<TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: September 30, 1998
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-16214
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ALBANY INTERNATIONAL CORP.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 14-0462060
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1373 Broadway, Albany, New York 12204
- ------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 518-445-2200
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
The registrant had 23,432,354 shares of Class A Common Stock and 5,671,856
shares of Class B Common Stock outstanding as of September 30, 1998.
<PAGE>
ALBANY INTERNATIONAL CORP.
INDEX
Page No.
----------
<C> <S>
Part I Financial information
Item 1. Financial Statements
Consolidated statements of income and retained earnings -
three months and nine months ended September 30, 1998 and 1997 1
Consolidated balance sheets - September 30, 1998 and December 31, 1997 2
Consolidated statements of cash flows - nine months ended September 30, 1998 and 1997 3
Notes to consolidated financial statements 4-7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11
Part II Other information
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE>
Item 1. Financial Statements
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
<C> <C> <S> <C> <C>
1998 1997 1998 1997
---- ---- ---- ----
$176,346 $171,730 Net sales $532,130 $525,454
103,016 97,815 Cost of goods sold 306,024 301,038
------- ------ ------- -------
73,330 73,915 Gross profit 226,106 224,416
52,573 49,853 Selling, technical and general expenses 158,596 151,839
------ ------ ------- -------
20,757 24,062 Operating income 67,510 72,577
4,973 3,845 Interest expense, net 14,267 11,570
(2,315) 1,672 Other (income)/expense, net (77) 2,696
------ ----- --- -----
18,099 18,545 Income before income taxes 53,320 58,311
7,056 7,232 Income taxes 20,792 22,740
----- ----- ------ ------
11,043 11,313 Income before associated companies 32,528 35,571
24 111 Equity in earnings of associated companies 189 207
-- --- --- ---
11,067 11,424 Net income 32,717 35,778
260,034 227,800 Retained earnings, beginning of period 246,013 209,875
3,067 3,250 Less dividends 10,696 9,679
----- ----- ------ -----
$268,034 $235,974 Retained earnings, end of period $268,034 $235,974
======== ======== ======== ========
$0.37 $0.37 Net income per share $1.09 $1.15
===== ===== ===== =====
$0.37 $0.36 Diluted net income per share $1.07 $1.14
===== ===== ===== =====
- $0.105 Cash dividends per common share $0.105 $0.315
====== ====== ======
29,782,592 31,187,311 Weighted average number of shares 30,153,103 31,005,132
========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, December 31,
1998 1997
<S> <C> <C>
---------------- ---------------
ASSETS
Cash and cash equivalents $4,439 $2,546
Accounts receivable, net 177,628 171,886
Inventories:
Finished goods 117,508 106,259
Work in process 43,813 38,904
Raw material and supplies 39,238 35,288
---------------- ---------------
200,559 180,451
Deferred taxes and prepaid expenses 20,519 18,440
---------------- ---------------
Total current assets 403,145 373,323
Property, plant and equipment, net 325,093 321,611
Investments in associated companies 4,310 2,444
Intangibles 56,174 36,080
Deferred taxes 23,240 22,826
Other assets 41,527 40,613
---------------- ---------------
Total assets $853,489 $796,897
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $124,321 $76,095
Accounts payable 24,738 25,786
Accrued liabilities 54,575 56,743
Current maturities of long-term debt 3,938 1,703
Income taxes payable and deferred 11,099 10,113
---------------- ---------------
Total current liabilities 218,671 170,440
Long-term debt 187,821 173,654
Other noncurrent liabilities 81,166 74,075
Deferred taxes and other credits 33,648 35,620
---------------- ---------------
Total liabilities 521,306 453,789
---------------- ---------------
SHAREHOLDERS' EQUITY
Preferred stock, par value $5.00 per share;
authorized 2,000,000 shares; none issued - -
Class A Common Stock, par value $.001 per share;
authorized 100,000,000 shares; issued
25,615,378 in 1998 and 25,375,413 in 1997 26 25
Class B Common Stock, par value $.001 per share;
authorized 25,000,000 shares; issued and
outstanding 5,671,856 in 1998 and 5,615,563 in 1997 6 6
Additional paid in capital 195,087 187,831
Retained earnings 268,034 246,013
Translation adjustments (accumulated other comprehensive income) (85,217) (84,351)
---------------- ---------------
377,936 349,524
Less treasury stock (Class A), at cost (2,183,024 shares
in 1998; 280,680 shares in 1997) 45,753 6,416
---------------- ---------------
Total shareholders' equity 332,183 343,108
---------------- ---------------
Total liabilities and shareholders' equity $853,489 $796,897
================ ===============
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
<S> <C> <C>
----------------- -----------------
OPERATING ACTIVITIES
Net income $32,717 $35,778
