Third-Quarter Highlights ALBANY, N.Y., Oct. 21
/PRNewswire-FirstCall/ -- Albany International Corp. (NYSE: AIN;
PCX/FWB: AIN) reported third-quarter net income per share of $0.58,
after tax-related effects that reduced earnings by $0.09 per share.
In the third quarter of 2004, net income per share was $0.33, after
net income was reduced by restructuring charges of $0.06 per share
and a tax valuation allowance of $0.03 per share. In the third
quarter of 2005, the Company reduced its annual estimated tax rate
from 30 percent to 28 percent. Had the 28 percent tax rate been in
place at June 30, 2005, year-to-date earnings per share through
that period would have been $0.03 higher than reported. The results
for the third quarter of 2005 also included a charge of $0.12 per
share related to the repatriation of undistributed foreign
earnings. The combined impact of these two effects was a reduction
in earnings per share of $0.09. Third-quarter net sales increased
$19.5 million, or 8.7 percent compared to the same period last
year. Excluding the effect of changes in currency translation
rates, net sales increased 6.5 percent. Following is a table of net
sales by segment and the effect of changes in currency translation
rates: Increase in Percent Change third-quarter Net sales 2005 net
sales as reported due to changes Excluding Three months ended in
currency Currency September 30, translation As Rate (in thousands)
2005 2004 rates Reported Effect Engineered Fabrics $186,290
$169,513 $4,083 9.9% 7.5% Albany Door Systems 26,724 26,081 72 2.5%
2.2% Applied Technologies 29,316 27,254 865 7.6% 4.4% Total
$242,330 $222,848 $5,020 8.7% 6.5% Gross profit was 41.1 percent of
net sales in the third quarter of 2005, compared to 39.2 percent in
the third quarter of 2004. The increase in gross profit as a
percentage of net sales is due principally to higher net sales and
the benefits derived from cost reduction initiatives. Selling,
technical, general, and research expenses increased 9.0 percent
compared to the same period last year and increased 7.6 percent
excluding the effect of changes in currency translation rates. The
increase is due principally to payments expected to be made under
the Company's annual and long-term incentive bonus plans due to
improved operating results and the increase in value of the
Company's common stock. A portion of the increase is also related
to compensation paid to the Company's new President, including an
initial cash bonus. Operating income improved to $30.8 million in
the third quarter of 2005 from $21.5 million in the same period
last year. Operating income in the third quarter of 2004 included
restructuring charges of $2.6 million. Year-to-date net sales were
7.3 percent higher than last year. Excluding the effect of changes
in currency translation rates, net sales were up 4.1 percent.
Following is a table of year-to-date net sales by segment and the
effect of changes in currency translation rates: Net sales Increase
in Percent Change as reported 2005 net sales Nine months due to
changes Excluding ended in currency Currency (in thousands)
September 30, translation As Rate 2005 2004 rates Reported Effect
Engineered Fabrics $555,752 $517,873 $16,435 7.3% 4.1% Albany Door
Systems 83,706 79,575 2,362 5.2% 2.2% Applied Technologies 91,342
83,915 2,810 8.9% 5.5% Total $730,800 $681,363 $21,607 7.3% 4.1%
For the first nine months of 2005, gross profit as a percentage of
net sales was 40.9 percent, compared to 39.2 percent for the first
nine months of last year. The increase is due principally to higher
net sales and the benefits derived from cost reduction initiatives.
Liquidity and Capital Resources Net cash provided by operating
activities was $46.6 million, after a $10 million contribution to
the Company's United States pension plan during the quarter. In the
same period last year, net cash provided by operating activities
was $24.9 million, after a $20 million contribution to the pension
plan. During the third quarter of 2005, excluding the effect of
changes in currency translation rates, accounts receivable
decreased $9.8 million, while inventories increased $4.7 million.
