MRO Magazine

Albany International Reports Second-Quarter Results


August 4, 2015
By Business Wire News

ROCHESTER, N.H.

Albany International Corp. (NYSE:AIN) reported that Q2 2015 income before income taxes was a loss of $2.5 million, including the previously announced BR725 charge of $14.0 million, restructuring charges of $1.2 million, and losses of $2.3 million from foreign currency revaluation. Including the impact of these items and charges of $0.7 million for income tax adjustments, income attributable to the Company was a loss of $2.2 million.

As previously announced, the Company recorded a $14.0 million charge ($0.28 per share) for a revision in the estimated profitability of a legacy contract in the Albany Engineered Composites segment (AEC). The long-term contract is for the manufacture of composite components for the Rolls-Royce BR725 engine, which powers the Gulfstream G650 business jet. The components are manufactured in AEC’s facility in Boerne, Texas.

Q2 2014 income before income taxes was $18.4 million, includingrestructuring charges of $2.0 million, gains of $1.0 million from foreign currency revaluation, and an insurance-recovery gain of $1.0 million. Including the impact of these items and charges of $0.8 million for income tax adjustments, income attributable to the Company was $11.2 million.

Table 1 summarizes net sales and the effect of changes in currency translation rates:

Table 1

                       
            Impact of    
Net Sales Changes Percent Change
Three Months ended in Currency excluding

 

June, Percent Translation

Currency

(in thousands)

   

2015

   

2014

   

Change

   

Rates

   

Rate Effect

Machine Clothing (MC)     $ 150,561     $ 172,809     -12.9 %     ($9,970 )     -7.1 %
Albany Engineered Composites (AEC)       21,728       20,709     4.9 %     (403 )     6.9 %
Total     $ 172,289     $ 193,518     -11.0 %     ($10,373 )     -5.6 %
   

Changes in currency translation rates, driven mainly by the stronger U.S. dollar, resulted in a $10.4 million decline in sales for the second quarter of 2015. Excluding that effect, MC sales were down 7.1% compared to Q2 2014, principally due to lower sales volume in North America and Europe, reflecting sharp declines in publication grades. Excluding currency translation effects, AEC sales increased 6.9% to $21.7 million in Q2 2015 due to growth in the LEAP program.

Q2 2015 gross profit was $54.6 million, or 31.7% net sales, compared to $75.3 million, or 38.9% of net sales, in the same period of 2014. The $14.0 million BR725 charge reduced Q2 2015 gross profit margin by 8.1%. Q2 2015 MC gross profit was $68.1 million, or 45.2% of net sales, compared to $73.3 million, or 42.4% of net sales, in Q2 2014. The decline in MC gross profit was primarily the result of lower sales volume in North America and Europe. Even though changes in currency translation rates had a significant effect on MC net sales, it had only a minor negative effect on gross profit. AEC gross profit was a loss of $13.1 million in Q2 2015, compared to income of $2.4 million in the same quarter of 2014. In addition to the $14.0 million charge, the decline in gross profit was due to unfavorable sales mix in legacy programs.

Selling, technical, general, and research (STG&R) expenses were $50.3 million, or 29.2% of net sales, in the second quarter of 2015, compared to $54.4 million, or 28.1% of net sales, in the second quarter of 2014. The decline in STG&R results principally from the effects of changes in currency translation rates and restructuring activities. The revaluation of nonfunctional-currency assets and liabilities resulted in a loss of $0.4 million in both quarters.

The following table presents expenses associated with internally funded research and development by segment:

Table 2

     
    Research and development
expenses by segment
Three Months ended
June 30,

(in thousands)

   

2015

   

2014

Machine Clothing     $ 4,779     $ 5,185
Albany Engineered Composites       2,905       2,267
Corporate expenses       190       199
Total     $ 7,874     $ 7,651
   

The following table summarizes second-quarter operating income by segment:

Table 3

     

 

   

Operating Income/(loss)

Three Months ended

June 30,

(in thousands)

   

2015

   

2014

Machine Clothing     $ 33,323         $ 33,879  
Albany Engineered Composites      

(18,633

)

*

      (3,545 )
Corporate expenses       (11,652 )         (11,357 )
Total     $ 3,038         $ 18,977  

*Includes $14.0 million BR725 charge

 

Segment operating income was affected by restructuring, currency revaluation, and the BR725 charge as shown in Table 4 below.

