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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended: DECEMBER 31, 1995
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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.
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(Exact name of registrant as specified in its charter)
DELAWARE 14-0462060
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1373 BROADWAY, ALBANY, NEW YORK 12204
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 518-445-2200
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
CLASS A COMMON STOCK ($0.001 PAR VALUE) NEW YORK STOCK EXCHANGE AND
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PACIFIC STOCK EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act:
NONE
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(Title of Class)
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of Class A Common Stock held on March 4, 1996 by non-
affiliates of the registrant was $479,666,851.
The registrant had 24,756,223 shares of Class A Common Stock and 5,615,563
shares of Class B Common Stock outstanding as of March 4, 1996.
DOCUMENTS INCORPORATED BY REFERENCE PART
Registrant's Annual Report to Shareholders for the year
ended December 31, 1995. II
Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 14, 1996. III
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PART I
ITEM 1. BUSINESS
The Registrant designs, manufactures and markets paper machine clothing for each
section of the paper machine. It is the largest producer of paper machine
clothing in the world. Paper machine clothing consists of large continuous
belts of custom designed and custom manufactured, engineered fabrics that are
installed on paper machines and carry the paper stock through each stage of the
paper production process. Paper machine clothing is a consumable product of
technologically sophisticated design that is made with synthetic monofilament
and fiber materials. The Registrant produces a substantial portion of its
monofilament requirements. The design and material composition of paper machine
clothing can have a considerable effect on the quality of paper products
produced and the efficiency of the paper machines on which it is used.
Practically all press fabrics are woven tubular or endless from monofilament
yarns. After weaving, the base press fabric goes to a needling operation where
a thick fiber layer, called a batt, is laid on the base just before passing
through the needling machine. The needles are equipped with tiny barbs that
grab batt fibers locking them into the body of the fabric. After needling, the
fabrics are usually washed, and water is removed. The fabric then is heat set,
treatments may be applied, and it is measured and trimmed.
The Registrant's manufacturing process is similar for forming fabrics and drying
fabrics, except that there is normally no needling operation in the construction
of those fabrics. Monofilament screens are woven on a loom. The fabrics are
seamed to produce an endless loop, and heat stabilized by running them around
two large cylinders under heat and drawn out by tension. After heat setting,
the fabrics are seamed and boxed.
In addition to paper machine clothing, the Registrant manufactures other
engineered fabrics which include fabrics for the non-woven industry, corrugator
belts, filtration media and Rapid Roll Doors-Registered Trademark-. Nomafa, our
Rapid Roll Door company, grew from the application of our coated fabric
technology to industrial doors. Since Nomafa's inception in the early 1980's,
manufacturing operations in North America and Europe have supplied over 60,000
installations worldwide and with the acquisition of Kelley Door Systems in
December 1995, our U.S. distribution network will be enhanced.
Another innovative engineered fabric development unrelated to paper machine
clothing is Primaloft -Registered Trademark- down which is believed to have
properties superior to goose down. This product continues to gain acceptance in
the marketplace for cold weather clothing and bedding.
INDUSTRY FACTORS
There are approximately 1,250 paper machines in the United States located in
approximately 600 paper mills. It is estimated that, excluding China, there are
about 7,300 paper machines in the world and approximately 7,000, mostly very
small, paper machines in China. Demand for paper machine clothing is tied to
the volume of paper production, which in turn reflects economic growth.
According to published data, world production volumes have grown in excess of 3%
annually over the last ten years. The Registrant anticipates continued growth
for the long-term in world paper production. The profitability of the paper
machine clothing business has generally been less cyclical than the
profitability of the papermaking industry.
Because the paper industry has been characterized by an evolving but essentially
stable manufacturing technology based on the wet forming papermaking process,
which requires a very large capital investment, the Registrant does not believe
that a commercially feasible substitute technology that does not employ paper
machine clothing is likely to be developed and incorporated into the paper
production process by paper manufacturers in the foreseeable future.
Accordingly, the prospects for continued growth of industry demand for paper
machine clothing appear excellent.
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Over the last few years, paper manufacturers have generally reduced the number
of suppliers of paper machine clothing per machine position. This trend has
increased opportunities for market leaders, including the Registrant, to expand
their market share.
INTERNATIONAL OPERATIONS
The Registrant maintains wholly-owned manufacturing facilities in Australia,
Brazil, Canada, China, Finland, France, Germany, Great Britain, Holland, Mexico,
Sweden and the United States. The Registrant has a 50% interest in two related
entities in South Africa which are engaged primarily in the paper machine
clothing business (see Note 1 of Notes to Consolidated Financial Statements).
The Registrant's geographically diversified operations allow it to serve the
world's paper markets more efficiently and to provide superior technical service
to its customers. The Registrant benefits from the transfer of research and
development product innovations between geographic regions. The worldwide scope
of the Registrant's manufacturing and marketing efforts also limits the impact
on the Registrant of economic downturns that are limited to a geographic region.
The Registrant's widespread presence subjects it to certain risks, including
controls on foreign exchange and the repatriation of funds. However, the
Registrant has been able to repatriate earnings in excess of working capital
requirements from each of the countries in which it operates without substantial
governmental restrictions and does not foresee any material changes in its
ability to continue to do so in the future. In addition, the Registrant
believes that the risks associated with its operations and locations outside the
United States are those normally associated with doing business in these
locations. In countries in which the Registrant operates that have experienced
high inflation rates, the Registrant frequently reprices its products. This
practice has enabled the Registrant to quickly pass on to its customers most of
the increased costs due to local inflation.
MARKETING, CUSTOMERS AND BACKLOG
Paper machine clothing is custom designed for each user depending upon the type,
size and speed of the papermaking machine, the machine section, the grade of
paper being produced, and the quality of the pulp stock used. Judgment and
experience are critical in designing the appropriate clothing for each position
on the machine. As a result, the Registrant employs highly skilled sales and
technical service personnel in 25 countries who work directly with paper mill
operating management. The Registrant's technical service program in the United
States gives its service engineers field access to the measurement and analysis
equipment needed for troubleshooting and application engineering. Sales,
service and technical expenses are major cost components of the Registrant. The
Registrant employs approximately 900 people in the sales and technical functions
combined, many of whom have engineering degrees or paper mill experience. The
Registrant's market leadership position in forming and pressing fabrics reflects
the Registrant's commitment to technological innovation.
Typically, the Registrant experiences its highest quarterly sales levels in the
fourth quarter of each fiscal year and its lowest levels in the first quarter.
The Registrant believes that this pattern only partially reflects seasonal
shifts in demand for its products but is more directly related to purchasing
policies of the Registrant's customers.
Payment terms granted to customers reflect general competitive practices. Terms
vary with product and competitive conditions, but generally require payment
within 30 to 90 days, depending on the country of operation. Historically, bad
debts have been insignificant. No single customer, or group of related
customers, accounted for more than 5% of the Registrant's sales of paper machine
clothing in any of the past three years. Management does not believe that the
loss of any one customer would have a material adverse effect on the
Registrant's business.
The Registrant's order backlogs at December 31, 1995 and 1994 were approximately
$492 million and $446 million, respectively. Orders recorded at December 31,
1995 are expected to be invoiced during the next 12 months.
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RESEARCH AND DEVELOPMENT
The Registrant invests heavily in research, new product development and
technical analysis to maintain its leadership in the paper machine clothing
industry. The Registrant's expenditures fall into two primary categories,
research and development and technical expenditures. Research and development
expenses totaled $19.7 million in 1995, $18.4 million in 1994 and $17.6 million
in 1993. While most research activity supports existing products, the
Registrant engages in research for new products. New product research has
focused primarily on more sophisticated paper machine clothing and has resulted
in a stream of products such as DUOTEX-Registered Trademark- and TRIOTEX-TM-
forming fabrics, for which the technology has been licensed to several
competitors, DURAFORM -Registered Trademark- SR, an enhanced single-layer
forming fabric, SEAMTECH-TM-, the patented on-machine-seamed press fabric,
DYNATEX-TM-, a unique multi-layer press fabric, long nip press belts which are
essential to water removal in the press section and Thermonetics-TM-, a dryer
fabric. Technical expenditures, primarily at the plant level, totaled $25.3
million in 1995, $22.5 million in 1994 and $21.4 million in 1993. Technical
expenditures are focused on design, quality assurance and customer support.
Although the Registrant has focused most of its research and development efforts
on paper machine clothing products and design, the Registrant also has made
progress in developing non-paper machine clothing products. Through its major
research facility in Mansfield, Massachusetts, the Registrant conducts research
under contract for the U.S. government and major corporations. In addition to
its Mansfield facility, the Registrant has four other research and development
centers located at manufacturing locations in Halmstad, Sweden; Selestat,
France; Albany, New York; and Menasha, Wisconsin.
The Registrant holds a number of patents, trademarks and licenses, none of which
are material to the continuation of the Registrant's business. The Registrant
has licensed some of its patents to one or more competitors, mainly to enhance
customer acceptance of the new products. The revenue from such licenses is less
than 1 percent of consolidated net sales.
COMPETITION
While there are more than 50 paper machine clothing suppliers worldwide, only
six major paper machine clothing companies compete on a global basis. Market
shares vary depending on the country and the type of paper machine clothing
produced. In the paper machine clothing market, the Registrant believes that it
has a market share of approximately 28% in the United States and Canadian
markets, taken together, 17% in the rest of the world and approximately 21% in
the world overall. Together, the United States and Canada constitute
approximately 38% of the total world market for paper machine clothing.
Competition is intense in all areas of the Registrant's business. While price
competition is, of course, a factor, the primary bases for competition are the
performance characteristics of the Registrant's products, which are principally
technology-driven, and the quality of customer service. The Registrant, like
its competitors, provides diverse services to customers through its sales and
technical service personnel including: (1) consulting on performance of the
paper machine; (2) consulting on paper machine configurations, both new and
rebuilt; (3) selection and custom manufacture of the appropriate paper machine
clothing; and (4) storing fabrics for delivery to the user.
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EMPLOYEES
The Registrant employs 5,658 persons, of whom approximately 75% are engaged in
manufacturing the Registrant's products. Wages and benefits are competitive
with those of other manufacturers in the geographic areas in which the
Registrant's facilities are located. The Registrant considers its relations
with its employees in general to be excellent.
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information with respect to the executive
officers of the Registrant:
NAME AGE POSITION
J. Spencer Standish 70 Chairman of the Board and Director
Francis L. McKone 61 President, CEO and Director
Michael C. Nahl 53 Senior Vice President and Chief Financial
Officer
Michel J. Bacon 46 Senior Vice-President - Canada and Pacific
J. Weldon Cole 59 Senior Vice President - Administration and
Development
Frank R. Schmeler 56 Senior Vice President - U.S. and Latin America
Edward Walther 52 Senior Vice President - Europe
Thomas H. Hagoort 63 General Counsel
Charles B. Buchanan 64 Vice President, Secretary and Director
Richard A. Carlstrom 52 Vice President - Controller
William H. Dutt 60 Vice President - Technical
Edward R. Hahn 51 Vice President - Research and Development
Hugh A. McGlinchey 56 Vice President - Information Systems
James W. Sherrer 60 Vice President - Industrial Products
Ervin D. Johnson 52 Treasurer
Charles J. Silva, Jr. 36 Assistant General Counsel and Assistant
Secretary
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J. SPENCER STANDISH joined the Registrant in 1952. He has served the Registrant
as Chairman of the Board since 1984, Vice Chairman from 1976 to 1984, Executive
Vice President from 1974 to 1976, and Vice President from 1972 to 1974. He has
been a Director of the Registrant since 1958. He is a director of Berkshire
Life Insurance Company.
FRANCIS L. MCKONE joined the Registrant in 1964. He has served the Registrant
as Chief Executive Officer since 1993, President since 1984, Executive Vice
President from 1983 to 1984, Group Vice President-Papermaking Products Group
from 1979 to 1983, and prior to 1979 as a Vice President of the Registrant and
Division President-Papermaking Products U.S. He has been a Director of the
Registrant since 1983.
MICHAEL C. NAHL joined the Registrant in 1981. He has served the Registrant as
Senior Vice President and Chief Financial Officer since 1983 and prior to 1983
as Group Vice President.
MICHEL J. BACON joined the Registrant in 1978. He has served the Registrant as
Senior Vice President since 1996 and as Vice President and General Manager of
Albany International Canada from 1991 to 1996, as Vice President of Operations,
Albany International Canada Press Division from 1989 to 1991 and as Vice
President of Marketing, Albany International Canada from 1987 to 1989.
J. WELDON COLE joined the Registrant as Senior Vice President on January 1,
1995. From 1988 until December 1994 he held various management positions, most
recently as President and Director of Beloit Corporation, an international
manufacturer of pulp and papermaking equipment.
FRANK R. SCHMELER joined the Registrant in 1964. He has served the Registrant
as Senior Vice President since 1988, as Vice President and General Manager of
the Felt Division from 1984 to 1988, as Division Vice President and General
Manager, Albany International Canada from 1978 to 1984 and as Vice President of
Marketing, Albany International Canada from 1976 to 1978.