Adjustments to reconcile net cash provided by operating activities:
Equity in earnings of associated companies (189) (207)
Depreciation and amortization 35,026 33,149
Provision for deferred income taxes, other credits and long-term liabilities 2,587 (6,744)
Increase in cash surrender value of life insurance, net of premiums paid (466) (358)
Unrealized currency transaction (gains)/losses (2,988) 3,385
Losses on disposition of assets 63 2
Shares contributed to ESOP 3,214 3,513
Changes in operating assets and liabilities:
Accounts receivable 1,365 7,387
Inventories (16,287) (2,258)
Prepaid expenses (1,918) (736)
Accounts payable (2,647) (4,756)
Accrued liabilities 2,841 1,479
Income taxes payable 640 (1,818)
Other, net 778 (3,300)
----------------- -----------------
Net cash provided by operating activities 54,736 64,516
----------------- -----------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (28,490) (39,410)
Purchased software (1,310) (954)
Proceeds from sale of assets 77 240
Premiums paid for life insurance (1,187) (1,190)
Acquisitions, net of cash acquired (24,135) -
Investment in associated companies (2,025) -
----------------- -----------------
Net cash used in investing activities (57,070) (41,314)
----------------- -----------------
FINANCING ACTIVITIES
Proceeds from borrowings 131,068 41,477
Principal payments on debt (74,101) (40,798)
Proceeds from options exercised 2,105 6,864
Tax benefit of options exercised 281 1,079
Purchases of treasury shares (45,227) (1,421)
Dividends paid (6,387) (9,475)
----------------- -----------------
Net cash provided/(used) in financing activities 7,739 (2,274)
----------------- -----------------
Effect of exchange rate changes on cash flows (3,512) (6,491)
----------------- -----------------
Increase in cash and cash equivalents 1,893 14,437
Cash and cash equivalents at beginning of year 2,546 8,034
----------------- -----------------
Cash and cash equivalents at end of period $4,439 $22,471
================= =================
The accompanying notes are an integral part of the financial statements.
3
</TABLE>
<PAGE>
ALBANY INTERNATIONAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Management Opinion
In the opinion of management the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary for a fair presentation of results for such
periods. The results for any interim period are not necessarily indicative of
results for the full year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These consolidated financial statements
should be read in conjunction with financial statements and notes thereto for
the year ended December 31, 1997.
2. Accounting for Derivatives
Gains or losses on forward exchange contracts that function as an
economic hedge against currency fluctuation effects on future revenue streams
are recorded in "Other (income)/expense, net".
Gains or losses on forward exchange contracts that are designated a
hedge of a foreign operation's net assets and/or long-term intercompany loans
are recorded in "Translation adjustments", a separate component of shareholders'
equity. These contracts reduce the risk of currency exposure on foreign currency
net assets and do not exceed the foreign currency amount being hedged. To the
extent the above criteria are not met, or the related assets are sold,
extinguished, or terminated, activity associated with such hedges is recorded in
"Other (income)/expense, net".
All open positions on forward exchange contracts are valued at fair
value using the estimated forward rate of a matching contract.
Gains or losses on futures contracts have been recorded in "Other
(income)/expense, net". Open positions have been valued at fair value using
quoted market rates.
In late June 1998, the Company entered into interest rate swap
transactions to hedge part of its interest rate exposure. Gains or losses on
these transactions are recorded in "Interest expense, net" and unrealized gains
or losses related to changes in the fair value of the contracts are not
recognized.
In June 1998, Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities", was issued. This Standard
establishes a new model for accounting for derivatives and hedging activities.
All derivatives will be required to be recognized as either assets or
liabilities and measured at fair value. Each hedging relationship must be
designated and accounted for pursuant to this Standard. Since the Company
already records forward exchange and futures contracts at fair value, this
Standard is not expected to have a material effect on the accounting for these
transactions. In accordance with this Standard, interest rate swaps that hedge
interest rate exposure will be measured at fair value with the initial asset or
liability recognized in "Other comprehensive income". Actual amounts paid or
received on these contracts will be reclassified from "Other comprehensive
income" to "Interest expense, net". The Company plans to adopt this Standard on
its effective date of January 1, 2000.
