SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: September 30, 1999
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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
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 Identification No.)
incorporation or organization)
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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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports,) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The registrant had 24,058,924 shares of Class A Common Stock and 5,754,376
shares of Class B Common Stock outstanding as of September 30, 1999.
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ALBANY INTERNATIONAL CORP.
INDEX
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Part I Financial information
Item 1. Financial Statements Page No.
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Consolidated statements of income and retained earnings -
three and nine months ended September 30, 1999 and 1998 1
Consolidated balance sheets - September 30, 1999 and December 31, 1998 2
Consolidated statements of cash flows - nine months ended September 30,
1999 and 1998 3
Notes to consolidated financial statements 4-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-10
Part II Other information
Item 6. Exhibits and Reports on Form 8-K 11
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Item 1. Financial Statements
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(unaudited)
(in thousands except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
<S> <C> <C> <C>
1999 1998 1999 1998
- ------------------ ----------------- ------------------ -----------------
$196,566 $176,346 Net sales $553,960 $532,130
118,197 103,016 Cost of goods sold 326,849 306,024
- ------------------ ----------------- ------------------ -----------------
78,369 73,330 Gross profit 227,111 226,106
54,474 52,573 Selling, technical and general 161,030 158,596
- ------------------ ----------------- expenses ------------------ -----------------
23,895 20,757 Operating income 66,081 67,510
6,489 4,973 Interest expense, net 15,227 14,267
(555) (2,315) Other income, net (231) (77)
- ------------------ ----------------- ------------------ -----------------
17,961 18,099 Income before income taxes 51,085 53,320
7,507 7,056 Income taxes 20,426 20,792
- ------------------ ----------------- ------------------ -----------------
10,454 11,043 Income before associated companies 30,659 32,528
213 24 Equity in earnings of associated 513 189
- ------------------ ----------------- companies ------------------ -----------------
10,667 11,067 Net income 31,172 32,717
276,091 260,034 Retained earnings, beginning of period 255,586 246,013
- 3,067 Less dividends - 10,696
- ------------------ ----------------- ------------------ -----------------
$286,758 $268,034 Retained earnings, end of period $286,758 $268,034
================== ================= ================== =================
$0.36 $0.37 Net income per share $1.05 $1.07
================== ================= ================== =================
$0.36 $0.36 Diluted net income per share $1.04 $1.06
================== ================= ================== =================
- - Cash dividends per common share - $0.105
================== ================= ================== =================
29,776,046 30,378,244 Weighted average number of shares 29,715,743 30,756,166
================== ================= ================== =================
The accompanying notes are an integral part of the
financial statements.
1
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ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
September 30, December 31,
<S> <C> <C>
1999 1998
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ASSETS
Cash and cash equivalents $24,983 $5,868
Accounts receivable, net 227,419 184,748
Inventories:
Finished goods 133,285 115,740
Work in process 63,396 43,523
Raw material and supplies 45,690 37,646
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242,371 196,909
Deferred taxes and prepaid expenses 26,418 22,188
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Total current assets 521,191 409,713
Property, plant and equipment, net 377,409 325,109
Investments in associated companies 4,389 4,054
Intangibles 233,223 60,800
Deferred taxes 31,304 27,193
Other assets 51,916 39,497
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Total assets $1,219,432 $866,366
=================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $28,850 $112,828
Accounts payable 37,776 25,838
Accrued liabilities 82,778 66,791
Current maturities of long-term debt 4,455 5,178
Income taxes payable and deferred 4,688 9,403
------------------- ---------------------
Total current liabilities 158,547 220,038
Long-term debt 554,219 181,137
Other noncurrent liabilities 135,616 113,282
Deferred taxes and other credits 42,062 37,059
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Total liabilities 890,444 551,516
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SHAREHOLDERS' EQUITY
Preferred stock, par value $5.00 per share;
authorized 2,000,000 shares; none issued - -
Class A Common Stock, par value $.001 per share;
authorized 100,000,000 shares; issued
26,264,916 in 1999 and 26,082,438 in 1998 26 26
Class B Common Stock, par value $.001 per share;
authorized 25,000,000 shares; issued and
outstanding 5,754,376 in 1999 and 5,785,282 in 1998 6 6
Additional paid in capital 209,344 206,428
Retained earnings 286,758 255,586
Accumulated items of other comprehensive income:
Translation adjustments (104,435) (83,736)
Pension liability adjustment (16,868) (16,868)
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374,831 361,442
Less treasury stock (Class A), at cost (2,205,992 shares
in 1999;2,240,050 shares in 1998) 45,843 46,592
------------------- ---------------------
Total shareholders' equity 328,988 314,850
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Total liabilities and shareholders' equity $1,219,432 $866,366
=================== =====================
The accompanying notes are an integral part of the financial
statements.
