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: MARCH 31, 1995
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
- ---------------------------------------- -----
(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 24,426,565 shares of Class A Common Stock and 5,633,427
shares of Class B Common Stock outstanding as of March 31, 1995.
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 ended March 31, 1995 and 1994 1
Consolidated balance sheets - March 31, 1995 and
December 31, 1994 2
Consolidated statements of cash flows - three months
ended March 31, 1995 and 1994 3
Notes to consolidated financial statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-6
Part II Other information
Item 6. Exhibits and Reports on Form 8-K 7
Item 1. Financial Statements
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
(in thousands except per share data)
Three Months Ended
March 31,
1995 1994
------------ -----------
Net sales $154,131 $131,424
Cost of goods sold 91,237 81,230
------------ -----------
Gross profit 62,894 50,194
Selling, technical and general expenses 44,672 39,253
------------ -----------
Operating Income 18,222 10,941
Interest expense, net 4,720 3,535
Other expense, net 831 1,046
------------ -----------
Income before income taxes 12,671 6,360
Income taxes 5,068 2,734
------------ -----------
Income before associated companies 7,603 3,626
Equity in earnings of associated companies 86 27
------------ -----------
Net Income 7,689 3,653
Retained earnings, beginning of period 139,740 126,276
Less dividends 2,633 2,617
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Retained earnings, end of period $144,796 $127,312
------------ -----------
------------ -----------
Net income per common share $0.26 $0.12
------------ -----------
------------ -----------
Dividends per common share $0.0875 $0.0875
------------ -----------
------------ -----------
Weighted average number of shares 30,046,144 29,894,600
------------ -----------
------------ -----------
The accompanying notes are an integral part of the financial statements.
-1-
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, December 31,
1995 1994
------------- -------------
ASSETS
Cash and cash equivalents $1,402 $228
Accounts receivable, net 155,423 154,140
Inventories:
Finished goods 82,036 78,501
Work in process 40,165 37,665
Raw material and supplies 25,867 26,364
------------- -------------
148,068 142,530
Deferred taxes and prepaid expenses 21,224 17,278
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Total current assets 326,117 314,176
Property, plant and equipment, net 321,703 320,719
Investments in associated companies 2,105 992
Intangibles 20,515 20,495
Deferred taxes 38,617 40,251
Other assets 28,939 24,753
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Total assets $737,996 $721,386
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------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $21,060 $16,676
Accounts payable 25,897 30,236
Accrued liabilities 48,748 53,750
Current maturities of long-term debt 3,713 1,044
Income taxes payable and deferred 13,717 11,071
------------- -------------
Total current liabilities 113,135 112,777
Long-term debt 234,807 232,767
Other noncurrent liabilities 82,915 81,176
Deferred taxes and other credits 25,601 22,719
------------- -------------
Total liabilities 456,458 449,439
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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
24,564,033 in 1995 and 1994 25 25
Class B common stock, par value $.001 per share;
authorized 25,000,000 shares; issued and
outstanding 5,633,427 in 1995 and 1994 6 6
Additional paid in capital 170,654 170,539
Retained earnings 144,796 139,740
Translation adjustments (32,372) (36,408)
------------- -------------
283,109 273,902
Less treasury stock (Class A), at cost (137,468
shares in 1995; 163,531 shares in 1994) 1,571 1,955
------------- -------------
Total shareholders' equity 281,538 271,947
------------- -------------
Total liabilities and shareholders' equity $737,996 $721,386
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------------- -------------
The accompanying notes are an integral part of the financial statements.
-2-
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended
March 31,
1995 1994
---------- ----------
OPERATING ACTIVITIES
Net income $7,689 $3,653
Adjustments to reconcile net cash provided by operating activities:
Equity in earnings of associated companies (86) (27)
Depreciation and amortization 10,698 9,970
Accretion of convertible subordinated debentures 407 379
Provision for deferred income taxes, other credits and long-term liabilities 3,392 (283)
Increase in cash surrender value of life insurance, net of premiums paid (463) (548)
Unrealized currency transaction losses/(gains), net 121 (799)
Gain on disposition of assets - (5)
Tax benefit of options exercised - 11
Treasury shares contributed to ESOP and profit-sharing plan 1,373 647
Changes in operating assets and liabilities:
Accounts receivable (1,404) (822)
Inventories (5,538) (5,109)
Prepaid expenses 150 (1,059)
Accounts payable (4,340) (2,897)
Accrued liabilities (4,766) (5,491)
Income taxes payable 1,202 (3,721)
Other, net (2,347) (3,119)
---------- ----------
Net cash provided/(used) in operating activities 6,088 (9,220)
---------- ----------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (8,871) (7,968)
Purchased software (303) (1,060)
Proceeds from sale of assets - 14
Acquisitions, net of cash acquired - 1,800
---------- ----------
Net cash used in investing activities (9,174) (7,214)
---------- ----------
FINANCING ACTIVITIES
Proceeds from borrowings 9,692 27,952
Principal payments on debt (1,607) (783)
Proceeds from options exercised - 126
Purchase of treasury shares (874) -
Investment in associated company (915) -
Dividends paid (2,627) (2,614)
---------- ----------
Net cash provided by financing activities 3,669 24,681
---------- ----------
Effect of exchange rate changes on cash 591 (3,411)
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Increase in cash and cash equivalents 1,174 4,836
Cash and cash equivalents at beginning of year 228 1,381
---------- ----------
Cash and cash equivalents at end of period $1,402 $6,217
---------- ----------
---------- ----------
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, 1994.
