<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended: June 30, 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 24,305,820 shares of Class A Common Stock and 5,653,251
shares of Class B Common Stock outstanding as of June 30, 1994.
<PAGE>
ALBANY INTERNATIONAL CORP.
INDEX
Page No.
--------
Part I Financial information
Item 1. Financial Statements
Consolidated statements of income and retained earnings -
three months and six months ended June 30, 1994 and 1993 1
Consolidated balance sheets - June 30, 1994 and December 31,1993 2
Consolidated statements of cash flows - six months ended
June 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 4 Submissions of Matters to a Vote of Security Holders 9
Item 6 Exhibits and Reports on Form 8-K 9
<PAGE>
Item 1. Financial Statements
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$139,626 $149,628 Net sales $271,050 $286,723
85,056 94,822 Cost of goods sold 166,286 184,467
---------- ---------- ---------- ----------
54,570 54,806 Gross profit 104,764 102,256
40,419 42,531 Selling, technical and general expenses 79,672 83,783
- 419 Restructuring charges and termination benefits - 419
---------- ---------- ---------- ----------
14,151 11,856 Operating Income 25,092 18,054
4,334 4,148 Interest expense, net 7,869 8,845
(439) 10 Other (income)/expense, net 607 232
---------- ---------- ---------- ----------
10,256 7,698 Income before income taxes 16,616 8,977
4,410 3,033 Income taxes 7,144 3,537
---------- ---------- ---------- ----------
5,846 4,665 Income before associated companies 9,472 5,440
86 (91) Equity in earnings/(losses) of associated companies 113 (735)
---------- ---------- ---------- ----------
5,932 4,574 Net Income 9,585 4,705
127,312 117,998 Retained earnings, beginning of period 126,276 120,113
2,620 2,249 Less dividends 5,237 4,495
---------- ---------- ---------- ----------
$130,624 $120,323 Retained earnings, end of period $130,624 $120,323
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
$0.20 $0.17 Net income per common share $0.32 $0.18
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
$0.0875 $0.0875 Dividends per common share $0.175 $0.175
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
29,935,204 25,694,218 Weighted average number of shares 29,915,014 25,675,298
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-1-
<PAGE>
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
June 30, December 31,
1994 1993
------------ -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $227 $1,381
Accounts receivable, net 134,170 120,416
Inventories:
Finished goods 77,687 72,763
Work in process 36,728 32,991
Raw material and supplies 23,177 18,539
------------ -------------
137,592 124,293
Deferred taxes and prepaid expenses 18,895 18,050
------------ -------------
Total current assets 290,884 264,140
Property, plant and equipment, net 316,750 302,829
Investments in associated companies 1,354 10,951
Intangibles 26,769 25,558
Deferred taxes 34,598 33,640
Other assets 27,821 18,302
------------ -------------
Total assets $698,176 $655,420
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $8,184 $8,560
Accounts payable 21,795 23,284
Accrued liabilities 51,244 55,288
Current maturities of long-term debt 1,637 2,917
Income taxes payable and deferred 3,407 7,881
------------ -------------
Total current liabilities 86,267 97,930
Long-term debt 243,124 208,620
Other noncurrent liabilities 87,802 82,423
Deferred taxes and other credits 20,824 21,979
------------ -------------
Total liabilities 438,017 410,952
------------ -------------
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 170,425 170,112
Retained earnings 130,624 126,276
Translation adjustments (35,871) (45,758)
Pension adjustment (1,856) (1,856)
------------ -------------
263,353 248,805
Less treasury stock (Class A), at cost (238,389 shares
in 1994; 307,491 shares in 1993) 3,194 4,337
------------ -------------
Total shareholders' equity 260,159 244,468
------------ -------------
Total liabilities and shareholders' equity $698,176 $655,420
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1994 1993
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 9,585 $ 4,705
Adjustments to reconcile net cash provided by operating activities:
Equity in (earnings)/losses of associated companies (113) 735
Distributions received from associated companies - 407
Depreciation and amortization 20,486 22,250
Provision for deferred income taxes, other credits and long-term liabilities 3,736 3,426