EDWARD WALTHER joined the Registrant in 1994. He has served the Registrant as
Senior Vice President since 1995 and as Vice President and General Manager --
Continental Europe since 1994. Prior to joining the Registrant, he held various
marketing and managerial positions with a company in the paper machine clothing
business.
THOMAS H. HAGOORT joined the Registrant as General Counsel on January 1, 1991.
From 1968 until December 31, 1990 he was a partner in Cleary, Gottlieb, Steen
and Hamilton, an international law firm with headquarters in New York City, to
which he became of counsel on January 1, 1991.
CHARLES B. BUCHANAN joined the Registrant in 1957. He has served the Registrant
as Vice President and Secretary since 1980 and as Vice President and Assistant
to the President from 1976 to 1980. He has been a Director of the Registrant
since 1969. He is a Director of Fox Valley Corporation.
RICHARD A. CARLSTROM joined the Registrant in 1972. He has served the
Registrant as Vice President-Controller since 1993, as Controller since 1980, as
Controller of a U.S. division from 1975 to 1980, and prior to 1975 as Financial
Controller of Albany International Pty. in Australia.
WILLIAM H. DUTT joined the Registrant in 1958. He has served the Registrant
since 1983 as Vice President-Technical, and prior to 1983 he served in various
technical, engineering, and research capacities including Director of Research
and Development and Vice President-Operations for Albany Felt.
EDWARD R. HAHN joined the Registrant in 1971. He has served the Registrant
since 1995 as Vice President-Research and Development and Executive Director of
Albany International Research Company, as Vice President and General Manager of
Press Fabrics U.S. from 1990 to 1995, as Vice President of Euroscan Press and
Dryer Divisions from 1987 to 1990 and as Vice President of Operations for
Nordiskafilt from 1986 to 1987.
HUGH A. MCGLINCHEY joined the Registrant in 1991. He has served the Registrant
as Vice President-Information Systems since 1993 and from 1991 to 1993 as
Director-Information Systems. Prior to 1991 he served as Director-Corporate
Information and Communications Systems for Avery Dennison Corporation.
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JAMES W. SHERRER joined the Registrant in 1992. He has served the
Registrant as Vice President-Industrial Products since 1996, as Vice President-
Administration from 1993 to 1996 and as Vice President from 1992 to 1993. Prior
to joining the Registrant, he held various technical and managerial positions
with a company in the paper machine clothing business.
ERVIN D. JOHNSON joined the Registrant in 1974. He has served the Registrant as
Treasurer since 1996 and as Controller of Press Fabrics U.S. from 1991 to 1996.
Prior to 1991 he served in various financial positions, including Controller of
Appleton Wire Division and Operations Manager for Nomafa Door Division.
CHARLES J. SILVA, JR. joined the Registrant in 1994. He has served the
Registrant as Assistant General Counsel and Assistant Secretary since 1996 and
as Assistant General Counsel from 1994 to 1996. Prior to 1994, he was an
associate in Cleary, Gottlieb, Steen and Hamilton, an international law firm
with headquarters in New York City.
RAW MATERIALS AND INVENTORY
Primary raw materials for the Registrant's products are synthetic fibers, which
are generally available from a number of suppliers. The Registrant, therefore,
is not required to maintain inventories in excess of its current needs to assure
availability. In addition, the Registrant manufactures monofilament, a basic
raw material for all types of paper machine clothing, at its facility in Homer,
New York, which supplies approximately 40% of its world-wide monofilament
requirements. This manufacturing capability assists the Registrant in its
negotiations with monofilament producers for the balance of its supply
requirements, and enhances the ability of the Registrant to develop proprietary
products.
The Registrant believes it is in compliance with all Federal, State and local
provisions which have been enacted or adopted regarding the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, and does not have knowledge of environmental regulations which do
or might have a material effect on future capital expenditures, earnings, or
competitive position.
The Registrant is incorporated under the laws of the State of Delaware and is
the successor to a New York corporation which was originally incorporated in
1895 and which was merged into the Registrant in August 1987 solely for the
purpose of changing the domicile of the corporation. Upon such merger, each
outstanding share of Class B Common Stock of the predecessor New York
corporation was changed into one share of Class B Common Stock of the
Registrant. References to the Registrant that relate to any time prior to the
August 1987 merger should be understood to refer to the predecessor New York
corporation.
ITEM 2. PROPERTIES
The Registrant's principal manufacturing facilities are located in the United
States, Canada, Europe, Brazil, Mexico, Australia and China. The aggregate
square footage of the Registrant's facilities in the United States and Canada is
approximately 2,414,000, of which 2,337,000 square feet are owned and 77,000
square feet are leased. The Registrant's facilities located outside the United
States and Canada comprise approximately 2,586,000 square feet, of which
2,389,000 square feet are owned and 197,000 square feet are leased. The
Registrant considers these facilities to be in good condition and suitable for
their purpose. The capacity associated with these facilities is adequate to
meet production levels required and anticipated through 1996. The Registrant's
expected 1996 capital expenditures, excluding the new facility in South Korea,
of about $45 million will provide sufficient capacity for anticipated growth.
The Registrant believes it has modern, efficient production equipment. In the
last five years, it has spent $169 million on new plants and equipment or
upgrading existing facilities, including the completion of new forming and press
fabric plants in Sweden.
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ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of 1995 to a vote of
security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
"Stock and Shareholders" and "Quarterly Financial Data" on page 26 of the Annual
Report are incorporated herein by reference.
Restrictions on dividends and other distributions are described in Note 6, on
pages 13 and 14 of the Annual Report. Such description is incorporated herein
by reference.
ITEM 6. SELECTED FINANCIAL DATA
"Eleven Year Summary" on pages 24 and 25 of the Annual Report is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Review of Operations" on pages 21 to 23 of the Annual Report is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and its
subsidiaries, included on pages 7 to 20 in the Annual Report, are incorporated
herein by reference:
Consolidated Statements of Income and Retained Earnings - years ended
December 31, 1995, 1994 and 1993
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Cash Flows - years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Accountants
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a) DIRECTORS. The information set out in the section captioned
"Election of Directors" of the Proxy Statement is incorporated herein by
reference.
b) EXECUTIVE OFFICERS OF REGISTRANT. Information about the officers of
the Registrant is set forth in Item 1 above.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the sections of the Proxy Statement captioned
"Executive Compensation", "Summary Compensation Table", "Option/SAR Grants in
Last Fiscal Year", "Option/SAR Exercises during 1995 and Year-End Values",
"Pension Plan Table", "Compensation and Stock Option Committee Report on
Executive Compensation" and "Stock Performance Graph" is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set out in the section captioned "Share Ownership" of the Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULE AND REPORTS ON FORM 8-K
a)(1) FINANCIAL STATEMENTS. The consolidated financial statements included
in the Annual Report are incorporated by reference in Item 8.
a)(2) SCHEDULE. The following consolidated financial statements schedule
for each of the three years in the period ended December 31, 1995 is included
pursuant to Item 14(d):
Report of Independent Accountants on Financial Statements Schedule
Schedule II - Valuation and qualifying accounts
a)(3)(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1995.
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(3) EXHIBITS
3(a) - Certificate of Incorporation of Registrant. (4)
3(b) - Bylaws of Registrant. (1)
4(a) - Article IV of Certificate of Incorporation of Registrant (included in Exhibit 3(a)).
4(b) - Specimen Stock Certificate for Class A Common Stock. (1)
EAST GREENBUSH
10(f)(i) - Installment Sale Agreement, dated as of July 1, 1987, between the Registrant and Rensselaer
County Industrial Development Authority. (1)
10(f)(ii) - Letter of Credit Agreement, dated as of July 1, 1987, between the Registrant and Norstar
Bank of Upstate NY. (1)
10(f)(iii) - Letter Agreement, undated, between the Registrant and Norstar Bank of Upstate NY, amending
the Letter of Credit Agreement referred to as Exhibit 10(f)(ii). (2)
10(f)(iv) - Letter Agreement, dated May 10, 1990, between the Registrant and Norstar Bank of Upstate NY,
further amending the Letter of Credit Agreement referred to as Exhibit 10(f)(ii). (8)
10(g)(i) - Loan Agreement, dated April 27, 1989, between the Registrant and New York State Urban
Development Corporation. (6)
D.I.A.L. LOAN
10(h)(i) - Loan Agreement, dated August 31, 1988, between the Registrant and The Chase Manhattan Bank
(National Association). (5)
10(h)(ii) - Letter Agreement, dated as of February 1, 1991, between the Registrant and Harris Trust and
Savings Bank, amending the Loan Agreement referred to as Exhibit 10(h)(i). (9)
MORGAN CREDIT AGREEMENT
10(i)(i) - Amended and restated Credit Agreement, dated as of February 29, 1996, among the Registrant,
certain banks listed therein, and Morgan Guaranty Trust Company of New York, as Agent. (15)
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EQUIPMENT LEASES
10(k)(i) - Equipment Lease Agreement, dated December 29, 1988, between Registrant and Fleet Credit
Corporation. (6)
10(k)(ii) - Master Lease Agreement, dated August 17, 1987, between Registrant and BancBoston Leasing. (6)
10(k)(iii) - Master Lease of Personal Property, dated November 19, 1987, between Registrant and Security
Pacific Equipment Leasing, Inc. (6)
10(k)(iv) - Master Lease of Personal Property No. 20910, dated August 31, 1989, between the Registrant
and Security Pacific Equipment Leasing, Inc. (7)
PARENT GUARANTEES
10(l)(i) - Guarantee, dated June 15, 1989, delivered by Registrant to Bank of Montreal related to
Albany International Canada, Inc. (6)
10(l)(ii) - Guarantee, dated August 10, 1989, delivered by Registrant to National Australia Bank Limited
related to Albany International Pty Ltd. (6)
10(l)(iii) - Limited Guaranty, dated as of December 5, 1989, delivered by the Registrant to The First
National Bank of Boston, guarantying certain repayment obligations of six subsidiaries of the Company. (9)
10(l)(iv) - Corporate Continuing Guaranty, dated August 8, 1990, delivered by the Registrant to Citicorp
and/or Citibank, N.A., guarantying certain repayment obligations of seven subsidiaries of the Company. (9)
10(l)(v) - Corporate Continuing Guaranty, dated September 20, 1990, delivered by the Registrant to
Citicorp and/or Citibank, N.A., guarantying certain repayment obligations of Albany International S.A. De
C.V. (9)
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STOCK OPTIONS
10(m)(i) - Form of Stock Option Agreement, dated as of August 1, 1983, between the Registrant and each
of five employees, together with schedule showing the names of such employees and the material differences
among the Stock Option Agreements with such employees. (1)
10(m)(ii) - Form of Amendment of Stock Option Agreement, dated as of July 1, 1987, between the
Registrant and each of the five employees identified in the schedule referred to as Exhibit 10(m)(i). (1)
10(m)(iii) - 1988 Stock Option Plan. (3)
10(m)(iv) - 1992 Stock Option Plan (13)
EXECUTIVE COMPENSATION
10(n) - Pension Equalization Plan adopted April 16, 1986, naming two current executive officers and
one former executive officer of Registrant as "Participants" thereunder. (1)
10(n)(i) - Supplemental Executive Retirement Plan. (14)
10(o)(i) - Form of Executive Deferred Compensation Plan adopted September 1, 1985, and Forms of
Election Agreement. (1)
10(o)(ii) - Form of Directors' Deferred Compensation Plan adopted September 1, 1985, and Form of
Election Agreement. (1)
10(o)(iii) - Executive Deferred Compensation Plan. (3)
10(o)(iv) - Directors' Deferred Compensation Plan. (3)
10(o)(v) - Deferred Compensation Plan of Albany International Corp. (15)
10(o)(vi) - Centennial Deferred Compensation Plan. (15)
OTHER AGREEMENTS
10(q) - Merchandise Orders Purchase and Sale Agreement, dated as of January 28, 1991, among the
Registrant, CXC Incorporated and Citicorp North America, Inc., as Agent. (10)
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10(q)(i) - Amendment No. 1 to Merchandise Orders Purchase and Sale Agreement, dated as of April 26,
1991, among the Registrant, CXC Incorporated and Citicorp North America, Inc., as Agent, amending the
Merchandise Orders Purchase and Sale Agreement referred to as Exhibit 10(q). (11)
11 - Schedule of Computation of Primary and Fully Diluted Net Income Per
Share.
13 - Annual Report to Security Holders for the year ended December 31, 1995.
21 - Subsidiaries of Registrant.
23 - Consent of Coopers & Lybrand L.L.P.
24 - Powers of Attorney. (12)
27 - Financial Data Schedule.
</TABLE>
All other schedules and exhibits are not required or are inapplicable and,
therefore, have been omitted.
(1) Previously filed as an Exhibit to the Company's Registration Statement
on Form S-1, No. 33-16254, as amended, declared effective by the
Securities and Exchange Commission on September 30, 1987, which
previously-filed Exhibit is incorporated by reference herein.