Capital spending was $12.1 million during the third quarter and
$30.5 million for the first nine months of 2005. Full-year capital
spending is expected to be approximately $45 million, as compared
to full-year depreciation and amortization of $52 million and $4
million, respectively. The Company reduced its outstanding debt by
$76.1 million during the third quarter, while cash decreased by
$41.4 million. Net debt, as defined in our principal credit
facility, was $119 million at the close of the quarter. During the
quarter, the Company did not purchase any additional shares of its
Class A Common Stock. However, it remains authorized to purchase an
additional 1,002,127 shares without further notice. The Company is
scheduled to close on a $150 million borrowing from Prudential
Capital Group on October 25, 2005. The principal will be due in
three installments of $50 million each at the end of years 8, 10
and 12 for an average life of 10 years, and the interest rate will
be fixed at 5.34 percent. The financing was arranged directly
between the Company and Prudential Capital Group. Comments on
Operations Chairman and Chief Executive Officer Frank Schmeler
commented, "We are pleased with the operating results for the
quarter, which reflect sales growth and the effects of our
continued focus on efficiency improvements. Our paper and
paperboard customers experienced swings in demand by region and
paper grade; however, demand for our products improved in Europe
and remained strong in other regions. "Although market conditions
in our Albany Door Systems segment were mixed, with slow economic
growth continuing to affect our customers in Europe, demand for our
products in the Applied Technologies segment remained strong. As
compared to the third quarter of last year, sales increased in both
segments." Engineered Fabrics This segment includes Paper Machine
Clothing and Process Belts (PMC) used in the manufacture of paper
and paperboard products. Third-quarter net sales for the Engineered
Fabrics segment increased 9.9 percent compared to the same period
last year. Excluding the effect of changes in currency translation
rates, net sales increased 7.5 percent. Net sales were positively
affected by strong demand for our products in each of our primary
markets, resulting from new product performance and value-focused
solutions for our customers. Year-to-date net sales increased 7.3
percent and increased 4.1 percent excluding the effect of changes
in currency translation rates. Albany Door Systems This segment
includes sales and service of High Performance Doors and
after-market sales to a variety of industrial customers.
Third-quarter Door Systems net sales increased 2.5 percent compared
to the third quarter of 2004 and 2.2 percent excluding the effect
of changes in currency translation rates. The improvement in net
sales during the quarter is due to distribution channel
improvements and new product introductions in North America as well
as growth in the European service business. Door sales in Europe,
in particular in Germany, continue to be affected by weak economic
conditions. Efficiency improvements in all Door Systems operations
contributed to improved earnings. Year-to-date net sales increased
5.2 percent and increased 2.2 percent excluding the effect of
changes in currency translation rates. Applied Technologies This
segment includes materials and structural-component businesses
including insulation for personal outerwear and home furnishings
(PrimaLoft); specialty materials and composite structures for
aircraft and other applications (Techniweave); specialty filtration
products for wet and dry applications (Industrial Process
Technologies); industrial insulation products (High Performance
Materials); and fabrics, wires and belting products for the
nonwovens and pulp industries (Engineered Products). Third-quarter
Applied Technologies net sales increased 7.6 percent compared to
the same period in 2004 and 4.4 percent excluding the effect of
changes in currency translation rates. Strong results in Engineered
Products and PrimaLoft in both North America and Europe, and demand
for our filtration products in China and Brazil, contributed to the
sales increase. As with the other business segments, earnings
improved due to sales growth as well as continuing efficiency
improvements. Year-to-date net sales increased 8.9 percent and
increased 5.5 percent excluding the effect of changes in currency
translation rates. Looking Ahead Mr. Schmeler continued, "Our focus
on growth in each of our business segments allowed us to build on
the efficiency gains in our operations with solid revenue
improvements. However, in the Engineered Fabrics segment, there is
increased concern about sustainable paper and paperboard demand in