2
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ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended
September 30,
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1999 1998
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OPERATING ACTIVITIES
Net income $31,172 $32,717
Adjustments to reconcile net cash provided by operating activities:
Equity in earnings of associated companies (513) (189)
Depreciation and amortization 38,662 35,026
Provision for deferred income taxes, other credits and long-term 6,335 2,587
liabilities
Increase in cash surrender value of life insurance, net of premiums paid (869) (466)
Unrealized currency transaction gains (3,206) (2,988)
Loss on disposition of assets 31 63
Shares contributed to ESOP 3,489 3,214
Debt issuance costs (4,905) -
Changes in operating assets and liabilities:
Accounts receivable 4,810 1,365
Inventories 6,573 (16,287)
Prepaid expenses (3,121) (1,918)
Accounts payable (5,402) (2,647)
Accrued liabilities (1,203) 2,841
Income taxes payable (4,792) 640
Other, net (314) 778
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Net cash provided by operating activities 66,747 54,736
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INVESTING ACTIVITIES
Purchases of property, plant and equipment (23,255) (28,490)
Purchased software (1,369) (1,310)
Proceeds from sale of assets 60 77
Premiums paid for life insurance (1,187) (1,187)
Acquisitions, net of cash acquired (241,591) (24,135)
Loan to other company (3,000) -
Distributions from associated companies 75 -
Investment in associated companies - (2,025)
----------------- -----------------
Net cash used in investing activities (270,267) (57,070)
----------------- -----------------
FINANCING ACTIVITIES
Proceeds from borrowings 573,306 131,068
Principal payments on debt (336,828) (74,101)
Proceeds from options exercised 165 2,105
Tax benefit of options exercised 11 281
Purchases of treasury shares - (45,227)
Dividends paid - (6,387)
----------------- -----------------
Net cash provided by financing activities 236,654 7,739
----------------- -----------------
Effect of exchange rate changes on cash flows (14,019) (3,512)
----------------- -----------------
Increase in cash and cash equivalents 19,115 1,893
Cash and cash equivalents at beginning of year 5,868 2,546
----------------- -----------------
Cash and cash equivalents at end of period $24,983 $4,439
================= =================
The accompanying notes are an integral part of the financial statements.
3
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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, 1998.
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, 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, 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, net". Open positions have been valued at fair value using quoted market
rates.
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. The Company plans to adopt this Standard on its effective date of
January 1, 2001.
3. Other Income, Net
Included in other income, net for the nine months ended September 30
are: currency transactions, $3.2 million income in 1999 and $4.0 million income
in 1998; amortization of debt issuance costs and loan origination fees, $0.9
million in 1999 and $0.5 million in 1998 and other miscellaneous items, none of
which are significant, in 1999 and 1998.
4
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Included in other income, net for the three months ended September 30
are: currency transactions, $1.2 million income in 1999 and $3.3 million income
in 1998; amortization of debt issuance costs and loan organization fees, $0.4
million in 1999 and $0.2 million in 1998 and other miscellaneous items, none of
which are significant, in 1999 and 1998.
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:
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Nine Months Ended Three Months Ended
September 30, September 30,
(in thousands) 1999 1998 1999 1998
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Income available to common stockholders:
Income available to common stockholders $31,172 $32,717 $10,667 $11,067
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Weighted average number of shares:
Weighted average number of shares used in
net income per share 29,716 30,756 29,776 30,378
Effect of dilutive securities:
Stock options 202 446 75 265
--- --- -- ---
Weighted average number of shares used in
diluted net income per share 29,918 31,202 29,851 30,643
------ ------ ------ ------
Options excluded from the computation of diluted net income per share because
the options' exercise price was greater than the average market price of the
common shares for the period were as follows:
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Nine Months Ended Three Months Ended
September 30, 1999 September 30, 1999
Exercise Exercise
Options Price Options Price
Outstanding Per Share Outstanding Per Share
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- - 23,500 $17.625
- - 57,200 18.625
- - 176,600 18.75
- - 412,000 19.375
- - 409,500 19.75
746,200 $22.25 746,200 22.25
250,000 25.5625 250,000 25.5625
- ------------------------------------------------------------------------------------------------------------------------------------
5
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5. Comprehensive Income
Total comprehensive income consists of:
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Nine Months Ended Three Months Ended
September 30, September 30,
(in thousands) 1999 1998 1999 1998
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Net income $31,172 $32,717 $10,667 $11,067
Other comprehensive (loss)/income, before tax:
Foreign currency translation adjustments (20,699) (866) 3,296 4,280
Income tax related to items of other
comprehensive loss - - - -
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Total comprehensive income $10,473 $31,851 $13,963 $15,347
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6. Operating Segment Data
The following table shows data by operating segment, reconciled to
consolidated totals included in the financial statements:
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Nine Months Ended Three Months Ended
September 30, September 30,
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- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1999 1998 1999 1998
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Net Sales
Engineered Fabrics $450,217 $433,363 $160,125 $142,423
High Performance Industrial Doors 72,280 71,127 25,506 24,600
All other 31,463 27,640 10,935 9,323
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Consolidated Total $553,960 $532,130 $196,566 $176,346
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Operating Income
Engineered Fabrics $101,011 $96,955 $37,336 $30,758
High Performance Industrial Doors 3,446 6,585 814 1,955
All other 4,000 4,085 808 1,217
Research expense (16,710) (17,392) (5,534) (5,681)
Unallocated expenses (25,666) (22,723) (9,529) (7,492)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income before reconciling items 66,081 67,510 23,895 20,757
Reconciling items:
Interest expense, net (15,227) (14,267) (6,489) (4,973)
Other income, net 231 77 555 2,315
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Consolidated income before income taxes $51,085 $53,320 $17,961 $18,099
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7. Income Taxes
The Company's effective tax rate for the nine months ended September
30, 1999 and 1998 was 40% and 39% respectively. The effective tax rate for the
full year 1999 is anticipated to be 43%.