(2) Previously filed as an Exhibit to the Company's Registration Statement
on Form S-1, No. 33-20650, declared effective by the Securities and
Exchange Commission on March 29, 1988, which previously-filed Exhibit
is incorporated by reference herein.
(3) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated August 8, 1988, which previously-filed Exhibit is
incorporated by reference herein.
(4) Previously filed as an Exhibit to the Registrant's Registration
Statement on Form 8-A, File No. 1-10026, declared effective by the
Securities and Exchange Commission on August 26, 1988 (as to The
Pacific Stock Exchange, Inc.), and on September 7, 1988 (as to The New
York Stock Exchange, Inc.), which previously-filed Exhibit is
incorporated by reference herein.
(5) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated January 6, 1989, which previously-filed Exhibit is
incorporated by reference herein.
14
<PAGE>
(6) Previously filed as an Exhibit to the Registrant's Registration
Statement on Form S-1, No. 33-30581, declared effective by the
Securities and Exchange Commission on September 26, 1989, which
previously-filed Exhibit is incorporated by reference herein.
(7) Previously filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989, which
previously-filed Exhibit is incorporated by reference herein.
(8) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated June 29, 1990, which previously-filed Exhibit is
incorporated by reference herein.
(9) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated February 28, 1991, which previously-filed Exhibit is
incorporated by reference herein.
(10) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated April 8, 1991, which previously-filed Exhibit is
incorporated by reference herein.
(11) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated May 28, 1991, which previously-filed Exhibit is
incorporated by reference herein.
(12) Previously filed as an Exhibit to the Registrant's Quarterly Report on
Form 10Q dated November 8, 1991, which previously-filed Exhibit is
incorporated by reference herein.
(13) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated January 18, 1993, which previously-filed Exhibit is
incorporated by reference herein.
(14) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated June 30, 1994, which previously-filed Exhibit is
incorporated by reference herein.
(15) Previously filed as an Exhibit to the Registrant's Current Report on
Form 8-K dated March 15, 1996, which previously-filed Exhibit is
incorporated by reference herein.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 26th day of March,
1996.
ALBANY INTERNATIONAL CORP.
by /s/ Michael C. Nahl
-------------------
Michael C. Nahl
Principal Financial Officer
Senior Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
*
_______________________ Chairman of the Board March 26, 1996
(J. Spencer Standish) and Director
*
_______________________ President and Director March 26, 1996
(Francis L. McKone) (Chief Executive Officer)
/s/Michael C. Nahl Senior Vice President and
- ----------------------- Chief Financial Officer March 26, 1996
(Michael C. Nahl) (Principal Financial Officer)
*
_______________________ Vice President-Controller March 26, 1996
(Richard A. Carlstrom) (Principal Accounting Officer)
*
_______________________ Vice President, Secretary and March 26, 1996
(Charles B. Buchanan) Director
*
________________________ Director March 26, 1996
(Thomas R. Beecher, Jr.,)
*
_______________________ Director March 26, 1996
(Stanley I. Landgraf)
*
_______________________ Director March 26, 1996
(Dr. Joseph G. Morone)
*
_______________________ Director March 26, 1996
(Allan Stenshamn)
*
_______________________ Director March 26, 1996
(Barbara P. Wright)
*By /s/Michael C. Nahl
------------------
Michael C. Nahl
Attorney-in-fact
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENTS SCHEDULE
To The Shareholders and Board of Directors
Albany International Corp.
Our report on the consolidated financial statements of Albany International
Corp. has been incorporated by reference in this form 10-K from page 7 of the
1995 Annual Report to Shareholders of Albany International Corp. In connection
with our audits of such financial statements, we have also audited the related
financial statements schedule listed in the index on page 10 of this Form 10-K.
In our opinion, the financial statements schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
Albany, New York
January 25, 1996
S-1
<PAGE>
SCHEDULE II
ALBANY INTERNATIONAL CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ----------------------------------------------------------------------------------------------
Balance at Additions
Beginning Charged to Balance at
Description of Period Expense Deductions (A) End of Period
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended December 31:
1995 $4,618 $963 $571 $5,010
1994 $4,579 $597 $558 $4,618
1993 $4,800 $1,667 $1,888 $4,579
</TABLE>
(A) Includes accounts written off as uncollectible, recoveries and the effect
of currency exchange rates.
S-2
<PAGE>
EXHIBIT 11
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME PER SHARE
<PAGE>
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:
<TABLE>
<CAPTION>
For the three months For the year ended
ended December 31, December 31,
1995 (1) 1994 (1) 1995 (1) 1994 (1)
- ------------ ----------- -------------- -------------
<S> <C> <C> <C> <C>
30,313,147 30,033,929 Common stock outstanding at end of period 30,313,147 30,033,929
Adjustments to ending shares to arrive at
weighted average for the period:
(23,553) (24,052) Shares contributed to E.S.O.P. (2) (75,763) (78,940)
(72) - Shares issued under option (2) (133,024) (1,643)
55,435 - Treasury shares purchased (2) 97,561 -
(26) - Shares issued due to conversion of (63) -
debt (2)
- ------------ ----------- --------------- -----------
30,344,931 30,009,877 Weighted average number of shares 30,201,858 29,953,346
- ------------ ----------- --------------- -----------
- ------------ ----------- --------------- -----------
$12,118 $8,383 Net income $43,050 $23,952
- ------------ ----------- --------------- -----------
- ------------ ----------- --------------- -----------
$0.40 $0.28 Net income per share (3) $1.43 $0.80
- ------------ ----------- --------------- -----------
- ------------ ----------- --------------- -----------
</TABLE>
(1) Includes Class A and Class B Common Stock
(2) Calculated as follows:
number of shares multiplied by the reciprocal of the number
of days outstanding (or the reciprocal of the number of days held in
treasury for treasury stock purchases) divided by the number of days
in the period
SHARES CONTRIBUTED TO E.S.O.P.:
<TABLE>
<S> <C> <C>
For the year:
January 31, 1994 10,831 * (30/365) 890
February 28, 1994 11,120 * (58/365) 1,767
March 31 1994 11,090 * (89/365) 2,704
April 12, 1994 56 * (101/365) 15
April 30, 1994 11,683 * (119/365) 3,809
May 31, 1994 11,882 * (150/365) 4,883
June 30, 1994 12,440 * (180/365) 6,135
July 31, 1994 12,977 * (211/365) 7,502
August 31, 1994 12,679 * (242/365) 8,406
September 30, 1994 13,090 * (272/365) 9,755
October 31, 1994 10,963 * (303/365) 9,101
November 14, 1994 39 * (317/365) 34
November 30, 1994 12,996 * (333/365) 11,857
December 31, 1994 12,114 * (364/365) 12,082
------
78,940
------
------
January 31, 1995 12,346 * (30/365) 1,015
February 23, 1995 656 * (53/365) 95
February 28, 1995 13,324 * (58/365) 2,117
February 28, 1995 37,040 * (58/365) 5,886
March 31, 1995 12,697 * (89/365) 3,096
April 30, 1995 9,968 * (119/365) 3,250
May 31, 1995 10,301 * (150/365) 4,233
</TABLE>
<PAGE>
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
<TABLE>
<S> <C> <C>
June 30, 1995 10,217 * (180/365) 5,039
July 18, 1995 32 * (198/365) 17
July 31, 1995 8,382 * (211/365) 4,845
August 31, 1995 10,146 * (242/365) 6,727
September 30, 1995 9,729 * (272/365) 7,250
October 31, 1995 10,943 * (303/365) 9,084
November 30, 1995 11,614 * (333/365) 10,596
December 31, 1995 12,547 * (364/365) 12,513
------
75,763
------
------
For the three months:
October 31, 1994 10,963 * (30/92) 3,575
November 14, 1994 39 * (44/92) 19
November 30, 1994 12,996 * (60/92) 8,476
December 31, 1994 12,114 * 91/92) 11,982
------
24,052
------
------
October 31, 1995 10,943 * (30/92) 3,568
November 30, 1995 11,614 * (60/92) 7,574
December 31, 1995 12,547 * (91/92) 12,411
------
23,553
------
------
SHARES ISSUED UNDER OPTION:
For the year:
March 22, 1994 7,500 * (80/365) 1,643
------
------
April 12, 1995 25,000 * (101/365) 6,918
April 27, 1995 5,000 * (116/365) 1,589
May 1, 1995 20,000 * (120/365) 6,575
June 2, 1995 7,500 * (152/365) 3,123
June 6, 1995 14,000 * (156/365) 5,983
June 14, 1995 600 * (164/365) 270
July 10, 1995 1,200 * (190/365) 625
July 12, 1995 15,000 * (192/365) 7,890
July 13, 1995 10,000 * (193/365) 5,288
July 19, 1995 15,000 * (199/365) 8,178
July 20, 1995 10,000 * (200/365) 5,479
July 26, 1995 7,500 * (206/365) 4,233
July 27, 1995 5,000 * (207/365) 2,836
July 28, 1995 28,800 * (208/365) 16,412
July 31, 1995 55,000 * (211/365) 31,794
August 4, 1995 3,000 * (215/365) 1,767
August 7, 1995 10,000 * (218/365) 5,973
August 10, 1995 3,700 * (221/365) 2,240
August 23, 1995 6,200 * (234/365) 3,975
September 1, 1995 1,200 * (243/365) 799
September 12, 1995 1,200 * (254/365) 835
September 15, 1995 10,000 * (257/365) 7,041
September 26, 1995 2,500 * (268/365) 1,836
October 2, 1995 1,200 * (274/365) 901
October 10, 1995 600 * (282/365) 464
------
133,024
------
------
</TABLE>
<PAGE>
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
<TABLE>
<S> <C> <C>
For the three months:
October 2, 1995 1,200 * (1/92) 13
October 10, 1995 600 * (9/92) 59
------
72
------
------
TREASURY SHARES PURCHASED:
For the year:
February 16, 1995 15,000 * (46/365) 1,890
March 14, 1995 35,000 * (72/365) 6,904
November 21, 1995 100,000 * (324/365) 88,767
------
97,561
------
------
For the three months:
November 21, 1995 100,000 * (51/92) 55,435
------
------
SHARES ISSUED DUE TO CONVERSION OF DEBT:
For the year:
November 1, 1995 76 * (304/365) 63
------
------
For the three months:
November 1, 1995 76 * (31/92) 26
------
------
</TABLE>
(3) Dilutive common stock equivalents are not material and therefore are not
included in the calculation of primary earnings per share.
FULLY DILUTED EARNINGS PER SHARE:
<TABLE>
<CAPTION>
For the three months For the year ended
ended December 31, December 31,
1995 1994 1995 1994
- -------------- ------------ ------------- -------------
<S> <C> <C> <C>
30,344,931 30,009,877 Weighted average number of shares 30,201,858 29,953,346
308,801 284,046 Incremental shares of unexercised 340,227 284,046
options (4)
5,712,374 5,712,450 Convertible shares of subordinated 5,712,374 5,712,450
- -------------- ------------ debentures (5) ------------- -------------
36,366,106 36,006,373 Adjusted weighted average number of 36,254,459 35,949,842
- -------------- ------------ shares ------------- -------------
- -------------- ------------ ------------- -------------
$13,567 $9,505 Net income (including after-tax income $48,846 $28,440
- -------------- ------------ adjustment) (5) ------------- -------------
- -------------- ------------ ------------- -------------
$0.37 $0.26 Fully diluted net income per share $1.35 $0.79
- -------------- ------------ ------------- -------------
- -------------- ------------ ------------- -------------
</TABLE>
(4) Incremental shares of unexercised options are calculated based on the
higher of the average price of the Company's stock or the ending price
for the respective period. The calculation includes all options whose
exercise price is below the higher of the average or ending stock price.
(5) The original subordinated debentures are convertible into 5,712,450
shares of the Company's Class A Common Stock. Two debentures were
converted into 76 shares as of December 31, 1995. Upon any conversion,
the Company would realize an after-tax income adjustment based on the
effective interest expense on the bonds less the corresponding income
tax deduction. The remaining amount of the shares and the income
adjustment will be included in the calculation only when they cause
dilution to net income per share.
<PAGE>
REPORT OF MANAGEMENT
Management of Albany International Corp. is responsible for the integrity and
objectivity of the accompanying financial statements and related information.
These statements have been prepared in conformity with generally accepted
accounting principles, and include amounts that are based on our best judgments
with due consideration given to materiality.
Management maintains a system of internal accounting controls designed to
provide reasonable assurance, at reasonable cost, that assets are safeguarded
and that transactions and events are recorded properly. A program of internal
audits and management reviews provides a monitoring process that allows the
Company to be reasonably sure the system of internal accounting controls
operates effectively.
