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, 1997
                                                                   ------------------

                                                                  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  25,351,423  shares of Class A Common  Stock and  5,615,563
shares of Class B Common Stock outstanding as of September 30, 1997.

                                                        ALBANY INTERNATIONAL CORP.

                                                                   INDEX
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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, 1997 and 1996                                                1

                 Consolidated balance sheets - September 30, 1997 and December 31, 1996                                        2

                 Consolidated statements of cash flows - nine months ended September 30, 1997 and 1996                         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 Nine Months Ended September 30, September 30, Restated Restated 1997 1996 1997 1996 ---- ---- ---- ---- $171,730 $169,821 Net sales $525,454 $509,969 97,815 97,768 Cost of goods sold 301,038 295,150 ------ ------ ------- ------- 73,915 72,053 Gross profit 224,416 214,819 49,853 47,580 Selling, technical and general expenses 151,839 146,152 ------ ------ ------- ------- 24,062 24,473 Operating income 72,577 68,667 3,845 3,706 Interest expense, net 11,570 12,221 1,672 602 Other expense, net 2,696 574 ----- --- ----- --- 18,545 20,165 Income before income taxes 58,311 55,872 7,232 7,864 Income taxes 22,740 21,792 ----- ----- ------ ------ 11,313 12,301 Income before associated companies 35,571 34,080 111 225 Equity in earnings of associated companies 207 112 --- --- --- --- 11,424 12,526 Income before extraordinary item 35,778 34,192 Extraordinary loss on early extinguishment of debt, - - net of tax of $828 - 1,296 ------ ------ ------ ----- 11,424 12,526 Net income 35,778 32,896 Retained earnings, beginning of period, as 224,233 185,013 previously reported 206,308 171,082 Cumulative effect on prior years of retroactive 3,567 3,011 restatement for accounting change for inventory 3,567 2,645 ----- ----- ----- ----- 227,800 188,024 Retained earnings, beginning of period, restated 209,875 173,727 3,250 3,041 Less dividends 9,679 9,114 ----- ----- ----- ----- $235,974 $197,509 Retained earnings, end of period $235,974 $197,509 ======== ======== ======== ======== Income/(loss) per common share: $0.37 $0.41 Income before extraordinary item $1.17 $1.13 - - Extraordinary loss on early extinguishment of debt - (0.04) ----- ----- ----- ----- $0.37 $0.41 Net income $1.17 $1.09 ===== ===== ===== ===== $0.105 $0.10 Dividends per common share $0.315 $0.30 ====== ===== ====== ===== 30,877,761 30,388,252 Weighted average number of shares 30,697,390 30,340,740 ========== ========== ========== ========== The accompanying notes are an integral part of the financial statements. 1 ALBANY INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) Restated September 30, December 31, 1997 1996 ---------------- ---------------- ASSETS Cash and cash equivalents $22,471 $8,034 Accounts receivable, net 168,694 179,516 Inventories: Finished goods 106,851 105,822 Work in process 40,808 40,568 Raw material and supplies 34,494 33,808 ---------------- ---------------- 182,153 180,198 Deferred taxes and prepaid expenses 17,801 16,879 ---------------- ---------------- Total current assets 391,119 384,627 Property, plant and equipment, net 323,471 339,461 Investments in associated companies 2,256 2,060 Intangibles 42,789 44,954 Deferred taxes 28,223 27,756 Other assets 41,950 33,059 ---------------- ---------------- Total assets $829,808 $831,917 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY Notes and loans payable $61,241 $65,165 Accounts payable 28,056 32,813 Accrued liabilities 59,152 59,755 Current maturities of long-term debt 2,126 2,295 Income taxes payable and deferred 11,532 16,718 ---------------- ---------------- Total current liabilities 162,107 176,746 Long-term debt 188,621 187,100 Other noncurrent liabilities 96,418 97,579 Deferred taxes and other credits 40,123 38,162 ---------------- ---------------- Total liabilities 487,269 499,587 ---------------- ---------------- 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 25,356,137 in 1997 and 24,865,573 in 1996 25 25 Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 5,615,563 in 1997 and 1996 6 6 Additional paid in capital 187,373 177,412 Retained earnings 235,974 209,875 Translation adjustments (68,265) (42,340) Pension liability adjustment (12,483) (12,483) ---------------- ---------------- 342,630 332,495 Less treasury stock (Class A), at cost (4,714 shares in 1997; 16,511 shares