<TABLE>
<S> <C>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: March 31, 2000
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-16214
--------
ALBANY INTERNATIONAL CORP.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 14-0462060
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1373 Broadway, Albany, New York 12204
- ------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 518-445-2200
------------
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 24,705,628 shares of Class A Common Stock and 5,869,457
shares of Class B Common Stock outstanding as of March 31, 2000.
</TABLE>
<PAGE>
<TABLE>
ALBANY INTERNATIONAL CORP.
INDEX
<S> <C> <C>
Page No.
------------
Part I Financial information
Item 1. Financial Statements
Consolidated statements of income and retained earnings -
three months ended March 31, 2000 and 1999 1
Consolidated balance sheets - March 31, 2000 and December 31, 1999 2
Consolidated statements of cash flows - three months ended March 31, 2000 and 1999 3
Notes to consolidated financial statements 4-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8
Part II Other information
Item 6. Exhibits and Reports on Form 8-K 9
</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
March 31,
<S> <C> <C>
2000 1999
---------------- ----------------
Net sales $215,754 $181,569
Cost of goods sold 128,434 106,549
---------------- ----------------
Gross profit 87,320 75,020
Selling, technical and general expenses 59,277 52,357
---------------- ----------------
Operating income 28,043 22,663
Interest expense, net 10,396 4,552
Other expense, net 455 103
---------------- ----------------
Income before income taxes 17,192 18,008
Income taxes 7,393 7,024
---------------- ----------------
Income before associated companies 9,799 10,984
Equity in earnings of associated companies 208 228
---------------- ----------------
Net income 10,007 11,212
Retained earnings, beginning of period 276,554 255,586
Less dividends - -
---------------- ----------------
Retained earnings, end of period $286,561 $266,798
================ ================
Net income per share $0.33 $0.37
================ ================
Diluted net income per share $0.33 $0.37
================ ================
Cash dividends per common share - -
================ ================
Weighted average number of shares 30,503,925 30,235,779
================ ================
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, December 31,
<S> <C> <C>
2000 1999
------------------- ---------------------
ASSETS
Cash and cash equivalents $25,831 $7,025
Accounts receivable, net 230,005 235,303
Inventories:
Finished goods 133,939 131,749
Work in process 60,659 61,200
Raw material and supplies 44,228 42,733
------------------- ---------------------
238,826 235,682
Deferred taxes and prepaid expenses 31,833 30,063
------------------- ---------------------
Total current assets 526,495 508,073
Property, plant and equipment, net 412,606 435,172
Investments in associated companies 4,372 4,389
Intangibles 186,080 197,953
Deferred taxes 9,527 10,871
Other assets 51,012 50,384
------------------- ---------------------
Total assets $1,190,092 $1,206,842
=================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $27,441 $36,839
Accounts payable 34,027 42,647
Accrued liabilities 81,900 86,008
Current maturities of long-term debt 5,461 6,174
Income taxes payable and deferred 7,760 5,296
------------------- ---------------------
Total current liabilities 156,589 176,964
Long-term debt 528,805 521,257
Other noncurrent liabilities 130,211 124,847
Deferred taxes and other credits 56,045 58,367
------------------- ---------------------
Total liabilities 871,650 881,435
------------------- ---------------------
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
26,911,620 in 2000 and 26,803,721 in 1999 27 27
Class B Common Stock, par value $.001 per share;
authorized 25,000,000 shares; issued and
outstanding 5,869,457 in 2000 and 1999 6 6
Additional paid in capital 221,023 219,443
Retained earnings 286,561 276,554
Accumulated items of other comprehensive income:
Translation adjustments (139,429) (120,877)
Pension liability adjustment (3,903) (3,903)
------------------- ---------------------
364,285 371,250
Less treasury stock (Class A), at cost (2,205,992 shares
in 2000 and 1999) 45,843 45,843
------------------- ---------------------
Total shareholders' equity 318,442 325,407
------------------- ---------------------
Total liabilities and shareholders' equity $1,190,092 $1,206,842
=================== =====================
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three Months Ended
March 31,
<S> <C> <C>
2000 1999
---------------- ----------------
OPERATING ACTIVITIES
Net income $10,007 $11,212
Adjustments to reconcile net cash provided by operating activities:
Equity in earnings of associated companies (208) (228)
Depreciation and amortization 16,084 12,471
Provision for deferred income taxes, other credits and long-term liabilities 3,431 5,148
Increase in cash surrender value of life insurance, net of premiums paid (628) (574)
Unrealized currency transaction (gains)/losses (312) 709
Loss/(gain) on disposition of assets 109 (19)
Shares contributed to ESOP 1,580 1,584
Changes in operating assets and liabilities:
Accounts receivable 5,610 3,275
Inventories (3,144) 5,660
Prepaid expenses (2,001) (889)
Accounts payable (8,620) (1,375)
Accrued liabilities 42 (4,190)
Income taxes payable 2,433 (1,437)
Other, net 253 (1,261)
---------------- --------------
Net cash provided by operating activities 24,636 30,086
---------------- --------------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (7,673) (5,157)
Purchased software (251) (516)
Proceeds from sale of assets 7,916 39
Loan to other company - (2,000)
---------------- ---------------
Net cash used in investing activities (8) (7,634)
---------------- ---------------
FINANCING ACTIVITIES
Proceeds from borrowings 13,000 -
Principal payments on debt (15,054) (5,119)
---------------- --------------
Net cash used in financing activities (2,054) (5,119)
---------------- --------------
Effect of exchange rate changes on cash flows (3,768) (14,094)
---------------- --------------
Increase in cash and cash equivalents 18,806 3,239
Cash and cash equivalents at beginning of year 7,025 5,868
---------------- --------------
Cash and cash equivalents at end of period $25,831 $9,107
================ ==============
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, 1999.
