<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: September 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
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ALBANY INTERNATIONAL CORP.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 14-0462060
- -------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1373 Broadway, Albany, New York 12204
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 518-445-2200
-------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----
The registrant had 24,344,566 shares of Class A Common Stock and 5,653,251
shares of Class B Common Stock outstanding as of September 30, 1994.
<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: November 7, 1994
by /s/ Michael C. Nahl
-------------------
Michael C. Nahl
Sr. Vice President and
Chief Financial Officer
<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 nine months ended September 30, 1994
and 1993 1
Consolidated balance sheets - September 30, 1994 and
December 31, 1993 2
Consolidated statements of cash flows - nine months ended
September 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 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 Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<C> <C> <S> <C> <C>
$145,144 $125,566 Net sales $416,194 $412,289
87,353 78,776 Cost of goods sold 253,639 263,243
---------- ---------- ---------- ----------
57,791 46,790 Gross profit 162,555 149,046
42,850 36,253 Selling, technical and general expenses 122,522 120,036
- - Restructuring charges and termination benefits - 419
---------- ---------- ---------- ----------
14,941 10,537 Operating Income 40,033 28,591
4,445 3,991 Interest expense, net 12,314 12,836
123 (391) Other expense/(income), net 730 (159)
---------- ---------- ---------- ----------
10,373 6,937 Income before income taxes 26,989 15,914
4,461 2,733 Income taxes 11,605 6,270
---------- ---------- ---------- ----------
5,912 4,204 Income before associated companies 15,384 9,644
72 219 Equity in earnings/(losses) of associated 185 (516)
companies
---------- ---------- ---------- ----------
5,984 4,423 Net Income 15,569 9,128
130,624 120,323 Retained earnings, beginning of period 126,276 120,113
2,624 2,252 Less dividends 7,861 6,747
---------- ---------- ---------- ----------
$133,984 $122,494 Retained earnings, end of period $133,984 $122,494
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
$0.20 $0.18 Net income per common share $0.52 $0.36
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
$0.0875 $0.0875 Dividends per common share $0.2625 $0.2625
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
29,972,230 25,728,457 Weighted average number of shares 29,934,296 25,693,212
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</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)
September 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,673 $1,381
Accounts receivable, net 145,711 120,416
Inventories:
Finished goods 76,465 72,763
Work in process 36,797 32,991
Raw material and supplies 25,139 18,539
------------ ------------
138,401 124,293
Deferred taxes and prepaid expenses 18,008 18,050
------------ ------------
Total current assets 304,793 264,140
Property, plant and equipment, net 324,399 302,829
Investments in associated companies 1,425 10,951
Intangibles 26,952 25,558
Deferred taxes 29,815 33,640
Other assets 27,809 18,302
------------ ------------
Total assets $715,193 $655,420
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $10,242 $8,560
Accounts payable 20,957 23,284
Accrued liabilities 57,318 55,288
Current maturities of long-term debt 984 2,917
Income taxes payable and deferred 4,670 7,881
------------ ------------
Total current liabilities 94,171 97,930
Long-term debt 252,071 208,620
Other noncurrent liabilities 84,471 82,423
Deferred taxes and other credits 15,414 21,979
------------ ------------
Total liabilities 446,127 410,952
------------ ------------
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 170,457 170,112
Retained earnings 133,984 126,276
Translation adjustments (30,998) (45,758)
Pension adjustment (1,856) (1,856)
------------ ------------
271,618 248,805
Less treasury stock (Class A), at cost (199,643
shares in 1994; 307,491 shares in 1993) 2,552 4,337
------------ ------------
Total shareholders' equity 269,066 244,468
------------ ------------
Total liabilities and shareholders' equity $715,193 $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>
Nine Months Ended
September 30,
1994 1993
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $15,569 $9,128
Adjustments to reconcile net cash provided by operating
activities:
Equity in (earnings)/losses of associated companies (185) 516
Distributions received from associated companies - 407
Depreciation and amortization 30,433 34,460
Provision for deferred income taxes, other credits (3,881) (4,177)
and long-term liabilities
Increase in cash surrender value of life insurance, (1,343) (152)
net of premiums paid
Unrealized currency transaction losses/(gains), net 3,648 (261)
Loss on disposition of assets 77 (2,991)
Tax benefit of options exercised 11 -
Treasury shares contributed to ESOP 1,994 1,772
Changes in operating assets and liabilities:
Accounts receivable (26,510) 13,681
Inventories (10,917) (268)
Prepaid expenses 782 (1,455)
Accounts payable (2,753) (3,234)
Accrued liabilities (119) 8,691
Income taxes payable (3,591) 859
Other, net (7,886) (1,518)
----------- -----------
Net cash (used)/provided by operating activities (4,671) 55,458
----------- -----------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (30,276) (19,996)
Proceeds from sale of assets 1,670 27,553
Acquisitions, net of cash acquired 526 (55,356)
