First-Quarter Highlights ALBANY, N.Y., April 20
/PRNewswire-FirstCall/ -- Albany International Corp. (NYSE: AIN;
PCX, FWB) reported first-quarter net income per share of $0.60,
which was equal to the same period last year. In the first quarter
of 2005, the favorable resolution of certain income tax matters had
a $0.04 per share positive effect on earnings. The Company had
earlier reported that an anticipated change in inventory practices
associated with a major customer was expected to have a negative
first-quarter-only impact on sales and operating income of $8
million and $3 million, respectively. As an agreement with this
customer has not yet been reached, the expected reductions did not
occur. Net sales increased $10.2 million, or 4.2 percent compared
to the same period last year. Excluding the effect of changes in
currency translation rates, net sales increased 6.7 percent. Net
sales for the first quarter of 2006 included $1.9 million from
Texas Composite Inc., an aerospace composite manufacturing company
acquired as of January 1, 2006, and integrated into Albany
Engineered Composites, a business of the Applied Technologies
segment. Excluding the effect of this acquisition and the effect of
changes in currency translation rates, net sales increased 5.9
percent. The following table presents net sales by segment and the
effect of changes in currency translation rates: (in thousands)
Decrease in first-quarter Percent Net sales 2006 net sales Change
Three months ended due to changes Excluding March 31, in currency
Percent Currency 2006 2005 translation rates Change Rate Effect
Paper Machine Clothing $186,533 $182,184 $(3,243) 2.4% 4.2% Applied
Technologies 35,205 29,554 (554) 19.1% 21.0% Albany Door Systems
29,485 29,326 (2,116) 0.5% 7.8% Total $251,223 $241,064 $(5,913)
4.2% 6.7% Gross profit was 41.4 percent of net sales in the first
quarter of 2006, compared to 40.8 percent in the first quarter of
2005 and 37.5 percent in the fourth quarter of 2005. The increase
is due principally to higher sales in 2006, which includes the
positive effects of price improvement and product upgrades.
Selling, technical, general, and research expenses increased from
28.4 percent of net sales in the first quarter of 2005 to 29.7
percent in the same period of 2006. The increase is due mainly to
the continuing implementation of incentive compensation programs,
severance payments, and the expensing of stock options. In the
first quarter of 2006, the Company adopted the provisions of FAS
123R, "Share-Based Payment," for its stock option plans. The
Company has not granted options since 2002, but must record
compensation expense for the value of options that vest after 2005.
Included in compensation expense for the first quarter of 2006 was
$0.4 million related to stock options. No comparable expense was
recorded for the same period of 2005. The Company anticipates that
the full-year 2006 expense related to stock options will be $1.6
million. Operating income was $29.4 million in the first quarter of
2006, compared to $29.8 million in the same period last year.
Interest expense, net, was $1.9 million for the first quarter of
2006, compared to $3.7 million for the first quarter of 2005. The
decrease is due principally to lower average interest rates in
2006. The effective income tax rate was 30.0 percent for the first
quarter of 2006, compared to 24.4 percent for the same period of
2005, which included the effect of favorable resolution of certain
income tax contingencies. Over the past six months, the Company has
implemented a series of steps that have reduced its cost of capital
and increased capital availability on attractive terms: 1. In
October 2005, the Company issued $150 million principal amount of
5.34 percent notes with a ten-year average life, directly to
Prudential Capital. 2. In March 2006, the Company issued $180
million principal amount of 2.25 percent convertible notes. In
connection with the offering, the Company entered into convertible
note hedge and warrant transactions with respect to its Class A
Common Stock at a cost of $14.7 million. These transactions are
intended to reduce the potential dilution upon future conversion of
the notes. 3. During the first quarter, the Company acquired
2,741,280 shares of its Class A Common Stock at a cost of $101.1
million. The Company remains authorized to purchase 758,720
additional shares without further announcement. 4. On April 14,
2006, the Company entered into a new $460 million five- year
Revolving Credit Agreement, which is currently undrawn. The
agreement replaced a similar $460 million revolving credit
facility. The new agreement with its principal banks provides the
Company greater strategic flexibility at a lower cost and extends
availability to April 14, 2011. Net cash provided by operating
activities was $26.3 million in comparison with $27.4 million in
the first quarter of 2005. Excluding the effects of the Texas
Composite acquisition and changes in currency translation rates,
inventories increased $14.7 million during the first quarter of
2006, and accounts receivable increased $1.6 million. Capital
spending during the quarter was $19.8 million, and the Company
remains on track with its previously announced capital spending
plans, which call for $90-100 million of spending in 2006.
