Second-Quarter Highlights ALBANY, N.Y., July 20
/PRNewswire-FirstCall/ -- Albany International Corp. (NYSE: AIN;
PCX, FWB) reported second-quarter net income of $0.63 per share,
compared to $0.64 per share for the same period last year. Net
sales increased $14.2 million, or 5.7 percent, compared to the
second quarter of last year. Excluding the effect of changes in
currency translation rates, net sales increased 4.6 percent. The
following table presents net sales by segment and the effect of
changes in currency translation rates: Increase in Second-Quarter
Net Sales 2006 Net Sales Percent Change Three Months due to Changes
excluding ended June 30, Percent in Currency Currency (in
thousands) 2006 2005 Change Translation Rates Rate Effect Paper
Machine Clothing $194,461 $185,265 5.0% $2,545 3.6% Applied
Technologies 37,765 34,485 9.5% 241 8.8% Albany Door Systems 29,404
27,656 6.3% 82 6.0% Total $261,630 $247,406 5.7% $2,868 4.6% Gross
profit was 39.8 percent of net sales in the second quarter of 2006,
compared to 40.9 percent for the same period of 2005. The decrease
in the second quarter compared to the same period last year is due
principally to the costs associated with the integration of Texas
Composite Inc. (TCI) and the ramp-up of manufacturing to meet the
TCI order backlog. Higher petroleum prices increased the cost of
materials by approximately $9 million, compared to the second
quarter of 2005. The adverse impact of these material cost
increases on gross profit percentages was offset by a combination
of revenue growth, price improvements, and efficiency gains.
Selling, technical, general, and research expenses increased from
27.9 percent of net sales in the second quarter of 2005 to 28.7
percent for the same period of 2006. The increase is due mainly to
the implementation of the previously discussed incentive
compensation programs, and the effect of changes in currency
translation rates on accounts receivable and other balances held in
currencies other than the local currency. Operating income was
$28.9 million in the second quarter of 2006, compared to $32.0
million in the same period last year. The decline in operating
income was attributable to the decline in gross profit percentage
and increased selling, technical, general, and research expenses.
Full-year net sales increased $24.4 million, or 5.0 percent,
compared to the same period last year. Excluding the effect of
changes in currency translation rates, net sales increased 5.6
percent. Following is a table of net sales by segment and the
effect of changes in currency translation rates: (Decrease) in 2006
Net Sales Percent Net Sales due to Changes Change Six Months in
Currency excluding Ended June 30, Percent Translation Currency (in
thousands) 2006 2005 Change Rates Rate Effect Paper Machine
Clothing $378,357 $364,842 3.7% ($698) 3.9% Applied Technologies
75,607 66,646 13.4% (313) 13.9% Albany Door Systems 58,889 56,982
3.3% (2,034) 6.9% Total $512,853 $488,470 5.0% ($3,045) 5.6%
Year-to-date gross profit was 40.6 percent in 2006, compared to
40.8 percent for the first six months of 2005. Year-to-date
operating income was $58.4 million in 2006, compared to $61.8
million in the same period last year. Liquidity and Capital
Resources Net cash provided by operating activities was $19.1
million, in comparison with $22.4 million in the second quarter of
2005. Excluding the effects of changes in currency translation
rates, inventories increased $5.3 million during the second quarter
of 2006, and accounts receivable increased $5.0 million. The
inventory increases are consistent with inventory practices in the
second quarters of previous years. Capital spending during the
quarter was $12.6 million and was $32.4 million for the first six
months of 2006. The Company remains on track with its previously
announced capital spending plans, which call for $90-100 million of
spending in 2006. Depreciation was $13.8 million and amortization
was $1.2 million for the second quarter of 2006, and are expected
to be approximately $54 million and $4 million, respectively, for
the full year. During the quarter, the Company purchased an
additional 758,720 shares of its Class A Common Stock at an average
price of $40.06 per share. For the first half of 2006, the Company
acquired 3.5 million shares of its stock at an average price of
$37.57 per share. The Company anticipates that it will make a
contribution of $20 million to its United States pension plan
during the third quarter of 2006, in comparison to a contribution
of $10 million in the third quarter of 2005. Paper Machine Clothing
This segment includes Paper Machine Clothing and Process Belts
(PMC) used in the manufacture of paper and paperboard products.
Second-quarter net sales of PMC increased 5.0 percent compared to
the same period last year. Excluding the effects of changes in
currency translation rates, net sales for the quarter increased 3.6
percent. Compared to the second quarter of 2005, net sales
benefited from volume increases, product upgrades, and price
improvements in some regions. Paper and paperboard manufacturers in
Canada and Europe continued their restructuring activities. During
the first six months of 2006, Canadian papermakers shut down or
announced plans to shut down a total of 12 paper machines, while
European papermakers shut down 30 paper machines and announced
plans to remove an additional 20 machines from production. Gross
margin in PMC was negatively affected by higher material costs as a
result of higher petroleum prices, which were offset by the
benefits of increased sales and efficiency improvements. Applied
Technologies This segment includes the emerging businesses that
apply our core competencies in advanced textiles and materials to
other industries including insulation for personal outerwear and
home furnishings (PrimaLoft(R)); specialty materials and composite
structures for aircraft and other applications (Albany Engineered
Composites); specialty filtration products for wet and dry
applications (Albany Filtration Technologies); industrial belts for
Tannery, Textile, and Corrugator applications (Albany Industrial
Process Belts); and fabrics, wires, and belting products for the
nonwovens and pulp industries (Albany Engineered Fabrics).
