3

           Notes to consolidated financial statements                      4-5

           Item 2.  Management Discussion and Analysis of Financial
           Condition and Results of Operations                             6-8


Part II    Other information

           Item 6.  Exhibits and Reports on Form 8-K                         9



                            Item 1. Financial Statements

                             ALBANY INTERNATIONAL CORP.
                CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
                                    (unaudited)

                        (in thousands except per share data)

Three Months Ended Nine Months Ended September 30, September 30, 1994 1993 1994 1993 ---------- ---------- ---------- ---------- $145,144 $125,566 Net sales $416,194 $412,289 87,353 78,776 Cost of goods sold 253,639 263,243 ---------- ---------- ---------- ---------- 57,791 46,790 Gross profit 162,555 149,046 42,850 36,253 Selling, technical and general expenses 122,522 120,036 - - Restructuring charges and termination benefits - 419 ---------- ---------- ---------- ---------- 14,941 10,537 Operating Income 40,033 28,591 4,445 3,991 Interest expense, net 12,314 12,836 123 (391) Other expense/(income), net 730 (159) ---------- ---------- ---------- ---------- 10,373 6,937 Income before income taxes 26,989 15,914 4,461 2,733 Income taxes 11,605 6,270 ---------- ---------- ---------- ---------- 5,912 4,204 Income before associated companies 15,384 9,644 72 219 Equity in earnings/(losses) of associated 185 (516) companies ---------- ---------- ---------- ---------- 5,984 4,423 Net Income 15,569 9,128 130,624 120,323 Retained earnings, beginning of period 126,276 120,113 2,624 2,252 Less dividends 7,861 6,747 ---------- ---------- ---------- ---------- $133,984 $122,494 Retained earnings, end of period $133,984 $122,494 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $0.20 $0.18 Net income per common share $0.52 $0.36 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- $0.0875 $0.0875 Dividends per common share $0.2625 $0.2625 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- 29,972,230 25,728,457 Weighted average number of shares 29,934,296 25,693,212 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements. -1- ALBANY INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS (in thousands)
(unaudited) September 30, December 31, 1994 1993 ------------ ------------ ASSETS Cash and cash equivalents $2,673 $1,381 Accounts receivable, net 145,711 120,416 Inventories: Finished goods 76,465 72,763 Work in process 36,797 32,991 Raw material and supplies 25,139 18,539 ------------ ------------ 138,401 124,293 Deferred taxes and prepaid expenses 18,008 18,050 ------------ ------------ Total current assets 304,793 264,140 Property, plant and equipment, net 324,399 302,829 Investments in associated companies 1,425 10,951 Intangibles 26,952 25,558 Deferred taxes 29,815 33,640 Other assets 27,809 18,302 ------------ ------------ Total assets $715,193 $655,420 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Notes and loans payable $10,242 $8,560 Accounts payable 20,957 23,284 Accrued liabilities 57,318 55,288 Current maturities of long-term debt 984 2,917 Income taxes payable and deferred 4,670 7,881 ------------ ------------ Total current liabilities 94,171 97,930 Long-term debt 252,071 208,620 Other noncurrent liabilities 84,471 82,423 Deferred taxes and other credits 15,414 21,979 ------------ ------------ Total liabilities 446,127 410,952 ------------ ------------ 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 24,544,209 in 1994 and 24,531,445 in 1993 25 25 Class B common stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 5,653,251 in 1994 and 5,658,515 in 1993 6 6 Additional paid in capital 170,457 170,112 Retained earnings 133,984 126,276 Translation adjustments (30,998) (45,758) Pension adjustment (1,856) (1,856) ------------ ------------ 271,618 248,805 Less treasury stock (Class A), at cost (199,643 shares in 1994; 307,491 shares in 1993) 2,552 4,337 ------------ ------------ Total shareholders' equity 269,066 244,468 ------------ ------------ Total liabilities and shareholders' equity $715,193 $655,420 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. -2- ALBANY INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Nine Months Ended September 30, 1994 1993 ----------- ----------- OPERATING ACTIVITIES Net income $15,569 $9,128 Adjustments to reconcile net cash provided by operating activities: Equity in (earnings)/losses of associated companies (185) 516 Distributions received from associated companies - 407 Depreciation and amortization 30,433 34,460 Provision for deferred income taxes, other credits (3,881) (4,177) and long-term liabilities Increase in cash surrender value of life insurance, (1,343) (152) net of premiums paid Unrealized currency transaction losses/(gains), net 3,648 (261) Loss on disposition of assets 77 (2,991) Tax benefit of options exercised 11 - Treasury shares contributed to ESOP 1,994 1,772 Changes in operating assets and liabilities: Accounts receivable (26,510) 