2. Other Expense, Net
Included in other expense, net are: currency transactions, $.1 million
income in 1995 and $.5 million expense in 1994, pre-receivable sales, $.2
million in 1994, amortization of debt issuance costs and loan origination fees
of $.4 million in 1995 and $.2 million in 1994, interest rate protection
agreements, $.3 million income in 1995, and other miscellaneous expenses none of
which are significant in 1995 and 1994.
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 March 31, 1995 and 1994. 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 March 31,
1995 and 1994.
4. Income Taxes
The Company's effective tax rate for the three months ended March 31, 1995
was 40.0% as compared to 43.0% for the same period last year and approximates
the anticipated effective tax rate for the full year 1995. The decrease is due
principally to the fact that the 1994 rate included an accrual of net charges
associated with prior years resulting from both U.S. and non-U.S. examinations.
5. Debt
In March 1995, the Company amended its existing $125 million revolving
credit agreement, with its principal banks in the United States, to increase the
banks' commitment to $150 million and to extend the maturity to the year 2000
with more favorable terms. Pricing will be based on a margin over floating rate
cost of banks' funding and varies depending upon the Company's performance.
6. Supplementary Cash Flow Information
Interest paid for the three months ended March 31, 1995 and 1994 was $6.8
million and $3.4 million, respectively.
Taxes paid for the three months ended March 31, 1995 and 1994 were $.6
million and $5.7 million, respectively.
-4-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS:
Net sales increased to $154.1 million for the three months ended March 31, 1995
compared with $131.4 million for the three months ended March 31, 1994. The
effect of the weaker U.S. dollar as compared to the first quarter of 1994 was to
increase net sales by $3.0 million. Excluding this effect, 1995 net sales
increased 15.0%. All geographic regions reported sales increases with the
exception of Mexico, which was affected by the peso devaluation.
The Company continues to gain market share in Forming Fabrics and Dryer Fabrics
and retain its Press Fabrics market share. During the three months ended March
31, 1995, price increases of 5% for the United States, 6% for Canada and for
selective European markets and Mexico became effective. It is expected that the
average effect of price increases for the full year will be approximately 3%.
Gross profit was 40.8% of net sales for the three months ended March 31, 1995 as
compared to 38.2% for the three months ended March 31, 1994. Year to date
variable costs as a percent of net sales increased from 31.2% in 1994 to 31.9%
for the same period in 1995, due mainly to increased sales of product lines with
higher cost to sales dollar ratios.
Selling, technical, general and research expenses increased 13.8% for the three
months ended March 31, 1995 as compared to the three months ended March 31,
1994. The translation of non-U.S. currencies into more U.S. dollars increased
those expenses by $1.2 million. Excluding this effect, expenses would have
increased 10.8%. Temporary increases associated with the introduction of a new
Press Fabric product and exchange losses on trade receivables, principally in
Europe, accounted for a significant portion of the increase.
Operating income as a percentage of net sales increased to 11.8% for the three
months ended March 31,1995 from 8.3% for the comparable period in 1994 due to
items discussed above. Management anticipates that operating income as a
percentage of net sales should continue to improve in 1995.
Interest expense increased compared to the three months ended March 31, 1994 due
to higher interest rates and higher total debt.
The tax rate for the three months ended March 31, 1995 is 40.0% as compared to
43.0% for the comparable period in 1994 and approximates the anticipated
effective rate for the full year 1995. The rate decrease is due principally to
the fact that the 1994 rate included an accrual of net charges associated with
prior years resulting from both U.S. and non-U.S. examinations.
5
LIQUIDITY AND CAPITAL RESOURCES:
Inventories increased $5.5 million during the three months ended March 31, 1995
due to the weakening U.S. dollar and high orders which resulted in some building
of inventory in anticipation of future sales.