the current energy-influenced economic environment. Because of the
continuing restructuring by some global paper manufacturers,
ongoing weakness in the North American market, and recent
announcements by some of our customers regarding production
curtailments in Europe, we are unlikely to maintain recent rates of
PMC sales growth in the near term. Despite this short-term outlook,
we remain committed to growth in PMC. "Albany Door Systems will
continue to pursue growth strategies that lead to innovative custom
door solutions, value-focused sales, and increased service and
support activities. In addition, continuing efforts to improve
efficiencies should further contribute to earnings. "Growth in the
Applied Technologies segment should result from our continued
investments in new products and the application of existing
technologies to new markets. Our opportunities for filtration
products in power generation applications and for composites and
advanced materials in aircraft are encouraging. In addition, we are
pleased by the increased demand for PrimaLoft personal insulation
products and expansion of our Engineered Products in the nonwovens
industry. "We expect that investments for growth will increase in
the coming quarters, and will impact our capital expenditures and
people costs in 2006. These strategic investments will likely
include new hires in key areas, capital expenditures for all
business segments, and potential acquisitions in the Applied
Technologies segment. We expect capital spending next year will be
between $70 and $80 million. These investments support our
long-term growth plans and may positively impact operations as
early as late 2006. "Our growth strategies include the continued
focus on important value drivers for our customers, which improve
their operations and increase their profitability. In doing so, we
believe we are providing superior value to our customers and
creating value for our shareholders. "As with all of our customers,
increased costs resulting from higher energy prices will continue
to impact our operations in the fourth quarter. We do not expect
these increases to exceed $12 million for the full-year 2005." The
Company plans a live webcast to discuss third-quarter 2005
financial results on Monday, October 24, 2005, at 9:00 a.m. Eastern
Time. For access, go to http://www.albint.com/. Albany
International is the world's largest producer of paper machine
clothing and high-performance doors with manufacturing plants
strategically located to serve its global customers. Additional
information about the Company and its businesses and products is
available at http://www.albint.com/. This release contains certain
items that may be considered to be non-GAAP financial measures.
Such items are provided because management believes that, when
presented together with the GAAP items to which they relate, they
can provide additional useful information to investors regarding
the registrant's financial condition, results of operations, and
cash flows. The effect of changes in currency translation rates is
calculated by converting amounts reported in local currencies into
U.S. dollars at the exchange rate of a prior period. That amount is
then compared to the U.S. dollar amount reported in the current
period. Forward-looking statements in this release or in the
webcast, including statements about future economic conditions,
energy costs, growth, sales and earnings, markets, new products,
paper industry outlook, capital expenditures, tax rates, and
depreciation and amortization are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements are based on current expectations and are subject
to various risks and uncertainties, including, but not limited to,
economic conditions affecting the paper industry and other risks
and uncertainties set forth in the Company's 2004 Annual Report to
Shareholders and subsequent filings with the U.S. Securities and
Exchange Commission. ALBANY INTERNATIONAL CORP. CONSOLIDATED
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (in thousands except
per share data) (unaudited) Three Months Ended Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 $242,330 $222,848
Net sales $730,800 $681,363 142,689 135,603 Cost of goods sold
431,649 414,200 99,641 87,245 Gross profit 299,151 267,163 Selling,
technical, general 68,842 63,134 and research expenses 206,522
196,946 - 2,576 Restructuring, net - 45,244 30,799 21,535 Operating
income 92,629 24,973 1,848 3,533 Interest expense, net 8,662 11,073
(665) 2,053 Other (income)/expense, net 916 10,180 29,616 15,949
Income before income taxes 83,051 3,720 11,140 5,640 Income tax
expense 25,783 5,753 Income/(loss) before 18,476 10,309 associated
companies 57,268 (2,033) 32 158 Equity in earnings of associated
companies 500 375 18,508 10,467 Net income/(loss) 57,768 (1,658)