13,681 Inventories (10,917) (268) Prepaid expenses 782 (1,455) Accounts payable (2,753) (3,234) Accrued liabilities (119) 8,691 Income taxes payable (3,591) 859 Other, net (7,886) (1,518) ----------- ----------- Net cash (used)/provided by operating activities (4,671) 55,458 ----------- ----------- INVESTING ACTIVITIES Purchases of property, plant and equipment (30,276) (19,996) Proceeds from sale of assets 1,670 27,553 Acquisitions, net of cash acquired 526 (55,356) Premiums paid for life insurance - (1,198) ----------- ----------- Net cash used in investing activities (28,080) (48,997) ----------- ----------- FINANCING ACTIVITIES Proceeds from borrowings 51,236 32,894 Principal payments on debt (10,721) (30,802) Proceeds from options exercised 126 - Dividends paid (7,842) (6,738) ----------- ----------- Net cash provided/(used) in financing activities 32,799 (4,646) ----------- ----------- Effect of exchange rate changes on cash 1,244 (588) ----------- ----------- Increase in cash and cash equivalents 1,292 1,227 Cash and cash equivalents at beginning of year 1,381 4,005 ----------- ----------- Cash and cash equivalents at end of period $2,673 $5,232 ----------- ----------- ----------- -----------
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, 1993. 2. Other Expense/(Income), Net Included in other expense/(income), net for the nine months ended September 30 are: currency transactions, $.2 million income in 1994 and $3.5 million income in 1993, pre-receivable sale, $.2 million income in 1994 and $1.4 million expense in 1993, amortization of debt issuance costs and loan origination fees, $.8 million in 1994 and $.6 million in 1993, interest rate protection agreements, $.6 million income in 1994 and $.1 million expense in 1993 and other miscellaneous expenses/(income), none of which are significant, in 1994 and 1993. Included in other expense/(income), net for the three months ended September 30 are: currency transactions, $1.1 million income in 1993, pre- receivable sale $.4 million expense in 1993, amortization of debt issuance costs and loan origination fees, $.2 million in 1994 and $.1 million in 1993, interest rate protection agreements, $.3 million income in 1994 and other miscellaneous expenses/(income), none of which are significant, in 1994 and 1993. 3. Earnings Per Share Earnings per share on common stock are computed using the weighted average number of shares of Class A and Class B Common Stock outstanding during each year. Options granted under the Company's stock option plans were not dilutive at September 30, 1994 and 1993. The convertible subordinated debentures are not common stock equivalents and will not affect primary earnings per share. Further, the convertible subordinated debentures were not dilutive at September 30, 1994 and 1993. 4. Income Taxes The Company's effective tax rate for the nine months ended September 30, 1994 was 43.0% as compared to 39.4% for the same period last year and approximates the anticipated effective tax rate for the full year 1994. The increase is due principally to the accrual of net charges associated with prior years resulting from both U.S. and non-U.S. examinations. 4 5. Debt The Company has an agreement under which it may sell to a financial institution up to $40 million of the Company's right to receive certain payments for goods ordered from the Company. At September 30, there were no amounts sold under this agreement as compared to $12.0 million at December 31, 1993. At December 31, 1993, this transaction had the effect of reducing long-term debt $12.0 million, reducing accounts receivable $5.4 million and increasing accrued liabilities $6.6 million. 6. Supplementary Cash Flow Information Interest paid for the nine months ended September 30, 1994 and 1993 was $14.4 million and $11.9 million, respectively. Taxes paid for the nine months ended September 30, 1994 and 1993 were $17.9 million and $2.0 million, respectively. 7. Acquisition In February 1994, the Company exchanged its 40% equity interests in Brazil and Argentina for the remaining 60% interest in Mexico. The transaction was accounted for as a purchase and, accordingly, the Company has included the results of operations in its financial statements as of January 1, 1994. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto. RESULTS OF OPERATIONS: Net sales for the three months ended September 30, 1994 increased $19.5 million or 15.6% compared to the same period in 1993. The weaker U.S. dollar during the quarter as compared to 1993 increased net sales by $4.2 million. Excluding this effect, net sales were 12.2% above third quarter 1993. The third quarter sales growth rate remained strong in the Nordic region and sales in Continental Europe began improving for the first time in this economic cycle. Canadian sales increased due principally to improved economic and paper industry operating conditions. Sales in North America increased even though selective price concessions for customers entering into Continuous Supply agreements for the Company's products tended to reduce net selling prices. Management believes that Continuous