4
<PAGE>
3. Other (Income)/Expense, Net
Included in other (income)/expense, net for the nine months ended
September 30 are: currency transactions, $4.0 million income in 1998 and $1.7
million income in 1997; amortization of debt issuance costs and loan origination
fees, $0.5 million in 1998 and $0.7 million in 1997; interest rate protection
agreements, $0.7 million income in 1997; strategic planning costs, $1.3 million
in 1997 and other miscellaneous (income)/expenses, none of which are
significant, in 1998 and 1997.
Included in other (income)/expense, net for the three months ended
September 30 are: currency transactions, $3.3 million income in 1998 and $1.0
million income in 1997; amortization of debt issuance costs and loan
organization fees, $0.2 million in 1998 and $0.3 million in 1997; strategic
planning costs, $1.3 million in 1997 and other miscellaneous (income)/expenses,
none of which are significant, in 1998 and 1997.
4. Earnings Per Share
In accordance with Financial Accounting Standard No. 128, "Earnings Per
Share", net income per share is computed using the weighted average number of
shares of Class A and Class B Common Stock outstanding during the period.
Diluted net income per share includes the effect of all potentially dilutive
securities.
The amounts used in computing earnings per share, including the effect
on income and the weighted average number of shares of potentially dilutive
securities, are as follows:
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
(in thousands) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Income available to common stockholders:
Income available to common stockholders
(No adjustments needed for dilutive securities) $32,717 $35,778 $11,067 $11,424
------- ------- ------- -------
Weighted average number of shares:
Weighted average number of shares used in
net income per share 30,153 31,005 29,783 31,187
Effect of dilutive securities:
Stock options 446 414 265 541
--- --- --- ---
Weighted average number of shares used in
diluted net income per share 30,599 31,419 30,048 31,728
------ ------ ------ ------
Options to purchase 250,000 shares of common stock at $25.5625 per share and
777,200 shares of common stock at $22.25 per share were outstanding at September
30, 1998 but were not included in the computation of diluted net income per
share for the three months ended September 30, 1998 because the options'
exercise price was greater than the average market price of the common shares
for that period. The 250,000 shares were also not included in the computation
for the nine months ended September 30, 1998.
5
<PAGE>
5. Comprehensive Income
Total comprehensive income consists of:
- ------------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
September 30, September 30,
(in thousands) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $32,717 $35,778 $11,067 $11,424
Other comprehensive loss, before tax:
Foreign currency translation adjustments (866) (25,925) 4,280 (2,875)
Income tax related to items of other
comprehensive loss - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income $31,851 $9,853 $15,347 $8,549
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. Income Taxes
The Company's effective tax rate for the nine months ended September
30, 1998 and 1997 was 39% and approximates the anticipated effective tax rate
for the full year 1998.
7. Supplementary Cash Flow Information
Interest paid for the nine months ended September 30, 1998 and 1997 was
$13.8 million and $11.4 million, respectively.
Taxes paid for the nine months ended September 30, 1998 and 1997 was
$19.7 million and $16.7 million, respectively.
8. Acquisitions
In January 1998, the Company acquired substantially all of the assets
of Burwell Door Systems located in Sydney, Australia for approximately $3.4
million.
In March 1998, the Company purchased all of the outstanding capital
stock of Techniweave, Inc., a specialty fabricator of high performance
textiles and composites. The purchase price was approximately $8.9 million
with $3.3 million paid at closing and $5.6 million deferred for up to ten
years.
In March 1998, the Company purchased all of the outstanding capital
stock of Metco Form Oy, a Finnish supplier of forming fabrics and other
engineered fabrics for pulp mills and other chemical process industries. The
purchase price was approximately $10.9 million.
In April 1998, the Company purchased all of the outstanding capital
stock of M&I Door Systems located in Barrie, Ontario, Canada for approximately
$8.4 million.
All of the above acquisitions were accounted for as purchases and,
accordingly, the Company included in its financial statements the results of
operations of the acquired entities as of the respective acquisition dates.
6
<PAGE>
In March 1998, the Company purchased a 50% interest in SARA (Loading Bay
Specialists, Ltd.), a distributor of high performance industrial doors located
in England for approximately $2.0 million. This investment is being accounted
for on an equity basis and is included in "Investments in Associated
Companies".