in 1996) 91 165 ---------------- ---------------- Total shareholders' equity 342,539 332,330 ---------------- ---------------- Total liabilities and shareholders' equity $829,808 $831,917 ================ ================ 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, Restated 1997 1996 ----------------- ----------------- OPERATING ACTIVITIES Net income $35,778 $32,896 Adjustments to reconcile net income to net cash provided by operating activities: Equity in earnings of associated companies (207) (112) Depreciation and amortization 33,149 34,488 Accretion of convertible subordinated debentures - 353 Provision for deferred income taxes, other credits and long-term liabilities (6,744) (3,375) Increase in cash surrender value of life insurance, net of premiums paid (358) (265) Unrealized currency transaction losses 3,385 263 Loss on disposition of assets 2 430 Shares contributed to ESOP 3,513 4,450 Loss on early extinguishment of debt - 1,296 Changes in operating assets and liabilities: Accounts receivable 7,387 (675) Inventories (2,258) (12,044) Prepaid expenses (736) (1,588) Accounts payable (4,756) (9,283) Accrued liabilities 1,479 (1,107) Income taxes payable (1,818) 9,841 Other, net (3,300) (3,144) ----------------- ----------------- Net cash provided by operating activities 64,516 52,424 ----------------- ----------------- INVESTING ACTIVITIES Purchases of property, plant and equipment (39,410) (34,342) Purchased software (954) (1,566) Proceeds from sale of assets 240 2,095 Premiums paid for life insurance (1,190) (1,193) ----------------- ----------------- Net cash used in investing activities (41,314) (35,006) ----------------- ----------------- FINANCING ACTIVITIES Proceeds from borrowings 41,477 215,878 Principal payments on debt (40,798) (217,107) Proceeds from options exercised 6,864 101 Tax benefit of options exercised 1,079 - Purchases of treasury shares (1,421) (2,552) Dividends paid (9,475) (9,104) ----------------- ----------------- Net cash used in financing activities (2,274) (12,784) ----------------- ----------------- Effect of exchange rate changes on cash (6,491) (3,077) ----------------- ----------------- Increase in cash and cash equivalents 14,437 1,557 Cash and cash equivalents at beginning of year 8,034 7,609 ----------------- ----------------- Cash and cash equivalents at end of period $22,471 $9,166 ================= ================= 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, 1996. 2. Other Expense, Net Included in other expense, net for the nine months ended September 30 are: currency transactions, $1.7 million income in 1997 and 1996, amortization of debt issuance costs and loan origination fees, $.7 million in 1997 and $.8 million in 1996, interest rate protection agreements, $.7 million income in 1997 and $.8 million income in 1996, strategic planning costs, $1.3 million in 1997 and other miscellaneous items, none of which are significant, in 1997 and 1996. Included in other expense, net for the three months ended September 30 are: currency transactions, $1.0 million income in 1997 and $.2 million expense in 1996, amortization of debt issuance costs and loan origination fees, $.3 million in 1997 and 1996, interest rate protection agreements, $.5 million income in 1996, strategic planning costs, $1.3 million in 1997 and other miscellaneous items, none of which are significant, in 1997 and 1996. 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 September 30, 1997 and 1996. Effective December 15, 1997, the Company is required to adopt Financial Accounting Standard No. 128, "Earnings per Share". This Standard requires both basic and diluted earnings per share to be reported for all periods presented. When income/(loss) per common share is calculated in accordance with this Standard, for the three and nine months ended September 30, 1997 and 1996, basic and diluted income/(loss) per common share do not significantly differ from reported amounts. 4. Income Taxes The Company's effective tax rate for the nine months ended September 30, 1997 and 1996 was 39% and approximates the anticipated effective tax rate for the full year 1997. 4 5. Supplementary Cash Flow Information Interest paid for the nine months ended September 30, 1997 and 1996 was $11.4 million and $14.7 million, respectively. Taxes paid for the nine months ended September 30, 1997 and 1996 was $16.7 million and $13.2 million, respectively. 6. 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 are recorded in "Other expense, net". Open positions are valued at fair value using quoted market rates. 