Supply agreements are part of an effort by paper companies to reduce the number of suppliers of paper machine clothing and that this ultimately will be beneficial to Albany International shareholders. Net sales increased $3.9 million or .9% for the nine months ended September 30, 1994 compared with the same period in 1993. Net sales were reduced by $2.1 million from the effect of a stronger U.S. dollar as compared to the first nine months of 1993 and by $20.5 million resulting from the divestiture of the Company's equipment division (AES) in mid-1993. Excluding these factors, net sales for the nine months were 6.8% above 1993. In comparison, 1994 net sales increased 3.9% in the first half of 1994 and 12.2% in the third quarter of 1994 as compared to the same period last year. The Company continues to gain market share in Forming Fabrics and Dryer Fabrics and to retain its Press Fabric market share. While there have not been any significant price increases in 1994, except for new products and upgrades, some of the Company's customers have increased prices, particularly in the kraft and pulp grades, and this could result in better pricing for paper machine clothing in 1995. Gross profit continued to improve and was 39.8% of net sales for the three months ended September 30, 1994 as compared to 37.3% for the same period in 1993 increasing the nine month result to 39.1% for 1994 as compared to 36.2% for 1993. Year to date variable costs as a percent of net sales decreased to 32.7% in 1994 from 34.4% in 1993. The improvement is due mainly to plant closings and workforce reductions, principally in Europe, and the divestiture of AES in June 1993. In addition, the Company's Total Quality Assurance program has resulted in improved product quality and efficiencies, both of which have contributed to lower costs. Selling, technical and general expenses increased $6.6 million or 18.5% for the three months ended September 30, 1994 as compared to the same period last year. Included in this amount were temporary increases associated with the development of a new Press Fabric product and consulting fees associated with the Company's restructuring efforts. In addition, exchange losses on trade receivables, principally in Europe, added to the increased costs. The Company anticipates some impact from the above items during the fourth quarter but to a much lesser degree. 6 Selling, technical and general expenses increased 2.1% for the nine months ended September 30, 1994 as compared to the nine months ended September 30, 1993. Translation of non-U.S. currencies into U.S. dollars decreased reported amounts by $.8 million due to the stronger U.S. dollar while the divestiture of AES reduced these costs by $6.6 million. Excluding these factors, expenses increased 8.8%. The Company has not reduced its sales and service efforts as there is increasing customer demand for service. Management anticipates that this demand will continue to increase as customers reduce the number of suppliers. Operating income as a percent of net sales increased to 9.6% for the nine months ended September 30, 1994 from 6.9% for the comparable period in 1993 and increased to 10.3% for the three months ended September 30, 1994 as compared to 8.4% for the same period last year due principally to factors described above. Management is continuing to review capacity requirements with the intention of further reducing costs and streamlining operations and anticipates that operating income as a percent of net sales should continue to improve during the rest of 1994 and into 1995. The decrease in other expense/(income), net was due to currency transactions which resulted in $3.3 million less income for the nine months ended September 30, 1994 as compared to the same period in 1993, no pre-receivable sales in 1994 which resulted in $1.6 million less expense in 1994 as compared to 1993 and interest rate protection income of $.6 million in 1994 as compared to $.1 million expense in 1993. The tax rate for the nine months ended September 30, 1994 is 43.0% as compared to 39.4% for the comparable period in 1993 and approximates the anticipated effective rate for the full year 1994. The rate increase is due principally to the accrual of net charges associated with prior years resulting from both U. S. and non-U. S. examinations. During February 1994 the Company exchanged its 40% equity interests in Brazil and Argentina for the remaining 60% interest in Mexico. The transaction was accounted for as a purchase and, accordingly, the Company has included the results of operations in its financial statements as of January 1, 1994. Reported results of Mexico were not significant. The Company's only remaining equity interest is a 50% partnership in South Africa. Reasons for changes in the results of operations for the three month period ended September 30, 1994 as compared to the corresponding period in 1993 are similar to those which affected the nine month comparisons, except where specifically noted. LIQUIDITY AND CAPITAL RESOURCES: The weakening U. S. dollar during the first nine months of 1994 and the