Exhibit 99.1
Albany International Reports Second-Quarter Financial Results
Second-Quarter Highlights
* Net loss per share was $0.47, compared to net income per share of $0.49
for the same period last year. Restructuring-related expenses reduced
net income per share by $0.80 during the quarter and $0.02 during the
same period in 2003.
* Net sales were $227.2 million, a decrease of 0.6 percent compared to the
same period last year and a decrease of 3.3 percent excluding the effect
of changes in currency translation rates.
* Operating income/loss decreased from income of $28.5 million in 2003 to
a loss of $9.6 million in 2004. Restructuring charges reduced operating
income $31.1 million during the quarter and $0.9 million during the same
period in 2003.
* Net cash provided by operating activities was $26.9 million during the
quarter, compared to $32.0 million for the same period in 2003. The
decrease reflects cash payments of approximately $5.0 million related to
restructuring activities.
* Savings from the $30 million restructuring program are expected to be
greater than previously announced.
ALBANY, N.Y., July 22 /PRNewswire-FirstCall/ -- Albany International Corp.
(NYSE/PCX/FWB: AIN) reported a second-quarter loss of $0.47 per share,
compared to net income of $0.49 per share for the same period last year.
Restructuring-related expenses reduced net income by $0.80 per share during
the quarter and $0.02 during the same period in 2003.
The following table summarizes effects on net income per share:
Second Quarter
2004 2003
Earnings per share before special items: $0.33 $0.51
Restructuring-related expenses:
Restructuring charges (0.66) (0.02)
Income tax charge related to restructuring
activities (0.14)
Net income/loss per share $(0.47) $0.49
Net sales decreased $1.3 million, or 0.6 percent compared to the same
period last year. Excluding the effect of changes in currency translation
rates, net sales were down 3.3 percent. The decrease in net sales is due
principally to weak paper machine clothing (PMC) demand and share-of-market
loss in certain regions.
In response to a comment letter received from the U.S. Securities and
Exchange Commission (SEC), as part of their periodic review of public company
annual reports mandated under the Sarbanes-Oxley Act, the Company changed its
policy of recording outbound freight cost. In past financial reports, the
Company reported these costs as a deduction in the computation of net sales.
The Company has revised its policy to include such freight costs in "cost of
goods sold." The amounts reported in this release, including prior period
data, reflect that change. The effect of other SEC comments, relating
primarily to enhancements to certain accounting presentations and management's
discussion and analysis, will be reflected in future annual and periodic
reports.
Following is a table of net sales by segment and the effect of changes in
currency translation rates:
Increase in
second-quarter Percent Change
2004 net sales
due to changes Excluding
Net sales as reported in currency Currency
Three months ended June 30, translation Rate
(in thousands) 2004 2003 rates As Reported Effect
Engineered
Fabrics $182,680 $190,500 $4,391 -4.1% -6.4%
Albany Door
Systems 25,662 24,307 1,034 5.6% 1.3%
Applied
Technologies 18,867 13,671 770 38.0% 32.4%
Total $227,209 $228,478 $6,195 -0.6% -3.3%
Gross profit was 38.8 percent of net sales in the second quarter of 2004,
compared to 41.0 percent in the second quarter of 2003. The reclassification
of freight costs had no effect on the amount of gross profit, but reduced
second-quarter gross profit as a percentage of net sales by 0.9 percent in
both 2004 and 2003. The decrease in gross profit as a percentage of net sales
is due principally to lower Engineered Fabrics net sales and $2.3 million
($0.05 per share) of costs related to equipment relocations and production
inefficiencies. These costs result from moving production from locations
being shut down to other company operations and cannot be categorized as
restructuring costs for accounting purposes.
Selling, technical, general, and research expenses increased 3.7 percent
compared to the same period last year and 1.0 percent excluding the effect of
changes in currency translation rates. The increase is due principally to
higher wages and travel costs.
Operating income/loss was a loss of $9.6 million in the second quarter of
2004, compared to income of $28.5 million in 2003. Operating income was
reduced by restructuring charges of $31.1 million in 2004, which include $4.7
million of non-cash items related to scrapping equipment in facilities that
are being closed. Restructuring charges in the second quarter of 2003 were
$0.9 million.