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 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 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
expense, 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 Expense, Net
Included in other expense, net for the three months ended March 31 are:
currency transactions, $0.4 million income in 2000 and $0.9 million income in
1999; amortization of debt issuance costs and loan origination fees, $0.6
million in 2000 and $0.2 million in 1999 and other miscellaneous items, none of
which are significant, in 2000 and 1999.
4
<PAGE>
4. 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>
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
(in thousands)
<S> <C> <C>
2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Income available to common stockholders:
Income available to common stockholders $10,007 $11,212
------- -------
Weighted average number of shares:
Weighted average number of shares used in
net income per share 30,504 30,236
Effect of dilutive securities:
Stock options - 204
- ---
Weighted average number of shares used in
diluted net income per share 30,504 30,440
------ ------
For the three months ended March 31, 2000, all options were 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.
5. Comprehensive Income/(Loss)
Total comprehensive income/(loss) consists of:
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
(in thousands) March 31,
<S> <C> <C>
2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $10,007 $11,212
Other comprehensive loss, before tax:
Foreign currency translation adjustments (18,552) (21,840)
Income tax related to items of other
comprehensive loss - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive loss $(8,545) $(10,628)
- ------------------------------------------------------------------------------------------------------------------------------------
5
<PAGE>
6. Operating Segment Data
The following table shows data by operating segment, reconciled to
consolidated totals included in the financial statements:
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands) 2000 1999
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Net Sales
Engineered Fabrics $181,175 $147,395
High Performance Doors 24,040 24,339
All other 10,539 9,835
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated Total $215,754 $181,569
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income
Engineered Fabrics $40,686 $33,334
High Performance Doors 1,634 1,904
All other 1,829 1,138
Research expense (5,089) (5,475)
Unallocated expenses (11,017) (8,238)
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income before reconciling items 28,043 22,663
Reconciling items:
Interest expense, net (10,396) (4,552)
Other expense, net (455) (103)
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated income before income taxes $17,192 $18,008
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7. Income Taxes
The Company's effective tax rate for the three months ended March 31,
2000 and 1999 was 43% and 39% respectively.
8. Supplementary Cash Flow Information
Interest paid for the three months ended March 31, 2000 and 1999 was
$9.3 million and $5.0 million, respectively.
Taxes paid for the three months ended March 31, 2000 and 1999 was $3.9
million and $5.0 million, respectively.
6
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
For the Three Months Ended March 31, 2000
The following discussion should be read in conjunction with the accompanying
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS:
Net sales increased to $215.8 million for the three months ended March 31, 2000
as compared to $181.6 million for the three months ended March 31, 1999. The
effect of the stronger U.S. dollar as compared to the first quarter of 1999 was
to decrease net sales by $4.5 million. Acquisitions made in 1999 added $33.3
million to first quarter 2000 net sales. Excluding these two factors, 2000 net
sales were up 3.0% as compared to 1999.
Geographically, net sales for the three months ended March 31, 2000, as compared
to the same period in 1999, excluding the effect of acquisitions, were flat in
the United States and increased 11.1% in Canada. Sales in Korea and China were
higher in 2000, as compared to 1999. European sales increased in local
currencies and were down in U.S. dollars.
Gross profit was 40.5% of net sales for the three months ended March 31, 2000
as compared to 41.3% for the same period in 1999. Excluding the effect of the
stronger U.S. dollar and acquisitions, gross profit was 42.2% of net sales in
2000. Year to date variable costs as a percent of net sales decreased to 34.7%
in 2000 from 35.4% for the same period in 1999. Excluding the effect of the
stronger U.S. dollar and acquisitions, variable costs as a percent of net sales
were 33.6% in 2000.
Selling, technical, general and research expenses, excluding the effect of the
stronger U.S. dollar and acquisitions, were down 1.0% for the three months
ended March 31, 2000 as compared to the same period in 1999.