Additionally, $6.7 million of cash was invested in the first
payment for shares of Texas Composite Inc. The second and final
payment of approximately $8 million for the remaining shares is
expected to be made in the fourth quarter. Depreciation was $13.2
million and amortization was $0.8 million for the first quarter of
2006, and are expected to be approximately $53 million and $4
million, respectively, for the full year. Comments on Operations
Paper Machine Clothing This segment includes Paper Machine Clothing
and Process Belts (PMC) used in the manufacture of paper and
paperboard products. First-quarter net sales of PMC increased 2.4
percent compared to the same period last year, despite the
continuing restructuring by paper producers in both Europe and the
Americas. Excluding the effect of changes in currency translation
rates, net sales for the quarter increased 4.2 percent. The effect
of increased material costs related to higher petroleum prices,
discussed in the fourth quarter 2005 earnings release, was offset
by sales growth in the first quarter. During the first quarter, the
Company was able to achieve improvements in average prices in major
markets, including Europe, as a result of product upgrades and
modest price increases. Additional positive effects from the
introduction of value pricing in Europe are expected in late 2006
and 2007. The Company had earlier reported that it expected a
change in inventory practices associated with a major customer to
reduce first-quarter-only net sales and operating income by
approximately $8 million and $3 million, respectively. As an
agreement with this customer has not yet been reached, the expected
reductions were not realized. The Company still anticipates that
the agreement will eventually be reached, but the timing and
precise impact on sales and operating income is uncertain. Applied
Technologies This segment includes the businesses that apply our
core competencies in advanced textiles and materials to other
industries including specialty materials and composite structures
for aircraft and other applications (Albany Engineered Composites);
fabrics, wires, and belting products for the nonwovens and pulp
industries (Albany Engineered Fabrics); specialty filtration
products for wet and dry applications (Albany Filtration
Technologies); industrial belts for Tannery, Textile and Corrugator
applications (Albany Industrial Process Belts);and insulation for
personal outerwear and home furnishings (PrimaLoft(R)). Led by
Albany Engineered Composites, PrimaLoft, and Engineered Fabrics,
first-quarter Applied Technologies net sales increased 19.1 percent
compared to the same period last year and 21.0 percent excluding
the effect of changes in currency translation rates. Excluding the
Texas Composite acquisition and the effect of changes in currency
translation rates, the segment net sales increase was 14.7 percent.
The integration of Texas Composite into the newly established
Albany Engineered Composites is moving forward on plan. Customer
reaction to the integration supports management's conviction that
this business represents a substantial growth opportunity. Albany
Door Systems This segment includes sales and service of High
Performance Doors and after-market sales to a variety of industrial
customers. First-quarter Door Systems net sales increased 0.5
percent compared to the first quarter of 2005, and increased 7.8
percent excluding the effect of changes in currency translation
rates. Strong global after-market sales and service results,
combined with improved demand for high-performance doors in Europe,
fueled the first-quarter results. Notably, the Company's sales in
the important German door market improved. Looking Ahead President
and CEO Joe Morone commented, "The important story in this quarter
is the continuing strength of the top line in each of our three
business segments. The increases in sales were driven by
improvements in price and product mix, which in turn drove the
improvement in gross margin. "These results further validate our
strategy to grow Albany into a family of advanced textiles and
materials businesses. In Applied Technologies, each of our emerging
businesses, and most notably Albany Engineered Composites, took
important steps forward in their new product and business
development efforts; and with each step forward in each of these
businesses, we uncover additional opportunities to accelerate
growth. "In PMC, we continue to focus on improving our performance
on every dimension of customer value. Despite continuing
restructuring and consolidation in the paper industry, we remain
convinced that there are opportunities for growth, if-and only
if-we can continue to deliver ever greater value to our customers.