During the second quarter, the Company initiated the final phase of its
previously announced $30 million restructuring program. The Company will
continue to incur expenses related to this program during the balance of 2004.
Additional charges for terminations and related equipment relocations will
approximate $5 million during the second half of the year. Annual savings
from this program are expected to be approximately $39 million.
For the second quarter of 2004, income tax expense was a benefit of $0.1
million on a loss before income taxes of $15.8 million. The second-quarter
income tax benefit was reduced by the effect of a $4.6 million ($0.14 per
share) tax valuation allowance related to the tax-loss-carry forward generated
by the restructuring activities. The Company expects its income tax rate for
the second half, before special items, to be approximately 30 percent.
Total year-to-date net sales were 3.5 percent higher than last year.
Excluding the effect of changes in currency translation rates, net sales were
down 2.2 percent. Following is a table of year-to-date net sales by segment
and the effect of changes in currency translation rates:
Increase in Percent Change
2004 net sales
due to changes Excluding
Net sales as reported in currency Currency
Six months ended June 30, translation Rate
(in thousands) 2004 2003 rates As Reported Effect
Engineered
Fabrics $371,159 $370,878 $18,555 0.1% -4.9%
Albany Door
Systems 53,494 47,200 4,360 13.3% 4.1%
Applied
Technologies 33,862 25,139 2,241 34.7% 25.8%
Total $458,515 $443,217 $25,156 3.5% -2.2%
For the first six months of 2004, gross profit as a percentage of net
sales was 39.2 percent, compared to 41.5 percent for the first six months of
last year. The decrease is principally due to costs associated with plant-
shutdown activities and lower Engineered Fabrics sales excluding the effect of
changes in currency translation rates. The reclassification of freight costs
reduced gross profit as a percentage of sales by 0.9 percent in each of 2004
and 2003.
Liquidity and Capital Resources
Net cash provided by operating activities was $26.9 million during the
second quarter of 2004, compared to $32.0 million for the same period of 2003.
The decrease includes approximately $5.0 million related to severance payments
and machine relocations. It is anticipated that additional payments for these
purposes of about $13.5 million in the third quarter and $10.0 million in the
fourth quarter will be funded by cash from operations. Additionally, the
Company anticipates that it will make a contribution of $20 million to its
United States pension plan during the third quarter.
Inventories increased $1.1 million, and accounts receivable increased $0.7
million during the second quarter of 2004 excluding the effect of changes in
currency translation rates. Inventory levels during the relocation of
production in connection with restructuring will likely remain slightly higher
than normal to ensure customer coverage.
Capital spending during the quarter was $11.2 million. Capital spending
is expected to be approximately $12 million in the third quarter and
approximately $14 million in the fourth quarter. Full-year capital spending
is expected to be approximately $52 million, as compared to full-year
depreciation and amortization of $54 million.
During the quarter, the Company purchased an additional 65,700 of its
shares at an average price of $29.88 per share and remains authorized to
purchase an additional 553,100 shares without further notice.
Comments on Operations:
Chairman and Chief Executive Officer Frank Schmeler commented, "Paper and
paperboard manufacturers increased production in many regions during the
second quarter. However, reductions in global PMC demand, and the Company's
previously disclosed decision to decline certain sales opportunities that did
not meet profit objectives, resulted in a decline in sales for the quarter. A
number of factors appear to be adversely impacting PMC demand. In North
America and Europe, some customers are running PMC longer and modifying PMC
inventory practices to reduce overall PMC inventories. In addition, the
overall global PMC market appears to have shifted and contracted over the last
several quarters.
"As previously reported, the Company's net sales of Engineered Fabrics,
excluding the effects of changes in currency translation rates, declined in
each of the last two years. Such declines continued during the first half of
2004, even though paper and paperboard operating rates improved. Industry
consolidation by paper and paperboard manufacturers, especially in North
America, has resulted in the closure of older mills and the shutdown of less
efficient machines, shifting more paper production to newer, more efficient
paper machines that require fewer PMC fabrics per ton of paper produced. This
trend has been most evident in the dryer section, as the consumption of dryer
fabrics on these more efficient machines in North America appears to have
declined by 10 percent. As a result of these factors, North American PMC
shipments declined 4 percent during the quarter, while North American paper
and paperboard production increased 3 percent.
