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, 1996
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 24,717,839 shares of Class A Common Stock and 5,615,563
shares of Class B Common Stock outstanding as of March 31, 1996.
ALBANY INTERNATIONAL CORP.
INDEX
Page No.
--------
Part I Financial information
Item 1. Financial Statements
Consolidated statements of income and retained earnings -
three months ended March 31, 1996 and 1995 1
Consolidated balance sheets - March 31, 1996 and
December 31, 1995 2
Consolidated statements of cash flows - three months
ended March 31, 1996 and 1995 3
Notes to consolidated financial statements 4-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
Part II Other information
Item 6. Exhibits and Reports on Form 8-K 8
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,
1996 1995
------------ ------------
Net sales ................................................................... $ 168,067 $ 154,131
Cost of goods sold .......................................................... 98,307 91,237
------------ ------------
Gross profit ................................................................ 69,760 62,894
Selling, technical and general expenses ................................... 48,832 44,672
------------ ------------
Operating income ............................................................ 20,928 18,222
Interest expense, net ..................................................... 4,515 4,720
Other expense, net ........................................................ 1,107 831
------------ ------------
Income before income taxes .................................................. 15,306 12,671
Income taxes .............................................................. 5,970 5,068
------------ ------------
Income before associated companies .......................................... 9,336 7,603
Equity in (losses)/earnings of associated companies ....................... (184) 86
------------ ------------
Income before extraordinary item ............................................ 9,152 7,689
Extraordinary loss on early extinguishment of debt, net of tax of $828 .... 1,296 --
------------ ------------
Net income .................................................................. 7,856 7,689
Retained earnings, beginning of period ...................................... 171,082 139,740
Less dividends .............................................................. 3,037 2,633
------------ ------------
Retained earnings, end of period ............................................ $ 175,901 $ 144,796
============ ============
Income/(loss) per common share:
Income before extraordinary item .......................................... $ 0.30 $ 0.26
Extraordinary loss on early extinguishment of debt ........................ (0.04) --
------------ ------------
Net income ................................................................ $ 0.26 $ 0.26
============ ============
Dividends per common share .................................................. $ 0.10 $ 0.0875
============ ============
Weighted average number of shares ........................................... 30,284,588 30,046,144
============ ============
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,
1996 1995
-------- --------
ASSETS
Cash and cash equivalents .............................. $ 8,076 $ 7,609
Accounts receivable, net ............................... 170,004 170,415
Inventories:
Finished goods ....................................... 92,137 88,378
Work in process ...................................... 44,273 42,480
Raw material and supplies ............................ 33,066 30,523
-------- --------
169,476 161,381
Deferred taxes and prepaid expenses .................... 19,057 19,095
-------- --------
Total current assets ............................... 366,613 358,500
Property, plant and equipment, net ..................... 340,852 342,150
Investments in associated companies .................... 1,985 2,366
Intangibles ............................................ 31,401 31,682
Deferred taxes ......................................... 32,537 28,537
Other assets ........................................... 31,412 33,290
-------- --------
Total assets ....................................... $804,800 $796,525
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable ................................ $ 46,717 $ 16,268
Accounts payable ....................................... 30,157 35,262
Accrued liabilities .................................... 46,969 59,301
Current maturities of long-term debt ................... 3,866 985
Income taxes payable and deferred ...................... 19,835 12,067
-------- --------
Total current liabilities .......................... 147,544 123,883
Long-term debt ......................................... 224,308 245,265
Other noncurrent liabilities ........................... 103,462 100,268
Deferred taxes and other credits ....................... 24,531 24,812
-------- --------
Total liabilities .................................. 499,845 494,228
-------- --------
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
24,841,173 in 1996 and 1995 .......................... 25 25
Class B Common Stock, par value .001 per share;
authorized 25,000,000 shares; issued and
outstanding 5,615,563 in 1996 and 1995 ............... 6 6
Additional paid in capital ............................. 176,294 176,345
Retained earnings ...................................... 175,901 171,082
Translation adjustments ................................ (33,137) (30,580)
Pension liability adjustment ........................... (12,382) (12,382)
-------- --------
306,707 304,496
Less treasury stock (Class A), at cost (123,334 shares
in 1996; 143,589 shares in 1995) ..................... 1,752 2,199
-------- --------
Total shareholders' equity ......................... 304,955 302,297
-------- --------
Total liabilities and shareholders' equity ......... $804,800 $796,525
======== ========
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,
1996 1995
------- ------
OPERATING ACTIVITIES
Net income ...................................................................... $ 7,856 $7,689
Adjustments to reconcile net cash provided by operating activities:
Equity in losses/(earnings) of associated companies ........................ 184 (86)
Depreciation and amortization .............................................. 11,573 10,698
Accretion of convertible subordinated debentures ........................... 353 407
Provision for deferred income taxes, other credits and long-term liabilities (851) 3,392
