AIN Albany International Corp

Third-Quarter Financial Highlights

• Net sales were $178.8 million, a decrease of 0.6% compared to Q3 2014. Excluding currency effects, net sales increased 4.7% (see Table 1).
• Adjusted EBITDA was $42.0 million, compared to $33.5 million in Q3 2014 (see Tables 6 and 7).
• Q3 2015 income attributable to the Company was $0.30 per share, compared to $0.37 in Q3 2014. Excluding adjustments (see Table 15), income attributable to the Company was $0.47 per share, compared to $0.31 in Q3 2014.
• Year-to-date net sales were $532.4 million, a decrease of 3.8%. Excluding currency effects, year-to-date net sales increased 1.9% compared to 2014 (see Table 8).
• Including a $14.0 million charge in Q2 related to an AEC contract, year-to-date Adjusted EBITDA was $102.3 million in 2015, compared to $108.5 million in 2014 (see Tables 9 and 10).

Albany International Corp. (NYSE:AIN) reported that Q3 2015 income attributable to the Company was $9.7 million, including net charges of $3.9 million for income tax adjustments. Income attributable to the Company in Q3 2014 was $11.8 million, including net charges of $0.3 million for income tax adjustments.

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Q3 2015 income before income taxes was $21.9 million, including restructuring charges of $3.7 million and gains of $1.0 million from foreign currency revaluation. Q3 2014 income before income taxes was $18.5 million, including restructuring charges of $0.9 million, and gains of $4.1 million from foreign currency revaluation and $0.2 million from an insurance recovery.

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

                       

Table 1

                               

 

 

 

 

Net SalesThree Months endedSeptember,

 

 

Percent

Impact ofChangesin CurrencyTranslation

PercentChangeexcludingCurrency

(in thousands)

     

2015

     

2014

     

Change

     

Rates

     

Rate Effect

Machine Clothing (MC)       $154,522       $157,891       -2 .1%       ($9,364 )       3 .8% Albany Engineered Composites (AEC)       24,267       21,970       10 .5%       (166 )       11 .2% Total       $178,789       $179,861       -0 .6%       ($9,530 )       4 .7%      

Changes in currency translation rates, driven mainly by the stronger U.S. dollar, resulted in a $9.5 million decline in sales . Excluding that effect, MC sales were up 3.8% compared to Q3 2014, principally due to global strength in the packaging and pulp grades, which offset declines in publication grades. Excluding currency translation effects, AEC sales increased 11.2% due to growth in the LEAP program.

Q3 2015 gross profit was $75.7 million, or 42.4% of net sales, compared to $68.6 million, or 38.2% of net sales, in the same period of 2014. MC gross profit improved to $74.7 million, or 48.4% of net sales, compared to $66.1 million, or 41.9% of net sales, in Q3 2014, reflecting very good capacity utilization and strong sales volume. Even though changes in currency translation rates had a significant effect on MC net sales, they had only a minor negative effect on gross profit. AEC gross profit was $1.4 million in Q3 2015, compared to $2.9 million in Q3 2014, as gross profit from the LEAP program was offset by continued weak profitability in legacy programs.

Selling, technical, general, and research (STG&R) expenses were $46.2 million, or 25.8% of net sales, in the third quarter of 2015, compared to $48.5 million, or 27.0% of net sales, in the third quarter of 2014. The revaluation of nonfunctional-currency assets and liabilities resulted in third-quarter gains of $2.0 million in 2015 and $2.2 million in 2014. The decrease in STG&R compared to 2014 was mostly due to changes in currency translation rates.

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

 

September 30,

(in thousands)

 

2015

 

2014

Machine Clothing   $4,775   $4,510 Albany Engineered Composites   2,769   3,593 Corporate expenses   190   159 Total   $7,734   $8,262  

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

   

Table 3

        Operating Income/(loss) Three Months ended

 

September 30,

(in thousands)

 

2015

 

2014

Machine Clothing   $41,956     $33,308   Albany Engineered Composites   (4,191 )   (2,765 ) Corporate expenses   (11,922 )   (11,385 ) Total   $25,843     $19,158    

Segment operating income was affected by restructuring and currency revaluation as shown in Table 4 below. Q3 2015 restructuring charges included a noncash charge of $3.2 million for a write-down in the value of our former manufacturing building in Germany which is being held for sale.

           

Table 4

                    Expenses/(gain) in Q3 2015 Expenses/(gain) in Q3 2014 resulting from resulting from (in thousands)  

Restructuring

 

Revaluation

     

Restructuring

 

Revaluation

Machine Clothing   $3,717   ($2,005 )       $968     ($2,308 ) Albany Engineered Composites   -   -         (49 )   135   Corporate expenses   -   4         -     1   Total   $3,717   ($2,001 )       $919     ($2,172 )  

Q3 2015 Other income/expense, net, was expense of $1.2 million, including losses related to the revaluation of nonfunctional-currency balances of $1.0 million. Q3 2014 Other income/expense, net, was income of $1.9 million, including gains related to the revaluation of nonfunctional-currency balances of $1.9 million, and an insurance-recovery gain of $0.2 million.

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

   

Table 5

        Income/(loss) attributable to currency revaluation Three Months ended

 

September 30,

(in thousands)

 

2015

   

2014

Operating income   $2,001     $2,172 Other income/(expense), net   (953 )   1,916 Total   $1,048     $4,088  

The Company’s income tax rate, excluding tax adjustments, was 38.0% for Q3 2015, compared to 34.9% for the same period of 2014. The higher tax rate in Q3 2015 was due primarily to the impact of restructuring charges in Germany, where the Company is unable to record a tax benefit related to the expense. In addition, the Company recorded net discrete tax charges of $4.9 million, principally related to changes in the expected outcome of a tax appeal in Germany to recover prepaid taxes; this was partially offset by a $1.0 million income tax reduction due to a decrease in the estimated tax rate. Discrete tax charges and the effect of a change in the estimated tax rate increased income tax expense by $0.3 million for the third quarter of 2014.