7. Inventories During the third quarter of 1997, the Company changed its method of determining the cost of United States inventories from the last-in, first-out (LIFO) method to the average cost method. The Company believes that the average cost method results in a closer matching of revenues and expenses during periods of increased productivity and changes in product mix. This change in accounting method has been applied retroactively and financial information for all periods presented has been restated to apply the average cost method. Income before extraordinary item and net income were increased by $.2 million, less than 1 cent per share, and $.5 million, 2 cents per share, for the three and nine months ended September 30, 1996, respectively, as a result of this change. There was no effect on 1997 income. Retained earnings has been adjusted for the effect of retroactive application of the new method. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations For the Three and Nine Months Ended September 30, 1997 The following discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto. RESULTS OF OPERATIONS: Net sales increased to $171.7 million for the three months ended September 30, 1997 as compared to $169.8 million for the three months ended September 30, 1996. The effect of the stronger U.S. dollar as compared to the third quarter of 1996 was to decrease net sales by $9.8 million. Excluding this effect and the 1996 acquisition of Schieffer Door Systems ("Schieffer"), 1997 net sales increased 2.8% as compared to 1996. Net sales increased 3% to $525.5 million for the nine months ended September 30, 1997 compared with the same period in 1996. The effect of the stronger U.S. dollar as compared to the first nine months of 1996 was to decrease net sales by $21.7 million while the effect of Schieffer was to increase 1997 net sales by $22.0 million. Geographically, net sales for the nine months ended September 30, 1997, as compared to the same period in 1996, increased in the U.S. and decreased in Canada. Net sales in Canada increased in the third quarter. Net sales in Europe, while up in local currency, decreased in U.S. dollars due to the effect of the stronger U.S. dollar. Gross profit was 43.0% of net sales for the three months ended September 30, 1997 as compared to 42.4% for the same period in 1996 bringing the nine month result to 42.7% for 1997 as compared to 42.1% for 1996. Excluding the effect of Schieffer, gross profit was 43.4% and 43.1% of net sales for the three and nine months ended September 30, 1997, respectively. Year to date variable costs as a percent of net sales increased from 32.9% in 1996 to 33.7% for the same period in 1997. Excluding the effect of Schieffer, variable costs as a percent of net sales would have declined to 32.6% in 1997. Selling, technical, general and research expenses, excluding Schieffer, were flat for the nine months ended September 30, 1997 as compared to the same period in 1996. Excluding the additional effect of translation of non-U.S. currencies into fewer U.S. dollars, these expenses increased 4.1%. Operating income as a percentage of net sales increased to 13.8% for the nine months ended September 30, 1997 from 13.5% for the comparable period in 1996. Even though third quarter 1997 fixed costs were right on forecast, the fact that net sales were below expectations caused operating income as a percentage of net sales to decrease to 14.0% for the three months ended September 30, 1997 from 14.4% for the comparable period in 1996. 6 LIQUIDITY AND CAPITAL RESOURCES: Accounts receivable decreased $10.8 million from December 31, 1996. Excluding the effect of the stronger U.S. dollar, accounts receivable decreased $4.1 million. Inventories increased $2.0 million, during the nine months ended September 30, 1997, after restatement for a change in accounting for inventory as discussed below. Excluding the effect of the stronger U.S. dollar, inventories increased $8.6 million. During the third quarter of 1997, the Company changed its method of determining the cost of United States inventories from the last-in, first-out (LIFO) method to the average cost method. The Company believes that the average cost method results in a closer matching of revenues and expenses during periods of increased productivity and changes in product mix. This change in accounting method has been applied retroactively and financial information for all periods presented has been restated to apply the average cost method. Income before extraordinary item and net income were increased by $.2 million, less than 1 cent per share, and $.5 million, 2 cents per share, for the three and nine months ended September 30, 1996, respectively, as a result of this change. There was no effect on 1997 income. Retained earnings has been adjusted for the effect of retroactive application of the new method. 