6
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8. Supplementary Cash Flow Information
Interest paid for the nine months ended September 30, 1999 and 1998 was
$15.3 million and $13.8 million, respectively.
Taxes paid for the nine months ended September 30, 1999 and 1998 was
$20.7 million and $19.7 million, respectively.
9. Acquisitions
In April 1999, the Company purchased all of the shares of Jansen
Tortechnik, a manufacturer of high quality sectional overhead doors located in
Surwold, Germany. The purchase price was approximately $7.7 million and was
accounted for as a purchase. Accordingly, the results of operations are included
in the financial statements since the acquisition date.
In August 1999, the Company completed the purchase of all of the
outstanding capital stock of the paper machine clothing business of the Geshmay
group for approximately $250 million. Geshmay's principal operations are located
in Europe and the United States. The transaction is being accounted for as a
purchase. The fair market value of assets and liabilities are being determined
by valuations and appraisals that are not yet complete. Therefore, the
allocation of the total purchase cost has been estimated at September 30, 1999.
The results of operations are included in the financial statements since the
acquisition date.
10. Debt
In August 1999, the Company entered into a new $750 million credit
agreement with its banks. $250 million of this facility is a term loan with $40
million due in 2001, $60 million in 2002, $70 million in 2003 and $80 million in
2004. The remaining $500 million is a revolving loan with the banks' commitment
to lend terminating in 2004. This agreement includes commitment fees and
variable interest rates based on various loan pricing methods. The credit
agreement contains various covenants which include limits on the disposition of
assets and interest coverage and a maximum leverage ratio, as well as mandatory
prepayments out of excess cash flow and proceeds from asset sales and debt
offerings. Borrowings are secured by a pledge of shares of, and intercompany
loans to, certain subsidiaries of the Company.
7
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Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
For the Three and Nine Months Ended September 30, 1999
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS:
Net sales increased to $196.6 million for the three months ended September 30,
1999 as compared to $176.3 million for the three months ended September 30,
1998. The effect of the stronger U.S. dollar as compared to the third quarter of
1998 was to decrease net sales by $1.1 million. Acquisitions made in 1999 (as
discussed below) added $19.0 million to third quarter 1999 net sales. Excluding
these two factors, 1999 net sales were up 1.3% as compared to 1998.
Net sales for the nine months ended September 30, 1999 increased to $554.0
million as compared to $532.1 million for the same period in 1998. The effect of
the stronger U.S. dollar as compared to the first nine months of 1998 was to
decrease net sales by $3.9 million. Acquisitions made in 1999 and 1998 added
$25.7 million to 1999 net sales. Excluding these two factors, 1999 net sales
were flat as compared to 1998.
In the United States, net sales in the third quarter of 1999 increased 2.5%
resulting in a year to date decrease of 1.0% as compared to the same period in
1998. Net sales for the nine months ended September 30, 1999, as compared to the
same period in 1998, decreased in Canada and were higher in Asia. European sales
increased in local currencies and were down 1.6% in U.S. dollars.
Gross profit was 39.9% of net sales for the three months ended September 30,
1999 as compared to 41.6% for the same period in 1998 bringing the nine month
result to 41.0% for 1999 as compared to 42.5% for 1998. Year to date variable
costs as a percent of net sales increased to 34.2% in 1999 from 33.6% for the
same period in 1998. Excluding the effect of the stronger U.S. dollar and
acquisitions, variable costs as a percent of net sales were 34.2% in 1999. The
decrease in gross profit margin is the result of acquisitions and pricing
pressures from major paper machine clothing customers. Improvements in
profitability at the paper-manufacturing base should translate to price
stability in the paper machine clothing industry.
Selling, technical, general and research expenses, excluding the effect of the
stronger U.S. dollar and acquisitions, decreased 1.0% for the nine months ended
September 30, 1999 as compared to the same period in 1998.
Operating income as a percentage of net sales decreased to 11.9% for the nine
months ended September 30, 1999 from 12.7% for the comparable period in 1998 due
to items discussed above. Excluding the effect of the stronger U.S. dollar and
acquisitions, operating income as a percentage of net sales was 12.2% in 1999.
Interest expense for the first nine months of 1999, as compared to 1998,
increased $1.0 million due to higher total debt as a result of acquisitions, as
noted below. Management anticipates interest expense, at current rates, to be
approximately $10 million per quarter beginning in the fourth quarter of 1999.