Operating income as a percentage of net sales increased to 13.0% for the three
months ended March 31, 2000 from 12.5% for the comparable period in 1999 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 14.5% in 2000.
Previously announced cost reduction initiatives continued on schedule during the
quarter and are expected to result in the targeted savings for the year 2000.
The full impact of the $50 million cost reduction program will be realized in
2001. The Company is on schedule to close plants in the United States, Mexico
and Germany and to reduce payroll-related costs by 3.5% by the end of 2000.
Expenditures for equipment relocations and asset write-offs were approximately
$1.4 million in the first quarter of 2000 and are expected to be approximately
$8 million for the full year. During the first quarter of 2000, the Company
announced the closing of a small forming fabric weaving facility in Italy and
proposed the closure of a 200,000-square-foot facility in Angouleme, France to
affected employees. In accordance with local law, the French proposal will not
become final until the conclusion of a review procedure involving local
managers and employees, which is expected to be completed during the second
quarter of 2000. Both plants will be phased out during the next several months.
7
<PAGE>
Interest expense for the three months ended March 31, 2000 increased $5.8
million as compared to the same period in 1999. This increase was due to
higher debt and interest rates during the period due principally to
acquisitions made in 1999.
The tax rate for the first three months of 2000 was 43% as compared to 39% for
the comparable period in 1999. The increase was principally due to the
non-deductibility of certain expenses related to acquisitions and restructuring.
LIQUIDITY AND CAPITAL RESOURCES:
Accounts receivable decreased $5.3 million since December 31, 1999. Excluding
the effect of the stronger U.S. dollar, accounts receivable decreased
$1.2 million. Inventories increased $3.1 million during the three months ended
March 31, 2000. Excluding the effect of the stronger U.S. dollar, inventories
increased $5.9 million.
The Company's current debt structure, which is mostly floating-rate, currently
provides approximately $150 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 anticipated operating requirements and
normal business opportunities which support corporate strategies.
Capital expenditures for the three months ended March 31, 2000, including
leases to the extent they are required to be capitalized, were $7.7 million as
compared to $5.2 million for the same period last year. The Company
anticipates that capital expenditures, including leases, will be approximately
$35 million for the full year and will continue to finance these expenditures
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.
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, annual cost savings, estimated
impact of actions upon future earnings, industry trends, debt capacity, capital
expenditures, 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.
These 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.
8
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 2000.
<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
9
</TABLE>
<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: May 10, 2000
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
ended March 31,
2000 (1) 1999 (1)
<S> <C> <C>
------------ ------------
Net income $10,007 $11,212
============ ============
Weighted average number of shares 30,503,925 30,235,779
Effect of potentially dilutive securities:
Stock options (2) - 203,742
------------ ------------
Weighted average number shares,
including the effect of potentially dilutive securities 30,503,925 30,439,521
============ ============
Net income per share $0.33 $0.37
============ ============
Diluted net income per share $0.33 $0.37
============ ============
Calculation of Weighted Average Number of Shares:
Weighted Average Shares
-----------------------------
For the three months
Shares Days ended March 31,
------------
Activity Outstanding(1) Year to Date 2000 1999
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------- ------------ ------------
1999
Beginning balance 30,220,223 30 10,073,408
ESOP shares - 13,772 30,234,271 28 9,406,218
ESOP shares - 15,530 30,250,111 31 10,419,483
ESOP shares - 49,234 30,300,330 1 336,670
------------
Totals 30,235,779
============
2000
Beginning balance 30,467,186 30 10,044,127
ESOP shares - 21,786 30,488,972 29 9,716,266
ESOP shares - 62,201 30,551,173 31 10,407,542
ESOP shares - 23,912 30,575,085 1 335,990
------------
Totals 30,503,925
============
(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 THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 25,831
<SECURITIES> 0
<RECEIVABLES> 238,162
<ALLOWANCES> 8,157
<INVENTORY> 238,826
<CURRENT-ASSETS> 526,495
<PP&E> 761,772
<DEPRECIATION> 349,166
<TOTAL-ASSETS> 1,190,092
<CURRENT-LIABILITIES> 156,589
<BONDS> 528,805
0
0
<COMMON> 33
<OTHER-SE> 318,409
<TOTAL-LIABILITY-AND-EQUITY> 1,190,092
<SALES> 215,754
<TOTAL-REVENUES> 215,754
<CGS> 128,434
<TOTAL-COSTS> 188,322
<OTHER-EXPENSES> 455
<LOSS-PROVISION> (611)
<INTEREST-EXPENSE> 10,396
<INCOME-PRETAX> 17,192
<INCOME-TAX> 7,393
<INCOME-CONTINUING> 10,007
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,007
<EPS-BASIC> 0.33
<EPS-DILUTED> 0.33
</TABLE>