The financial statements have been audited by Coopers & Lybrand L.L.P.,
independent accountants. Their role is to express an opinion as to whether
management's financial statements present fairly, in accordance with generally
accepted accounting principles, the Company's financial condition and operating
results. Their opinion is based on procedures which include reviewing and
evaluating certain aspects of selected systems, procedures and internal
accounting controls, and conducting such tests as they deem necessary.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with the independent accountants, management and
internal audit to review their work and confirm that they are properly
discharging their responsibilities. In addition, the independent accountants are
free to meet with the Audit Committee without the presence of management to
discuss results of their work and observations on the adequacy of internal
financial controls, the quality of financial reporting and other relevant
matters.
[SIG]
J. Spencer Standish
CHAIRMAN OF THE BOARD
[SIG]
Francis L. McKone
PRESIDENT AND CHIEF EXECUTIVE OFFICER
[SIG]
Michael C. Nahl
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALBANY INTERNATIONAL CORP.
We have audited the accompanying consolidated balance sheets of Albany
International Corp. as of December 31, 1995 and 1994, and the related
consolidated statements of income and retained earnings, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Albany
International Corp. as of December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
[COOPERS & LYBRAND SIG]
Albany, New York
January 25, 1996, except for Notes 6 and 17, for which the date is February 13,
1996
7
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ALBANY INTERNATIONAL CORP.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENTS OF INCOME
Net sales $ 652,645 $ 567,583 $ 546,120
Cost of goods sold 379,632 338,868 344,609
- -------------------------------------------------------------------------------------
Gross profit 273,013 228,715 201,511
Selling and general expenses 139,102 124,883 123,496
Technical and research expenses 45,020 40,888 38,968
Restructuring of operations and termination benefits -- -- (1,863)
- -------------------------------------------------------------------------------------
Operating income 88,891 62,944 40,910
Interest income (114) (317) (365)
Interest expense 20,123 17,137 16,480
Other (income)/expense, net (1,024) 4,324 (630)
- -------------------------------------------------------------------------------------
Income before income taxes 69,906 41,800 25,425
Income taxes 27,233 17,974 10,017
- -------------------------------------------------------------------------------------
Income before associated companies 42,673 23,826 15,408
Equity in earnings of associated companies 377 126 116
- -------------------------------------------------------------------------------------
Net income 43,050 23,952 15,524
RETAINED EARNINGS
Retained earnings, beginning of period 139,740 126,276 120,113
Less dividends 11,708 10,488 9,361
- -------------------------------------------------------------------------------------
Retained earnings, end of period $ 171,082 $ 139,740 $ 126,276
- -------------------------------------------------------------------------------------
NET INCOME PER SHARE
Primary $ 1.43 $ 0.80 $ 0.58
Fully diluted $ 1.35 $ 0.80 $ 0.58
- -------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<PAGE>
CONSOLIDATED BALANCE SHEETS
ALBANY INTERNATIONAL CORP.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
AT DECEMBER 31, 1995 1994
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,609 $ 228
Accounts receivable, less allowance for doubtful accounts
($5,010, 1995; $4,618, 1994) 170,415 154,140
Inventories
Finished goods 88,378 78,501
Work in process 42,480 37,665
Raw material and supplies 30,523 26,364
Deferred taxes and prepaid expenses 19,095 17,278
- ---------------------------------------------------------------------------------------
Total current assets 358,500 314,176
- ---------------------------------------------------------------------------------------
Property, plant and equipment, at cost, net 342,150 320,719
Investments in associated companies 2,366 992
Intangibles 31,682 20,495
Deferred taxes 28,537 40,251
Other assets 33,290 24,753
- ---------------------------------------------------------------------------------------
Total assets $ 796,525 $ 721,386
- ---------------------------------------------------------------------------------------
LIABILITIES
Current liabilities:
Notes and loans payable $ 16,268 $ 16,676
Accounts payable 35,262 30,236
Accrued liabilities 59,301 53,750
Current maturities of long-term debt 985 1,044
Income taxes payable and deferred 12,067 11,071
- ---------------------------------------------------------------------------------------
Total current liabilities 123,883 112,777
- ---------------------------------------------------------------------------------------
Long-term debt 245,265 232,767
Other noncurrent liabilities 100,268 81,176
Deferred taxes and other credits 24,812 22,719
- ---------------------------------------------------------------------------------------
Total liabilities 494,228 449,439
- ---------------------------------------------------------------------------------------
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; 24,841,173 issued in 1995 and 24,564,033
in 1994 25 25
Class B Common Stock, par value $.001 per share; authorized
25,000,000 shares; issued and outstanding 5,615,563 in 1995
and 5,633,427 in 1994 6 6
Additional paid in capital 176,345 170,539
Retained earnings 171,082 139,740
Translation adjustments (30,580) (36,408)
Pension liability adjustment (12,382) --
- ---------------------------------------------------------------------------------------
304,496 273,902
Less treasury stock, at cost 2,199 1,955
- ---------------------------------------------------------------------------------------
Total shareholders' equity 302,297 271,947
- ---------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 796,525 $ 721,386
- ---------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
ALBANY INTERNATIONAL CORP.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 43,050 $ 23,952 $ 15,524
Adjustments to reconcile net cash provided by
operating activities:
Equity in earnings of associated companies (377) (126) (116)
Distributions received from associated companies -- 42 407
Depreciation and amortization 43,087 38,649 41,969
Accretion of convertible subordinated debentures 1,628 1,519 1,419
Provision for deferred income taxes, other
credits and long-term liabilities 6,739 (2,395) (8,455)
Increase in cash surrender value of life
insurance, net of premiums paid (654) (468) (452)
Unrealized currency transaction gains (1,469) (1,271) (998)
(Gain)/loss on disposition of assets (754) 1,280 (6,967)
Treasury shares contributed to ESOP 3,454 2,671 2,344
Changes in operating assets and liabilities:
Accounts receivable (13,926) (30,021) 3,272
Inventories (19,061) (15,046) (815)
Prepaid expenses 386 586 470
Accounts payable 4,658 6,527 212
Accrued liabilities 1,527 (5,054) (6,715)
Income taxes payable (88) 2,124 4,587
Other, net (747) 140 (507)
- ------------------------------------------------------------------------------------
Net cash provided by operating activities 67,453 23,109 45,179
- ------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (41,921) (36,322) (30,940)
Purchased software (2,215) (2,053) --
Proceeds from sale of assets 1,762 1,855 27,750
Acquisitions, net of cash acquired (11,312) 526 (55,356)
Investment in associated company (915) -- --
Premiums paid for life insurance (1,196) (1,196) (1,198)
- ------------------------------------------------------------------------------------
Net cash used in investing activities (55,797) (37,190) (59,744)
- ------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from borrowings 21,348 51,484 65,205
Principal payments on debt (14,542) (23,490) (107,090)
Proceeds from options exercised 4,408 126 --
Tax benefit of options exercised 581 12 --
Purchases of treasury shares (2,883) -- --
Proceeds from sale of common stock -- -- 68,690
Dividends paid (11,305) (10,474) (8,990)
- ------------------------------------------------------------------------------------
Net cash (used)/provided by financing activities (2,393) 17,658 17,815
- ------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (1,882) (4,730) (5,874)
- ------------------------------------------------------------------------------------
Increase/(decrease) in cash and cash equivalents 7,381 (1,153) (2,624)
Cash and cash equivalents at beginning of year 228 1,381 4,005
- ------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 7,609 $ 228 $ 1,381
- ------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Albany
International Corp. and its subsidiaries after elimination of intercompany
transactions. The Company has a 50% interest in two related entities in
South Africa. The consolidated financial statements include the Company's
original investment in the South African entities, plus its share of
undistributed earnings, in the account "Investments in associated
companies." The Company had 40% equity interests in companies in Mexico,
Brazil and Argentina until the first quarter of 1994 when it exchanged its
40% equity interests in Brazil and Argentina for the remaining 60% equity
interest in Mexico.
REVENUE RECOGNITION
The Company records sales when products are shipped to customers pursuant
to orders or contracts. Sales terms are in accordance with industry
practice in markets served. The Company limits the concentration of credit
risk in receivables from the paper manufacturing industry by closely
monitoring credit and collection policies. The allowance for doubtful
accounts is adequate to absorb estimated losses.
ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
TRANSLATION OF FINANCIAL STATEMENTS
Assets and liabilities of non-U.S. operations are translated at year-end
rates of exchange, and the income statements are translated at the average
rates of exchange for the year. Gains or losses resulting from translating
non-U.S. currency financial statements are accumulated in a separate
component of shareholders' equity.
For operations in countries that are considered to have highly inflationary
economies, gains and losses from translation and transactions are
determined using a combination of current and historical rates and are
included in net income.
Gains or losses resulting from currency transactions denominated in a
currency other than the entity's local currency, forward exchange contracts
which are not designated as hedges for accounting purposes and futures
contracts are generally included in income. Changes in value of forward
exchange contracts which are effective as hedges for accounting purposes
are generally reported, net of tax, in shareholders' equity in the caption
"Translation adjustments."
RESEARCH EXPENSE
Research expense, which is charged to operations as incurred, was
$19,700,000 in 1995, $18,388,000 in 1994 and $17,605,000 in 1993.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid short-term
investments with original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of United
States inventories is based on the last-in, first-out (LIFO) method; all
other inventories are valued at average cost.
PROPERTY, PLANT AND EQUIPMENT
Depreciation is recorded using the straight-line method over the estimated
useful lives of the assets for financial reporting purposes; accelerated
methods are used for income tax purposes.
Significant additions or improvements extending assets' useful lives are
capitalized; normal maintenance and repair costs are expensed as incurred.
The cost of fully depreciated assets remaining in use are included in the
respective asset and accumulated depreciation accounts. When items are sold
or retired, related gains or losses are included in net income.
INTANGIBLES AND OTHER ASSETS
The excess purchase price over fair values assigned to assets acquired is
amortized on a straight-line basis over either 25 or 40 years.
Patents, at cost, are amortized on a straight-line basis over either 8 or
10 years.
Computer software, at cost, is amortized on a straight-line basis over 5
years and is included in "Other assets."
11
<PAGE>
INCOME TAXES
The Company accounts for taxes in accordance with Financial Accounting
Standard No. 109, "Accounting for Income Taxes," which requires the use of
the asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred income taxes are recognized for the
tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable for future years to differences between financial
statement and tax bases of existing assets and liabilities. Under FAS No.
109, the effect of tax rate changes on deferred taxes is recognized in the
income tax provision in the period that includes the enactment date.
It is the Company's policy to accrue appropriate U.S. and non-U.S. income
taxes on earnings of subsidiary companies which are intended to be remitted
to the parent company in the near future.
The provision for taxes is reduced by investment and other tax credits in
the years such credits become available.
PENSION PLANS
Substantially all employees are covered under either Company or government
sponsored pension plans. For principal Company sponsored plans, pension
plan costs are based on actuarial determinations. The plans are generally
trusteed or insured and accrued amounts are funded as required in
accordance with governing laws and regulations.
EARNINGS PER SHARE
Primary 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 primary earnings per share during 1995, 1994 and 1993.
The 5.25% convertible subordinated debentures issued in March 1992 are not
common stock equivalents and are therefore not considered in the
calculation of primary earnings per share. The weighted average number of
common shares outstanding during 1995, 1994 and 1993 was 30,201,858,
29,953,346 and 26,679,361, respectively. For purposes of calculating fully
diluted earnings per share, conversion of the subordinated debentures,
interest savings, net of income taxes, and the exercise of options assuming
the purchase of treasury shares with the proceeds, are considered. The
weighted average number of shares outstanding, assuming full dilution, in
1995 was 36,254,459 and net income was $48,800,000. The options and the
convertible subordinated debentures were not dilutive during 1994 and 1993.
2. INVENTORIES
The cost of inventories valued under the LIFO method is $67,872,000 at
December 31, 1995 and $67,251,000 at December 31, 1994. Had the Company's
inventory been valued at average cost (which approximates replacement
cost), inventories would have been $5,707,000 higher in 1995 and $5,771,000
higher in 1994.
3. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are summarized below:
<TABLE>
<CAPTION>
- -------------------------------------------------------
(IN THOUSANDS) 1995 1994
- -------------------------------------------------------
<S> <C> <C>
Land $ 23,107 $ 22,467
Buildings 160,476 147,439
Machinery and equipment 441,536 386,034
- -------------------------------------------------------
625,119 555,940
- -------------------------------------------------------
Accumulated depreciation 282,969 235,221
- -------------------------------------------------------
$342,150 $320,719
- -------------------------------------------------------
</TABLE>
Construction in progress was approximately $363,000 in 1995 and $3,339,000
in 1994.
Depreciation expense was $41,375,000 in 1995, $37,554,000 in 1994, and
$41,286,000 in 1993.
Expenditures for maintenance and repairs are charged to income as incurred
and amounted to $15,129,000 in 1995, $14,400,000 in 1994, and $15,138,000
in 1993.
Capital expenditures were $41,921,000 in 1995, $36,322,000 in 1994, and
$30,940,000 in 1993. At the end of 1995, the Company was committed to
$25,592,000 of future expenditures for new equipment.