Increase in cash surrender value of life insurance, net of premiums paid (893) (900)
Unrealized currency transaction (gains)/losses, net (3,021) 1,452
Loss on disposition of assets 74 419
Tax benefit of options exercised 11 -
Treasury shares contributed to ESOP 1,320 1,211
Changes in operating assets and liabilities:
Accounts receivable (8,300) 3,990
Inventories (10,108) 1,897
Prepaid expenses (815) (114)
Accounts payable (1,914) (2,873)
Accrued liabilities (6,174) 16,881
Income taxes payable (7,071) 3,426
Other, net (8,184) 394
-------- -------
Net cash (used)/provided by operating activities (11,381) 57,306
-------- -------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (17,280) (11,730)
Proceeds from sale of assets 1,733 27,454
Acquisitions, net of cash acquired 526 (55,356)
-------- -------
Net cash used in investing activities (15,021) (39,632)
-------- -------
FINANCING ACTIVITIES
Proceeds from borrowings 41,792 28,180
Principal payments on debt (10,291) (28,942)
Proceeds from options exercised 126 -
Dividends paid (5,230) (4,489)
-------- -------
Net cash provided/(used) in financing activities 26,397 (5,251)
-------- -------
Effect of exchange rate changes on cash (1,149) (11,622)
-------- -------
(Decrease)/increase in cash and cash equivalents (1,154) 801
Cash and cash equivalents at beginning of year 1,381 4,005
-------- -------
Cash and cash equivalents at end of period $ 227 $ 4,806
-------- -------
-------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
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 (Income)/Expense, Net
Included in other (income)/expense, net for the six months ended June 30
are: currency transactions, $.5 million income in 1994 and $2.3 million income
in 1993, pre-receivable sale, $.3 million income in 1994 and $1.0 million
expense in 1993, amortization of debt issuance costs and loan origination fees,
$.4 million in 1994 and $.5 million in 1993 and other miscellaneous
(income)/expenses, none of which are significant, in 1994 and 1993.
Included in other (income)/expense, net for the three months ended June 30
are: currency transactions, $1.0 million income in 1994 and $1.5 million income
in 1993, pre-receivable sale $.5 million income in 1994 and $.6 million expense
in 1993, amortization of debt issuance costs and loan origination fees, $.2
million in 1994 and 1993, and other miscellaneous (income)/expenses, 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 June 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 June 30,
1994 and 1993.
4. Income Taxes
The Company's effective tax rate for the six months ended June 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
<PAGE>
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 June 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 six months ended June 30, 1994 and 1993 was $7.8
million and $7.9 million, respectively.
Taxes paid for the six months ended June 30, 1994 and 1993 were $12.7
million and $.6 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
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 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 June 30, 1994 decreased $10.0 million or
6.7% compared to the same period in 1993. The stronger U.S. dollar during the
quarter as compared to 1993 decreased net sales by $3.1 million. The
divestiture of the Company's equipment division (AES) in mid-1993 further
reduced sales by $11.2 million. Excluding these factors, net sales were 2.9%
above second quarter 1993.
The sales growth rate for paper machine clothing in the United States declined
in the second quarter. Canadian sales declined in U. S. dollar equivalent terms
due to approximately flat sales in Canadian dollars and a weaker Canadian dollar
than in the second quarter of last year. In North America, sales growth rates
were also slowed by selective price concessions, mainly for customers entering
into continuous supply agreements for the Company's products. Management
believes that continuous supply agreements are part of a continuing effort by
paper companies to reduce the number of suppliers of paper machine clothing and
that this will be beneficial to Albany International shareholders. The sales
growth rate remained strong in Scandinavia. In Continental Europe, orders imply
that the recession is past and that gradual economic improvement can be
expected over the remainder of the year which should have a positive effect on
the Company's fourth quarter earnings.