Premiums paid for life insurance - (1,198)
----------- -----------
Net cash used in investing activities (28,080) (48,997)
----------- -----------
FINANCING ACTIVITIES
Proceeds from borrowings 51,236 32,894
Principal payments on debt (10,721) (30,802)
Proceeds from options exercised 126 -
Dividends paid (7,842) (6,738)
----------- -----------
Net cash provided/(used) in financing activities 32,799 (4,646)
----------- -----------
Effect of exchange rate changes on cash 1,244 (588)
----------- -----------
Increase in cash and cash equivalents 1,292 1,227
Cash and cash equivalents at beginning of year 1,381 4,005
----------- -----------
Cash and cash equivalents at end of period $2,673 $5,232
----------- -----------
----------- -----------
</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/(Income), Net
Included in other expense/(income), net for the nine months ended September
30 are: currency transactions, $.2 million income in 1994 and $3.5 million
income in 1993, pre-receivable sale, $.2 million income in 1994 and $1.4 million
expense in 1993, amortization of debt issuance costs and loan origination fees,
$.8 million in 1994 and $.6 million in 1993, interest rate protection
agreements, $.6 million income in 1994 and $.1 million expense in 1993 and other
miscellaneous expenses/(income), none of which are significant, in 1994 and
1993.
Included in other expense/(income), net for the three months ended
September 30 are: currency transactions, $1.1 million income in 1993, pre-
receivable sale $.4 million expense in 1993, amortization of debt issuance costs
and loan origination fees, $.2 million in 1994 and $.1 million in 1993, interest
rate protection agreements, $.3 million income in 1994 and other miscellaneous
expenses/(income), 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 September 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 September
30, 1994 and 1993.
4. Income Taxes
The Company's effective tax rate for the nine months ended September 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 September 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 nine months ended September 30, 1994 and 1993 was
$14.4 million and $11.9 million, respectively.
Taxes paid for the nine months ended September 30, 1994 and 1993 were $17.9
million and $2.0 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 NINE MONTHS ENDED SEPTEMBER 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 September 30, 1994 increased $19.5 million
or 15.6% compared to the same period in 1993. The weaker U.S. dollar during
the quarter as compared to 1993 increased net sales by $4.2 million. Excluding
this effect, net sales were 12.2% above third quarter 1993.
The third quarter sales growth rate remained strong in the Nordic region and
sales in Continental Europe began improving for the first time in this economic
cycle. Canadian sales increased due principally to improved economic and paper
industry operating conditions. Sales in North America increased even though
selective price concessions for customers entering into Continuous Supply
agreements for the Company's products tended to reduce net selling prices.
Management believes that Continuous Supply agreements are part of an effort by
paper companies to reduce the number of suppliers of paper machine clothing and
that this ultimately will be beneficial to Albany International shareholders.
Net sales increased $3.9 million or .9% for the nine months ended September 30,
1994 compared with the same period in 1993. Net sales were reduced by $2.1
million from the effect of a stronger U.S. dollar as compared to the first nine
months of 1993 and by $20.5 million resulting from the divestiture of the
Company's equipment division (AES) in mid-1993. Excluding these factors, net
sales for the nine months were 6.8% above 1993. In comparison, 1994 net sales
increased 3.9% in the first half of 1994 and 12.2% in the third quarter of 1994
as compared to the same period last year.
The Company continues to gain market share in Forming Fabrics and Dryer Fabrics
and to 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 39.8% of net sales for the three
months ended September 30, 1994 as compared to 37.3% for the same period in 1993
increasing the nine month result to 39.1% for 1994 as compared to 36.2% for
1993. Year to date variable costs as a percent of net sales decreased to 32.7%
in 1994 from 34.4% 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 increased $6.6 million or 18.5% for the
three months ended September 30, 1994 as compared to the same period last year.
Included in this amount were temporary increases associated with the development
of a new Press Fabric product and consulting fees associated with the Company's
restructuring efforts. In addition, exchange losses on trade receivables,
principally in Europe, added to the increased costs. The Company anticipates
some impact from the above items during the fourth quarter but to a much lesser
degree.
6
<PAGE>
Selling, technical and general expenses increased 2.1% for the nine months ended
September 30, 1994 as compared to the nine months ended September 30, 1993.
Translation of non-U.S. currencies into U.S. dollars decreased reported amounts
by $.8 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 8.8%. 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.
Operating income as a percent of net sales increased to 9.6% for the nine months
ended September 30, 1994 from 6.9% for the comparable period in 1993 and
increased to 10.3% for the three months ended September 30, 1994 as compared to
8.4% 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 and into 1995.