9. Stock Dividends
On July 3, 1998 and October 5, 1998, the Company distributed a total of
239,640 shares of Class A Common Stock and 56,286 shares of Class B Common
Stock in connection with two 0.5% stock dividends. As a result of the stock
dividends, additional paid-in capital was increased $4.9 million, treasury
stock was reduced $2.7 million and retained earnings was decreased $7.6
million as of September 30, 1998. All references in the accompanying financial
statements to the number of common shares and per-share amounts have been
restated to reflect the stock dividends.
7
<PAGE>
Item 2. Management's Discussion and Analysis
-----------------------------------
of Financial Condition and Results of Operations
------------------------------------------------
For the Three and Nine Months Ended September 30, 1998
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS:
Net sales increased to $176.3 million for the three months ended September 30,
1998 as compared to $171.7 million for the three months ended September 30,
1997. The effect of the stronger U.S. dollar as compared to the third quarter of
1997 was to decrease net sales by $3.9 million. Acquisitions, as discussed
below, added $7.2 million to third quarter 1998 net sales. Excluding these two
factors, 1998 net sales were flat as compared to 1997.
Net sales for the nine months ended September 30, 1998 increased 1.3% to $532.1
million as compared to $525.5 million for the same period in 1997. The effect of
the stronger U.S. dollar as compared to the first nine months of 1997 was to
decrease net sales by $17.4 million. 1998 acquisitions added $14.0 million to
net sales. Excluding these two factors, 1998 net sales increased 1.9% as
compared to 1997.
Geographically, net sales for the nine months ended September 30, 1998, as
compared to the same period in 1997, increased slightly in the United States and
decreased in Canada. Net sales in Canada were impacted by the effect of the
stronger U.S. dollar and a weather related shutdown that closed manufacturing
operations for about two weeks in January 1998. Asian sales were lower in 1998,
as compared to 1997. European sales increased in local currencies and were up
slightly in U.S. dollars.
Gross profit was 41.6% of net sales for the three months ended September 30,
1998 as compared to 43.0% for the same period in 1997 bringing the nine month
result to 42.5% for 1998 as compared to 42.7% for 1997. Year to date variable
costs as a percent of net sales decreased to 33.6% in 1998 from 33.7% for the
same period in 1997. Excluding the effect of the stronger U.S. dollar, 1998
acquisitions and the start-up of the Company's new Korean plant, as discussed
below, variable costs as a percent of net sales were 32.6% in 1998.
Selling, technical, general and research expenses increased 1.8%, excluding 1998
acquisitions and the new Korean plant, for the nine months ended September 30,
1998 as compared to the nine months ended September 30, 1997. Excluding the
additional effect of translation of non-U.S. currencies into fewer U.S. dollars,
these expenses increased 4.3% as compared to 1997. This increase was principally
due to higher wages and benefit costs and the unfavorable change in the
remeasurement of foreign currency transactions incurred principally in Sweden
and France.
Operating income as a percentage of net sales decreased to 12.7% for the nine
months ended September 30, 1998 from 13.8% for the comparable period in 1997 due
to items discussed above. Excluding the effect of the stronger U.S. dollar, 1998
acquisitions and the new Korean plant, operating income as a percentage of net
sales was 13.4% in 1998.
In October 1998, the Company announced an enhanced retirement program for
certain eligible employees. Although the extent of the savings and charges
expected to result from this program are not yet determinable, an announcement
will be made by the end of the year. Charges against earnings in the fourth
8
<PAGE>
quarter of 1998 will be incurred based on decisions made by employees offered
the retirement incentive, plus other cost reduction steps to be formalized by
the end of the year.
Interest expense increased $2.7 million for the nine months ended September 30,
1998 as compared to the same period in 1997. This increase was due to higher
total debt during 1998 as a result of acquisitions and the Company's purchase of
2,458,300 shares of its own stock since November 1997.
The tax rate for the nine months ended September 30, 1998 and 1997 was 39.0% and
approximates the anticipated effective rate for the full year 1998.
In late 1997, the Company finished the construction of a new paper machine
clothing plant located in Chungju, South Korea for a total cost of approximately
$22 million. The first shipments to customers were made in February 1998.
In January 1998, the Company acquired substantially all of the assets of Burwell
Door Systems located in Sydney, Australia for approximately $3.4 million.