4. INTANGIBLES
The components of intangibles are summarized below:
<TABLE>
<CAPTION>
- -----------------------------------------------------
(IN THOUSANDS) 1995 1994
- -----------------------------------------------------
<S> <C> <C>
Excess purchase price over
fair value $34,643 $29,049
Patents 10,440 10,329
Accumulated amortization (19,679) (18,883)
Deferred unrecognized pension
cost (see Note 12) 6,278 --
- -----------------------------------------------------
$31,682 $20,495
- -----------------------------------------------------
</TABLE>
Amortization expense was $796,000 in 1995 and $683,000 in 1994 and 1993.
12
<PAGE>
5. ACCRUED LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
- -----------------------------------------------------
(IN THOUSANDS) 1995 1994
- -----------------------------------------------------
<S> <C> <C>
Salaries and wages $18,622 $14,853
Employee benefits 15,967 13,895
Returns and allowances 4,326 2,744
Interest 3,072 3,325
Restructuring costs 1,039 2,852
Acquisition obligation 5,000 --
Other 11,275 16,081
- -----------------------------------------------------
$59,301 $53,750
- -----------------------------------------------------
</TABLE>
6. FINANCIAL INSTRUMENTS
Notes and loans payable at December 31, 1995 and 1994 were short-term debt
instruments with banks, denominated in local currencies with a weighted
average interest rate of 13.2% (7.63% excluding Brazil) in 1995 and 6.7% in
1994.
Long-term debt at December 31, 1995 and 1994, principally to banks and
bondholders, exclusive of amounts due within one year, consists of:
<TABLE>
<CAPTION>
- -------------------------------------------------------
(IN THOUSANDS) 1995 1994
- -------------------------------------------------------
<S> <C> <C>
$150 million 5.25% converti-
ble subordinated debentures
due 2002, yielding 7.0%. $136,963 $135,338
$150 million revolving credit
agreement which terminates
in 2000 with LIBOR borrow-
ings outstanding at an aver-
age interest of 6.15% in
1995 and 4.85% in 1994. 64,000 50,000
Various notes, mortgages and
debentures relative to
operations principally
outside the United States,
at an average interest of
6.92% in 1995 and 6.11% in
1994, due in varying amounts
through 2015. 29,774 30,287
Industrial revenue financings
at an average interest of
5.89% in 1995 and 5.43% in
1994, due in varying amounts
through 2015. 14,528 17,142
- -------------------------------------------------------
$245,265 $232,767
- -------------------------------------------------------
</TABLE>
Principal payments due on long-term debt are: 1996, $985,000; 1997,
$6,134,000; 1998, $10,545,000; 1999, $1,079,000; 2000, $64,354,000.
Interest paid was $20,076,000 in 1995, $16,708,000 in 1994, and $16,634,000
in 1993.
The Company's revolving credit agreement provides that the Company may
borrow up to $150,000,000 until March 31, 2000 at which time the banks'
commitment to lend is terminated. In 1996, the revolving credit agreement
was renegotiated to increase the banks' commitment to $300 million, of
which $150 million will mature in 2001 and the remainder in 2002. The terms
of the revolving credit agreement include a facility fee and allow the
Company to select from various loan pricing options. The maximum interest
rate margin over LIBOR is determined by the Company's cash flow to debt
ratio. New borrowings under the revolving credit facility are conditional
on the absence of material adverse changes in the business, financial
position, results of operations and prospects of the Company and its
consolidated subsidiaries taken as a whole. In the event of nonperformance
by any bank on its commitment to extend credit, the Company could not
borrow the full amount of the facility. However, the Company does not
anticipate nonperformance by any bank.
The revolving credit agreement contains various covenants which include
limits on: the disposition of assets, minimum consolidated tangible net
worth, interest coverage and cash flow to debt ratios, cash dividends, or
certain restricted investments unless the required consolidated tangible
net worth, as defined, is maintained. At December 31, 1995, $39,806,000 was
available for the payment of cash dividends.
Under the revolving credit agreement and formal and informal agreements
with other financial institutions, the Company could have borrowed an
additional $159,000,000 at December 31, 1995.
During March 1992, the Company sold original issue discount 5.25%
convertible subordinated debentures due 2002 which, if held to maturity,
would yield 7.0% to the original purchaser. The proceeds to the Company,
net of original issue discount and expenses, were $128,430,000. The
original issue discount is amortized over the term of the debentures. When
issued, the debentures were convertible into 5,712,450 shares of Class A
Common Stock. At December 31, 1995, two debentures have been converted into
76 shares of Class A Common Stock. On February 13, 1996, the Company
notified the holders of the debentures that the debentures would be
redeemed on March 15, 1996 at a redemption price of 91.545%. A one-time
extraordinary non-cash charge to income of approximately $1,200,000, net of
tax, will be recorded in the first quarter of 1996.
The Company has swap agreements wherein on a notional amount of
$250,000,000 the Company will pay a periodic floating rate based upon an
index of yields of high-grade, tax-exempt bond issues published by Kenny
Information Systems. The counterparty is obligated to make payments
13
<PAGE>
to the Company calculated at an average of 70% of LIBOR. As of December 31,
1995 and 1994, the average blended rates payable on the long-term swap
agreements were 4.24% and 4.14%, respectively, and the blended rates
receivable were 4.33% and 4.21%, respectively. The swap agreements expire
during 2000. The practical effect of these swaps is to partially hedge the
potential effect of higher tax rates after August 1990. The Company values
these contracts at market (approximately $282,000) by estimating the cost
of entering into one or more inverse swap transactions on such date that
would neutralize the original transactions. The cost is estimated by
obtaining the market swap rate for fixed-rate contracts of similar
duration. Included in the "Interest rate protection agreements" component
of "Other (income)/expense, net", see Note 9, is (income)/expense of
approximately $(1,026,000), $(557,000) and $220,000 related to the net cash
(received)/paid as part of these agreements in 1995, 1994 and 1993,
respectively. Also included in "Interest rate protection agreements" is the
change in the valuation which resulted in income of approximately
$(304,000) and $(297,000) in 1995 and 1994, respectively.
At December 31, 1995, the Company had various forward exchange contracts
maturing during 1996. For each closed position, a sale contract of a
particular currency was matched with a purchase contract for the same
currency at the same amount, counterparty and settlement date. Open
positions were valued at fair value using the estimated forward exchange
rate of a matching contract as of December 31, 1995. The foreign currency
positions, both open and closed, as of December 31, 1995, by major
currency, are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Buy Contracts Sell Contracts
Currency or Fair Value or Fair Value
- ------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Dutch Guilder $24,748 $25,206
German Mark 25,179 25,135
Swedish Krona 26,917 24,738
- ------------------------------------------------------------------
Total $76,844 $75,079
- ------------------------------------------------------------------
</TABLE>
The primary purpose of these contracts was to either provide an economic
hedge against currency fluctuation effects on future revenue streams or to
hedge the net assets and intercompany loans related to foreign operations.
Forward exchange contracts that are designated hedges are typically entered
into at currency amounts up to an amount equal to the net assets of the
related foreign operation and any intercompany loan balance in that foreign
currency. Periodically, the Company also enters into futures contracts
primarily to hedge in the short-term against interest rate fluctuations. At
December 31, 1995 and 1994, the Company was not a party to any such
contracts. The "Interest rate protection agreements" component of "Other
(income)/expense, net" includes losses on futures contracts, based on fair
value, of $917,000 and $222,000 in 1994 and 1993, respectively.
All financial instruments are held for purposes other than trading. For all
positions there is risk from the possible inability of the counterparties
(major financial institutions) to meet the terms of the contracts and the
risk of unfavorable changes in interest and currency rates which may reduce
the benefit of the contracts. However, for most closed forward exchange
contracts, both the purchase and sale sides of the Company's exposures are
with the same financial institution. The Company seeks to control off
balance sheet risk by evaluating the credit worthiness of counterparties
and by monitoring the currency exchange and interest rate markets, hedging
risks in compliance with internal guidelines and reviewing all principal
economic hedging contracts with designated directors of the Company.
The Company has an agreement under which it may sell to a financial
institution up to $40,000,000 of the Company's right to receive certain
payments for goods ordered from the Company. At December 31, 1995 and 1994,
there were no amounts sold under this agreement.
At December 31, 1995 the estimated fair value of the Company's long-term
debt excluding current maturities approximates $243,774,000. The estimate
is based on the quoted market price for the 5.25% convertible subordinated
debentures, the present value of future cash flows of fixed rate debt based
upon changes in the general level of interest rates, and on the assumption
that carrying value approximates fair value for variable rate debt.
14
<PAGE>
7. LEASES
Total rental expense amounted to $16,673,000, $15,527,000, and $21,488,000
for 1995, 1994, and 1993, respectively. Principal leases are for machinery
and equipment, vehicles and real property. Certain leases contain renewal
and purchase option provisions at fair market values. There were no
significant capital leases.
Future rental payments required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December
31, 1995 are: 1996, $17,400,000; 1997, $14,837,000; 1998, $10,215,000;
1999, $8,039,000; 2000 $4,587,000; and thereafter, $3,336,000.
8. SHAREHOLDERS' EQUITY
The Company has two classes of Common Stock, Class A Common Stock, par
value $.001 and Class B Common Stock, par value $.001 which have equal
liquidation rights. Each share of the Company's Class A Common Stock is
entitled to one vote on all matters submitted to shareholders and each
share of Class B Common Stock is entitled to ten votes. Class A and Class B
Common Stock will receive equal dividends as the Board of Directors may
determine from time to time. The Class B Common Stock is convertible into
an equal number of shares of Class A Common Stock at any time. At December
31, 1995, 15,061,237 shares of Class A Common Stock were reserved for the
conversion of Class B Common Stock, the exercise of stock options and the
conversion of 5.25% convertible subordinated debentures.
The Board of Directors authorized the purchase of up to an aggregate of
2,000,000 shares of the Company's Class A Common Stock in the open market.
The Company has purchased 853,200 shares of its Class A Common Stock since
1990 and may purchase up to 1,146,800 more shares without further advance
public announcement.
The Board authorized the payment of dividends totalling $.3875 per common
share during 1995 and $.35 per common share per year during 1994 and 1993.
Changes in shareholders' equity for 1995, 1994, and 1993 are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Class A Class B Treasury Stock
Common Stock Common Stock Additional (Class A)
-------------- -------------- Paid in --------------
(IN THOUSANDS) Shares Amount Shares Amount Capital Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance: January 1, 1993 20,429 $20 5,659 $6 $101,395 445 $6,649
Shares contributed to ESOP -- -- -- -- 32 (138) (2,312)
Public offering 4,102 4 -- -- 68,685 -- --
Other -- 1 -- -- -- -- --
- -----------------------------------------------------------------------------------------------
Balance: December 31, 1993 24,531 $25 5,659 $6 $170,112 307 $4,337
Shares contributed to ESOP -- -- -- -- 289 (143) (2,382)
Conversion of Class B shares
to Class A shares 26 -- (26) -- -- -- --
Options exercised 7 -- -- -- 138 -- --
- -----------------------------------------------------------------------------------------------
Balance: December 31, 1994 24,564 $25 5,633 $6 $170,539 164 $1,955
Shares contributed to ESOP -- -- -- -- 815 (170) (2,639)
Conversion of Class B shares
to Class A shares 18 -- (18) -- -- -- --
Conversion of subordinated
debentures -- -- -- -- 2 -- --
Purchases of treasury shares -- -- -- -- -- 150 2,883
Options exercised 259 -- -- -- 4,989 -- --
Other -- -- 1 -- -- -- --
- -----------------------------------------------------------------------------------------------
Balance: December 31, 1995 24,841 $25 5,616 $6 $176,345 144 $2,199
- -----------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
9. OTHER (INCOME)/EXPENSE, NET
The components of other (income)/expense, net, as further described in Note
6, are:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Currency transactions $(3,281) $2,590 $(5,515)
Interest rate protection
agreements (1,330) 63 442
Pre-receivable sales 93 (214) 2,348
Amortization of debt issuance
costs and loan origination
fees 837 804 804
Other 2,657 1,081 1,291
- -------------------------------------------------------------
$(1,024) $4,324 $ (630)
- -------------------------------------------------------------
</TABLE>
10. INCOME TAXES
Income taxes currently payable are provided on taxable income at the
statutory rate applicable to such income. The components of income taxes
are:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. Federal $ 6,280 $14,920 $10,132
U.S. State 860 948 1,305
Non-U.S. 5,304 5,835 8,699
- --------------------------------------------------------------
12,444 21,703 20,136
- --------------------------------------------------------------
Deferred:
U.S. Federal 5,402 (5,772) (4,694)
U.S. State 617 (660) (536)
Non-U.S. 8,770 2,703 (4,889)
- --------------------------------------------------------------
14,789 (3,729) (10,119)
- --------------------------------------------------------------
$27,233 $17,974 $10,017
- --------------------------------------------------------------
</TABLE>
U.S. income before income taxes was $32,472,000 in 1995, $18,097,000 in
1994, and $31,405,000 in 1993.