Table 4

   

Expenses/(gain) in Q2 2015

    Expenses/(gain) in Q2 2014

resulting from

resulting from

(in thousands)

   

Restructuring

 

 

Revaluation

 

 

BR725 Charge

   

Restructuring

 

 

Revaluation

Machine Clothing     $ 1,211     $ 394     $     $ 1,297     $ 350
Albany Engineered Composites             1       14,000       660       61
Corporate expenses             2                   2
Total     $ 1,211     $ 397     $ 14,000     $ 1,957     $ 413
   

Q2 2015 Other income/expense, net, was expense of $2.8 million, including losses related to the revaluation of nonfunctional-currency balances of $1.9 million. Q2 2014 Other income/expense, net, was income of $2.1 million, including gains related to the revaluation of nonfunctional-currency balances of $1.4 million and an insurance-recovery gain of $1.0 million.

The following table summarizes currency revaluation effects on certain financial metrics:

Table 5

 

   

Income/(loss) attributable

to currency revaluation

Three Months ended

June 30,

(in thousands)

   

2015

   

2014

Operating income     ($397 )       ($413 )
Other income/(expense), net     (1,878 )       1,397  
Total     ($2,275 )    

 

$984

 
   

The Company’s income tax rate, excluding tax adjustments, was 43.5% for Q2 2015, compared to 36.5% for the same period of 2014. The higher tax rate in Q2 2015 was due primarily to the impact of restructuring charges where the Company is unable to record a tax benefit related to the expense. Discrete tax charges and the effect of a change in the estimated tax rate increased second-quarter income tax expense by $0.7 million in 2015 and $0.8 million in 2014.

The following tables summarize Adjusted EBITDA:

Table 6

Three Months ended June 30, 2015         Albany     Corporate    
Machine Engineered expenses Total

(in thousands)

    Clothing     Composites     and other     Company
Net income/(loss)     $ 33,323    

($18,633

)

*

    ($16,810 )       ($2,120 )
Interest expense, net                   2,702         2,702  
Income tax expense/(benefit)                   (364 )       (364 )
Depreciation and amortization       10,212     2,869         2,103         15,184  
EBITDA      43,535    (15,764)      (12,369)      15,402  
Restructuring expenses, net       1,211                     1,211  
Foreign currency revaluation (gains)/losses       394     1         1,880         2,275  
Pretax income attributable to noncontrolling interest in ASC           (64 )               (64 )
Adjusted EBITDA    $45,140    ($15,827)      ($10,489)    $18,824  

* Includes $14.0 million BR725 charge

 

Table 7

Three Months ended June 30, 2014         Albany     Corporate    
Machine Engineered expenses Total

(in thousands)

    Clothing     Composites     and other     Company
Net income     $ 33,879     ($3,545 )     ($19,157 )     $ 11,177  
Interest expense, net                 2,717         2,717  
Income tax expense                 7,216         7,216  
Depreciation and amortization       11,554     2,453       2,090         16,097  
EBITDA      45,433    (1,092)    (7,134)      37,207  
Restructuring expenses, net       1,297     660               1,957  
Foreign currency revaluation losses/(gains)       350     61       (1,395 )       (984 )
Gain on insurance recovery                 (961 )       (961 )
Pretax loss attributable to noncontrolling interest in ASC           45               45  
Adjusted EBITDA    $47,080    ($326)    ($9,490)    $37,264  
 

Capital spending was $18.8 million for Q2 2015, compared to $12.8 million for Q2 2014. Depreciation and amortization was $15.2 million for Q2 2015, compared to $16.1 million for Q2 2014.