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 $230 million in committed and available unused long-term debt capacity with financial institutions. Management believes that this debt capacity, in combination with expected free cash flows, should be sufficient to meet operating requirements and for business opportunities and most acquisitions which support corporate strategies. Capital expenditures for the nine months ended September 30, 1997 were $39.4 million as compared to $34.3 million for the same period last year. The Company anticipates that capital expenditures, excluding the capital equivalent of leases, will be approximately $55 million for the full year. The largest single capital expenditure will be approximately $15 million to construct a new manufacturing facility in South Korea which should be complete in November 1997. The Company will continue to 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 1996, was paid in the first quarter of 1997. The Company also declared cash dividends of $.105 per share for each of the first three quarters of 1997, which were paid in the second and third quarters and will be paid in the fourth quarter of this year. Effective December 15, 1997, the Company is required to adopt Financial Accounting Standard No. 128, "Earnings per Share". This Standard requires both basic and diluted earnings per share to be reported for all periods presented. When income/(loss) per common share is calculated in accordance with this Standard, for the three and nine months ended September 30, 1997 and 1996, basic and diluted income/(loss) per common share do not significantly differ from reported amounts. 7 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, 1997. Exhibit No. Description ----------- ----------- 11. Schedule of computation of primary and fully diluted net income per share 18. Letter re change in accounting principle 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: November 4, 1997 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 For the nine months ended September 30, ended September 30, Restated Restated 1997 (1) 1996 (1) 1997 (1) 1996 (1) - ---------------- -------------- -------------- -------------- 30,966,986 30,411,824 Common stock outstanding at end of period 30,966,986 30,411,824 Adjustments to ending shares to arrive at weighted average for the period: (19,630) (23,572) Shares contributed to E.S.O.P. (2) (63,787) (85,275) (69,595) - Shares issued under option (2) (213,219) (4,262) - - Treasury shares purchased (2) 7,410 18,453 - ---------------- -------------- -------------- -------------- 30,877,761 30,388,252 Weighted average number of shares 30,697,390 30,340,740 ================ ============== ============== ============== $11,424 $12,526 Income before extraordinary item $35,778 $34,192 Extraordinary loss on early extinguishment of debt, - - net of tax of $828 - $1,296 - ---------------- -------------- -------------- -------------- $11,424 $12,526 Net income $35,778 $32,896 ================ ============== ============== ============== $0.37 $0.41 Income per share before extraordinary item (3) $1.17 $1.13 - - Extraordinary loss on early extinguishment of debt (3) - ($0.04) - ---------------- -------------- -------------- -------------- $0.37 $0.41 Net income per share (3) $1.17 $1.09 ================ ============== ============== ============== (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 ADJUSTMENTS TO ENDING SHARES: Number of days in period ------------------------------- Three months Nine months -------------- -------------- 1996 92 274 1997 92 273 ============== ============== Reciprocal days Shares adjustment - --------------------------------- -------------------------------------------- Three months Nine months Shares Three months Nine months - ---------------- -------------- --------------------------- -------------- 1996 Shares Contributed to ESOP: - 30 31-Jan-96 12,969 - 1,420 - 59 29-Feb-96 136,670 - 29,429 - 90 31-Mar-96 11,616 - 3,815 - 120 30-Apr-96 10,790 - 4,726 - 151 31-May-96 12,658 - 6,976 - 181 30-Jun-96 10,383 - 6,859 30 212 31-Jul-96 12,253 3,996 9,480 61 243 31-Aug-96 13,016 8,630 11,543 91 273 30-Sep-96 11,067 10,946 11,027 -------------- -------------- Totals 23,572 85,275 ============== ============== Shares Issued Under Option or to Directors: - 140 20-May-96 2,255 - 1,152 - 142 22-May-96 6,000 - 3,110 -------------- -------------- Totals - 4,262 ============== ============== Treasury Shares Purchased: - 16 17-Jan-96 91,000 - 5,314 - 72 13-Mar-96 50,000 - 13,139 -------------- -------------- Totals - 18,453 ============== ============== 1997 Shares Contributed to ESOP: - 30 31-Jan-97 12,002 - 1,319 - 58 28-Feb-97 58,773 - 12,487 - 89 31-Mar-97 12,126 - 3,953 - 119 30-Apr-97 12,380 - 5,396 - 150 31-May-97 12,193 - 6,699 - 180 30-Jun-97 11,243 - 7,413 30 211 31-Jul-97 10,555 3,442 8,158 61 242 31-Aug-97 9,406 6,236 8,338 91 272 30-Sep-97 10,061 9,952 10,024 -------------- -------------- Totals 