Increase in cash surrender value of life insurance, net of premiums paid ... (485) (463)
Unrealized currency transaction losses ..................................... 6 121
Loss on disposition of assets .............................................. 19 --
Treasury shares contributed to ESOP ........................................ 2,948 1,373
Loss on early extinguishment of debt ....................................... 1,296 --
Changes in operating assets and liabilities:
Accounts receivable ........................................................ 405 (1,404)
Inventories ................................................................ (8,095) (5,538)
Prepaid expenses ........................................................... 38 150
Accounts payable ........................................................... (5,105) (4,340)
Accrued liabilities ........................................................ (7,734) (4,766)
Income taxes payable ....................................................... 8,585 1,202
Other, net ................................................................. (594) (2,347)
------- ------
Net cash provided by operating activities .................................. 10,399 6,088
------- ------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ................................. (11,650) (8,871)
Purchased software ......................................................... (849) (303)
Proceeds from sale of assets ............................................... 1,799 --
------- ------
Net cash used in investing activities ...................................... (10,700) (9,174)
------- ------
FINANCING ACTIVITIES
Proceeds from borrowings ................................................... 151,426 9,692
Principal payments on debt ................................................. (144,113) (1,607)
Purchases of treasury shares ............................................... (2,552) (874)
Investment in associated company ........................................... -- (915)
Dividends paid ............................................................. (3,030) (2,627)
------- ------
Net cash provided by financing activities .................................. 1,731 3,669
------- ------
Effect of exchange rate changes on cash ......................................... (963) 591
------- ------
Increase in cash and cash equivalents ........................................... 467 1,174
Cash and cash equivalents at beginning of year .................................. 7,609 228
------- ------
Cash and cash equivalents at end of period ...................................... $8,076 $1,402
======= ======
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, 1995.
2. Other Expense, Net
Included in other expense, net are: currency transactions, $.1
million expense in 1996 and $.1 million income in 1995, amortization of debt
issuance costs and loan origination fees, $.1 million in 1996 and $.4 million
in 1995, interest rate protection agreements, $.3 million expense in 1996 and
$.3 million income in 1995 and other miscellaneous expenses, none of which are
significant, in 1996 and 1995.
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 to earnings per share at March 31, 1996 and 1995. As discussed in
Note 5, the convertible subordinated debentures were redeemed in March 1996
and therefore excluded from the 1996 earnings per share calculation. The
convertible subordinated debentures are not common stock equivalents and did
not affect 1995 primary earnings per share. Further, the convertible
subordinated debentures were not dilutive at March 31, 1995.
4. Income Taxes
The Company's effective tax rate for the three months ended March 31,
1996 was 39% as compared to 40% for the same period last year and approximates
the anticipated effective tax rate for the full year 1996.
5. Debt
In February 1996, the Company amended its existing $150 million
revolving credit agreement, with its principal banks in the United States, to
increase the banks' commitment to $300 million with more favorable terms. The
banks' commitment will decline to $150 million in 2001 with the final maturity
in 2002. The terms of the revolving credit agreement include a facility fee and
allow the Company to select from various loan pricing options.
On March 15, 1996, the Company redeemed the $150 million, 5.25%
convertible subordinated debentures at a redemption price of 91.545%. This
redemption resulted in an extraordinary loss of approximately $1.3 million,
net of tax.
4
6. Supplementary Cash Flow Information
Interest of $6.8 million was paid during the three months ended
March 31, 1996 and the three months ended March 31, 1995.
Taxes of $.6 million were paid during the three months ended
March 31, 1996 and the three months ended March 31, 1995.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS:
Net sales increased to $168.1 million for the three months ended March 31,
1996 as compared to $154.1 million for the three months ended March 31, 1995.
The effect of the weaker U.S. dollar as compared to the first quarter of 1995
was to increase net sales by $1.1 million. Excluding this effect, 1996 net
sales increased 8.4%. Sales increases were reported in all geographic regions.
The Company continues to gain market share in all product areas. During the
three months ended March 31, 1996, a 5% price increase became effective in the
United States, and other price increases took effect in Canada and selective
European markets. It is expected that the average effect of price increases
for the full year will be between 2% and 3%.
Gross profit was 41.5% of net sales for the three months ended March 31, 1996
as compared to 40.8% for the three months ended March 31, 1995. Year to date
variable costs as a percent of net sales decreased from 31.9% in 1995 to 31.8%
for the same period in 1996.
Selling, technical, general and research expenses increased 9.3% for the three
months ended March 31, 1996 as compared to the three months ended March 31,
1995. The translation of non-U.S. currencies into more U.S. dollars increased
those expenses by $.5 million. Excluding this effect, expenses would have
increased 8.2%. Increased wages and benefit costs, higher sales commissions
and additional costs generated by acquisitions made after the first quarter of
1995 accounted for a significant portion of the increase.
Operating income as a percentage of net sales increased to 12.5% for the three
months ended March 31,1996 from 11.8% for the comparable period in 1995 due to
items discussed above. Management anticipates that operating income as a
percentage of net sales should continue to improve in 1996.