CFO Comments

CFO and Treasurer John Cozzolino commented, “During the quarter, the Company entered into a new $400 million revolving credit facility with its principal bank group. The new facility provides an additional $70 million of available financing and extends through June 2020 essentially the same favorable terms, including LIBOR spreads, contained in the previous agreement. At the end of Q2, $202 million was drawn down from the facility. Up-front fees associated with the new facility were $1.6 million. Also, in July, we entered into interest rate swap transactions that extend until June 2020 our interest rate protection on $110 million to $120 million of our debt.

“Net debt (total debt less cash) increased $8 million to $120 million (see Table 16), as capital expenditures included $9 million related to the lease buyout of a building in Rochester, New Hampshire, that houses the Company’s headquarters and AEC’s R&D center. The Company’s leverage ratio, as defined in our primary debt agreements, increased from 1.28 at the end of Q1 to 1.55 at the end of Q2. Capital expenditures for the first six months of the year were $31 million, and we currently estimate full-year spending in 2015 to be $60 million to $70 million. Cash paid for income taxes was about $5 million in Q2, and we estimate cash taxes in 2015 to range from $20 million to $23 million.

“Compared to currency rates in effect during Q2 2014, net sales were once again negatively impacted by the broadly stronger U.S. dollar while the impact on Adjusted EBITDA was somewhat positive. In the future, the currency impact on Adjusted EBITDA could be significantly different depending on the movement of the U.S. dollar against any of our key foreign currency net income or expense exposures.”

CEO Comments

President and CEO Joe Morone said, “Following our good performance in Q1, Q2 2015 was a weak quarter for Albany International with sales and EBITDA considerably lower than in the comparable period in 2014. Nonetheless, year-to-date MC Adjusted EBITDA and AEC sales are in line with expectations and ahead of last year’s pace, and we remain on track toward our full-year outlook of comparable year-over-year Adjusted EBITDA in MC and 5-10% growth in sales in AEC. And of significance for the longer term, there were several important developments during the quarter, the most notable being a decision to respond to the rapidly growing demand for LEAP engines by building a third plant.

“In MC, excluding currency effects, sales were down 7% compared to Q2 2014, primarily due to a sharply weaker market and lower sales in the publication grades in North America and Europe. The other grades performed as expected. And despite the economic instabilities, sales in China and South America were stable. Year to date, and excluding currency effects, sales are 2% behind the first half of 2014 and orders are 3% ahead.

“Q2 Gross profit margins remained strong and well above Q2 2014 levels. This mitigated the impact of the weak sales on adjusted EBITDA, which declined 4% compared to Q2 2014 and which leaves year-to-date Adjusted EBITDA 1.5% ahead of the first half of 2014.

“We continued to make good progress during the quarter on the shift of sales mix away from publication grades. Meanwhile, in the development of our new technology platform, we ran successful trials with important customers in the tissue segment, scheduled initial trials in the packaging sector, and are seeing encouraging results from initial prototypes across all of our product lines.

“Turning to AEC, during Q2 we recorded a charge of $14 million related to composite parts for the BR725 engine, a small, legacy program, manufactured in our Boerne, Texas, operations and governed by a contract signed in 2007 that sets very aggressive pricing levels. As discussed in previous releases, Boerne’s operational performance has improved dramatically, with strong on-time deliveries and good yields, including on the BR725 program. But as we’ve gained more manufacturing experience with the BR725, we’ve concluded that future costs are likely to be higher than previously estimated, and given the challenging price levels, this led to the conclusion that we needed to take the $14 million charge.

“In other respects, AEC performed well, and is firmly on track both for our full-year forecast of 5-10% growth in sales and for the LEAP ramp that begins late next year. The most important development this quarter was the decision to build a third joint plant with Safran for the LEAP program, this one in Mexico. Annual production of the LEAP engine is now projected to reach at least 1,900 engines by 2020, and Boeing and Airbus are publically pressuring CFM to increase production to even higher levels. The addition of the GE9X fan case, which we will produce in Rochester, the much higher-than-expected demand for LEAP engines, and the possibility of still higher levels of demand by next decade all led to the decision to move forward with plant three as soon as possible. Groundbreaking is scheduled for next year, with initial operation targeted for late 2017. We are not at this time altering our projection of total annual capital spending for the company of, on average, $70 million. The likely impact of the higher LEAP demand and third plant will be to stretch the years of peak spending for LEAP by one to two years, rather than increase peak spending in any one year.