Taxes paid, net of refunds, were $9,269,000 in 1995, $19,639,000 in 1994,
and $3,657,000 in 1993.
A comparison of the federal statutory rate to the Company's effective rate
is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory rate 35.0% 35.0% 35.0%
State taxes 2.7 2.4 6.8
Non-U.S. tax rates,
repatriation of earnings,
and other net charges
associated with prior years (.3) 5.9 (1.4)
Other 1.4 (.3) (1.0)
- -------------------------------------------------------------
Effective tax rate 38.8% 43.0% 39.4%
- -------------------------------------------------------------
</TABLE>
The significant components of deferred income tax expense/(benefit)
attributed to income from
operations for the years ended December 31, 1995, 1994, and 1993 are as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax
expense/(benefit) $ 9,113 $(6,603) $(10,518)
Adjustments to deferred tax
assets and liabilities for
enacted changes in tax laws
and rates 4,500 (1,584) (1,983)
Utilization of operating
loss carryforwards 1,176 4,458 2,382
- ---------------------------------------------------------------
$14,789 $(3,729) $(10,119)
- ---------------------------------------------------------------
</TABLE>
Investment tax credits and other credits utilized for financial reporting
purposes were not material.
Undistributed earnings of subsidiaries outside the United States for which
no provision for U.S. taxes has been made amounted to approximately
$80,897,000 at December 31, 1995. In the event earnings of foreign
subsidiaries are remitted, foreign tax credits may be available to offset
U.S. taxes.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995
and 1994 are presented below:
-----------------------------------------------
<TABLE>
<CAPTION>
U.S. Non-U.S.
---------------- ----------------
(IN THOUSANDS) 1995 1994 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accounts receivable, princi-
pally due to allowance for
doubtful accounts $ 369 $ 273 $ (134) $ (521)
Inventories, principally due
to additional costs
inventoried for tax
purposes, pursuant to the
Tax Reform Act of 1986 6,591 4,919 (18) 2
Tax loss carryforwards -- -- 4,587 3,851
Other 2,307 3,063 1,032 975
- -----------------------------------------------------------------------
Total current deferred tax
assets 9,267 8,255 5,467 4,307
- -----------------------------------------------------------------------
Sale lease back transaction 1,208 1,537 -- --
Deferred compensation 5,557 4,707 -- --
Tax loss carryforwards -- -- 16,486 21,645
Plant, equipment and
depreciation (8,309) (3,814) 260 (150)
Postretirement benefits
other than pensions 14,200 17,105 -- --
Other (281) (129) (584) (650)
- -----------------------------------------------------------------------
Total noncurrent deferred
tax assets 12,375 19,406 16,162 20,845
- -----------------------------------------------------------------------
Total deferred tax assets $21,642 $27,661 $21,629 $25,152
- -----------------------------------------------------------------------
Total current deferred tax
liabilities -- -- $ 2,835 $ 1,685
- -----------------------------------------------------------------------
Plant, equipment and
depreciation -- -- 20,996 19,425
Other -- -- 1,328 (811)
- -----------------------------------------------------------------------
Total noncurrent deferred
tax liabilities -- -- 22,324 18,614
- -----------------------------------------------------------------------
Total deferred tax
liabilities -- -- $25,159 $20,299
- -----------------------------------------------------------------------
</TABLE>
16
<PAGE>
In the U.S., the Company has had a substantial tax liability for each of
the past three years and expects to pay taxes in the future at this or
greater levels. Substantially all of the non-U.S. net deferred tax asset
relates to tax loss carryforwards of which approximately 15% is expected to
be used in 1996 and the remainder of the noncurrent loss carryforward has
no expiration. The Company has restructured its operations to reduce or
eliminate losses and has reorganized in certain countries to ensure that
losses will be offset against the profits of companies with long-term
earnings histories. Accordingly, the Company expects to realize the benefit
of its U.S. and non-U.S. deferred tax assets in the future.
11. BUSINESS SEGMENT AND GEOGRAPHIC DATA
The Company operates primarily in one industry segment which includes
developing, manufacturing, marketing and servicing custom designed
engineered fabrics and related products used in the manufacture of paper
and paperboard. The Company sells its products on a worldwide basis with
its principal markets listed in the table below.
The following table shows data by geographic area and in 1993 includes
restructuring of operations and termination benefits and the gain related
to the sale of the Engineered Systems Division:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
United States $258,974 $239,755 $240,853
Canada 65,203 57,459 58,015
Europe 240,663 191,883 177,688
Rest of World 87,805 78,486 69,564
- -----------------------------------------------------------------
Total $652,645 $567,583 $546,120
- -----------------------------------------------------------------
OPERATING INCOME/ (LOSS)
United States $ 41,549 $ 31,400 $ 38,668
Canada 12,815 7,333 5,506
Europe 23,119 15,233 (7,881)
Rest of World 11,408 8,978 4,617
- -----------------------------------------------------------------
Total $ 88,891 $ 62,944 $ 40,910
- -----------------------------------------------------------------
ASSETS
United States $297,597 $270,143 $251,318
Canada 67,638 59,280 55,714
Europe 307,728 283,499 251,722
Rest of World 123,562 108,464 96,666
- -----------------------------------------------------------------
Total $796,525 $721,386 $655,420
- -----------------------------------------------------------------
</TABLE>
Sales among geographic areas and export sales are not significant.
Operating income includes an allocation of corporate expenses because such
costs are incurred principally for the benefit of operating companies.
Assets exclude intercompany accounts.
12. PENSION PLANS
The Company has a noncontributory, qualified defined benefit pension plan
covering U.S. employees, a noncontributory, nonqualified pension plan
covering certain U.S. executives and both contributory and noncontributory
pension plans covering non-U.S. employees. Employees are covered primarily
by plans which provide pension benefits that are based on the employee's
service and average compensation during the three to five years before
retirement or termination of employment.
The following table sets forth the Plans' funded status and amounts
recognized in the Company's balance sheet. Amounts are shown at September
30, for U.S. pension plans. Amounts for non-U.S. plans are projected to
December 31 from the most recent valuation.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Plans in Which Plans in Which
Assets Exceed Accumulated
Accumulated Benefits Exceed
Benefits Assets
------------------- -------------------
(IN THOUSANDS) 1995 1994 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested $ (26,979) $(88,180) $(94,095) $ (9,419)
Accumulated (29,348) (93,576) (99,364) (10,973)
Projected (37,138) (112,125) (116,643) (14,487)
Plan assets at fair value,
primarily listed stocks and
bonds 35,787 100,369 75,628 --
- -----------------------------------------------------------------------------
Projected benefit
obligation in excess
of plan assets (1,351) (11,756) (41,015) (14,487)
Unrecognized net loss 4,321 17,377 33,239 2,472
Prior service cost not yet
recognized in net periodic
pension cost 760 7,585 6,278 --
Remaining unrecognized net
(asset)
obligation (199) (7,626) (5,164) 315
Recognized unaccrued pension
expense -- -- (19,320) --
- -----------------------------------------------------------------------------
Accrued pension asset
(liability) $ 3,531 $ 5,580 $(25,982) $ (11,700)
- -----------------------------------------------------------------------------
</TABLE>
The expected long-term rate of return for U.S. plans was 10% for 1995,
1994, and 1993. The weighted average discount rate was 7.8% for 1995, 9.5%
for 1994, and 7.8% for 1993. The rate of increase in future compensation
levels for salaried and hourly employees was 5.1% and 5.9%, respectively in
1995, 5.9% and 6.0%, respectively in 1994, and 4.4% and 4.5%, respectively
in 1993.
17
<PAGE>
The weighted average expected long-term rate of return for non-U.S. plans
was 8.0% for 1995, 7.4% for 1994, and 8.0% for 1993. The weighted average
discount rate was 7.9% for 1995, 8.5% for 1994, and 7.3% for 1993. The
weighted average rate of increase in future compensation levels was 5.3%
for 1995, 5.7% for 1994, and 4.8% for 1993.
The Company was required to accrue an additional minimum liability in 1995
for those plans for which accumulated plan benefits exceeded plan assets.
The liability at December 31, 1995 of $18,660,000 was offset by an asset
amounting to $6,278,000 (included in intangibles) and a direct charge to
equity of $12,382,000. No additional minimum liability was required to be
accrued for 1994.
The vested benefit obligation has been determined based upon the actuarial
present value of the vested benefits to which an employee is currently
entitled, based on the employee's expected date of separation or
retirement.
Net pension cost included the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 4,093 $ 4,276 $ 4,311
Interest cost on
projected benefit
obligation 11,425 9,709 9,780
Actual return on assets (9,553) (7,197) (9,341)
Net amortization and deferral (544) (1,837) 1,158
- --------------------------------------------------------------
Net periodic pension cost $ 5,421 $ 4,951 $ 5,908
- --------------------------------------------------------------
</TABLE>
Annual pension cost charged to operating expense for all Company plans was
$8,342,000 for 1995, $8,529,000 for 1994, and $7,840,000 for 1993.
13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company provides certain
medical, dental and life insurance benefits for its retired United States
employees. Substantially all of the Company's U.S. employees may become
eligible for these benefits, which are subject to change, if they reach
normal retirement age while working for the Company. Retirees share in the
cost of these benefits. The Company's non-U.S. operations do not offer such
benefits to retirees.
In accordance with Financial Accounting Standard No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", the Company
accrues the cost of providing postretirement benefits during the active
service period of the employees. The Company currently funds the plan as
claims are paid.
The following table reflects the status of the postretirement benefit plan:
<TABLE>
<CAPTION>
- -----------------------------------------------------
(IN THOUSANDS) 1995 1994
- -----------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $24,905 $22,890
Fully eligible active plan
participants 4,198 3,131
Other active participants 15,536 9,740
- -----------------------------------------------------
44,639 35,761
Unrecognized gain 7,757 15,586
- -----------------------------------------------------
Accrued postretirement cost $52,396 $51,347
- -----------------------------------------------------
</TABLE>
Net periodic postretirement benefit cost included the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- -----------------------------------------------------------
<S> <C> <C> <C>
Service cost of benefits
earned $ 699 $ 935 $ 804
Interest cost on accumulated
postretirement benefit
obligation 3,264 3,163 3,475
Amortization of unrecognized
net gain (613) (141) (96)
- -----------------------------------------------------------
Net periodic postretirement
benefit cost $3,350 $3,957 $4,183
- -----------------------------------------------------------
</TABLE>
For measuring the expected postretirement benefit obligation, an annual
rate of increase in the per capita claims cost of 7.5% is assumed for 1995.
This rate is assumed to decrease gradually to 5.5% by 1999 and remain at
that level thereafter.
The weighted average discount rate was 7.8% for 1995, 9.5% for 1994 and
7.8% for 1993.
A one percentage point increase in the health care cost trend rate would
result in a $5,808,000 increase in the accumulated postretirement benefit
obligation as of December 31, 1995 and an increase of $582,000 in the
aggregate service and interest cost components of the net periodic
postretirement benefit cost for 1995.
18
<PAGE>
14. TRANSLATION ADJUSTMENTS
The Consolidated Statements of Cash Flows were affected by translation as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Change in cumulative
translation
adjustments $(5,828) $(9,350) $ 21,860
Other noncurrent
liabilities (1,095) (2,117) 2,531
Deferred taxes (1,421) (51) (101)
Long-term debt (565) (459) 1,038
Investments in associated
companies 81 (278) (198)
Net fixed assets 10,863 17,046 (19,408)
Other assets (153) (61) 152
- ---------------------------------------------------------------
Effect of exchange rate
changes $ 1,882 $ 4,730 $ 5,874
- ---------------------------------------------------------------
</TABLE>
Shareholders' equity was affected by translation as follows:
(increase)/decrease from translation of non-U.S. financial statements of
$(462,000), $(1,853,000) and $9,577,000; from remeasurement of loans of
$(7,379,000), $(11,023,000) and $9,518,000 in 1995, 1994, and 1993,
respectively; and by losses on designated hedges, net of tax, of
$2,013,000, $3,526,000 and $2,765,000 in 1995, 1994 and 1993, respectively.
In 1995 and 1994, net translation losses/(gains) included in operations in
Brazil were $354,000 and $(532,000), respectively, and were included in
cost of goods sold. Net translation losses related to operations in Brazil
and Mexico in 1993 were $1,316,000 with amounts included in cost of goods
sold.
15. STOCK OPTIONS AND INCENTIVE PLANS
During 1988 and during 1992, the shareholders approved stock option plans
which each provide for granting of up to 2,000,000 shares of Class A Common
Stock to key employees. Options are generally exercisable in five
cumulative annual amounts beginning 12 months after date of grant. Option
exercise prices are not less than the market value of the shares on the
date of grant. Unexercised options generally terminate twenty years after
date of grant for both the 1988 and 1992 plans. Prices per share for shares
under option at December 31, 1995 range from $15.00 to $22.25. In 1995 and
1994, options were exercised at prices that range from $16.25 to $18.75.