In March 1998, the Company purchased all of the outstanding capital stock of
Techniweave, Inc., a specialty fabricator of high performance textiles and
composites. The purchase price was approximately $8.9 million with $3.3 million
paid at closing and $5.6 million deferred for up to ten years.
In March 1998, the Company purchased all of the outstanding capital stock of
Metco Form Oy, a Finnish supplier of forming fabrics and other engineered
fabrics for pulp mills and other chemical process industries. The purchase price
was approximately $10.9 million.
In April 1998, the Company purchased all of the outstanding capital stock of M&I
Door Systems located in Barrie, Ontario, Canada for approximately $8.4 million.
All of the above acquisitions were accounted for as purchases and, accordingly,
the Company included in its financial statements the results of operations of
the acquired entities as of the respective acquisition dates. Management does
not expect these acquisitions to have a significant impact on 1998 operating
results.
In March 1998, the Company purchased a 50% interest in SARA (Loading Bay
Specialists, Ltd.), a distributor of high performance industrial doors located
in England for approximately $2.0 million. This investment is being accounted
for on an equity basis and is included in "Investments in Associated Companies".
Reasons for the changes in operating results for the three month period ended
September 30, 1998 as compared to the corresponding period in 1997 are similar
to those which affected the nine month comparisons, except where specifically
noted.
LIQUIDITY AND CAPITAL RESOURCES:
Accounts receivable increased $5.7 million since December 31, 1997. Excluding
the effect of the stronger U.S. dollar, acquisitions and the new Korean plant,
accounts receivable decreased $0.9 million. Inventories increased $20.1 million
during the nine months ended September 30, 1998. Excluding the factors noted
above, inventories increased $13.0 million. The Company is currently taking
steps to reduce inventories, including reduced production schedules and
short-time at some operations.
9
<PAGE>
The Company's current debt structure provides approximately $160 million in
committed and available unused debt capacity with financial institutions.
Management believes that this debt capacity, in combination with informal
commitments and expected free cash flows, should be sufficient to meet operating
requirements and for business opportunities and most acquisitions which support
corporate strategies.
Capital expenditures for the nine months ended September 30, 1998, including
leases to the extent they are required to be capitalized, were $28.5 million as
compared to $39.4 million for the same period last year. The Company anticipates
that capital expenditures, including leases, will be approximately $53 million
for the full year and will continue to finance these expenditures with cash from
operations and existing credit facilities.
A cash dividend of $.105 per share, which was declared for the fourth quarter
of 1997, was paid in the first quarter of 1998. The Company also declared a cash
dividend of $.105 per share for the first quarter of 1998, which was paid in the
second quarter of this year. On July 3, 1998 and October 5, 1998, the Company
distributed 239,640 shares of Class A Common Stock and 56,286 shares of Class B
Common Stock in connection with two 0.5% stock dividends. As a result of the
stock dividends, additional paid-in capital was increased $4.9 million, treasury
stock was reduced $2.7 million and retained earnings was decreased $7.6 million
as of September 30, 1998. All references in the accompanying financial
statements to the number of common shares and per-share amounts have been
restated to reflect the stock dividends.
In 1997, the Company began a program to assess, test and remedy its computer and
manufacturing systems to assure that these systems will properly recognize the
year 2000 and therefore substantially eliminate the risk of date-related
computer shutdowns.
The most significant area to assess under this program is the Company's business
systems, which includes the Company's information system, the hardware and
software associated with its network of personal computers and its
telecommunications infrastructure. Most of the Company's operating units have
completed the assessment phase of the program and some have already begun
testing and remediation. All phases are expected to be complete by mid-1999.
Currently, a company-wide implementation of a new information system is in
progress. This implementation has not been accelerated as a result of the year
2000 issue. Each of the Company's operating units are at a different level of
completion. In some cases, the existing system which is being replaced is not
year 2000 compliant. For these systems, if the implementation of the new system
is not expected to be complete by the year 2000, a contingency plan which
includes upgrading the existing software or the temporary use of manual
processes will be put in place. The Company does not expect any significant
problems related to year 2000 compliance of its business systems.
The Company's manufacturing process involves some use of computers and embedded
chips in process equipment. Each operating unit has been assigned a coordinator
to oversee the planning, testing and remediation of this equipment. While each
operation is at a different state of readiness, all work is expected to be
complete by mid-1999. While the Company does not anticipate any year 2000
related shutdowns, it expects that any problems that do occur would be isolated
to one or a few operations. In these cases, production can be moved to other
operations within the Company until the problems are corrected. The Company
would expect to be able to remediate any undiscovered year 2000 related
machinery problems within a matter of days, with no material impact on overall
production.