468,235 416,594 Retained earnings, beginning of period 434,057
433,407 (2,899) (2,536) Dividends declared (7,981) (7,224) Retained
earnings, $483,844 $424,525 end of period $483,844 $424,525
Earnings per share - basic: $0.58 $0.33 Net income/(loss) $1.82
($0.05) Earnings per share - diluted: $0.57 $0.32 Net income/(loss)
$1.79 ($0.05) Average number of shares used in basic earnings
32,063 32,160 per share computations 31,791 32,947 Average number
of shares used in diluted earnings 32,513 32,732 per share
computations 32,292 32,947 $0.09 $0.08 Dividends per share $0.25
$0.22 ALBANY INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS (in
thousands, except share data) (unaudited) September 30, December
31, 2005 2004 ASSETS Cash and cash equivalents $35,961 $58,982
Accounts receivable, net 130,484 144,950 Note receivable 18,751
18,955 Inventories 197,769 185,530 Deferred taxes 22,605 26,526
Prepaid expenses 10,617 8,867 Total current assets 416,187 443,810
Property, plant and equipment, net 338,666 378,170 Investments in
associated companies 6,378 6,456 Intangibles 13,201 14,207 Goodwill
155,203 171,622 Deferred taxes 84,825 87,848 Cash surrender value
of life insurance policies 36,977 34,583 Other assets 22,823 19,064
Total assets $1,074,260 $1,155,760 LIABILITIES AND SHAREHOLDERS'
EQUITY Notes and loans payable $4,693 $14,617 Accounts payable
37,379 43,378 Accrued liabilities 118,377 120,263 Current
maturities of long-term debt 1,010 1,340 Income taxes payable and
deferred 26,216 29,620 Total current liabilities 187,675 209,218
Long-term debt 139,708 213,615 Other noncurrent liabilities 146,907
147,268 Deferred taxes and other credits 29,767 34,882 Total
liabilities 504,057 604,983 Commitments and Contingencies - -
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
34,045,574 in 2005 and 33,176,872 in 2004 34 33 Class B Common
Stock, par value $.001 per share; authorized 25,000,000 shares;
issued and outstanding 3,236,476 in 2005 and 3,236,476 in 2004 3 3
Additional paid in capital 317,654 296,045 Retained earnings
483,844 434,057 Accumulated items of other comprehensive income:
Translation adjustments (64,996) (11,711) Derivative valuation
adjustment - (2,785) Pension liability adjustment (38,369) (38,369)
698,170 677,273 Less treasury stock (Class A), at cost (5,050,319
shares in 2005 and 5,004,152 shares in 2004) 127,967 126,496 Total
shareholders' equity 570,203 550,777 Total liabilities and
shareholders' equity $1,074,260 $1,155,760 ALBANY INTERNATIONAL
CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(unaudited) Nine Months Ended September 30, 2005 2004 OPERATING
ACTIVITIES Net income/(loss) $57,768 ($1,658) Adjustments to
reconcile net income/(loss) to net cash provided by operating
activities: Equity in earnings of associated companies (500) (376)
Depreciation 38,570 39,691 Amortization 2,877 2,710 Provision for
deferred income taxes, other credits and long- term liabilities
(1,326) (19,488) Provision for write-off of equipment 2,138 11,931
Provision for impairment of investment - 4,000 Increase in cash
surrender value of life insurance (1,372) (1,141) Change in
unrealized currency transaction gains and losses (3,058) 8,150 Gain
on disposition of assets - 842 Shares contributed to ESOP 4,361
4,546 Tax benefit of options exercised 4,672 1,322 Changes in
operating assets and liabilities: Accounts receivable 7,378 3,542
Note receivable 203 3,553 Inventories (18,840) (2,800) Prepaid
expenses (807) (283) Accounts payable (466) (4,126) Accrued
liabilities 10,767 19,131 Income taxes payable (3,659) 6,626 Other,
net (2,267) 60 Net cash provided by operating activities 96,439
76,232 INVESTING ACTIVITIES Purchases of property, plant and
equipment (30,541) (41,296) Purchased software (2,035) (489)
Proceeds from sale of assets 5,067 3,944 Cash received from life
insurance policy terminations - 863 Premiums paid for life
insurance policies (1,022) (1,089) Net cash used in investing
activities (28,531) (38,067) FINANCING ACTIVITIES Proceeds from
borrowings 20,280 53,388 Principal payments on debt (103,965)
(21,295) Purchase of treasury shares (1,576) (66,135) Proceeds from
options exercised 12,531 5,303 Debt issuance costs - (1,555)
Dividends paid (7,590) (7,034) Net cash used in financing
activities (80,320) (37,328) Effect of exchange rate changes on
cash flows (10,609) 1,557 (Decrease)/increase in cash and cash
equivalents (23,021) 2,394 Cash and cash equivalents at beginning
of year 58,982 78,822 Cash and cash equivalents at end of period
$35,961 $81,216 DATASOURCE: Albany International Corp. CONTACT:
Kenneth C. Pulver, Vice President-Global Marketing &
Communications, Albany International Corp., +1-518-445-2214 Web
site: http://www.albint.com/
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