Net sales decreased $15.7 million or 5.5% to $271 million for the six months
ended June 30, 1994 compared with the same period in 1993. Net sales were
reduced by $6.3 million from the effect of a stronger U.S dollar as compared to
the first six months of 1993 and by $20. 6 million resulting from the
divestiture of AES. Excluding these factors, 1994 net sales were 3.9% above
1993 net sales.
The Company continues to gain market share in Forming Fabrics and 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 39.1% of net sales for the three
months ended June 30, 1994 as compared to 36.6% for the same period in 1993
bringing the six month result to 38.7% for 1994 as compared to 35.7% for 1993.
Year to date variable costs as a percent of net sales decreased to 32.2% in 1994
from 34.9% 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 decreased 4.9% for the six months ended
June 30, 1994 as compared to the six months ended June 30, 1993. Translation of
non-U.S. currencies into U.S. dollars decreased reported amounts by $1.6 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 5.5%. 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.
6
<PAGE>
Operating income as a percent of net sales increased to 9.3% for the six months
ended June 30, 1994 from 6.3% for the comparable period in 1993 and increased to
10.1% for the three months ended June 30, 1994 as compared to 7.9% 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.
However, the magnitude of any improvements will depend on the rate of recovery
of the European economies.
Interest expense decreased as compared to the six months ended June 30, 1993 as
total debt is lower at June 30, 1994 as compared to the same period in 1993.
This reduction is due principally to a 4.1 million share public offering of the
Company's Class A Common Stock during the fourth quarter of 1993 which proceeds
were used to repay floating rate bank debt.
The decrease in other (income)/expense, net was due to currency transactions
which resulted in income of $.5 million for the six months ended June 30, 1994
as compared to income of $2.3 million for the same period in 1993 and to no pre-
receivable sales in 1994 which resulted in $1.3 million less expense in 1994 as
compared to 1993.
The tax rate for the six months ended June 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 June 30, 1994 as compared to the corresponding period in 1993 are similar
to those which affected the six month comparisons, except where specifically
noted.
LIQUIDITY AND CAPITAL RESOURCES:
The weakening U. S. dollar during the first six months of 1994 and the purchase
of the remaining Mexican equity interest (discussed above) increased accounts
receivable by $ 11.9 million and increased inventories by $ 5.8 million. In
addition, no accounts receivable were sold at June 30, 1994 as compared to $ 5.4
million sold at December 31, 1993. During the first six months of 1994, the
Company implemented Continuous Supply programs with a number of paper
manufacturers. These relationships require the Company to carry inventory
rather than the customer 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.
7
<PAGE>
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 June 30, 1994, 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.
Capital expenditures for the six months ended June 30, 1994 were $17.3 million
as compared to $11.7 million for the same period last year. The Company
anticipates that capital expenditures for the full year will approximate $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 two quarters of 1994
and were related to the fourth quarter of 1993 and the first quarter of 1994.
The Company also declared a cash dividend of $.0875 per share for the second
quarter of 1994 which will be paid in the third quarter of this year.
8
<PAGE>
Part II - Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of shareholders held on May 12, 1994 items subject to a
vote of security holders were the election of eight directors and the election
of auditors.