“As for R&D, this was a very encouraging quarter, with good progress on a number of potentially important airframe and engine projects, for both the near and long term. While significant uncertainties remain on all of them, several are approaching important development or commercialization decision points. Likewise, with Ricardo, we are actively engaged with a number of automotive OEMs in technical assessments of the viability of AEC technology for application in the high-performance, super-luxury segment of the automotive market. We expect to have developed a clear understanding of the near-term commercial viability of our technology for this market segment within the next six to twelve months.

“As mentioned above, our outlook for the full-year remains unchanged. We continue to view macroeconomic uncertainties as the primary source of downside risk to our outlook, and given recent developments in such key growth markets as China and Brazil, that risk appears to be growing. But barring further deterioration in the macroeconomic environment, we continue to expect MC Adjusted EBITDA for the second half of the year, and thus full-year Adjusted EBITDA, to be comparable to last year; and for AEC, we expect a strong second-half of the year, with full-year revenue at least 5-10% ahead of 2014.

“In sum, this was a weak quarter due primarily to lower MC sales in the publication grades in North America and Europe, compounded by the charge for the BR725 program. But in the larger picture, we remain firmly on track in both businesses — in the short term, toward our full-year outlook, and for the longer term, toward our strategic objectives of steady EBITDA and cash flow in MC, and a decade or more of double-digit growth in AEC, driven primarily by LEAP and additionally by new projects emerging from the pipeline.”

The Company plans a webcast to discuss second-quarter 2015 financial results on Wednesday, August 5, 2015, at 9:00 a.m. Eastern Time. For access, go to www.albint.com.

About Albany International Corp.

Albany International is a global advanced textiles and materials processing company, with two core businesses. Machine Clothing is the world’s leading producer of custom-designed fabrics and belts essential to production in the paper, nonwovens, and other process industries. Albany Engineered Composites is a rapidly growing supplier of highly engineered composite parts for the aerospace industry. Albany International is headquartered in Rochester, New Hampshire, operates 19 plants in 10 countries, employs 4,000 people worldwide, and is listed on the New York Stock Exchange (Symbol AIN). Additional information about the Company and its products and services can be found at www.albint.com.

This release contains certain items, such as earnings before interest, taxes, depreciation and amortization (EBITDA), Adjusted EBITDA, sales excluding currency effects, income tax rate excluding adjustments, net debt, net income attributable to the Company, excluding adjustments (on an absolute and per-share basis), and certain income and expense items on a per-share basis that could be considered non-GAAP financial measures. Such items are provided because management believes that, when presented together with the GAAP items to which they relate, they provide additional useful information to investors regarding the Company’s operational performance. Presenting increases or decreases in sales, after currency effects are excluded, can give management and investors insight into underlying sales trends. An understanding of the impact in a particular quarter of specific restructuring costs, or other gains and losses, on operating income or EBITDA can give management and investors additional insight into quarterly performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect. All non-GAAP financial measures in this release relate to the Company’s continuing operations.