"In Europe, PMC industry shipments remained flat during the first half of
2004, in spite of reported increases in paper and paperboard production during
this period. Although European PMC industry shipments declined slightly in
dryer fabrics, the total PMC market for all forms of PMC remained essentially
unchanged over the last several quarters. In contrast, the PMC market in Asia
appears to be growing at a pace equal to the growth of paper and paperboard
production in the region.
"Since major consolidation and capacity rationalization in the paper
industry appears to be largely completed, the Company expects the negative
impact of these changes on PMC demand in future periods will be minimized.
"As previously reported, the Company continues to decline business that
fails to meet its profit objectives. Our strategy to grow our business
focuses on documenting to our customers the economic value of our products and
services. We remain convinced that our customers will pay for value where it
can be demonstrated.
"Our restructuring efforts further contributed to the shortfall in
earnings in the second quarter. As we closed plants, reduced our work force,
and transferred equipment and processes to other Albany facilities, we focused
on providing our customers timely delivery of products. During this process,
we incurred additional operating costs. As the disruption associated with the
restructuring activities lessens, we expect these costs will be largely
eliminated by the fourth quarter."
Engineered Fabrics
(This segment includes paper machine clothing and process belts (PMC) used
in the manufacture of paper and paperboard products, and engineered products
for the nonwovens and pulp industries.)
Second-quarter net sales for the Engineered Fabrics segment decreased 4.1
percent compared to the same period last year. Excluding the effect of
changes in currency translation rates, net sales decreased 6.4 percent
compared to the second quarter of 2003. The sales decrease resulted from weak
PMC demand due to customer PMC inventory adjustments, longer fabric life due
to product enhancements, the impact of the more efficient installed paper
machine base, and loss of some unprofitable business due to price. Despite
having "walked away" from some unattractive business during the period, the
Company's share of the global PMC market remained relatively constant.
North America
In the United States, Canada, and Mexico, paper and paperboard operating
rates improved over the second quarter of last year, although shipments of PMC
declined. For the quarter, net sales in North America were 3.9 percent behind
last year. Excluding the effect of changes in currency translation rates, net
sales decreased 3.8 percent compared to 2003. Year-to-date net sales
decreased 2.6 percent and decreased 3.6 percent excluding the effect of
changes in currency translation rates. Changes in customer inventory
practices by some customers had a negative impact on sales for the quarter.
Europe
In Europe, industry shipments of PMC remained flat while paper and
paperboard production increased based on the most recent industry report.
Second-quarter net sales increased 1.1 percent over the same quarter in 2003
and decreased 5.1 percent excluding the effect of changes in currency
translation rates. Year-to-date net sales increased 5.9 percent and decreased
4.4 percent excluding the effect of changes in currency translation rates.
Many customers in Europe are running fabrics longer and are reducing their PMC
inventories. While the reduction of inventory has the effect of disrupting
PMC shipments in the short term, it provides mutual benefit in inventory
management.
Pacific
Second-quarter net sales in the Pacific region decreased 10.2 percent
compared to the same period last year and decreased 12.6 percent excluding the
effect of changes in currency translation rates. Year-to-date net sales
decreased 3.3 percent and decreased 7.1 percent excluding the effect of
changes in currency translation rates. During the second quarter of 2004, net
sales were adversely affected by customer PMC inventory practices and the
absence of new machine start-ups. Sales in this region commonly fluctuate
based on the timing of new machine start-ups. The Company expects the impact
of inventory practices will be minimized in future quarters. Net sales in
China, the largest potential market in Asia, were flat compared to the second
quarter of last year, but remain well ahead of 2003 six-months results.
Albany Door Systems
(This segment includes sales and service of high-performance doors and
aftermarket sales to a wide variety of industrial customers.)
Net sales increased 5.6 percent compared to the second quarter of 2003 and
increased 1.3 percent excluding the effect of changes in currency translation
rates. Year-to-date net sales increased 13.3 percent and increased 4.1
percent excluding the effect of changes in currency translation rates. New
product introductions and improvement in aftermarket sales provided sales
gains in spite of continued softness in key markets. Improvements in segment
earnings resulted from efficiency gains.
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); and industrial insulation
products (High Performance Materials).)