The tax rate for the first nine months of 1999 was 40%. The tax rate for the
full year 1999 is expected to be 43% due to the Geschmay acquisition, as noted
below. This will result in an unusually high tax rate in the fourth quarter of
1999, which is not expected to continue in future quarters.
8
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The Company is on schedule to achieve slightly more than the expected 1999 cost
reduction of $10 million resulting from the global restructuring plan announced
in January 1999. In 1999, as part of this plan, the Company announced the
closing of plants in Weaverville, North Carolina, Ahlen, Germany and a press
fabrics plant in Simpsonville, South Carolina. This plan will result in
cumulative annual cost savings of $22 million in 2000 and $25 million in 2001.
The acquisition of Geschmay, as discussed below, has created synergistic
opportunities that should result in additional cost reductions of $25 million,
for a total of $50 million when all restructuring plans are complete. The first
steps of this integration plan were announced in October 1999 and included the
closing of a dryer fabrics plant in Simpsonville, South Carolina, a reduction of
the combined sales force in the United States and the closing of the Geschmay
sales offices in Singapore and Canada.
In April 1999, the Company purchased all of the shares of Jansen Tortechnik, a
manufacturer of high quality sectional overhead doors located in Surwold,
Germany. The purchase price was approximately $7.7 million and was accounted for
as a purchase. Accordingly, the results of operations are included in the
financial statements since the acquisition date.
In August 1999, the Company completed the purchase of all of the outstanding
capital stock of the paper machine clothing business of the Geschmay group for
approximately $250 million. Geschmay's principal operations are located in
Europe and the United States. The transaction is being accounted for as a
purchase. The fair market value of assets and liabilities are being determined
by valuations and appraisals that are not yet complete. Therefore, the
allocation of the total purchase cost has been estimated at September 30, 1999.
The results of operations are included in the financial statements since the
acquisition date.
Reasons for the changes in operating results for the three month period ended
September 30, 1999 as compared to the corresponding period in 1998 are similar
to those which affected the nine month comparisons, except where specifically
noted.
LIQUIDITY AND CAPITAL RESOURCES:
Accounts receivable increased $42.7 million since December 31, 1998. Excluding
the effect of the stronger U.S. dollar and the Geschmay acquisition, accounts
receivable were flat. Inventories increased $45.5 million during the nine months
ended September 30, 1999. Excluding the items noted above, inventories decreased
$1.4 million.
In order to fund the Geschmay acquisition, in August 1999, the Company entered
into a new $750 million credit agreement with its banks. $250 million of this
facility is a term loan with $40 million due in 2001, $60 million in 2002, $70
million in 2003 and $80 million in 2004. The remaining $500 million is a
revolving loan with the banks' commitment to lend terminating in 2004. $515
million of this facility was used as of September 30, 1999. This agreement
includes commitment fees and variable interest rates based on various loan
pricing methods. The credit agreement contains various covenants which include
limits on the disposition of assets and interest coverage and a maximum leverage
ratio, as well as mandatory prepayments out of excess cash flow and proceeds
from asset sales and debt offerings. Borrowings are secured by a pledge of
shares of, and intercompany loans to, certain subsidiaries of the Company.
Capital expenditures for the nine months ended September 30, 1999, including
leases to the extent they are required to be capitalized, were $23.3 million as
compared to $28.5 million for the same period last year. The Company anticipates
that capital expenditures, including leases, will be approximately $45 million.
These expenditures will be financed with cash from operations and existing
credit facilities.
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. The Company plans to
adopt this Standard on its effective date of January 1, 2001.
9
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YEAR 2000
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 from internal operations.
The most significant area to assess under this program is the Company's business
system, 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 operations have
substantially completed the assessment, testing and remediation phases of this
program. Currently, the implementation of a new information system is in
progress and has not been accelerated as a result of the year 2000 issue. Each
of the Company's operations are at a different level of completion. In some
cases, the existing system which is being replaced is not year 2000 compliant.
If the implementation of the new system for these operations 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.
Management does not expect any significant internal issues related to year 2000
compliance.
The Company's manufacturing process involves some use of computers and embedded
chips in process equipment. Each operation has been assigned a coordinator to
oversee the planning, testing and remediation of this equipment. While
management does not expect any year 2000 related shutdowns, it believes that any
problems that do occur would be isolated. In these cases, production can be
moved to other operations within the Company until the problem is corrected.
Management expects to remediate any undiscovered year 2000 equipment 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.
As of September 30, 1999, total external expenditures related to the year 2000
program are approximately $1.0 million and have been funded from cash from
operations. Of the $1.0 million, $0.3 million was for consultants, $0.4 million
for hardware, $0.2 million for software and $0.1 million for communications
equipment. Future expenditures for this program are not expected to be
significant.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995. These statements include statements
about such matters as global restructuring, product pricing, interest expense,
annual cost savings, future sales, estimated impact of actions upon future
earnings, year 2000 expenditures and compliance, industry trends, operating
efficiency and profitability. Actual future events and circumstances (including
future performance, results and trends) could differ materially from those set
forth in such statements due to various factors. One factor is the risk to
completing the year 2000 plan, which includes 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. Other
factors include even more competitive marketing conditions resulting from
customer consolidations, possible softening of customer demand, unanticipated
events or circumstances related to recently acquired businesses, the occurrence
of unanticipated events or difficulties relating to divestiture, joint venture,
operating, capital, global integration and other projects, changes in currency
exchange rates, changes in general economic and competitive conditions,
technological developments, and other risks and uncertainties, including those
detailed in the Company's filings with the Securities and Exchange Commission.