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 Company calculates Income tax adjustments by adding discrete tax items to the effect of a change in tax rate for the reporting period. The Company calculates its income tax rate, exclusive of income tax adjustments, by removing income tax adjustments from total Income tax expense, then dividing that result by Income before income taxes. The Company calculates EBITDA by removing the following from Net income: Interest expense net, Income tax expense, Depreciation and amortization, and Income or loss from Discontinued Operations. Adjusted EBITDA is calculated by: adding to EBITDA costs associated with restructuring and pension settlement charges; adding (or subtracting) revaluation losses (or gains); subtracting (or adding) gains (or losses) from the sale of buildings or investments; subtracting insurance recovery gains; and subtracting Income attributable to the noncontrolling interest in Albany Safran Composites (ASC). The Company believes that EBITDA and Adjusted EBITDA provide useful information to investors because they provide an indication of the strength and performance of the Company’s ongoing business operations, including its ability to fund discretionary spending such as capital expenditures and strategic investments, as well as its ability to incur and service debt. While depreciation and amortization are operating costs under GAAP, they are noncash expenses equal to current period allocation of costs associated with capital and other long-lived investments made in prior periods.

While restructuring expenses, foreign currency revaluation losses or gains, pension settlement charges, insurance-recovery gains, and gains or losses from sales of buildings or investments have an impact on the Company’s net income, removing them from EBITDA can provide, in the opinion of the Company, a better measure of operating performance. EBITDA is also a calculation commonly used by investors and analysts to evaluate and compare the periodic and future operating performance and value of companies. EBITDA, as defined by the Company, may not be similar to EBITDA measures of other companies. Such EBITDA measures may not be considered measurements under GAAP, and should be considered in addition to, but not as substitutes for, the information contained in the Company’s statements of income.

The Company discloses certain income and expense items on a per-share basis. The Company believes that such disclosures provide important insight into underlying quarterly earnings and are financial performance metrics commonly used by investors. The Company calculates the quarterly per-share amount for items included in continuing operations by using the estimated effective annual tax rate and the weighted average number of shares outstanding for each period. Year-to-date earnings per-share effects are determined by adding the amounts calculated at each reporting period.

Table 8

 

   

Net Sales

Six Months ended

June,

   

Percent

   

Impact of Changes

in Currency

Translation

   

Percent Change

excluding Currency

(in thousands)

   

2015

   

2014

   

Change

   

Rates

   

Rate Effect

Machine Clothing (MC)     $ 309,055     $ 336,897     -8.3 %     ($21,287 )     -1.9 %
Albany Engineered Composites (AEC)       44,558       36,928     20.7 %     (740 )     22.7 %
Total     $ 353,613     $ 373,825     -5.4 %     ($22,027 )     0.5 %
   

Table 9

Six Months ended June 30, 2015         Albany     Corporate    
Machine Engineered expenses Total

(in thousands)

    Clothing     Composites     and other     Company
Net income     $ 69,013      

($22,444

)

*

    ($36,450 )     $ 10,119  
Interest expense, net                     5,378         5,378  
Income tax expense                     8,155         8,155  
Depreciation and amortization       20,416       5,865         4,257         30,538  
EBITDA      89,429      (16,579)      (18,660)      54,190  
Restructuring expenses, net       10,212                       10,212  
Foreign currency revaluation losses/(gains)       (2,529 )     (17 )       (551 )       (3,097 )
Gain on sale of investment                     (872 )       (872 )

Pre-tax income attributable to noncontrolling interest in ASC

            (90 )               (90 )
Adjusted EBITDA    $97,112      ($16,686)      ($20,083)    $60,343  

*Includes $14 million BR725 charge

 

Table 10

Six Months ended June 30, 2014         Albany     Corporate    
Machine Engineered expenses Total

(in thousands)

    Clothing     Composites     and other     Company
Net income     $ 70,022     ($7,021 )     ($41,131 )     $ 21,870  
Interest expense, net                 5,635         5,635  
Income tax expense                 14,673         14,673  
Depreciation and amortization       23,009     4,775       4,221         32,005  
EBITDA      93,031    (2,246)    (16,602)      74,183  
Restructuring expenses, net       2,159     980               3,139  
Foreign currency revaluation losses/(gains)       502     99       (1,901 )       (1,300 )
Gain on insurance recovery                 (961 )       (961 )
Pre-tax income attributable to noncontrolling interest in ASC           (13 )             (13 )
Adjusted EBITDA    $95,692    ($1,180)    ($19,464)    $75,048  
 

Table 11

Three Months ended June 30, 2015                

 