Second-quarter net sales in this segment increased 38.0 percent compared
to the same period in 2003 and increased 32.4 percent excluding the effect of
changes in currency translation rates. Year-to-date net sales increased 34.7
percent and increased 25.8 percent excluding the effect of changes in currency
translation rates. Increased sales of filtration products and sales growth
for both PrimaLoft and Techniweave operations contributed to the stronger
quarter. Sales and earnings for the segment benefited from increased customer
spending levels, new products, and improved efficiency.
Looking Ahead
Mr. Schmeler continued, "In spite of the market impact of our customers'
consolidation and continued pricing pressure in some PMC markets, we remain
optimistic about our potential for revenue and earnings growth. In each of
our industries served, we look for growth due to our ability to create value
with products and services. Using the Albany Value Concept, we are making a
difference for our customers and providing new opportunities every day. At
the same time, our employees are using the Albany Value Concept internally to
create best-practice opportunities and a common business culture focused on
delivering value to customers and, ultimately, shareholders. The Albany Value
Concept, combined with our new product development efforts, has resulted in a
very strong new product portfolio. For our customers, these new products
improve their operations and the profitability of their businesses. We
believe this value and technology focus provides our best opportunity for
growth and improvements for our customers.
"On the cost side, our restructuring activities resulted in removing more
costs than previously announced. The apparent adjustment of the PMC market
size makes these additional gains especially important. We will complete our
product transitions in the third quarter and expect to eliminate the
disruptions resulting from the restructuring activities by the end of the
fourth quarter.
"Recent sales and earnings growth in the Applied Technologies segment is
encouraging and reflects both efficiency and market improvements. New product
opportunities in this segment will assist in sustaining market momentum.
"The Albany Door System segment, while improving, has yet to return to
expected business levels, principally due to continuing market softness in
Germany. With efficiency improvements in place and underway, new product
introductions in full rollout, and expansion of aftermarket efforts, we expect
further improvements in this segment in the second half.
"Through the first half, our employees continued to focus on the tasks of
supporting our customers, completing the restructuring initiatives, and
ensuring our success."
The Company plans a live webcast to discuss second-quarter 2004 financial
results on Friday, July 23, 2004, at 9:00a.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 customers throughout the world. 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 Company's
financial condition, results of operations, and cash flows. Earnings per share
before special items is calculated by adding back to net income per share
certain individually significant items that affect the comparability of
reporting periods.
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 sales, earnings, cash flows, possible uses for cash,
pricing, markets, cost reductions, new products and process improvements,
paper industry consolidation and 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 2003 Annual Report to Shareholders and subsequent filings with the
Securities and Exchange Commission.
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(unaudited)
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
$227,209 $228,478 Net sales $458,515 $443,217
139,069 134,812 Cost of goods sold 278,597 259,226
88,140 93,666 Gross profit 179,918 183,991
Selling, technical,
general and
66,660 64,270 research expenses 133,812 126,058
31,075 851 Restructuring, net 42,668 1,682
(9,595) 28,545 Operating (loss)/income 3,438 56,251
3,886 3,535 Interest expense, net 7,540 7,406
2,340 2,138 Other expense, net 8,127 3,347
(Loss)/income before
(15,821) 22,872 income taxes (12,229) 45,498
Income tax
(104) 6,890 (benefit)/expense 113 8,434
(Loss)/income before
(15,717) 15,982 associated companies (12,342) 37,064
Equity in earnings/
(losses) of associated
299 (7) companies 217 (95)
(15,418) 15,975 Net (loss)/income (12,125) 36,969
Retained earnings,
434,330 406,819 beginning of period 433,407 387,609
(2,318) (1,799) Dividends declared (4,688) (3,583)
