<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: March 31, 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
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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) h as been subject to
such filing requirements for the past 90 days. Yes X No
---
The registrant had 24,269,759 shares of Class A Common Stock and 5,653,251
shares of Class B Common Stock outstanding as of March 31, 1994.
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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, 1994 and 1993 1
Consolidated Balance Sheets - March 31, 1994 and
December 31,1993 2
Consolidated Statements of Cash Flows - three months ended
March 31, 1994 and 1993 3
Notes to Consolidated Financial Statements 4-5
Item 2. Management Discussion and Analysis of Financial
Condition and Results of Operations 6-7
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 8
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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
March 31,
1994 1993
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<S> <C> <C>
Net sales $131,424 $137,095
Cost of goods sold 81,230 89,645
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Gross profit 50,194 47,450
Selling, technical & general expenses 39,253 41,252
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Operating income 10,941 6,198
Interest expense, net 3,535 4,697
Other expense, net 1,046 222
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Income before income taxes 6,360 1,279
Income taxes 2,734 504
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Income before associated company 3,626 775
Equity in earnings/(losses) of associated
companies 27 (644)
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Net income 3,653 131
Retained earnings, beginning of period 126,276 120,113
Less dividends 2,617 2,246
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Retained earnings, end of period $127,312 $117,998
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Net income per common share $0.12 $0.01
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Dividends per common share $0.0875 $0.0875
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Weighted average number of shares 29,894,600 25,656,168
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</TABLE>
The accompanying notes are an integral part of the financial statements.
-1-
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ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
1994 1993
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<S> <C> <C>
ASSETS
Cash and cash equivalents $6,217 $1,381
Accounts receivable, net 124,273 120,416
Inventories:
Finished goods 75,435 72,763
Work in process 35,650 32,991
Raw material and supplies 21,049 18,539
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132,134 124,293
Deferred taxes and prepaid expenses 19,132 18,050
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Total current assets 281,756 264,140
Property, plant and equipment, net 311,612 302,829
Investments in associated companies 1,258 10,951
Intangibles 26,080 25,558
Deferred taxes 31,569 33,640
Other assets 23,082 18,302
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Total assets $675,357 $655,420
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LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $11,661 $8,560
Accounts payable 20,387 23,284
Accrued liabilities 51,930 55,288
Current maturities of long-term debt 2,188 2,917
Income taxes payable and deferred 4,263 7,881
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Total current liabilities 90,429 97,930
Long-term debt 233,395 208,620
Other noncurrent liabilities 83,000 82,423
Deferred taxes and other credits 20,525 21,979
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Total liabilities 427,349 410,952
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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 24,544,209
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 170,350 170,112
Retained earnings 127,312 126,276
Translation adjustments (44,038) (45,758)
Pension adjustment (1,856) (1,856)
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251,799 248,805
Less treasury stock (Class A), at cost (274,450 shares
in 1994; 307,491 shares in 1993) 3,791 4,337
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Total shareholders' equity 248,008 244,468
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Total liabilities and shareholders' equity $675,357 $655,420
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</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>
Three Months Ended
March 31,
1994 1993
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $3,653 $131
Adjustments to reconcile net cash provided by
operating activities:
Equity in earnings/(losses) of associated companies (27) 644
Depreciation and amortization 9,970 10,903
Provision for deferred income taxes, other credits
and long term liabilities (283) (718)
Increase in cash surrender value of life insurance,
net of premiums paid (548) (450)
Unrealized currency transaction gains/(losses), net (799) 4,756
(Gain)/Loss on sale of assets (5) 16
Tax benefit of options exercised 11 -
Treasury shares contributed to ESOP 647 604
Changes in operating assets and liabilities:
Accounts receivable (822) 2,749
Inventories (5,109) (761)
Prepaid expenses (1,059) (1,076)
Accounts payable (2,897) (3,738)
Accrued liabilities (5,491) 20,365
Income taxes payable (3,721) (3,074)
Other, net (4,179) 763
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Net cash (used)/provided by operating activities (10,659) 31,114
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INVESTING ACTIVITIES
Purchases of property, plant and equipment (7,968) (4,887)
Proceeds from sale of assets 14 12
Acquisition, net of cash acquired 1,800 (50,856)
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Net cash used in investing activities (6,154) (55,731)
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FINANCING ACTIVITIES
Proceeds from borrowings 28,331 26,395
Principal payments on debt (783) (935)
Proceeds from options exercised 126 -
Dividends paid (2,614) (2,243)
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Net cash provided by financing activities 25,060 23,217
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Effect of exchange rate changes on cash (3,411) 96
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Increase/(Decrease) in cash and cash equivalents 4,836 (1,304)
Cash and cash equivalents at beginning of period 1,381 4,005
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Cash and cash equivalents at end of period $6,217 $2,701
------------ ------------
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</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 Expense, Net
Included in other expense, net are: currency transactions, $.5
million expense in 1994 and $.9 million income in 1993, pre-receivable
sales, $.2 million in 1994 and $.4 million in 1993, amortization of debt
issuance costs and loan origination fees of $.2 million in 1994 and $.3
million in 1993, and other miscellaneous 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 March 31, 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 March 31, 1994 and 1993.