Pre-tax After-tax Per Share

(in thousands, except per share amounts)

    amounts     Tax Effect     Effect     Effect
Restructuring and other, net     $ 1,211     $ 448     $ 763     $ 0.02
Foreign currency revaluation losses       2,275       842       1,433       0.04
Net discrete income tax benefit             20       20       0.00
Unfavorable effect of change in income tax rate             736       736       0.02
Charge for revision in estimated contract profitability       14,000       5,180       8,820       0.28
 

Table 12

Three Months ended June 30, 2014                
Pre-tax After-tax Per Share

(in thousands, except per share amounts)

    amounts     Tax Effect     Effect     Effect
Restructuring and other, net     $ 1,957     $ 714     $ 1,243     $ 0.04
Foreign currency revaluation gains       984       359       625       0.02
Gain on insurance recovery       961             961       0.03
Net discrete income tax charge             569       569       0.02
Unfavorable effect of change in income tax rate             278       278       0.01
 

Table 13

Six Months ended June 30, 2015                
Pre-tax After-tax Per Share

(in thousands, except per share amounts)

    amounts     Tax Effect     Effect     Effect
Restructuring and other, net     $ 10,212     $ 3,868     $ 6,344     $ 0.20
Foreign currency revaluation gains       3,097       1,199       1,898       0.06
Gain on sale of investment       872       331       541       0.02
Net discrete income tax charge             199       199       0.01
Charge for revision in estimated contract profitability       14,000       5,180       8,820       0.28
 

Table 14

Six Months ended June 30, 2014                
Pre-tax After-tax Per Share

(in thousands, except per share amounts)

    amounts     Tax Effect     Effect     Effect
Restructuring and other, net     $ 3,139     $ 1,128     $ 2,011     $ 0.06
Foreign currency revaluation gains       1,300       469       831       0.03
Gain on insurance recovery       961             961       0.03
Net discrete income tax charge             1,673       1,673       0.05
 

The following table contains the calculation of net income per share attributable to the Company, excluding adjustments:

Table 15

 

   

Three Months ended

June 30,

   

Six Months ended

June 30,

Per share amounts (Basic)

   

2015

   

2014

   

2015

   

2014

Net income/(loss) attributable to the Company, reported      

($0.07

)

*

    $ 0.35      

$

0.31

*

 

  $ 0.69  
Adjustments:                          
Restructuring charges       0.02           0.04         0.20         0.06  
Discrete tax charges and effect of change in income tax rate       0.02           0.03         0.01         0.05  
Foreign currency revaluation (gains)/ losses       0.04           (0.02 )       (0.06 )       (0.03 )
Gain on insurance recovery                 (0.03 )               (0.03 )
Gain on the sale of investment                         (0.02 )        
Net income attributable to the Company, excluding adjustments     $ 0.01         $ 0.37       $ 0.44       $ 0.74  

*Includes $0.28 per share for BR725 charge

     

The following table contains the calculation of net debt:

Table 16

    June 30,     March 31,     December 31,     September 30,     June 30,     March 31,     December 31,
(in thousands)     2015     2015     2014     2014     2014     2014     2013
Notes and loans payable     $ 543     $ 496     $ 661     $ 551     $ 692     $ 797     $ 625
Current maturities of long-term debt       50,015       50,015       50,015       15       1,265       2,514       3,764
Long-term debt       252,088       232,092       222,096       283,100       283,104       299,108       300,111
Total debt      302,646      282,603      272,772      283,666      285,061      302,419      304,500
Cash and cash equivalents       182,474       170,838       179,802       195,461       206,836       208,379       222,666
Net debt    $120,172    $111,765    $92,970    $88,205    $78,225    $94,040    $81,834
 

This press release may contain statements, estimates, or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “should” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties (including, without limitation, those set forth in the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q) that could cause actual results to differmaterially from the Company’s historical experience and our present expectations or projections.