The Company depends on customers and suppliers for its daily operations.
Disruptions due to year 2000 problems in their operations could have a
significant impact on the Company. The Company is currently monitoring the
status of its customers and suppliers to determine risks and contingency plans.
10
<PAGE>
11
Total external costs of the year 2000 program are estimated to be $1.0 million
and are expected to be funded from cash flow from operations. Of the $1.0
million, $0.3 million is for consultants, $0.5 million for hardware and $0.2
million for software. As of September 30, 1998, $0.3 million has been spent on
consultants and $0.1 million has been spent on hardware. Cost estimates are
being monitored and will be revised as needed.
The estimates and conclusions herein contain forward-looking statements and are
based on management's best estimates of future events. The risks to completing
this plan include the Company's ability to discover and correct year 2000
problems within its systems and the ability of its customers and suppliers to
bring their systems into year 2000 compliance.
In June 1998, Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities", was issued. This Standard establishes a new
model for accounting for derivatives and hedging activities. All derivatives
will be required to be recognized as either assets or liabilities and measured
at fair value. Each hedging relationship must be designated and accounted for
pursuant to this Standard. Since the Company already records forward exchange
and futures contracts at fair value, this Standard is not expected to have a
material effect on the accounting for these transactions. In accordance with
this Standard, interest rate swaps, that hedge interest rate exposure, will be
measured at fair value with the initial asset or liability recognized in "Other
comprehensive income". Actual amounts paid or received on these contracts will
be reclassified from "Other comprehensive income" to "Interest expense, net".
The Company plans to adopt this Standard on its effective date of January 1,
2000.
11
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
No reports on Form 8-K were filed during the quarter ended September 30, 1998.
<TABLE>
<S> <C>
Exhibit No. Description
----------- -----------
11. Schedule of computation of net income per share and diluted net income per share
27. Financial data schedule
</TABLE>
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALBANY INTERNATIONAL CORP.
--------------------------
(Registrant)
Date: November 10, 1998
by /s/Michael C. Nahl
---------------------
Michael C. Nahl
Sr. Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE AND DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
For the three months For the nine months
ended September 30, ended September 30,
1998 (1) 1997 (1) 1998 (1) 1997 (1)
<S> <C> <C> <C> <C>
--------------- -------------- ----------- ---------
Net Income $11,067 $11,424 $32,717 $35,778
=============== ============== =========== =========
Weighted average number of shares 29,782,592 31,187,311 30,153,103 31,005,132
Effect of potentially dilutive securities:
Stock options (2) 265,494 540,754 445,730 413,860
--------------- -------------- ----------- ---------
Weighted average number shares,
including the effect of potentially dilutive securities 30,048,086 31,728,065 30,598,833 31,418,992
=============== ============== =========== =========
Net income per share $0.37 $0.37 $1.09 $1.15
=============== ============== =========== =========
Diluted net income per share $0.37 $0.36 $1.07 $1.14
=============== ============== =========== =========
Calculation of Weighted Average Number of Shares (3):
Weighted Average Shares
-----------------------------------------------------
For the three months For the nine months
Days ended September 30, ended September 30,
Shares ------------------
Activity Outstanding (1) Year to Date Quarter 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------- --------------- -------------- ----------- ---------