In the vote for the election of eight members of the Board of Directors of the
Company, the number of votes cast for, and the number of votes withheld from,
each of the nominees were as follows:
<TABLE>
<CAPTION>
Nominee Number of Votes For Number of Votes Withheld Broker Nonvotes
- - ------- ------------------------- ---------------------------- ----------------
Class A Class B Class A Class B Class A Class B
--------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
J. Spencer Standish 18,880,991 56,333,270 26,838 - - -
Francis L. McKone 18,880,991 56,333,270 26,838 - - -
Charles B. Buchanan 18,880,991 56,333,270 26,838 - - -
Paul Bancroft III 18,880,751 56,333,270 27,078 - - -
Thomas R. Beecher, Jr. 18,880,991 56,333,270 26,838 - - -
Stanley I. Landgraf 18,881,091 56,333,270 26,738 - - -
Allan Stenshamn 18,880,991 56,333,270 26,838 - - -
Barbara P. Wright 18,880,630 56,333,270 27,199 - - -
</TABLE>
In the vote on the motion to appoint the firm of Coopers & Lybrand as the
Company's auditor for 1994, the number of votes cast for, the number cast
against, and the number of votes abstaining with respect to such resolution were
as follows:
<TABLE>
<CAPTION>
Number of Votes For Number of Votes Against Number of Votes Abstaining Broker Nonvotes
Class A Class B Class A Class B Class A Class B Class A Class B
-------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
18,844,830 56,333,270 22,784 - 40,215 - - -
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A report on Form 8-K was filed on June 30, 1994 containing exhibits only (no
items were reported).
Exhibit No. Description
----------- -----------
11. Schedule of computation of primary net income per share
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALBANY INTERNATIONAL CORP.
--------------------------
(Registrant)
Date: August 12, 1994
by /s/ Michael C. Nahl
-------------------
Michael C. Nahl
Sr. Vice President and
Chief Financial Officer
<PAGE>
ALBANY INTERNATIONAL CORP.
EXHIBIT II
SCHEDULE OF COMPUTATION OF PRIMARY NET INCOME PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
1994 (1) 1993 (1) 1994 (1) 1993 (1)
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
29,959,071 25,718,187 Common stock outstanding at end of period 29,959,071 25,718,187
Adjustments to ending shares to arrive at
weighted average for the period:
(23,867) (23,969) Shares contributed to E.S.O.P. (2) (40,742) (42,889)
- - Shares issued under option (2) (3,315) -
----------- ---------- ----------- -----------
29,935,204 25,694,218 Weighted average number of shares 29,915,014 25,675,298
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
$5,932 $4,574 Net income $9,585 $4,705
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
$0.20 $0.17 Net income per share $0.32 $0.18
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
<FN>
(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
</TABLE>
<TABLE>
<CAPTION>
SHARES CONTRIBUTED TO E.S.O.P.: Shares
For the six months:
<S> <C> <C>
January 31, 1993 13,626 * (30/181) 2,259
February 28, 1993 13,572 * (58/181) 4,349
March 31 1993 12,074 * (89/181) 5,937
April 30, 1993 12,736 * (119/181) 8,373
May 31, 1993 11,770 * (150/181) 9,754
June 30, 1993 12,285 * (180/181) 12,217
--------
42,889
--------
--------
January 31, 1994 10,831*(30/181) 1,795
February 28, 1994 11,120*(58/181) 3,564
March 31, 1994 11,090*(89/181) 5,453
April 12, 1994 56*(101/181) 31
April 30, 1994 11,683*(119/181) 7,681
May 31, 1994 11,882*(150/181) 9,847
June 30, 1994 12,440*(180/181) 12,371
--------
40,742
--------
--------
For the three months:
April 30, 1993 12,736*(29/91) 4,059
May 31, 1993 11,770*(60/91) 7,760
June 30, 1993 12,285*(90/91) 12,150
--------
23,969
--------
--------
April 12, 1994 56*(11/91) 7
April 30, 1994 11,683*(29/91) 3,723
May 31, 1994 11,882*(60/91) 7,834
June 30, 1994 12,440*(90/91) 12,303
--------
23,867
--------
--------
</TABLE>
<PAGE>
ALBANY INTERNATIONAL CORP.
EXHIBIT II
SCHEDULE OF COMPUTATION OF PRIMARY NET INCOME PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
SHARES ISSUED UNDER OPTION:
For the six months: Shares
--------
<S> <C> <C>
March 22, 1994 7,500*(80/181) 3,315
--------
--------
</TABLE>