10
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Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K were filed on September 8, 1999 (Item 2. Acquisition or
Disposition of Assets) and September 21, 1999 (exhibit only).
Exhibit No. Description
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3(b). Bylaws of Registrant
11. Schedule of computation of net income per share and
diluted net income per share
27. Financial data schedule
11
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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, 1999
by /s/Michael C. Nahl
---------------------
Michael C. Nahl
Sr. Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT 3(b)
Bylaws of Registrant
<PAGE>
[Revised By Laws adopted by the
Board of Directors on May 6, 1999]
ALBANY INTERNATIONAL CORP.
--------------------------
BY LAWS
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ARTICLE I
MEETINGS OF STOCKHOLDERS
------------------------
SECTION 1. An annual meeting of the stockholders for the election of
directors and such other business as may properly come before such meeting shall
be held on such date prior to September 1 of each year, and at such place and
time, as shall be designated by the Board of Directors or by such person or
persons as the Board of Directors shall authorize.
SECTION 2. Special meetings of stockholders may be called at any time
by a majority of the whole number of members of the Board of Directors. It shall
also be the duty of the Chairman of the Board, or, if there is no Chairman of
the Board, the President, to call a special meeting whenever requested in
writing to do so by stockholders holding shares of common stock of the Company
entitling such stockholders to cast a majority of the votes for the election of
directors. Any such request shall state the purpose or purposes for which the
meeting is to be called. No business shall be transacted at a special meeting of
stockholders other than business stated in the notice of such meeting as the
purpose or purposes for which the meeting is called.
SECTION 3. Written notice of each meeting of stockholders shall be
given to each stockholder entitled to vote thereat, stating the place, date and
hour or the meeting, and, in the case of a special meeting, the purpose or
purposes of the meeting. Such notice may be given by mail or by such other means
as is permitted by law.
SECTION 4. At all meetings of stockholders, shares of common stock of
the corporation entitling the holders thereof to cast a majority of the votes
for the election of directors, present in person or by proxy, shall constitute a
quorum.
SECTION 5. At all meetings of stockholders, only such persons shall be
entitled to vote, in person or by proxy, as appear as stockholders on the books
of the corporation on the record date for such meeting. The Board of Directors
may fix a record date for a meeting as permitted by law.
SECTION 6. The Chairman of the Board of Directors shall preside at all
meetings of stockholders. If the Chairman of the Board of Directors is absent or
that office is vacant, the President shall preside. If the Chairman of the Board
of Directors and the President are absent, or those offices are vacant, the
longest serving member of the Board of Directors present shall preside at the
meeting unless otherwise determined by the Board of Directors.
SECTION 7. Proposals of stockholders, including nominations of persons
for election to the Board of Directors of the corporation, shall not be
presented, considered or voted upon at an annual meeting of stockholders of the
corporation, or at any adjournment thereof, unless (i) notice of the proposal
has been received by mail directed to the Secretary of the corporation at its
principal executive offices at P.O., Box 1907, Albany, New York,12201 not less
than 100 days nor more than 180 days prior to the anniversary date of the last
preceding annual meeting of stockholders and (ii) the stockholder giving such
notice is a stockholder of record on the date of the giving of such notice and
on the record date for the determination of stockholders entitled to vote at
such annual meeting. Each such notice shall set forth (i) the proposal desired
to be brought before the annual meeting and the reasons for presenting such
proposal at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder making such proposal, (iii) the number
and class of shares owned beneficially
<PAGE>
or of record by such stockholder, (iv) any material
interest of such stockholder in the proposal and (iv) such other information
with respect to the proposal and such stockholder as is required to be disclosed
in solicitation of proxies to vote upon such proposal, or is otherwise required,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
("the Proxy Rules"). In the case of proposed nominations of persons for election
to the Board of Directors, each such notice shall also (i) set forth such
information with respect to such nominees and the stockholder proposing the
nominations as is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, pursuant to the Proxy Rules and
(ii) be accompanied by the written consent of each proposed nominee to being
named in the corporation's proxy statement as a nominee and to serving as a
director if elected and by written confirmation by each such nominee of the
information relating to such nominee contained in the notice.
ARTICLE II
DIRECTORS
---------
SECTION 1. Until changed by the Board of Directors as hereinafter
provided, the number of directors shall be nine. The number of directors may be
changed by the Board of Directors to such number, not less than three, as the
Board of Directors may determine from time to time. No decrease in the number of
directors shall shorten the term of any incumbent director. Each director shall
hold office until the next annual meeting of stockholders, or the delivery of a
consent or consents in lieu thereof, and until his or her successor has been
elected and qualified. No person shall be elected a director of the corporation
after he or she shall have reached the age of 72 years; but any person who
shall, while a director, reach the age of 72 years may continue to serve until
the next annual meeting, or the delivery of a consent or consents in lieu
thereof, and until his or her successor has been elected and qualified.