1997
Beginning balance 30,770,033 1 112,711
Options - 200 shares 30,770,235 1 112,711
Options - 3,600 shares 30,773,871 3 338,174
Options - 10,000 shares 30,783,971 1 112,762
Options - 900 shares 30,784,880 1 112,765
Options - 5,000 shares 30,789,930 19 2,142,889
Treasury shares - 57,500 30,731,854 3 337,713
Options - 37,300 shares 30,769,528 1 112,709
ESOP shares - 12,002 30,781,650 3 338,260
Options - 20,000 shares 30,801,851 4 451,309
Options - 5,000 shares 30,806,901 5 564,229
Options - 27,000 shares 30,834,171 1 112,946
Options - 1,400 shares 30,835,586 1 112,951
Options - 28,600 shares 30,864,472 4 452,227
Options - 10,000 shares 30,874,572 10 1,130,937
ESOP shares - 58,773 30,933,935 31 3,512,645
ESOP shares - 12,126 30,946,182 2 226,712
Options - 1,800 shares 30,948,000 19 2,153,890
Directors shares - 2,922 30,950,952 9 1,020,361
ESOP shares - 12,380 30,963,456 1 113,419
Treasury shares - 4,400 30,959,012 30 3,402,089
ESOP shares - 12,193 30,971,327 9 1,021,033
Options - 2,500 shares 30,973,852 3 340,372
Options - 17,900 shares 30,991,931 1 113,524
Options - 10,200 shares 31,002,234 5 567,806
Options - 8,700 shares 31,011,021 1 113,593
Options - 19,200 shares 31,030,413 6 681,987
Options - 5,000 shares 31,035,463 1 113,683
Options - 14,000 shares 31,049,604 4 454,939
ESOP shares - 11,243 31,060,959 22 21 7,090,002 2,503,081
Options - 5,100 shares 31,066,111 2 2 675,350 227,591
Options - 22,000 shares 31,088,331 1 1 337,917 113,877
Options - 60,000 shares 31,148,933 6 6 2,031,452 684,592
Options - 26,800 shares and
ESOP shares - 10,555 31,186,662 1 1 338,985 114,237
Options - 600 shares 31,187,268 4 4 1,355,968 456,956
<PAGE>
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE AND DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Options - 16,800 shares 31,204,237 1 1 339,176 114,301
Options - 1,000 shares 31,205,247 1 1 339,187 114,305
Options - 1,000 shares 31,206,257 1 1 339,198 114,309
Options - 12,500 shares 31,218,882 4 4 1,357,343 457,420
Options - 2,500 shares 31,221,407 2 2 678,726 228,728
Options - 500 shares 31,221,912 4 4 1,357,474 457,464
Options - 1,800 shares 31,223,730 1 1 339,388 114,373
Options - 800 shares 31,224,538 1 1 339,397 114,376
Options - 3,400 shares 31,227,972 2 2 678,869 228,776
Options - 1,800 shares 31,229,790 3 3 1,018,363 343,185
Options - 4,300 shares 31,234,133 1 1 339,501 114,411
Options - 1,800 shares 31,235,951 5 5 1,697,606 572,087
ESOP shares - 9,406 31,245,452 2 2 679,249 228,904
Options - 1,000 shares 31,246,462 1 1 339,635 114,456
Options - 600 shares 31,247,068 1 1 339,642 114,458
Options - 1,000 shares 31,248,078 1 1 339,653 114,462
Options - 4,400 shares 31,252,522 6 6 2,038,208 686,869
Options - 1,000 shares 31,253,532 1 1 339,712 114,482
Options - 8,300 shares 31,261,915 3 3 1,019,410 343,538
Options - 5,300 shares 31,267,268 15 15 5,097,924 1,717,982
ESOP shares - 10,061 31,277,430 1 1 339,972 114,569
-------------- ---------
Totals 31,187,311 31,005,132
============== =========
1998
Beginning balance 31,018,167 8 908,957
Treasury shares - 5,000 31,013,117 6 681,607
Options - 2,500 shares 31,015,642 1 113,610
Treasury shares - 411,100 30,600,420 7 784,626
Treasury shares - 400,000 30,196,410 7 774,267
Treasury shares - 13.700 30,182,573 1 110,559
ESOP shares - 12,783 30,195,484 25 2,765,154
Treasury shares - 26,000 30,169,224 3 331,530
ESOP shares - 41,378 30,211,016 13 1,438,620
Options - 600 shares 30,211,622 5 553,326
Options - 20,000 shares 30,231,823 9 996,654
Options - 8,000 shares 30,239,903 4 443,076
Options - 9,500 shares and
ESOP shares - 10,011 30,259,610 2 221,682
Options - 4,400 shares 30,264,054 1 110,857
Options - 8,000 shares 30,272,134 3 332,661
Options - 16,600 shares 30,288,900 15 1,664,225
Options - 1,600 shares 30,290,516 3 332,863
Options - 5,400 shares 30,295,971 4 443,897
Options - 1,500 shares 30,297,486 2 221,960