Interest expense decreased compared to the three months ended March 31, 1995,
despite higher total debt. This was possible due to lower interest rates
during the three months ended March 31, 1996 as compared to the same period in
1995.
The tax rate for the three months ended March 31, 1996 is 39.0% as compared to
40.0% for the comparable period in 1995 and approximates the anticipated
effective rate for the full year 1996.
6
LIQUIDITY AND CAPITAL RESOURCES:
Inventories increased $8.1 million during the three months ended March 31,
1996 due to the weakening U.S. dollar and high orders which resulted in some
building of inventory in anticipation of future sales.
In February 1996, the Company amended its existing $150 million revolving
credit agreement, with its principal banks in the United States, to increase
the banks' commitment to $300 million with more favorable terms. The banks'
commitment will decline to $150 million in 2001 with the final maturity in
2002. The terms of the revolving credit agreement include a facility fee and
allow the Company to select from various loan pricing options. 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.
On March 15, 1996, the Company redeemed the $150 million, 5.25% convertible
subordinated debentures at a redemption price of 91.545%. This redemption
resulted in an extraordinary loss of approximately $1.3 million, net of tax.
The debentures were redeemed by utilizing the revolving credit agreement and
short-term debt. The Company's current debt structure has resulted in lower
interest expense and currently provides approximately $200 million in
committed and available unused long-term debt capacity with financial
institutions.
Capital expenditures for the three months ended March 31, 1996 were $11.7
million as compared to $8.9 million for the same period last year. The Company
anticipates that capital expenditures, excluding South Korea and China, will
be approximately $45 million for the full year. An additional $10 million will
be spent for construction of the recently announced facility in South Korea
and for equipment for our 1995 acquisition in China. The Company will finance
these expenditures with cash from operations and existing credit facilities.
A cash dividend of $.10 per share, which was declared for the fourth quarter
of 1995, was paid in the first quarter of 1996. The Company also declared a
cash dividend of $.10 per share for the first quarter of 1996, which will be
paid in the second quarter of this year.
7
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on March 15, 1996 containing exhibits only (no
items were reported).
Exhibit No. Description
- ---------- -----------
11. Schedule of computation of primary and fully diluted net
income per share
27. Financial data schedule
8
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 1, 1996
by /s/Michael C. Nahl
------------------
Michael C. Nahl
Sr. Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
11. Schedule of computation of primary and fully diluted net
income per share
27. Financial data schedule
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,
1996 (1) 1995 (1)
----------- -----------
Common stock outstanding at end of period ................................ 30,333,402 30,059,992
Adjustments to ending shares to arrive at weighted average for the period:
Shares contributed to E.S.O.P. (2) ................................... (104,374) (49,514)
Treasury shares purchased (2) ........................................ 55,560 35,666
----------- -----------
Weighted average number of shares ........................................ 30,284,588 30,046,144
=========== ===========
Net income ............................................................... $7,856 $7,689
=========== ===========
Net income per share (3) ................................................. $0.26 $0.26
=========== ===========
(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 reciprocal of the number of days held in treasury
for treasury stock purchases) divided by the number of days in the
period
SHARES CONTRIBUTED TO E.S.O.P.:
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
=======
January 31, 1996 ............. 12,969 * (30/91) 4,276
February 29, 1996 ............ 136,670 * (59/91) 88,610
March 31, 1996 ............... 11,616 * (90/91) 11,488
-------
104,374
=======
TREASURY SHARES PURCHASED:
February 16, 1995 ............ 15,000 * (46/90) 7,666
March 14, 1995 ............... 35,000 * (72/90) 28,000
-------
35,666
=======
January 17, 1996 ............. 91,000 * (16/91) 16,000
March 13, 1996 ............... 50,000 * (72/91) 39,560
-------
55,560
=======
(3) Dilutive common stock equivalents are not material and therefore are
not included in the calculation of primary earnings per common share.
FULLY DILUTED EARNINGS PER SHARE:
For the three months
ended March 31,
1996 1995
------------ -----------
Weighted average number of shares .................... 30,284,588 30,046,144
Incremental shares of unexercised options (4) ........ 253,364 259,133
Convertible shares of subordinated debentures (5) .... -- 5,712,450
------------ -----------
Adjusted weighted average number of shares ........... 30,537,952 36,017,727
============ ===========
Net income (including after-tax income adjustment) (5) $7,856 $9,114
============ ===========
Fully diluted net income per share ................... $0.26 $0.25
============ ===========
(4) Incremental shares of unexercised 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 convertible subordinated debentures were redeemed in March 1996
and therefore removed from the fully diluted calculation. In 1995,
the subordinated debentures were 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 are included in the
calculation only when they cause dilution to net income per share.
5
1,000
3-MOS
DEC-31-1996
JAN-01-1996
MAR-31-1996
8,076
0
174,855
4,851
169,476
366,613
630,484
289,632
804,800
147,544
224,308
0
0
31
304,924
804,800
168,067
168,067
98,307
147,298
1,107
(159)
4,515
15,306
5,970
9,152
0
(1,296)
0
7,856
.26
.26