Activity with respect to these plans is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Shares under option at
January 1 2,630,400 2,417,850 2,087,500
Options granted 436,250 244,500 380,250
Options cancelled 7,800 24,450 49,900
Options exercised 259,200 7,500 --
- --------------------------------------------------------------------
Shares under option at
December 31 2,799,650 2,630,400 2,417,850
Options exercisable at
December 31 1,896,050 1,837,700 1,601,400
Shares available 933,650 1,362,100 1,582,150
- --------------------------------------------------------------------
</TABLE>
The Company's voluntary deferred compensation plans provide that a portion
of certain employees' salaries are deferred in exchange for amounts payable
upon their retirement, disability or death. The repayment terms are
selected by the participants in accordance with the provisions of each
plan. The Company is the beneficiary of life insurance policies on the
lives of certain plan participants. The Company's expense for all plans,
net of the increase in cash surrender value, was $1,240,000 in 1995,
$1,211,000 in 1994 and $1,002,000 in 1993. The increase in cash value, net
of premiums, was $654,000 in 1995, $468,000 in 1994 and $452,000 in 1993.
The Company maintains a voluntary savings plan covering substantially all
employees in the United States. The Plan, known as "Prosperity Plus," is a
401(k) plan under the U.S. Internal Revenue Code. Employees may contribute
from 3% to 15% of their regular wages which under Section 401(k) are tax
deferred. The Company matches 50% of each dollar contributed by employees
up to 10% of their wages in the form of Class A Common Stock which is
contributed to an Employee Stock Ownership Plan. The investment of employee
contributions to the plan is self directed. The cost of the plan amounted
to $2,906,000 in 1995, $2,771,000 in 1994 and $2,400,000 in 1993.
In 1994, the Company adopted a profit-sharing plan covering substantially
all employees in the United States. At the beginning of each year, the
Board of Directors announces the formula that it expects to utilize in
determining the amount of the profit-sharing contribution for that year.
The profit-sharing contributions will only be made to current active
participants in Prosperity Plus in the form of cash or the Company's Class
A Common Stock. The expense recorded for this plan was $2,279,000 in 1995
and $1,161,000 in 1994.
19
<PAGE>
In 1996, the Company intends to adopt the required disclosure provisions of
Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation".
16. ACQUISITIONS, DIVESTITURE AND RESTRUCTURING
In May 1995, the Company acquired substantially all of the assets of Panyu
South Fabrics Industrial Company, a manufacturer of paper machine clothing
located in China, for approximately $7,000,000.
In September 1995, the Company concluded the purchase of all of the
outstanding capital stock and land and buildings used in the business of
Technical Service Industries, a supplier of engineered fabrics to the
nonwovens industry. The purchase price was approximately $10,000,000, with
$900,000 paid at closing, $5,000,000 due January 1, 1996 and the balance
deferred up to 10 years.
In December 1995, the Company completed the acquisition of Kelley Door
Systems for approximately $4,000,000. Kelley operations will be
consolidated with the Company's Nomafa Door Division.
All 1995 acquisitions were accounted for as purchases and, accordingly, the
Company has included in its financial statements the results of operations
of the acquired entities as of the respective acquisition dates.
As part of the Company's previously announced program to restructure
operations in order to focus on the core paper machine clothing industry,
the Company completed on June 30, 1993 the sale of its Albany Engineered
Systems Division (AES) for $27,400,000. The Company realized an $8,900,000
gain on the sale. At the same time, the Company recorded restructuring
charges which included $2,200,000 for asset write offs, $2,500,000 for
lease obligations related to an unoccupied facility and $2,300,000 for
termination costs related to downsizing certain operations. The asset write
offs and termination costs will continue until 1996 and lease obligation
payments will continue until 1999.
The components of accrued restructuring costs consist of:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(IN THOUSANDS) 1995 1994 1993
- -----------------------------------------------------------
<S> <C> <C> <C>
Termination costs $ 317 $1,490 $2,329
Asset write offs 275 1,087 1,358
Lease obligations 1,693 1,873 2,500
Other -- -- 12
- -----------------------------------------------------------
$2,285 $4,450 $6,199
- -----------------------------------------------------------
</TABLE>
The decrease in accrued balances are the result of actual payments for
terminations or incurred expenses and the disposal of written down
equipment.
17. SUBSEQUENT EVENT
In February 1996, the Company announced that it had received approval from
the Korean government to establish a 100% owned paper machine clothing
manufacturing operation in South Korea. The Company expects to construct a
new facility on approximately nine acres of land in Chungju Industrial Park
located about 75 miles southeast from Seoul at an initial cost of
approximately $16,000,000, with shipments expected to begin in late 1997.
20
<PAGE>
FINANCIAL REVIEW
REVIEW OF OPERATIONS
- --1995 VS. 1994
Net sales increased $85.1 million or 15.0% as compared with 1994. Net sales were
increased by $8.1 million from the effect of a weaker U.S. dollar as compared to
1994. Excluding this effect, 1995 net sales increased 13.6% over 1994.
Net sales in the United States increased 8.0% in 1995 as compared to 1994. In
the U.S., the robust performance of all paper grades in 1995 was slowed in the
fourth quarter due to papermakers' temporary shutdowns, particularly for
containerboard inventory correction. Canadian sales increased 13.5% due in part
to higher export sales to Asian markets.
European sales increased 25.4% in 1995 as compared to 1994. Excluding the effect
of the weaker U.S. dollar, net sales in Europe increased 11.9%. Sales in the
Rest of World segment increased 11.9% as compared to 1994.
The Company continued to gain market share in all product lines due to good
customer acceptance and excellent performance of new products on all three
sections of the paper machine. In December 1995, a price increase of 5% for the
United States was announced commencing in January 1996. In addition, 1996 price
increases were announced in selective European markets and Canada. Management
anticipates that the average effect of price increases for 1996 will be between
2% and 3%.
Gross profit continued to improve and was 41.8% of net sales in 1995 as compared
to 40.3% in 1994. Variable costs as a percent of net sales increased to 32.9% in
1995 from 32.4% in 1994 due mainly to increased sales of product lines with
higher cost to sales dollar ratios.
Selling, technical, general and research expenses increased 11.1% in 1995 as
compared to 1994. Excluding the effect of translation of non-U.S. currencies
into U.S. dollars, these expenses would have increased 9.9%. Temporary increases
associated with the introduction of new products, increased wages and benefit
costs and higher sales commissions were the principal reasons for this increase.
Operating income as a percent of net sales increased to 13.6% as compared to
11.1% in 1994. Management anticipates that operating income as a percent of net
sales should continue to improve in 1996.
The increase in other (income)/expense, net as compared to 1994, was due to
currency transactions which resulted in $5.9 million more income in 1995.
Currency transaction income results from economic hedges which can have either a
positive or negative effect on other (income)/expense, net in any particular
quarter. The specific hedges in place are changed from time to time depending on
market conditions and cash flow forecasts of various non-U.S. operations and are
intended to offset the effects of translation on operating income (see Notes 6
and 9 of Notes to Consolidated Financial Statements).
The effective tax rate for 1995 is approximately 39% as compared to 43% for
1994. The 1994 rate included an accrual of net charges associated with prior
years resulting from both U.S. and non-U.S. examinations. Management anticipates
that the 1996 effective tax rate will be approximately 39%.
In May 1995, the Company acquired substantially all of the assets of Panyu South
Fabrics Industrial Company, a manufacturer of paper machine clothing located in
China, for approximately $7 million. Management anticipates that this purchase
and additional investments in China will total approximately $15 million by the
end of 1996.
In September 1995, the Company concluded the purchase of all of the outstanding
capital stock and land and buildings used in the business of Technical Service
Industries, a supplier of engineered fabrics to the nonwovens industry. The
purchase price was approximately $10 million, with $.9 million paid at closing,
$5.0 million due January 1, 1996 and the balance deferred up to 10 years.
In December 1995, the Company completed the acquisition of Kelley Door Systems
for approximately $4 million. Kelley operations will be consolidated with the
Company's Nomafa Door Division. Additional expenditures in early 1996 for
equipment and inventories will approximate $1 million.
All 1995 acquisitions were accounted for as purchases and, accordingly, the
Company has included in its financial statements the results of operations of
the acquired entities as of the respective acquisition dates. Reported results
were not significant.
In February 1996, the Company announced that it had received approval from the
Korean government to establish a 100% owned paper machine clothing manufacturing
operation in South Korea. The Company expects to construct a new facility on
approximately nine acres of land in Chungju Industrial Park located about 75
miles southeast from Seoul at an initial cost of approximately $16 million, with
shipments expected to begin in late 1997.
- --1994 VS. 1993
Net sales increased $21.5 million or 3.9% as compared with 1993. Net sales were
increased by $4.2 million from the effect of a weaker U.S. dollar
21
<PAGE>
as compared to 1993 and were decreased by $20.5 million resulting from the
divestiture of the Company's equipment division (AES) in mid-1993. Excluding
these factors, 1994 net sales increased 7.2% over 1993.
Net sales in the United States were comparable to the prior year's sales.
Selective price concessions for customers entering into Continuous Supply
agreements for the Company's products tended to reduce selling prices and had a
slight negative impact on sales. Management believes that Continuous Supply
agreements are part of an effort by paper manufacturers to reduce the number of
suppliers of paper machine clothing and that this will be beneficial to the
Company in the long term. Canadian sales approximated prior year's sales and
increased significantly during the last six months of 1994 reflecting improved
economic and paper industry operating conditions.
European sales increased 8.0% in 1994 as compared to 1993 reversing a three year
decline which began in 1991. Sales growth rates in the Nordic region and
Continental Europe were strongest in the second half of 1994. Sales in the Rest
of World segment increased 12.8% as compared to 1993.
The Company continued to gain market share in Forming Fabrics and Dryer Fabrics
and retain its Press Fabrics market share. There were no significant price
increases that took effect in 1994, except for new products and upgrades. Price
increases announced in December 1994 for the United States, Canada and parts of
Europe became effective during 1995.
Gross profit continued to improve and was 43.7% of net sales for the three
months ended December 31, 1994 as compared to 39.2% for the same period in 1993
increasing the full year result to 40.3% for 1994 as compared to 36.9% for 1993.
Variable costs as a percent of net sales decreased to 32.4% in 1994 from 34.0%
in 1993 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 resulted in improved product quality and
efficiencies, both of which have contributed to lower costs.
Selling, technical, general and research expenses increased 2.0% in 1994 as
compared to 1993. Excluding the effect of translation of non-U.S. currencies
into U.S. dollars and the sale of AES, these expenses would have increased 6.2%.
The Company did not reduce its sales and service efforts as there was increasing
customer demand for service.
Operating income as a percent of net sales increased to 11.1% as compared to
7.5% in 1993. The capacity expansion and upgrades over the last several years,
along with the restructuring program, should position the Company to capitalize
on future opportunities for sales and earnings growth as world economies and
markets continue to improve.
The decrease in other (income)/expense, net as compared to 1993, was due to
currency transactions which resulted in $8.1 million less income in 1994 and no
pre-receivable sales in 1994 which resulted in $2.6 million less expense in
1994.
The Company's 1994 effective tax rate was 43.0% as compared to 39.4% for the
comparable period in 1993. The rate increase was 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 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
interests are 50% ownership in two related entities in South Africa. (See Note 1
of Notes to Consolidated Financial Statements).
INTERNATIONAL ACTIVITIES
The Company conducts more than half of its business in countries outside of the
United States. As a result, the Company experiences transaction and translation
gains and losses because of currency fluctuations. The Company periodically
enters into foreign currency contracts to hedge this exposure (see Notes 6, 9
and 14 of Notes to Consolidated Financial Statements). The Company believes that
the risks associated with its operations and locations outside the United States
are not other than those normally associated with operations in such locations.
In countries in which the Company operates that have experienced high inflation
rates, the Company frequently reprices its products. This practice has enabled
the Company to quickly pass on to its customers most of the increased costs due
to local inflation.
The profitability in the Company's geographic regions in 1995 as compared to
1994 increased in all regions (see Note 11 of Notes to Consolidated Financial
Statements). Total operating income increased 41.2% as compared to 1994.
Operating income/(loss) as a percent of net sales, after excluding restructuring
of operations and termination benefits, for the United States was 16.0% in 1995,
13.1% in 1994 and 10.8 % in 1993; and for Canada was 19.7% in 1995, 12.8% in
1994 and 10.5% in 1993; for Europe was 9.6% in 1995, 7.9% in 1994 and (.1%) in
1993 and for Rest of World was 13.0% in 1995, 12.0% in 1994 and 10.1% in
22
<PAGE>
1993. The increase in all geographic regions in 1995 were due to higher sales
and continued cost controls.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995 the Company's order backlog was $492.2 million, an increase
of $46.2 million from the prior year-end.
Inventories increased $18.9 million during 1995 due to the weakening U.S. dollar
and high orders which resulted in some building of inventory in anticipation of
future sales. As a result of a weaker U.S. dollar and the increase in net sales,
accounts receivable increased $16.3 million or 10.6% in 1995.