During the first quarter, we enjoyed modest advances in our
internal efforts to improve performance on the factors that drive
customer value and believe that the potential for more significant
gains remains. "We expect that the impact of higher petroleum
prices will continue to be felt in each of our businesses in future
quarters. For example, based on the current contractual agreements
with our raw material suppliers, we anticipate additional increases
of approximately $1 million per quarter, beginning in the third
quarter of 2006. "Finally, the buyback of more than 2.7 million
shares of stock in the first quarter underscores that, as we grow
our emerging businesses and reinvest in our core, and as we focus
the entire Company on increasing the value we deliver to our
customers, our management team and board of directors are
determined to do so with the interests of the shareholders foremost
in our minds." The Company plans a live webcast to discuss
first-quarter 2006 financial results on Friday, April 21, 2006, at
9:00 a.m. Eastern Time. For access, go to http://www.albint.com/ .
Albany International is the world's largest producer of
custom-designed paper machine fabrics and process belts that are
essential to the manufacture of paper and paperboard. In its family
of businesses, Albany applies its core competencies in advanced
textiles and materials to other industries. Founded in 1895, the
Company is headquartered in Albany, New York, and employs
approximately 5,900 people worldwide. The Company's plants are
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. The release contains "forward-looking statements" within
the meaning of the Securities Act and the Securities Exchange Act.
Forward-looking statements in this release, or in the related
webcast, include statements about future economic conditions,
material and petroleum-related costs, growth, sales and earnings,
markets, acquisitions, paper industry outlook, capital
expenditures, tax rates, the timing or effect of customer contract
changes, the timing or effect of operational efficiencies, and
depreciation and amortization. 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 2005 Annual Report to Shareholders, especially under the
headings "Risk Factors," "Industry Trends," "Challenges, Risks and
Opportunities," and "Forward-Looking Statements and non-GAAP
measures," as well as in subsequent filings with the U.S.
Securities and Exchange Commission. A change in any one or more of
the foregoing factors could have a material effect on the Company's
financial results in any period. We do not undertake to update any
forward-looking statements. ALBANY INTERNATIONAL CORP. CONSOLIDATED
STATEMENTS OF INCOME AND RETAINED EARNINGS (in thousands except per
share data) (unaudited) Three Months Ended March 31, 2006 2005 Net
sales $251,223 $241,064 Cost of goods sold 147,247 142,729 Gross
profit 103,976 98,335 Selling, technical, general and research
expenses 74,562 68,541 Operating income 29,414 29,794 Interest
expense, net 1,879 3,689 Other expense, net 909 1,318 Income before
income taxes 26,626 24,787 Income tax expense 7,988 6,048 Income
before associated companies 18,638 18,739 Equity in earnings of
associated companies 177 170 Net income 18,815 18,909 Retained
earnings, beginning of period 495,018 434,057 Dividends declared
(2,677) (2,534) Retained earnings, end of period $511,156 $450,432
Earnings per share: Basic $0.60 $0.60 Diluted $0.59 $0.59 Shares
used in computing earnings per share: Basic 31,419 31,534 Diluted
31,953 32,231 Dividends per share $0.09 $0.08 ALBANY INTERNATIONAL
CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
(unaudited) March 31, December 31, 2006 2005 ASSETS Cash and cash
equivalents $129,764 $72,771 Accounts receivable, net 136,474