Second-quarter Applied Technologies net sales increased 9.5 percent
compared to the same period last year and 8.8 percent excluding the
effect of changes in currency translation rates. The segment
benefited from strong second-quarter performance in PrimaLoft,
Engineered Fabrics, and Industrial Process Belts. Gross margin
percentages in Albany Engineered Composites declined as a result of
costs associated with integrating the first-quarter 2006
acquisition of Texas Composite Inc. and increases in manufacturing
capacity to satisfy growth in the order backlog. During the
quarter, Albany Engineered Composites entered into two long-term,
exclusive agreements with leaders in jet engines and aircraft
landing gear. First, Snecma has agreed to develop and commercialize
advanced composite fan blades for future jet engines utilizing
Albany's unique technology. Snecma is a world-leader in aircraft
and space engines. In civil aviation in particular, Snecma and
General Electric team up to produce the best-selling family of
CFM56 aircraft engines. Similarly, Messier-Dowty, a world-leader in
landing gear, has agreed to develop and build advanced composite
landing gear components that will utilize Albany's technology.
Albany Door Systems This segment includes sales and service of High
Performance Doors and after-market sales to a variety of industrial
customers. Second-quarter Door Systems net sales increased 6.3
percent compared to the second quarter of 2005, and increased 6.0
percent excluding the effect of changes in currency translation
rates. Increased sales in Europe and Australia, both in new
products and in the after-market, were responsible for the
year-on-year improvements. Looking Ahead President and CEO Joe
Morone commented, "Second-quarter 2006 results reflected the
continuation of the trends of the past several quarters. The
highlights were record net sales, driven by continued top-line
strength in PMC and growth in the emerging businesses, and the
formal agreements in the aerospace composites business with Snecma
and Messier-Dowty. These agreements validate the significant growth
potential that we foresee for Albany Engineered Composites. "In
PMC, we were able to offset inflation and almost all of the
increase in materials cost through increased revenue, driven in
part by new products, and through internal efficiencies. "In the
emerging businesses, we continued to balance positive short-term
performance with the measures necessary to build the foundation for
long-term, sustainable growth. Earnings this quarter were
negatively affected by integration costs at Texas Composite Inc.
and ramp-up of their manufacturing capacity to meet a strong order
backlog. We remain confident that the acquisition will be accretive
in 2007. "Looking forward, our long-term strategy remains on track,
and if anything, ahead of schedule: the emerging businesses
continue on their path to sustainable growth; the PMC investments
in Asia and Latin America are progressing well; and we are
increasingly optimistic about our PMC products and R&D
pipeline. And, while there is always the risk that petroleum price
increases will undermine our efforts, we expect that company-wide
internal improvement initiatives will have positive impacts on
margins beginning late in the fourth quarter of 2006. "On the other
hand, we do see a notable change in our environment that could
affect earnings in the short term. This earnings release refers to
continuing consolidation in the paper industry in Canada and
Europe. In addition, some of our competitors in Europe are
aggressively reducing PMC prices. The combination of the financial
pressures on the paper industry and the discounting by our
competitors leads us to the conclusion that it would be prudent to
expect a slowdown in PMC revenue growth in the near term. "Because
of the downward pressure on PMC revenue, we are, in this current
third quarter, accelerating the above-mentioned internal efforts to
improve margins. These accelerated efforts will have a negative
impact on earnings in the third quarter of 2006. But we are hopeful
that by year-end 2006, the resulting margin improvements will
offset the impact on earnings from any slowdown in PMC revenue
growth. We remain bullish about the PMC industry and confident that
our value generating activities in general, and investments in the
growth markets of Asia and Latin America in particular, will have
enduring, positive impacts on our PMC business and returns to
shareholders." The Company plans a live webcast to discuss
second-quarter 2006 financial results on Friday, July 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 with 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,
material and petroleum costs, growth, sales and earnings, new
products, research and development, internal efficiencies, pension
contributions, future margins, future revenues, the impacts of
consolidation and price competition on future revenues or margins,
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 2005 Annual Report to
Shareholders and subsequent filings with the U.S. Securities and