Retained earnings, end
$416,594 $420,995 of period $416,594 $420,995
Earnings per share - basic:
($0.47) $0.49 Net (loss)/income ($0.36) $1.14
Earnings per share - diluted:
($0.47) $0.48 Net (loss)/income ($0.36) $1.12
Average number of
shares used in basic
earnings per share
33,094 32,605 computations 33,345 32,522
Average number of
shares used in diluted
earnings per share
33,094 33,163 computations 33,345 33,009
$0.07 0.055 Dividends per share $0.07 $0.11
ALBANY INTERNATIONAL CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
June 30 December 31,
2004 2003
ASSETS
Cash and cash equivalents $82,206 $78,822
Accounts receivable, net 144,270 151,157
Note receivable 19,418 21,814
Inventories:
Finished goods 93,024 93,787
Work in process 57,151 53,936
Raw material and supplies 31,063 29,805
181,238 177,528
Deferred taxes 35,818 33,314
Prepaid expenses 6,374 8,067
Total current assets 469,324 470,702
Property, plant and equipment, net 351,609 370,280
Investments in associated companies 5,938 5,278
Intangibles 15,147 15,790
Goodwill 156,239 159,543
Deferred taxes 64,229 70,450
Cash surrender value of life
insurance policies 33,546 32,399
Other assets 16,346 21,274
Total assets $1,112,378 $1,145,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $8,125 $5,250
Accounts payable 32,764 35,080
Accrued liabilities 142,547 122,550
Current maturities of long-term
debt 1,916 1,949
Income taxes payable and deferred 10,006 20,475
Total current liabilities 195,358 185,304
Long-term debt 213,952 214,894
Other noncurrent liabilities 152,674 153,811
Deferred taxes and other credits 34,465 37,052
Total liabilities 596,449 591,061
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 32,908,400 in 2004 and
32,548,938 in 2003 33 33
Class B Common Stock, par value
$.001 per share; authorized 25,000,000
shares; issued and outstanding 3,236,476
in 2004 and 3,236,476 in 2003 3 3
Additional paid in capital 289,877 280,734
Retained earnings 416,594 433,407
Accumulated items of other
comprehensive income:
Translation adjustments (75,858) (65,613)
Derivative valuation adjustment (6,652) (8,840)
Pension liability adjustment (39,579) (39,579)
584,418 600,145
Less treasury stock (Class A), at
cost (3,014,537 shares in 2004 and
2,190,038 shares in 2003) 68,489 45,490
Total shareholders' equity 515,929 554,655
Total liabilities and
shareholders' equity $1,112,378 $1,145,716
ALBANY INTERNATIONAL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
2004 2003
OPERATING ACTIVITIES
Net (loss)/income ($12,125) $36,969
Adjustments to reconcile net cash
provided by operating activities:
Equity in (earnings)/losses of
associated companies (217) 95
Depreciation 26,907 25,567
Amortization 1,831 2,550
Provision for deferred income
taxes, other credits and long-
term liabilities 3,697 3,410
Provision for write-off of
equipment 11,620 -
Provision for impairment of
investment 4,000 -
Increase in cash surrender value
of life insurance (1,525) (1,470)
Change in unrealized currency
transaction gains and losses 7,367 (1,199)
Loss/(gain) on disposition of
assets 736 (529)
Shares contributed to ESOP 3,560 3,528
Tax benefit of options exercised 1,110 322
Changes in operating assets and
liabilities:
Accounts receivable 1,659 6,885
Sale of accounts receivable (5,326) (2,603)
Note receivable 2,396 (1,290)
Inventories (6,402) (2,742)
Prepaid expenses 1,590 (1,535)
Accounts payable (1,598) (9,331)
Accrued liabilities 21,240 6,826
Income taxes payable (10,643) (558)
Other, net 1,495 (615)
Net cash provided by operating
activities 51,372 64,280
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (26,426) (18,702)
Purchased software (383) (423)
Proceeds from sale of assets 1,246 3,824
Net cash used in investing
activities (25,563) (15,301)
FINANCING ACTIVITIES
Proceeds from borrowings 14,489 34,532
Principal payments on debt (12,476) (36,161)
Purchase of treasury shares (23,120) -
Proceeds from options exercised 4,426 2,248
Debt issuance costs (1,555) -
Dividends paid (4,716) (3,568)
Net cash used in financing
activities (22,952) (2,949)
Effect of exchange rate changes on
cash flows 527 (5,664)
Increase in cash and cash
equivalents 3,384 40,366
Cash and cash equivalents at
beginning of year 78,822 18,799
Cash and cash equivalents at end of
period $82,206 $59,165
SOURCE Albany International Corporation
-0- 07/22/2004
/CONTACT: Kenneth C. Pulver, Vice President-Corporate Communications,
Albany International Corporation, +1-518-445-2214/
/Web site: http://www.albint.com /
(AIN)
CO: Albany International Corporation
ST: New York
IN: PAP REA TEX MAC
SU: ERN CCA