In March 1995, the Company amended its existing $125 million revolving credit
agreement, with its principal banks in the United States, to increase the banks
commitment to $150 million and to extend the maturity to the year 2000 with more
favorable terms. Pricing will be based on a margin over floating rate cost of
banks funding and varies depending upon the Company's performance. Management
believes that the unused line, in combination with expected free cash flows,
should be sufficient to meet operating requirements and for business
opportunities and acquisitions which support corporate strategies to enhance
value to customers and shareholders.
Capital expenditures for the three months ended March 31, 1995 were $8.9 million
as compared to $8.0 million for the same period last year. The Company
anticipates that capital expenditures for the full year will be approximately
$40 million. The Company will finance these expenditures with cash from
operations and existing credit facilities.
A cash dividend of $.0875 per share, which was declared for the fourth quarter
of 1994, was paid in the first quarter of 1995. The Company also declared a
cash dividend of $.0875 per share for the first quarter of 1995 which will be
paid in the second quarter of this year.
6
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 March 31, 1995.
EXHIBIT NO. DESCRIPTION
11. Schedule of computation of primary and fully diluted net
income per share
27. Financial data schedule
7
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: May 3, 1995
by /s/Michael C. Nahl
-------------------
Michael C. Nahl
Sr. Vice President and
Chief Financial Officer
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
PRIMARY EARNINGS PER SHARE:
For the three months
ended March 31,
1995 (1) 1994 (1)
------------- -------------
Common stock outstanding at end of period 30,059,992 29,923,010
Adjustments to ending shares to arrive at
weighted average for the period:
Shares contributed to E.S.O.P. (2) (49,514) (21,743)
Shares issued under option (2) - (6,667)
Treasury shares purchased (2) 35,666 -
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Weighted average number of shares 30,046,144 29,894,600
------------- -------------
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Net income $7,689 $3,653
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Net income per share (3) $0.26 $0.12
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(1) Includes Class A and Class B Common Stock
(2) Calculated as follows:
number of shares multiplied by the reciprocal
of the number of days outstanding (or the
number of days held in treasury) divided by
the number of days in the period
SHARES CONTRIBUTED TO E.S.O.P.:
January 31, 1994 10,831 * (30/90) 3,610
February 28, 1994 11,120 * (58/90) 7,166
March 31 1994 11,090 * (89/90) 10,967
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21,743
--------------
--------------
January 31, 1995 12,346 * (30/90) 4,115
February 23, 1995 656 * (53/90) 386
February 28, 1995 13,324 * (58/90) 8,587
February 28, 1995 37,040 * (58/90) 23,870
March 31, 1995 12,697 * (89/90) 12,556
--------------
49,514
--------------
--------------
SHARES ISSUED UNDER OPTION:
March 22, 1994 7,500 * (80/90) 6,667
--------------
--------------
TREASURY SHARES PURCHASED:
February 16, 1995 15,000 * (46/90) 7,666
March 14, 1995 35,000 * (72/90) 28,000
--------------
35,666
--------------
--------------
(3) Dilutive common stock equivalents are not material and therefore are not
included in the calculation of primary earnings per common share.
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
FULLY DILUTED EARNINGS PER SHARE:
For the three months
ended March 31,
1995 1994
------------- ------------
Weighted average number of shares 30,046,144 29,894,600
Incremental shares of unexercised options (4) 259,133 323,889
Convertible shares of subord. debentures (5) 5,712,450 -
------------- ------------
Adjusted weighted average number of shares 36,017,727 30,218,489
------------- ------------
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Net income (including after-tax income adjustment) (5) $9,114 $3,653
------------- ------------
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Fully diluted net income per share $0.25 $0.12
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(4) Incremental shares of exercisable options are calculated based on the
higher of the average price of the Company's stock or the ending price
for the respective period. The calculation includes all options whose
exercise price is below the higher of the average or ending stock price.
(5) The subordinated debentures are convertible into 5,712,450 shares of the
Company's Class A common stock. There were no conversions as of March 31,
1995. Upon any conversion, the Company would realize an after-tax income
adjustment based on the effective interest expense on the bonds less the
corresponding income tax deduction. The full amount of the shares and
the income adjustment will be included in the calculation only when they
cause dilution to net income per share.
5
1,000
3-MOS
DEC-31-1995
MAR-31-1995
1,402
0
159,892
4,469
148,068
326,117
571,353
249,650
737,996
113,135
234,807
31
0
0
281,507
737,996
154,131
154,131
91,237
135,822
831
87
4,720
12,671
5,068
7,603
0
0
0
7,689
$0.26
$0.25