The decrease in other expense/(income), net was due to currency transactions
which resulted in $3.3 million less income for the nine months ended
September 30, 1994 as compared to the same period in 1993, no pre-receivable
sales in 1994 which resulted in $1.6 million less expense in 1994 as compared
to 1993 and interest rate protection income of $.6 million in 1994 as compared
to $.1 million expense in 1993.
The tax rate for the nine months ended September 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 September 30, 1994 as compared to the corresponding period in 1993 are
similar to those which affected the nine month comparisons, except where
specifically noted.
LIQUIDITY AND CAPITAL RESOURCES:
The weakening U. S. dollar during the first nine months of 1994 and the purchase
of the remaining Mexican equity interest (discussed above) increased accounts
receivable by $8.7 million and increased inventories by $7.5 million. In
addition, no accounts receivable were sold at September 30, 1994 as compared to
$ 5.4 million sold at December 31, 1993. A significant portion of the increase
in accounts receivable resulted from sales in September. During 1994, the
Company implemented Continuous Supply programs with a number of paper
manufacturers. These relationships require the Company rather than the customer
to carry inventory 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.
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 September 30, 1994,
7
<PAGE>
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.
Total debt at September 30, 1994 is $263.3 million as compared to $220.1 million
at December 31, 1993. The increase is due primarily to the increase in accounts
receivable and inventories which total $39.4 million. Management does not
anticipate any significant reductions in working capital requirements in the
short term.
Capital expenditures for the nine months ended September 30, 1994 were $30.3
million as compared to $20.0 million for the same period last year. The Company
anticipates that capital expenditures for the full year will be $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 three quarters of
1994 and were related to the fourth quarter of 1993 and the first two quarters
of 1994. The Company also declared a cash dividend of $.0875 per share for the
third quarter of 1994 which will be paid in the fourth quarter of this year.
8
<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 September 30, 1994.
EXHIBIT NO. DESCRIPTION
11. Schedule of computation of primary net income per share
9
<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 nine months
ended September 30, ended September 30,
1994 (1) 1993 (1) 1994 (1) 1993 (1)
- ---------- ---------- ---------- ----------
<C> <C> <S> <C> <C>
29,997,817 25,749,095 Common stock outstanding at end of period 29,997,817 25,749,095
Adjustments to ending shares to arrive at
weighted average for the period:
(25,587) (20,638) Shares contributed to E.S.O.P. (2) (61,323) (55,883)
- - Shares issued under option (2) (2,198) -
- ---------- ---------- ---------- ----------
29,972,230 25,728,457 Weighted average number of shares 29,934,296 25,693,212
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
$5,984 $4,423 Net income $15,569 $9,128
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
$0.20 $0.18 Net income per share $0.52 $0.36
- ---------- ---------- ---------- ----------
- ---------- ---------- ---------- ----------
<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
SHARES CONTRIBUTED TO E.S.O.P.: Shares
----------
For the nine months:
January 31, 1993 13,626 * (30/273) 1,498
February 28, 1993 13,572 * (58/273) 2,883
March 31 1993 12,074 * (89/273) 3,936
April 30, 1993 12,736 * (119/273) 5,552
May 31, 1993 11,770 * (150/273) 6,467
June 30, 1993 12,285 * (180/273) 8,100
July 31, 1993 10,209 * (211/273) 7,890
August 31, 1993 9,706 * (242/273) 8,604
September 30, 1993 10,993 * (272/273) 10,953
----------
55,883
----------
----------
January 31, 1994 10,831 * (30/273) 1,190
February 28, 1994 11,120 * (58/273) 2,362
March 31, 1994 11,090 * (89/273) 3,615
April 12, 1994 56 * (101/273) 21
April 30, 1994 11,683 * (119/273) 5,093
May 31, 1994 11,882 * (150/273) 6,529
June 30, 1994 12,440 * (180/273) 8,202
July 31, 1994 12,977 * (211/273) 10,030
August 31, 1994 12,679 * (242/273) 11,239
September 30, 1994 13,090 * (272/273) 13,042
----------
61,323
----------
----------
<PAGE>
For the three months:
July 31, 1993 10,209 * (30/92) 3,329
August 31, 1993 9,706 * (61/92) 6,436
September 30, 1993 10,993 * (91/92) 10,873
----------
20,638
----------
----------
July 31, 1994 12,977 * (30/92) 4,232
August 31, 1994 12,679 * (61/92) 8,407
September 30, 1994 13,090 * (91/92) 12,948
----------
25,587
----------
----------
SHARES ISSUED UNDER OPTION: Shares
----------
For the nine months:
March 22, 1994 7,500 * (80/273) 2,198
----------
----------
</TABLE>