SECTION 2. Newly created directorships resulting from an increase in
the number of directors, and vacancies occurring in the Board of Directors for
any reason, may be filled by vote of a majority of the directors then in office,
although less than a quorum exists, or by a sole remaining director.
SECTION 3. The Board of Directors may hold meetings at such times and
places as it may from time to time determine. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board of Directors,
by the President or by any three directors. Notice of each regular or special
meeting of the Board of Directors, stating the time and place thereof, shall be
given, orally or in writing, personally, by mail, telephone, facsimile or other
electronic means or by any other reasonable method at least 48 hours prior to
such meeting. A director may waive such notice in writing, either before or
after the meeting. Attendance in person at any meeting of the Board of Directors
shall be deemed to constitute waiver of notice by a director.
SECTION 4. The Board of Directors may provide for compensation to, and
expenses of, its members for attendance at meetings of the Board and any
committees thereof. The Board of Directors may also provide for compensation to,
and expenses of, committees of stockholders.
SECTION 5. The Board of Directors may designate one or more committees
consisting of one or more members of the Board of Directors. Such committees
shall have and may exercise all of the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation,
including the power to authorize the seal of the corporation to be affixed to
documents, as the Board of Directors may provide in the resolution establishing
such committee or by other action taken from time to time. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. No committee shall have power
or authority to (i) approve, adopt or recommend to the stockholders any action
or matter expressly required by the Delaware General Corporation Law to be
submitted to the stockholders for approval or (ii) amend the By Laws of the
corporation.
2
<PAGE>
SECTION 6. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting if all of the members of the Board or such committee consent thereto in
writing, and the writing or writings are filed with the minutes of the Board or
Committee.
SECTION 7. Members of the Board of Directors, or any committee, may
participate in a meeting of the Board or committee by means of conference
telephone or similar communications equipment that permits all persons
participating in the meeting to hear each other participant, and participation
in a meeting in such manner shall constitute presence in person at the meeting.
SECTION 8. The Chairman of the Board shall preside at all meetings of
the Board of Directors. If the Chairman of the Board is absent or that office is
vacant, the President shall preside. If the Chairman of the Board and the
President are absent, or those offices are vacant, the longest serving member of
the Board of Directors present shall preside at the meeting unless otherwise
determined by the Board of Directors.
ARTICLE III
OFFICERS
--------
The Board of Directors may elect or appoint a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer and such
other officers as the Board of Directors may from time to time determine. Any
two or more offices may be held by the same person. Each officer shall have such
authority, and perform such duties, as usually devolve upon his or her office or
as may otherwise be determined from time to time by the Board of Directors or
provided for in the By Laws of the corporation.
ARTICLE IV
INDEMNIFICATION
---------------
SECTION 1. The corporation shall indemnify any person who is a party,
or is threatened to be made a party, or who is called or threatened to be called
to give testimony (whether during pre-trial discovery, at trial or otherwise) in
connection with any threatened, pending or completed action, suit or proceeding
of any kind, whether civil, criminal or investigative, including an action by or
in the right of the corporation, by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against costs, expenses (including attorneys fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if (i) such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, (ii) such person did not
personally gain, as a result of the acts or omissions to which such action, suit
or proceeding relates, a financial profit or other financial advantage to which
such person was not legally entitled and, (iii) with respect to any criminal
action or proceeding, such person had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
meet the standards of conduct set forth in the preceding sentence.
SECTION 2. Any person entitled to indemnification under Section 1 of
this Article IV shall, upon delivery to the corporation of the undertaking
described in the following sentence, be entitled to require the corporation to
pay, in advance of the final disposition
3
<PAGE>
of any action, suit or proceeding in respect of which indemnification is
required hereunder, the costs and expenses (including attorneys fees) reasonably
incurred by such person from time to time in connection with such action, suit
or proceeding. The undertaking referred to above shall be a valid, written
agreement of such person to repay all amounts paid to such person by the
corporation pursuant to the preceding sentence if it shall ultimately be
determined that such person is not entitled to indemnification by the
corporation under this Article.
SECTION 3. In the event the corporation refuses to indemnify any person
and an action, suit or proceeding is commenced in order to determine whether
such indemnification is required under this Article IV, or in the event of any
action, suit or proceeding to enforce any undertaking referred to in Section 2
of this Article, (i) the corporation, and any other participant in such an
action, suit or proceeding who asserts that such person is not entitled to
indemnification by the corporation under this Article, shall have the burden of
proof to establish that such person is not entitled to indemnification under
this Article, and (ii) if, as a result of such action, suit or proceeding, such
person is held to be entitled to indemnification under this Article, or if the
corporation and all other participants asserting such claim cease to pursue the
claim that such person is not entitled to indemnification, then the corporation
shall, in addition to the indemnification otherwise required under Section 1 of
this Article, indemnify such person against the costs and expenses (including
attorneys fees) reasonably incurred by such person in connection with the
action, suit or proceeding in which such person's right to indemnification was
disputed.