Cash flow provided from operating activities was $67.5 million in 1995 compared
with $23.1 million in 1994 and $45.2 million in 1993. Capital expenditures were
$41.9 million for 1995, $36.3 million for 1994 and $30.9 million for 1993.
Capital expenditures in 1996 are expected to be about $45.0 million, excluding
acquisitions and new ventures. The Company will continue to finance these
expenditures with cash from operations and existing credit facilities.
Total debt increased $12.0 million during 1995 caused principally by the monies
borrowed to finance the acquisitions, as discussed above.
In March 1995, the Company amended its existing $125 million revolving credit
agreement, with its principal banks in the United States, to increase the banks'
commitment to $150 million and to extend the maturity to the year 2000 with more
favorable terms. Pricing will be based on a margin over floating rate cost of
banks' funding and varies depending upon the Company's performance. In 1996, the
revolving credit agreement was renegotiated to increase the banks' commitment to
$300 million, of which $150 million will mature in 2001 and the remainder in
2002. Management believes that the unused line, in combination with expected
free cash flows, will be sufficient to meet operating requirements and for
normal business opportunities.
As described in Note 6 of Notes to Consolidated Financial Statements, on
February 13, 1996 the Company notified the holders of the $150 million 5.25%
convertible subordinated debentures that the debentures would be redeemed on
March 15, 1996 at a redemption price of 91.545%. A one-time extraordinary
non-cash charge to income of approximately $1.2 million, net of tax, will be
recorded in the first quarter of 1996.
Cash dividends of $.0875 per share were paid in the first quarter and $.10 in
the second, third and fourth quarters of 1995.
During the second quarter of 1993 the Company recorded certain costs related to
restructuring of operations which totaled $7.0 million. (See Note 16 of Notes to
Consolidated Financial Statements). Actual restructuring costs have approximated
management's original estimates. The 1993 provision for asset write offs and
termination payments will be utilized in 1996 and lease obligation payments will
continue until 1999.
The Company intends to focus on its core paper machine clothing business and
will consider acquiring other paper machine clothing companies where such
acquisitions support corporate strategies to enhance value to customers and
shareholders.
23
<PAGE>
ELEVEN YEAR SUMMARY
ALBANY INTERNATIONAL CORP.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
-------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales $652,645 $567,583 $546,120 $561,084
Cost of goods sold 379,632 338,868 344,609 367,516
Operating income (1),(2),(7) 88,891 62,944 40,910 18,133
Interest expense, net 20,009 16,820 16,115 18,829
Income before income taxes 69,906 41,800 25,425 2,522
Income taxes 27,233 17,974 10,017 958
Income before associated companies 42,673 23,826 15,408 1,564
Net income/(loss) (3),(4),(6) 43,050 23,952 15,524 (3,585)
Per share:
Primary 1.43 0.80 0.58 (0.14)
Fully diluted 1.35 0.80 0.58 (0.14)
Average number of shares outstanding 30,202 29,953 26,679 25,559
Capital expenditures 41,921 36,322 30,940 20,219
Dividends declared 11,708 10,488 9,361 8,950
Per Class A common share 0.3875 0.3500 0.3500 0.3500
Per Class B common share 0.3875 0.3500 0.3500 0.3500
FINANCIAL POSITION
Current assets $358,500 $314,176 $264,140 $249,669
Current liabilities 123,883 112,777 97,930 109,477
Current ratio 2.9 2.8 2.7 2.3
Property, plant and equipment, net 342,150 320,719 302,829 308,618
Total assets 796,525 721,386 655,420 645,992
Long-term debt 245,265 232,767 208,620 239,732
Shareholders' equity 302,297 271,947 244,468 190,700
Per share 9.97 9.05 8.18 7.44
Total capital (5) 564,815 522,434 464,565 453,498
Total debt to total capital 46.5% 47.9% 47.4% 57.9%
Return on shareholders' equity 14.2% 8.8% 6.4% (1.9)%
NUMBER OF EMPLOYEES 5,658 5,404 5,286 5,678
</TABLE>
----------------------------------------
(1) The Company adopted Financial Accounting Standard (FAS) No.
87 "Employers' Accounting for Pensions", with respect to its
U.S. retirement plans in December 1986 retroactive to January
1, 1986. The adoption of FAS 87 reduced pension cost for 1986
by $2,541,000. In 1989, the Company adopted the Standard for
non-U.S. plans which reduced pension cost by $1,077,000.
(2) Included in 1990 is a charge to income of $8,500,000 for an
early retirement window and terminations which were part of a
world wide cost containment program.
(3) Included in 1987 is a charge to income for the difference
between the amount accrued under Incentive Stock Unit (ISU)
agreements and the appraised value of the 1,534,256 Class B
common shares which were issued to the holders of the ISU's.
The amount of this charge was $2,195,000.
(4) In January 1989, the Company sold its property and facilities
in Halmstad, Sweden for approximately $51,000,000 in cash and
notes with a resulting net gain of approximately $23,000,000.
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 557,218 $ 556,104 $ 505,474 $ 461,246 $ 402,203 $ 336,393 $ 301,830
360,251 359,997 300,007 267,782 237,708 198,569 174,972
43,421 30,361 66,907 73,347 62,920 53,060 55,041
20,090 18,450 19,857 16,637 14,908 16,625 20,705
18,685 13,121 75,552 52,925 46,495 32,575 25,764
10,219 6,858 33,171 18,809 21,875 19,427 16,352
8,466 6,263 42,381 34,116 24,620 13,148 9,412
10,311 7,649 44,492 36,258 25,245 14,717 11,365
0.41 0.30 1.75 1.46 1.15 0.59 0.45
0.41 0.30 1.75 1.46 1.11 0.59 0.45
25,415 25,312 25,408 24,779 21,992 24,947 25,094
40,067 110,729 82,252 58,601 40,216 23,712 24,213
8,903 7,518 5,775 4,674 1,082 -- --
0.3500 0.3500 0.3125 0.2625 0.0625 -- --
0.3500 0.1313 -- -- -- -- --
$ 253,924 $ 272,696 $ 242,518 $ 206,729 $ 177,421 $ 150,264 $ 130,734
103,031 104,299 98,885 84,880 86,691 69,529 54,374
2.5 2.6 2.4 2.4 2.0 2.2 2.4
362,456 365,558 260,907 214,807 182,232 152,669 140,866
674,713 703,286 566,342 477,237 417,722 359,727 325,999
250,423 262,042 145,493 157,833 130,745 173,041 159,809
244,427 242,683 238,584 178,248 146,036 67,135 65,662
9.59 9.57 9.26 7.10 6.01 3.06 2.62
548,436 572,656 450,866 391,410 319,027 271,426 251,571
48.4% 49.5% 38.9% 48.3% 47.7% 70.4% 70.0%
4.2% 3.2% 21.3% 22.4% 23.7% 22.2% 19.6%
5,726 6,144 6,090 5,659 5,244 5,122 5,017
</TABLE>
(5) 1991 and prior includes all debt, deferred taxes and other
credits and shareholders' equity. Following the adoption of FAS
No. 109 "Accounting for Income Taxes" in 1992, total capital
includes all debt and shareholders' equity.
(6) In 1992, the Company elected to adopt FAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions",
effective January 1, 1992, and recognize the accumulated
liability. This adoption resulted in a charge of $27,431,000, net
of tax of $16,813,000, and a reduction of 1992 operating income of
$2,798,000.
The Company's election to adopt FAS No. 109, as of January 1,
1992, resulted in an increase to 1992 income of $20,142,000.
During the fourth quarter of 1992, the Company elected an early
payment of a $3,000,000 tax exempt financing for $1,357,000 which
resulted in an extraordinary gain of $1,019,000, net of tax.
(7) In 1992, the Company reported a charge of $12,045,000 for
restructuring of certain operations, including plant closings in
Norway and Germany and other workforce reductions.
25
<PAGE>
QUARTERLY FINANCIAL DATA
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 1ST 2ND 3RD 4TH
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
Net sales $154.1 $166.8 $162.0 $ 169.7
Gross profit 62.9 70.9 67.8 71.4
Net income 7.7 11.7 11.6 12.1
Net income per share:
Primary .26 .38 .39 .40
Fully diluted .26 .36 .36 .37
Dividends per share .0875 .10 .10 .10
Class A Common Stock prices:
High 19.625 23.875 26.50 23.625
Low 17.125 18.75 22.875 17.875
- --------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------
Net sales $131.4 $139.6 $145.2 $ 151.4
Gross profit 50.2 54.5 57.8 66.2
Net income 3.7 5.9 6.0 8.4
Net income per share:
Primary .12 .20 .20 .28
Fully diluted .12 .20 .20 .26
Dividends per share .0875 .0875 .0875 .0875
Class A Common Stock prices:
High 21.25 20.375 19.50 20.00
Low 18.00 17.75 16.125 16.25
- --------------------------------------------------------------------------------
1993
- --------------------------------------------------------------------------------
Net sales $137.1 $149.6 $125.6 $ 133.8
Gross profit 47.5 54.8 46.8 52.4
Net income .1 4.6 4.4 6.4
Net income per share:
Primary .01 .17 .18 .22
Fully diluted .01 .17 .18 .22
Dividends per share .0875 .0875 .0875 .0875
Class A Common Stock prices:
High 16.625 17.875 19.00 19.25
Low 14.25 15.50 16.50 17.50
- --------------------------------------------------------------------------------
</TABLE>
STOCK AND SHAREHOLDERS
The Company's Class A Common Stock is traded principally on the New York
Stock Exchange. At December 31, 1995 there were approximately 5,200
shareholders.
26
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
<PAGE>
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
Percent Percent
Direct Indirect
Ownership Ownership Jurisdiction
--------- --------- ------------
<S> <C> <C> <C>
Albany International Pty.,Ltd. 100 Australia
Albany International Feltros e Telas Industriais Ltda. 100 Brazil
Albany International Canada Inc. 100 Canada
Albany International (China) Co., Ltd. 100 China
Albany Fennofelt Oy AB 100 Finland
Albany International Holding S.A. 100 France
Albany International S.A. 100 France
Martel Catala S.A. 100 France
Toiles Franck S.A. 100 France
Nomafa S.A.R.L. 100 France
Nomafa Betriebsschutzeinrichtungen GmbH 100 Germany
Nordiskafilt GmbH 100 Germany
Albany International GmbH Ahlen 100 Germany
Albany International GmbH Goppingen 100 Germany
Albany International Nederland B.V. 100 Netherlands
Nomafa B.V. 100 Netherlands
Albany International B.V. 100 Netherlands
Nordiskafilt Kabushiki Kaisha 100 Japan
Albany International S.A. de C.V. 100 Mexico
Martel Wire, S.A. de C.V. 100 Mexico
Telas Industriales de Mexico, S.A. de C.V. 100 Mexico
Albany Nordiskafilt AS 100 Norway
Albany International Korea, Inc. 100 South Korea
Albany International Korea, Inc. 100 South Korea
Albany Nordiskafilt AB 100 Sweden
Nordiska Maskinfilt Aktiebolag 100 Sweden
Nordiskafilt Aktiebolag 100 Sweden
Dewa Consulting AB 100 Sweden
Nomafa Aktiebolag 100 Sweden
Albany Wallbergs AB 100 Sweden
Nordiska Industrie Produkte AG 100 Switzerland
Albany International AG 100 Switzerland
Albany International Ltd. 100 United Kingdom
Albany International Research Co. 100 United States
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Albany International Corp. on Form S-8 (File Nos. 33-23163, 33-28028 and 33-
33048) of our report dated January 25, 1996, except for Notes 6 and 17, for
which the date is February 13, 1996, on our audits of the consolidated financial
statements and financial statements schedules of Albany International Corp. as
of December 31, 1995 and 1994, and for the years ended December 31, 1995, 1994,
and 1993, which report is incorporated by reference in this Annual Report on
Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Albany, New York
March 26, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALBANY
INTERNATIONAL CORP.'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,609
<SECURITIES> 0
<RECEIVABLES> 175,425
<ALLOWANCES> 5,010
<INVENTORY> 161,381
<CURRENT-ASSETS> 358,500
<PP&E> 625,119
<DEPRECIATION> 282,969
<TOTAL-ASSETS> 796,525
<CURRENT-LIABILITIES> 123,883
<BONDS> 245,265
0
0
<COMMON> 31
<OTHER-SE> 302,266
<TOTAL-LIABILITY-AND-EQUITY> 796,525
<SALES> 652,645
<TOTAL-REVENUES> 652,645
<CGS> 379,632
<TOTAL-COSTS> 562,791
<OTHER-EXPENSES> (1,024)
<LOSS-PROVISION> 963
<INTEREST-EXPENSE> 20,009
<INCOME-PRETAX> 69,906
<INCOME-TAX> 27,233
<INCOME-CONTINUING> 43,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,050
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.35
</TABLE>