19,630 63,787 ============== ============== Shares Issued Under Option or to Directors: - 1 02-Jan-97 200 - 1 - 2 03-Jan-97 3,600 - 26 - 5 06-Jan-97 10,000 - 183 - 6 07-Jan-97 900 - 20 - 7 08-Jan-97 5,000 - 128 - 29 30-Jan-97 37,300 - 3,962 - 33 03-Feb-97 20,000 - 2,418 - 37 07-Feb-97 5,000 - 678 - 42 12-Feb-97 27,000 - 4,154 - 43 13-Feb-97 1,400 - 221 - 44 14-Feb-97 28,600 - 4,610 - 48 18-Feb-97 10,000 - 1,758 - 91 02-Apr-97 1,800 - 600 - 110 21-Apr-97 2,922 - 1,177 - 159 09-Jun-97 2,500 - 1,456 - 162 12-Jun-97 17,900 - 10,622 - 163 13-Jun-97 10,200 - 6,090 - 168 18-Jun-97 8,700 - 5,354 - 169 19-Jun-97 19,200 - 11,886 - 175 25-Jun-97 5,000 - 3,205 - 176 26-Jun-97 14,000 - 9,026 21 202 22-Jul-97 5,100 1,164 3,774 23 204 24-Jul-97 22,000 5,500 16,440 24 205 25-Jul-97 60,000 15,652 45,055 30 211 31-Jul-97 26,800 8,739 20,713 31 212 01-Aug-97 600 202 466 35 216 05-Aug-97 16,800 6,391 13,292 36 217 06-Aug-97 1,000 391 795 37 218 07-Aug-97 1,000 402 799 38 219 08-Aug-97 12,500 5,163 10,027 42 223 12-Aug-97 2,500 1,141 2,042 44 225 14-Aug-97 500 239 412 48 229 18-Aug-97 1,800 939 1,510 49 230 19-Aug-97 800 426 674 50 231 20-Aug-97 3,400 1,848 2,877 52 233 22-Aug-97 1,800 1,018 1,536 55 236 25-Aug-97 4,300 2,571 3,717 56 237 26-Aug-97 1,800 1,096 1,563 63 244 02-Sep-97 1,000 685 894 64 245 03-Sep-97 600 417 538 65 246 04-Sep-97 1,000 707 901 66 247 05-Sep-97 4,400 3,157 3,981 72 253 11-Sep-97 1,000 783 927 73 254 12-Sep-97 8,300 6,586 7,722 76 257 15-Sep-97 5,300 4,378 4,989 -------------- -------------- Totals 69,595 213,219 ============== ============== Treasury Shares Purchased: - 26 27-Jan-97 57,500 - 5,476 - 120 01-May-97 4,400 - 1,934 -------------- -------------- - 7,410 ============== ============== (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 For the nine months ended September 30, ended September 30, Restated Restated 1997 1996 1997 1996 - ---------------- -------------- -------------- -------------- 30,877,761 30,388,252 Weighted average number of shares 30,697,390 30,340,740 529,032 333,876 Incremental shares of unexercised options (4) 501,737 333,876 - ---------------- -------------- -------------- -------------- 31,406,793 30,722,128 Adjusted weighted average number of shares 31,199,127 30,674,616 ================ ============== ============== ============== $11,424 $12,526 Income before extraordinary item $35,778 $34,192 Extraordinary loss on early extinguishment of debt, - - net of tax of $828 - $1,296 - ---------------- -------------- -------------- -------------- $11,424 $12,526 Net income $35,778 $32,896 ================ ============== ============== ============== $0.36 $0.41 Income per share before extraordinary item $1.15 $1.11 - - Extraordinary loss on early extinguishment of debt - ($0.04) - ---------------- -------------- -------------- -------------- $0.36 $0.41 Fully diluted net income per share $1.15 $1.07 ================ ============== ============== ==============
(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. EXHIBIT 18 LETTER RE CHANGE IN ACCOUNTING PRINCIPLE August 27, 1997 Albany International Corp. 1373 Broadway Albany, New York 12201 We are providing this letter to you for inclusion as an exhibit to your Form 10-Q filing pursuant to Item 601 of Regulation S-K. We have read management's justification for the change in accounting from the last-in, first-out method (LIFO) of accounting for inventory to the average cost method contained in the Company's Form 10-Q for the quarter ended September 30, 1997. Based on our reading of the data and discussions with Company officials of the business judgment and business planning factors relating to the change, we believe management's justification to be reasonable. Accordingly, in reliance on management's determination as regards elements of business judgment and business planning, we concur that the newly adopted accounting principle described above is preferable in the Company's circumstances to the method previously applied. We have not audited any financial statements of Albany International Corp. as of any date or for any period subsequent to December 31, 1996, nor have we audited the application of the change in accounting principle disclosed in Form 10-Q of Albany International Corp. for the three and nine months ended September 30, 1997; accordingly, our comments are subject to revision on completion of an audit of the financial statements that include the accounting change. /s/Coopers & Lybrand, L.L.P.
 

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALBANY INTERNATIONAL CORP'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 SEP-30-1997 22,471 0 173,471 4,777 182,153 391,119 629,243 305,772 829,808 162,107 188,621 0 0 31 342,508 829,808 525,454 525,454 301,038 453,062 2,696 (185) 11,570 58,311 22,740 35,778 0 0 0 35,778 1.17 1.17