4. Income Taxes
The Company's effective tax rate for the three months ended March 31,
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.
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 March 31 there were no
amounts sold under this agreement as compared to $12.0 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 three months ended March 31, 1994 and 1993 was
$3.4 million and $4.7 million, respectively.
Taxes paid for the three months ended March 31, 1994 and 1993 were
$5.7 million and $.4 million, respectively.
4
<PAGE>
7. Acquisitions
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 MONTHS ENDED MARCH 31, 1994
The following discussion should be read in conjunction with the
accompanying Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS:
Net sales decreased to $131.4 million for the three months ended March 31,
1994 compared with $ 137.1 for the three months ended March 31, 1993. The
effect of the stronger U.S. dollar as compared to the first quarter of 1993
was to decrease net sales by $3.1 million. The sale of Albany Engineered
Systems (AES) on June 30, 1993 further reduced first quarter 1994 sales by
$ 9.4 million. Excluding these factors, 1994 net sales would have
increased 5.0%. United States sales increased while Canadian sales
decreased. In Europe, Nordic region sales increased significantly while
sales in Continental Europe were behind 1993 levels due to continuing
economic problems, particularly in Germany. Management is optimistic about
the Company's long term prospects in Europe. The Company continues to gain
market share in Forming Fabrics and retain its Press Fabric market share.
There were no significant price increases during the three months ended
March 31, 1994. Management anticipates that 1994 price increases will be
minimal.
Gross profit was 38.2% of net sales for the three months ended March 31,
1994 as compared to 34.6% for the three months ended March 31, 1993. Year
to date variable costs as a percent of net sales decreased from 34.8% in
1993 to 31.2% for the same period in 1994, due mainly to plant closings and
workforce reductions, principally in Europe, during 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 4.8% for the three
months ended March 31, 1994 as compared to the three months ended March 31,
1993. These costs were reduced by translation of non-U.S. currencies into
fewer U.S. dollars due to the stronger U.S. dollar, $.8 million, and the
sale of AES, $3.2 million. Excluding these effects, expenses increased
4.9%. The Company has not reduced its sales and service efforts as there
is an increasing customer demand for service. Management anticipates that
this demand for service will continue to increase as customers reduce the
number of suppliers.
Operating income as a percentage of net sales increased to 8.3% for the
three months ended March 31, 1994 from 4.5% for the comparable period in
1993 due to items discussed above. The Company estimates that operating
income as a percent of net sales should continue to improve during 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 three months ended March 31,
1993 as total debt is $40.9 million lower at March 31, 1994 as compared to
the same period in 1993. This debt reduction is due principally to a 4.1
million share public offering during the fourth quarter of 1993 which
proceeds were used to repay floating rate bank debt.
The change in other expense, net was due primarily to currency transactions
which resulted in income of $.9 million for the three months ended March
31, 1993 and an expense of $.5 million for the comparable period in 1994.
The tax rate for the three months ended March 31, 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.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Inventories increased $7.8 million during the three months ended March
31,1994 due to the strengthening of the U.S. dollar during the period, the
purchase of the remaining Mexican equity interest (discussed above) and
customer requests to maintain higher stocks as the transition to fewer
suppliers takes effect. This transition should cause inventories to
increase in the near term but should result in more predictable
requirements and possibly lower levels in the long term.
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 March 31, 1994, the 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, reduced accounts receivable by $5.4 million and increased accrued
liabilities by $6.6 million.
Capital expenditures for the three months ended March 31, 1994 were $8.0
million as compared to $4.8 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.
A cash dividend of $.0875 per share, which was declared for the fourth
quarter of 1993, was paid in the first quarter of 1994. The Company also
declared a cash dividend of $.0875 per share for the first quarter of 1994
which will be paid in the second quarter of this year.
7
<PAGE>
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, 1994.
EXHIBIT NO. DESCRIPTION
11. Schedule of computation of primary net income per share
8
<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: April 27, 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
ended March 31,
1994 (1) 1993 (1)
------------- ------------
<S> <C> <C>
Common stock outstanding at end of period 29,923,010 25,681,396
Adjustments to ending shares to arrive at
weighted average for the period:
Shares contributed to E.S.O.P. (2) (21,743) (25,228)
Shares issued under option (2) (6,667) -
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Weighted average number of shares 29,894,600 25,656,168
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Net income $3,653 $131
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Net income per share $0.12 $0.01
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<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
------------
<S> <C>
January 31, 1993 13,626 * (30/90) 4,542
February 28, 1993 13,572 * (58/90) 8,746
March 31, 1993 12,074 * (89/90) 11,940
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25,228
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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
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SHARES ISSUED UNDER OPTION:
March 22, 1994 7,500 * (80/90) 6,667
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</TABLE>