132,247 Note receivable 18,163 17,827 Inventories 211,021 194,398
Deferred taxes 22,164 22,012 Prepaid expenses 9,805 7,892 Total
current assets 527,391 447,147 Property, plant and equipment, net
352,287 335,446 Investments in associated companies 6,682 6,403
Intangibles 11,854 12,076 Goodwill 159,342 153,001 Deferred taxes
94,595 75,875 Cash surrender value of life insurance policies
38,632 37,778 Other assets 24,074 19,321 Total assets $1,214,857
$1,087,047 LIABILITIES AND SHAREHOLDERS' EQUITY Notes and loans
payable $6,875 $6,151 Accounts payable 42,663 36,775 Accrued
liabilities 122,880 116,395 Current maturities of long-term debt
1,013 1,009 Income taxes payable and deferred 32,985 14,793 Total
current liabilities 206,416 175,123 Long-term debt 341,865 162,597
Other noncurrent liabilities 149,770 144,905 Deferred taxes and
other credits 30,239 29,504 Total liabilities 728,290 512,129
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 34,307,097 in 2006 and
34,176,010 in 2005 34 34 Class B Common Stock, par value $.001 per
share; authorized 25,000,000 shares; issued and outstanding
3,236,098 in 2006 and 3,236,476 in 2005 3 3 Additional paid in
capital 309,270 319,372 Retained earnings 511,156 495,018
Accumulated items of other comprehensive income: Translation
adjustments (64,488) (71,205) Pension liability adjustment (40,340)
(40,340) 715,635 702,882 Less treasury stock (Class A), at cost
(7,791,439 shares in 2006 and 5,050,159 shares in 2005) 229,068
127,964 Total shareholders' equity 486,567 574,918 Total
liabilities and shareholders' equity $1,214,857 $1,087,047 ALBANY
INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands) (unaudited) Three Months Ended March 31, 2006 2005
OPERATING ACTIVITIES Net income $18,815 $18,909 Adjustments to
reconcile net income to net cash provided by operating activities:
Equity in earnings of associated companies (177) (170) Depreciation
13,174 13,376 Amortization 778 725 Provision for deferred income
taxes, other credits and long-term liabilities 893 5,200 Provision
for write-off of equipment 95 807 Increase in cash surrender value
of life insurance (854) (798) Unrealized currency transaction gains
and losses 1,721 (569) Shares contributed to ESOP 3,145 2,368 Tax
benefit of options exercised - 1,261 Changes in operating assets
and liabilities: Accounts receivable (3,312) 4,409 Note receivable
(336) (384) Inventories (14,711) (8,451) Prepaid expenses (1,786)
(339) Accounts payable 4,895 464 Accrued liabilities 5,331 (2,100)
Income taxes payable (516) (4,841) Other, net (849) (2,454) Net
cash provided by operating activities 26,306 27,413 INVESTING
ACTIVITIES Purchases of property, plant and equipment (19,764)
(9,508) Purchased software (85) (411) Acquisitions, net of cash
acquired (6,232) - Net cash used in investing activities (26,081)
(9,919) FINANCING ACTIVITIES Proceeds from borrowings 186,875 8,040
Principal payments on debt (9,105) (15,493) Purchase of treasury
shares (101,104) - Purchase of call options on common stock
(47,688) - Sale of common stock warrants 32,961 - Proceeds from
options exercised 869 3,814 Debt issuance costs (4,704) - Dividends
paid (2,910) (2,509) Stock option expense 386 - Tax benefit of
options exercised 226 - Net cash used in financing activities
55,806 (6,148) Effect of exchange rate changes on cash flows 962
(4,445) Increase in cash and cash equivalents 56,993 6,901 Cash and
cash equivalents at beginning of year 72,771 58,982 Cash and cash
equivalents at end of period $129,764 $65,883 DATASOURCE: Albany
International Corp. CONTACT: Kenneth C. Pulver, Vice
President-Global Marketing & Communications of Albany
International, +1-518-445-2214 Web site: http://www.albint.com/
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