Exchange Commission. 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. ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (in
thousands except per share data) (unaudited) Three Months Ended Six
Months Ended June 30, June 30, 2006 2005 2006 2005 $261,630
$247,406 Net sales $512,853 $488,470 157,621 146,231 Cost of goods
sold 304,868 288,960 104,009 101,175 Gross profit 207,985 199,510
75,064 69,139 Selling, technical, general and research expenses
149,626 137,680 28,945 32,036 Operating income 58,359 61,830 2,712
3,125 Interest expense, net 4,591 6,814 (137) 263 Other
(income)/expense, net 772 1,581 26,370 28,648 Income before income
taxes 52,996 53,435 7,749 8,595 Income tax expense 15,737 14,643
18,621 20,053 Income before associated companies 37,259 38,792 66
298 Equity in earnings of associated companies 243 468 18,687
20,351 Net income 37,502 39,260 511,156 450,432 Retained earnings,
beginning of period 495,018 434,057 (2,945) (2,548) Dividends
declared (5,622) (5,082) $526,898 $468,235 Retained earnings, end
of period $526,898 $468,235 Earnings per share: $0.63 $0.64 Basic
$1.23 $1.24 $0.62 $0.63 Diluted $1.21 $1.22 Shares used in
computing earnings per share: 29,554 31,770 Basic 30,481 31,653
30,094 32,246 Diluted 31,019 32,174 $0.10 $0.08 Dividends per share
$0.19 $0.16 ALBANY INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) (unaudited) June 30, December 31,
2006 2005 ASSETS Cash and cash equivalents $103,575 $72,771
Accounts receivable, net 146,681 132,247 Note receivable 18,332
17,827 Inventories 220,528 194,398 Deferred taxes 19,239 22,012
Prepaid expenses 9,154 7,892 Total current assets 517,509 447,147
Property, plant and equipment, net 361,788 335,446 Investments in
associated companies 6,968 6,403 Intangibles 15,242 12,076 Goodwill
168,351 153,001 Deferred taxes 77,124 75,875 Cash surrender value
of life insurance policies 39,486 37,778 Other assets 28,719 19,321
Total assets $1,215,187 $1,087,047 LIABILITIES AND SHAREHOLDERS'
EQUITY Notes and loans payable $6,705 $6,151 Accounts payable
44,497 36,775 Accrued liabilities 129,418 116,395 Current
maturities of long-term debt 11,157 1,009 Income taxes payable and
deferred 11,465 14,793 Total current liabilities 203,242 175,123
Long-term debt 331,857 162,597 Other noncurrent liabilities 151,351
144,905 Deferred taxes and other credits 31,659 29,504 Total
liabilities 718,109 512,129 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
34,387,512 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 312,218 319,372 Retained earnings
526,898 495,018 Accumulated items of other comprehensive income:
Translation adjustments (42,469) (71,205) Pension liability
adjustment (40,340) (40,340) 756,344 702,882 Less treasury stock
(Class A), at cost (8,541,191 shares in 2006 and 5,050,159 shares
in 2005) 259,266 127,964 Total shareholders' equity 497,078 574,918
Total liabilities and shareholders' equity $1,215,187 $1,087,047
ALBANY INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited) Six Months Ended June 30, 2006 2005
OPERATING ACTIVITIES Net income $37,502 $39,260 Adjustments to
reconcile net income to net cash provided by operating activities:
Equity in earnings of associated companies (243) (468) Depreciation
26,936 26,317 Amortization 1,961 1,989 Provision for deferred
income taxes, other credits and long-term liabilities 5,024 5,412
Provision for write-off of equipment 321 1,262 Increase in cash
surrender value of life insurance (1,708) (1,596) Unrealized
currency transaction gains and losses 1,436 (1,867) Shares
contributed to ESOP 4,183 3,364 Stock option expense 770 - Tax
benefit of options exercised (529) 2,050 Changes in operating
assets and liabilities, net of business acquisition: Accounts
receivable (7,976) (3,663) Note receivable (505) (913) Inventories
(20,055) (14,097) Prepaid expenses (999) (425) Accounts payable
(3,048) (3,101) Accrued liabilities 8,834 1,404 Income taxes
payable (2,551) (5,209) Other, net (3,562) 107 Net cash provided by
operating activities 45,791 49,826 INVESTING ACTIVITIES Purchases
of property, plant and equipment (32,352) (18,478) Purchased
software (147) (1,647) Proceeds from sale of assets - 5,067
Acquisitions, net of cash acquired (8,112) - Net cash used in
investing activities (40,611) (15,058) FINANCING ACTIVITIES
Proceeds from borrowings 192,996 15,586 Principal payments on debt
(15,677) (23,362) Purchase of treasury shares (131,499) (1,576)
Purchase of call options on common stock (47,688) - Sale of common
stock warrants 32,961 - Proceeds from options exercised 1,926 5,936
Tax benefit of options exercised 529 - Debt issuance costs (5,434)
- Dividends paid (5,658) (5,044) Net cash provided by/(used in)
financing activities 22,456 (8,460) Effect of exchange rate changes
on cash flows 3,168 (7,919) Increase in cash and cash equivalents
30,804 18,389 Cash and cash equivalents at beginning of year 72,771
58,982 Cash and cash equivalents at end of period $103,575 $77,371
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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