Forward-looking statements in this release or in the webcast include, without limitation, statements about macroeconomic and paper industry trends and conditions during 2015 and in future years; expectations in 2015 and in future periods of sales, EBITDA, Adjusted EBITDA, income, gross profit, gross margin and other financial items in each of the Company’s businesses and for the Company as a whole; the timing and impact of production and development programs in the Company’s AEC business segment and AEC sales growth potential; the amount and timing of capital expenditures, future tax rates and cash paid for taxes, depreciation and amortization; future debt and net debt levels and debt covenant ratios; the timeline for ASC’s planned facility in Mexico; and changes in currency rates and their impact on future revaluation gains and losses. Furthermore, 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. Such statements are based on current expectations, and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Statements expressing management’s assessments of the growth potential of its businesses, or referring to earlier assessments of such potential, are not intended as forecasts of actual future growth, and should not be relied on as such. While management believes such assessments to have a reasonable basis, such assessments are, by their nature, inherently uncertain. This release and earlier releases set forth a number of assumptions regarding these assessments, including historical results, independent forecasts regarding the markets in which these businesses operate, and the timing and magnitude of orders for our customers’ products. Historical growth rates are no guarantee of future growth, and such independent forecasts and assumptions could prove materially incorrect, in some cases.

           
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
   
Three Months Ended Six Months Ended
June 30, June 30,
  2015     2014     2015     2014  
 
$ 172,289 $ 193,518 Net sales $ 353,613 $ 373,825
  117,697     118,175   Cost of goods sold   222,337     223,673  
 
54,592 75,343 Gross profit 131,276 150,152
39,932 40,012 Selling, general, and administrative expenses 75,165 79,169
10,411 14,397 Technical, product engineering, and research expenses 22,712 28,266
  1,211     1,957   Restructuring expenses, net   10,212     3,139  
 
3,038 18,977 Operating income 23,187 39,578
2,702 2,717 Interest expense, net 5,378 5,635
  2,820     (2,133 ) Other (income)/expenses, net   (465 )   (2,600 )
 
(2,484 ) 18,393 Income/(loss) before income taxes 18,274 36,543
  (364 )   7,216   Income tax expense/(benefit)   8,155     14,673  
 
(2,120 ) 11,177 Net income/(loss) 10,119 21,870
  52     (42 ) Net income/(loss) attributable to the noncontrolling interest   78     30  
  ($2,172 ) $ 11,219   Net income/(loss) attributable to the Company $ 10,041   $ 21,840  
 
($0.07 ) $ 0.35 Earnings/(losses) per share attributable to Company shareholders – Basic $ 0.31 $ 0.69
 
($0.07 ) $ 0.35 Earnings(losses) per share attributable to Company shareholders – Diluted $ 0.31 $ 0.68
 
Shares of the Company used in computing earnings per share:
31,999 31,832 Basic 31,941 31,809
31,999 31,935 Diluted 32,015 31,913
 
$ 0.17 $ 0.16 Dividends per share $ 0.33 $ 0.31
 
       
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
 
June 30, December 31,
  2015     2014  
ASSETS
Cash and cash equivalents $ 182,474 $ 179,802
Accounts receivable, net 160,997 158,237
Inventories 109,630 107,274
Deferred income taxes 6,661 6,743
Asset held for sale 8,326 9,102
Prepaid expenses and other current assets   8,739     8,074  
Total current assets 476,827 469,232
 
Property, plant and equipment, net 379,139 386,011
Intangibles 270 385
Goodwill 67,489 71,680
Income taxes receivable and deferred 71,817 69,540
Other assets   27,905     32,456  
Total assets $ 1,023,447   $ 1,029,304  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes and loans payable $ 543 $ 661
Accounts payable 32,258 34,787
Accrued liabilities 89,544 95,149
Current maturities of long-term debt 50,015 50,015
Income taxes payable and deferred   1,742     2,786  
Total current liabilities 174,102 183,398
 
Long-term debt 252,088 222,096
Other noncurrent liabilities 98,589 103,079
Deferred taxes and other credits   6,783     7,163  
Total liabilities   531,562     515,736  
 