ESOP shares - 10,443 30,308,033 1 111,018
Options - 500 shares 30,308,538 10 1,110,203
Options - 7,400 shares 30,316,012 4 444,191
Directors shares - 2,004 30,318,037 4 444,220
Options - 600 shares 30,318,643 1 111,057
Options - 3,000 shares 30,321,673 2 222,137
Options - 1,200 shares 30,322,885 5 555,364
Options - 600 shares 30,323,491 4 444,300
ESOP shares - 9,096 30,332,678 3 333,326
Options - 10,000 shares 30,342,778 2 222,291
Options - 10,000 shares 30,352,878 3 333,548
Options - 2,500 shares 30,355,403 1 111,192
Options - 500 shares 30,355,908 9 1,000,744
Options - 3,000 shares 30,358,939 1 111,205
Treasury shares - 6,900 30,351,969 3 333,538
<PAGE>
ALBANY INTERNATIONAL CORP.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE AND DILUTED NET INCOME PER SHARE
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Options - 550 shares 30,352,525 3 333,544
Treasury shares - 120,000 30,231,322 5 553,687
ESOP shares - 11,371 30,243,186 22 21 6,903,336 2,437,180
Treasury shares - 72,200 30,170,625 1 1 327,942 110,515
Treasury shares - 33,700 30,136,756 1 1 327,573 110,391
Treasury shares - 50,000 30,086,506 7 7 2,289,191 771,449
ESOP shares - 13,945 30,100,521 4 4 1,308,718 441,033
Treasury shares - 52,000 30,048,261 3 3 979,835 330,201
Treasury shares - 64,800 29,983,137 4 4 1,303,615 439,313
Treasury shares - 7,800 29,975,298 2 2 651,637 219,599
Treasury shares - 63,700 29,911,279 4 4 1,300,490 438,261
Treasury shares - 16,800 29,894,395 2 2 649,878 219,007
Treasury shares - 60,000 29,834,095 1 1 324,284 109,282
Treasury shares - 14,400 29,819,623 1 1 324,126 109,229
Treasury shares - 50,000 29,769,373 5 5 1,617,901 545,227
Treasury shares - 40,100 29,729,073 1 1 323,142 108,898
Treasury shares - 5,000 29,724,048 4 4 1,292,350 435,517
ESOP shares - 13,856 29,737,973 2 2 646,478 217,861
Treasury shares - 36,000 29,701,793 1 1 322,846 108,798
Treasury shares - 152,000 29,549,033 1 1 321,185 108,238
Treasury shares - 200,000 29,348,033 5 5 1,595,002 537,510
Treasury shares - 100,000 29,247,533 1 1 317,908 107,134
Treasury shares - 15,000 29,232,458 5 5 1,588,721 535,393
Treasury shares - 35,000 29,197,283 1 1 317,362 106,950
Treasury shares - 44,900 29,152,159 9 9 2,851,842 961,060
Treasury shares - 63,600 29,088,241 5 5 1,580,883 532,752
ESOP shares - 14,678 29,104,210 1 1 316,350 106,609
--------------- -----------
Totals 29,782,592 30,153,103
=============== ===========
</TABLE>
(1) Includes Class A and Class B Common Stock
(2) Incremental shares of unexercised options are calculated based on the
average price of the Company's stock for the respective period. The
calculation includes all options that are dilutive to earnings per share.
(3) Weighted average number of shares have been retroactively restated to
reflect the 0.5% stock dividends issued on July 3, 1998 and October 5,
1998. Each change in the total share balance is comprised of the
transaction noted plus the retroactive effect of the stock dividends.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ALBANY INTERNATIONAL CORP'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
Note - Earnings per share reflect the impact of a 0.5% stock dividend that
was distributed on October 5, 1998. Prior Financial Data Schedules have
not been restated to reflect this dividend.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,439
<SECURITIES> 0
<RECEIVABLES> 183,810
<ALLOWANCES> 6,182
<INVENTORY> 200,559
<CURRENT-ASSETS> 403,145
<PP&E> 656,147
<DEPRECIATION> 331,054
<TOTAL-ASSETS> 853,489
<CURRENT-LIABILITIES> 218,671
<BONDS> 187,821
0
0
<COMMON> 32
<OTHER-SE> 332,151
<TOTAL-LIABILITY-AND-EQUITY> 853,489
<SALES> 532,130
<TOTAL-REVENUES> 532,130
<CGS> 306,024
<TOTAL-COSTS> 463,662
<OTHER-EXPENSES> (77)
<LOSS-PROVISION> 958
<INTEREST-EXPENSE> 14,267
<INCOME-PRETAX> 53,320
<INCOME-TAX> 20,792
<INCOME-CONTINUING> 32,717
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,717
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 1.07
</TABLE>