SECTION 4.
(a) The Board of Directors of the corporation may authorize the
purchase and maintenance by the corporation of insurance for the benefit of any
person or persons entitled to indemnification under this Article covering risks
of the kind to which such indemnification relates. Such insurance coverage may
exceed the scope of such indemnification.
(b) If, at any time, any person receives proceeds from an insurance
policy referred to in the preceding subsection (a) on account of any matter with
respect to which such person is entitled to indemnification under this Article,
the indemnification obligations of the corporation under this Article shall be
reduced by the amount of such proceeds so received.
(c) Upon payment by the corporation of any amount as indemnification
under this Article, the corporation will be subrogated, to the extent of such
amount, to the rights, if any, of the indemnified person under any insurance
policy covering risks of the kind to which indemnification under this Article
relates, and the indemnified person will cooperate to facilitate the
corporation's enforcement of such subrogation rights.
SECTION 5. Indemnification rights provided under this Article IV shall
be deemed to be contract rights. No modification or termination of any provision
of this Article or of the rights provided hereunder shall diminish or change any
right of any person to indemnification under this Article with respect to any
action, suit or proceeding which relates to acts or omissions of such person
occurring prior to the time when such person receives written notice that such
modification or termination has occurred.
SECTION 6. The Board of Directors of the corporation may authorize the
execution and delivery by the corporation of agreements with persons who are or
who become beneficiaries of the indemnification rights provided under this
Article, such agreements to contain provisions substantially in accordance with
the provisions of this Article.
SECTION 7. The rights of indemnification provided in this Article IV
are not intended to be exclusive of any other rights of indemnification to which
any person may be or become entitled, whether by reason of law, contract, action
by the Board of Directors or otherwise.
4
<PAGE>
SECTION 8. For purposes of this Article IV: references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonable believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" for purposes of
this Article.
SECTION 9. The rights of indemnification provided in this Article IV
(including, without limitation, rights to advancement of costs and expenses)
shall continue as to a person who has ceased to be a director, officer, employee
or agent of the corporation with respect to acts or omissions occurring while
such person was a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person with respect
to such acts or omissions.
ARTICLE V
AMENDMENT OF BY LAWS
--------------------
SECTION 1. These By Laws may be amended at any time, and from time to
time, by the Board of Directors or by the stockholders of the corporation.
5
<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)
For the three months For the nine months
ended September 30, ended September 30,
1999 (1) 1998 (1) 1999 (1) 1998 (1)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net income $10,667 $11,067 $31,172 $32,717
============ ============= ============ ============
Weighted average number of shares 29,776,046 30,378,244 29,715,743 30,756,166
Effect of potentially dilutive securities:
Stock options (2) 75,190 265,494 201,856 445,730
------------ ------------- ------------ ------------
Weighted average number shares,
including the effect of potentially dilutive securities 29,851,236 30,643,738 29,917,599 31,201,896
============ ============= ============ ============
Net income per share $0.36 $0.37 $1.05 $1.07
============ ============= ============ ============
Diluted net income per share $0.36 $0.36 $1.04 $1.06
============ ============= ============ ============
Calculation of Weighted Average Number of Shares:
Weighted Average Shares
----------------------------------------------------------------
For the three months For the nine months
Shares Days ended September 30, ended September 30,
-------------------
Activity Outstanding (1)Year to Date Quarter 1999 1998 1999 1998
- ------------------------------------------------------------------ ----------- ------------- ------------ ------------
1998
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 31,638,530 8 927,136
Treasury shares - 5,000 31,633,379 6 695,239
Options - 2,500 shares 31,635,954 1 115,883
Treasury shares - 411,100 31,212,429 7 800,319