purchase of the remaining Mexican equity interest (discussed above) increased accounts receivable by $8.7 million and increased inventories by $7.5 million. In addition, no accounts receivable were sold at September 30, 1994 as compared to $ 5.4 million sold at December 31, 1993. A significant portion of the increase in accounts receivable resulted from sales in September. During 1994, the Company implemented Continuous Supply programs with a number of paper manufacturers. These relationships require the Company rather than the customer to carry inventory and provide just in time sourcing to the customers mill. This has resulted in increased inventories and may result in additional increases in the near term but should result in more predictable requirements and lower inventory levels and increased sales in the long term. Management does not expect to see any significant reductions in inventory until the first quarter of 1995. The Company has an agreement under which it may sell to a financial institution up to $40 million of the Company's right to receive certain payments for goods ordered from the Company. At September 30, 1994, 7 there were no amounts sold under this agreement as compared to $12.0 million at December 31,1993. At December 31, 1993 this transaction reduced long-term debt by $12.0 million, reduced accounts receivable by $5.4 million and increased accrued liabilities by $6.6 million. Total debt at September 30, 1994 is $263.3 million as compared to $220.1 million at December 31, 1993. The increase is due primarily to the increase in accounts receivable and inventories which total $39.4 million. Management does not anticipate any significant reductions in working capital requirements in the short term. Capital expenditures for the nine months ended September 30, 1994 were $30.3 million as compared to $20.0 million for the same period last year. The Company anticipates that capital expenditures for the full year will be $39 million. The Company will finance these expenditures with cash from operations and existing credit facilities. Cash dividends of $.0875 per share, were paid in the first three quarters of 1994 and were related to the fourth quarter of 1993 and the first two quarters of 1994. The Company also declared a cash dividend of $.0875 per share for the third quarter of 1994 which will be paid in the fourth quarter of this year. 8 Part II - Other Information ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1994. EXHIBIT NO. DESCRIPTION 11. Schedule of computation of primary net income per share 9 ALBANY INTERNATIONAL CORP. EXHIBIT II SCHEDULE OF COMPUTATION OF PRIMARY NET INCOME PER SHARE (in thousands, except per share data)
For the three months For the nine months ended September 30, ended September 30, 1994 (1) 1993 (1) 1994 (1) 1993 (1) - ---------- ---------- ---------- ---------- 29,997,817 25,749,095 Common stock outstanding at end of period 29,997,817 25,749,095 Adjustments to ending shares to arrive at weighted average for the period: (25,587) (20,638) Shares contributed to E.S.O.P. (2) (61,323) (55,883) - - Shares issued under option (2) (2,198) - - ---------- ---------- ---------- ---------- 29,972,230 25,728,457 Weighted average number of shares 29,934,296 25,693,212 - ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- $5,984 $4,423 Net income $15,569 $9,128 - ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- $0.20 $0.18 Net income per share $0.52 $0.36 - ---------- ---------- ---------- ---------- - ---------- ---------- ---------- ---------- (1) Includes Class A and Class B Common Stock (2) Calculated as follows: number of shares outstanding multiplied by the reciprocal of the number of days outstanding divided by the number of days in the period SHARES CONTRIBUTED TO E.S.O.P.: Shares ---------- For the nine months: January 31, 1993 13,626 * (30/273) 1,498 February 28, 1993 13,572 * (58/273) 2,883 March 31 1993 12,074 * (89/273) 3,936 April 30, 1993 12,736 * (119/273) 5,552 May 31, 1993 11,770 * (150/273) 6,467 June 30, 1993 12,285 * (180/273) 8,100 July 31, 1993 10,209 * (211/273) 7,890 August 31, 1993 9,706 * (242/273) 8,604 September 30, 1993 10,993 * (272/273) 10,953 ---------- 55,883 ---------- ---------- January 31, 1994 10,831 * (30/273) 1,190 February 28, 1994 11,120 * (58/273) 2,362 March 31, 1994 11,090 * (89/273) 3,615 April 12, 1994 56 * (101/273) 21 April 30, 1994 11,683 * (119/273) 5,093 May 31, 1994 11,882 * (150/273) 6,529 June 30, 1994 12,440 * (180/273) 8,202 July 31, 1994 12,977 * (211/273) 10,030 August 31, 1994 12,679 * (242/273) 11,239 September 30, 1994 13,090 * (272/273) 13,042 ---------- 61,323 ---------- ---------- For the three months: July 31, 1993 10,209 * (30/92) 3,329 August 31, 1993 9,706 * (61/92) 6,436 September 30, 1993 10,993 * (91/92) 10,873 ---------- 20,638 ---------- ---------- July 31, 1994 12,977 * (30/92) 4,232 August 31, 1994 12,679 * (61/92) 8,407 September 30, 1994 13,090 * (91/92) 12,948 ---------- 25,587 ---------- ---------- SHARES ISSUED UNDER OPTION: Shares ---------- For the nine months: March 22, 1994 7,500 * (80/273) 2,198 ---------- ----------