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 37,230,013
in 2015 and 37,085,489 in 2014 37 37
Class B Common Stock, par value $.001 per share;
authorized 25,000,000 shares; issued and
outstanding 3,235,048 in 2015 and 2014 3 3
Additional paid in capital 422,204 418,972
Retained earnings 455,597 456,105
Accumulated items of other comprehensive income:
Translation adjustments (81,263 ) (55,240 )
Pension and postretirement liability adjustments (50,056 ) (51,666 )
Derivative valuation adjustment (1,024 ) (861 )
Treasury stock (Class A), at cost 8,455,293 shares
in 2015 and 8,459,498 in 2014   (257,391 )   (257,481 )
Total Company shareholders’ equity 488,107 509,869
Noncontrolling interest   3,778     3,699  
Total equity   491,885     513,568  
Total liabilities and shareholders’ equity $ 1,023,447   $ 1,029,304  
 
               
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
  2015     2014     2015     2014  

 

OPERATING ACTIVITIES

($2,120 ) $ 11,177

 

Net income/(loss)

$ 10,119 $ 21,870

 

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

13,373 14,276 Depreciation 26,897 28,383
1,811 1,821 Amortization 3,641 3,622
(5,920 ) 2,946 Change in long-term liabilities, deferred taxes and other credits (6,197 ) 2,732
263 728 Provision for write-off of property, plant and equipment 415 729
(961 ) Gain on disposition or involuntary conversion of assets (1,056 ) (961 )
(342 ) (106 ) Excess tax benefit of options exercised (603 ) (145 )
419 405 Compensation and benefits paid or payable in Class A Common Stock 995 947
 

 

Changes in operating assets and liabilities that provide/(use) cash:

4,212 3,333 Accounts receivable (9,487 ) 14,297
(4,061 ) (1,963 ) Inventories (7,131 ) (10,959 )
1,715 1,762 Prepaid expenses and other current assets (990 ) (386 )
(158 ) (7 ) Income taxes prepaid and receivable (74 ) 14
(4,853 ) 555 Accounts payable (1,341 ) (739 )
(933 ) 170 Accrued liabilities (2,520 ) (12,679 )
475 651 Income taxes payable 77 (1,059 )
  7,062     (2,098 ) Other, net   4,607     (4,129 )
  10,943     32,689   Net cash provided by operating activities   17,352     41,537  
 

 

INVESTING ACTIVITIES

(18,455 ) (12,799 ) Purchases of property, plant and equipment (30,666 ) (27,402 )
(304 ) (21 ) Purchased software (337 ) (315 )
      961   Proceeds from sale or involuntary conversion of assets   2,797     961  
  (18,759 )   (11,859 ) Net cash used in investing activities   (28,206 )   (26,756 )
 

 

FINANCING ACTIVITIES

24,346 235 Proceeds from borrowings 39,620 4,670
(4,303 ) (17,593 ) Principal payments on debt (9,746 ) (24,109 )
(1,630 ) Debt acquisition costs (1,630 )
1,039 261 Proceeds from options exercised 1,724 387
342 106 Excess tax benefit of options exercised 603 145
  (5,107 )   (4,774 ) Dividends paid   (10,205 )   (9,539 )
  14,687     (21,765 ) Net cash provided by/(used in) financing activities   20,366     (28,446 )

 

  4,765     (608 )

 

Effect of exchange rate changes on cash and cash equivalents

  (6,840 )   (2,165 )
 
11,636 (1,543 )

 

Increase/(decrease) in cash and cash equivalents

2,672 (15,830 )
  170,838     208,379  

 

Cash and cash equivalents at beginning of period

  179,802     222,666  
$ 182,474   $ 206,836  

 

Cash and cash equivalents at end of period

$ 182,474   $ 206,836  

Albany International Corp.
Investors
John Cozzolino, 518-445-2281
john.cozzolino@albint.com
or
Media
Susan Siegel, 603-330-5866
susan.siegel@albint.com