Treasury shares - 400,000 30,800,339 7 789,752
Treasury shares - 13.700 30,786,224 1 112,770
ESOP shares - 12,783 30,799,394 25 2,820,457
Treasury shares - 26,000 30,772,608 3 338,161
ESOP shares - 41,378 30,815,237 13 1,467,392
Options - 600 shares 30,815,855 5 564,393
Options - 20,000 shares 30,836,459 9 1,016,587
Options - 8,000 shares 30,844,701 4 451,937
Options - 9,500 shares and
ESOP shares - 10,011 30,864,802 2 226,116
Options - 4,400 shares 30,869,335 1 113,074
Options - 8,000 shares 30,877,577 3 339,314
Options - 16,600 shares 30,894,678 15 1,697,510
Options - 1,600 shares 30,896,327 3 339,520
Options - 5,400 shares 30,901,890 4 452,775
Options - 1,500 shares 30,903,435 2 226,399
ESOP shares - 10,443 30,914,194 1 113,239
Options - 500 shares 30,914,709 10 1,132,407
Options - 7,400 shares 30,922,333 4 453,074
Directors shares - 2,004 30,924,397 4 453,105
Options - 600 shares 30,925,015 1 113,278
Options - 3,000 shares 30,928,106 2 226,580
Options - 1,200 shares 30,929,342 5 566,471
Options - 600 shares 30,929,961 4 453,186
ESOP shares - 9,096 30,939,331 3 339,993
Options - 10,000 shares 30,949,634 2 226,737
Options - 10,000 shares 30,959,936 3 340,219
Options - 2,500 shares 30,962,512 1 113,416
Options - 500 shares 30,963,027 9 1,020,759
Options - 3,000 shares 30,966,117 1 113,429
Treasury shares - 6,900 30,959,009 3 340,209
Options - 550 shares 30,959,575 3 340,215
Treasury shares - 120,000 30,835,948 5 564,761
ESOP shares - 11,371 30,848,049 22 21 7,041,403 2,485,923
Treasury shares - 72,200 30,774,037 1 1 334,500 112,725
Treasury shares - 33,700 30,739,491 1 1 334,125 112,599
Treasury shares - 50,000 30,688,236 7 7 2,334,974 786,878
ESOP shares - 13,945 30,702,531 4 4 1,334,893 449,854
Treasury shares - 52,000 30,649,226 3 3 999,431 336,805
Treasury shares - 64,800 30,582,800 4 4 1,329,687 448,100
<PAGE>
<S> <C> <C> <C> <C> <C>
Treasury shares - 7,800 30,574,804 2 2 664,670 223,991
Treasury shares - 63,700 30,509,505 4 4 1,326,500 447,026
Treasury shares - 16,800 30,492,283 2 2 662,876 223,387
Treasury shares - 60,000 30,430,777 1 1 330,769 111,468
Treasury shares - 14,400 30,416,016 1 1 330,609 111,414
Treasury shares - 50,000 30,364,761 5 5 1,650,259 556,131
Treasury shares - 40,100 30,323,654 1 1 329,605 111,076
Treasury shares - 5,000 30,318,529 4 4 1,318,197 444,228
ESOP shares - 13,856 30,332,733 2 2 659,407 222,218
Treasury shares - 36,000 30,295,829 1 1 329,302 110,974
Treasury shares - 152,000 30,140,014 1 1 327,609 110,403
Treasury shares - 200,000 29,934,994 5 5 1,626,902 548,260
Treasury shares - 100,000 29,832,484 1 1 324,266 109,276
Treasury shares - 15,000 29,817,107 5 5 1,620,495 546,101
Treasury shares - 35,000 29,781,229 1 1 323,709 109,089
Treasury shares - 44,900 29,735,202 9 9 2,908,878 980,281
Treasury shares - 63,600 29,670,005 5 5 1,612,500 543,407
ESOP shares - 14,678 29,686,322 1 1 322,677 108,741
------------- ------------
Totals 30,378,244 30,756,166
============= ============
1999
Beginning balance 29,627,670 30 3,255,788
ESOP shares - 13,772 29,641,442 28 3,040,148
ESOP shares - 15,530 29,656,972 31 3,367,642
ESOP shares - 49,234 29,706,206 20 2,176,279
Options - 2,400 shares 29,708,606 10 1,088,227
ESOP shares - 13,350 29,721,956 6 653,230
Stock dividend adjust. - 1,592 29,723,548 4 435,510
Directors shares - 2,884 29,726,432 2 217,776
Options - 1,550 shares 29,727,982 1 108,894
Options - 1,400 shares 29,729,382 4 435,595
Options - 1,000 shares 29,730,382 4 435,610
Options - 400 shares 29,730,782 10 1,089,040
ESOP shares - 12,335 29,743,117 14 1,525,288
Options - 1,800 shares 29,744,917 16 1,743,292
ESOP shares - 13,827 29,758,744 31 30 9,703,938 3,379,198
ESOP shares - 16,877 29,775,621 31 31 10,033,090 3,381,114
ESOP shares - 16,925 29,792,546 30 30 9,714,961 3,273,906
ESOP shares - 20,754 29,813,300 1 1 324,058 109,206
------------ ------------
Totals 29,776,046 29,715,743
============ ============
(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.
</TABLE>
<PAGE>
<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, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 24,983
<SECURITIES> 0
<RECEIVABLES> 235,691
<ALLOWANCES> 8,272
<INVENTORY> 242,371
<CURRENT-ASSETS> 521,191
<PP&E> 724,162
<DEPRECIATION> 346,753
<TOTAL-ASSETS> 1,219,432
<CURRENT-LIABILITIES> 158,547
<BONDS> 554,219
0
0
<COMMON> 32
<OTHER-SE> 328,956
<TOTAL-LIABILITY-AND-EQUITY> 1,219,432
<SALES> 553,960
<TOTAL-REVENUES> 553,960
<CGS> 326,849
<TOTAL-COSTS> 488,048
<OTHER-EXPENSES> (231)
<LOSS-PROVISION> (169)
<INTEREST-EXPENSE> 15,227
<INCOME-PRETAX> 51,085
<INCOME-TAX> 20,426
<INCOME-CONTINUING> 31,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,172
<EPS-BASIC> 1.05
<EPS-DILUTED> 1.04
</TABLE>