The following tables summarize Adjusted EBITDA:

                       

Table 6

                               

Three Months ended September 30, 2015

 

(in thousands)

     

 

MachineClothing

     

AlbanyEngineeredComposites

     

Corporateexpensesand other

     

 

TotalCompany

Net income       $41,956         ($4,191 )       ($28,085 )       $9,680   Interest expense, net       -         -         2,671         2,671   Income tax expense       -         -         12,243         12,243   Depreciation and amortization       9,660         2,981         2,102         14,743   EBITDA       51,616         (1,210 )       (11,069 )       39,337   Restructuring expenses, net       3,717         -         -         3,717   Foreign currency revaluation (gains)/losses       (2,005 )       -         957         (1,048 ) Pretax income attributable to noncontrolling interest in ASC       -         (25 )       -         (25 ) Adjusted EBITDA       $53,328         ($1,235 )       ($10,112 )       $41,981                            

Table 7

                               

Three Months ended September 30, 2014

 

(in thousands)

     

 

MachineClothing

     

AlbanyEngineeredComposites

     

Corporateexpensesand other

     

 

TotalCompany

Net income       $33,308         ($2,765 )       ($18,769 )       $11,774   Interest expense, net       -         -         2,486         2,486   Income tax expense       -         -         6,762         6,762   Depreciation and amortization       11,060         2,607         2,069         15,736   EBITDA       44,368         (158 )       (7,452 )       36,758   Restructuring and other, net       968         (49 )       -         919   Foreign currency revaluation (gains)/losses       (2,308 )       135         (1,915 )       (4,088 ) Gain on insurance recovery       -         -         (165 )       (165 ) Pretax loss attributable to noncontrolling interest in ASC       -         77         -         77   Adjusted EBITDA       $43,028         $5         ($9,532 )       $33,501    

Capital spending was $9.3 million for Q3 2015, compared to $18.9 million for Q3 2014. Depreciation and amortization was $14.7 million for Q3 2015, compared to $15.7 million for Q3 2014.

CFO Comments

CFO and Treasurer John Cozzolino commented, “Cash flow was strong during the quarter due to the improved operating results. Net debt (total debt less cash) decreased $21 million to $99 million (see Table 16). Total debt declined to $270 million at the end of Q3, compared to $303 million at the end of Q2, as the Company repatriated $30 million from its non-U.S. operations. The Company’s leverage ratio, as defined in our primary debt agreements, decreased from 1.55 at the end of Q2 to 1.29 at the end of Q3. Capital expenditures during Q3 were about $9 million, and we currently estimate full-year spending in 2015 to be $45 million to $55 million.

“The Company’s tax rate in Q3, excluding tax adjustments, was 38%, which is in-line with our full-year expectation. Cash paid for income taxes was about $4 million in Q3, and we estimate cash taxes in 2015 to range from $20 million to $22 million.

“Net sales continue to be reduced by currency rates, as compared to currency rates in effect during Q3 2014. However, due to our mix of sales and costs by currency (e.g., net cost positions in Brazil and Mexico), currency rates have had a positive impact on Adjusted EBITDA when compared to prior-year rates. Adjusted EBITDA in future quarters could be negatively impacted by significant currency rate changes related to our key exposures, such as the peso and the real.”

CEO Comments

President & CEO Joe Morone said, “Q3 2015 was a strong quarter for Albany International. Compared to Q3 2014, sales excluding currency effects improved by 5%, and Adjusted EBITDA improved 25%. Net debt declined by $21 million. Both businesses performed well, and as they have all year, are firmly on track toward their long-term strategic objectives of steady annual Adjusted EBITDA and cash flow in MC, and rapid, profitable growth in AEC.

“In MC, sales excluding currency effects were 4% ahead of Q3 2014; Adjusted EBITDA was 24% ahead. Year-to-date sales excluding currency effects were flat compared to 2014; Adjusted EBITDA was 8% ahead. All regions performed well in Q3. Consistent with our long-term view of this business, the publication grades declined in every region of the world, but the decline was more than offset by good performance across all of our growth grades and regions. On a year-over-year basis, Asia and South America grew modestly, despite economic weakness in those regions; North America rebounded back to normal levels, despite much lower publication grade sales; and Europe was stable. Margins were exceptional, and reflect continuing efforts to improve productivity and consolidate operations. The strong dollar relative to the Mexican peso and Brazilian real also contributed to the improvement in gross margin and Adjusted EBITDA.

“AEC once again performed well. Sales were 11% ahead of Q3 2014, while Adjusted EBITDA continued to hover slightly below breakeven and about $1 million behind last year. Until the LEAP ramp begins in earnest a year from now, the most important metrics for AEC are performance to schedule, manufacturing yield, manufacturing cycle time, and of course, market demand. Against these four metrics, performance was very strong in Q3. On the development front, broad progress continued in all areas of focus – that is, on applications for aircraft engines, airframes, and the high end of the automotive market. Two milestones of particular note this quarter were the production of the first three prototype fan cases for the GE9X engine, and the entry into initial production of a family of woven, semi-finished components that are used to connect the skin of aircraft to their underlying structure in a variety of defense applications. While this family of components has only modest revenue potential – roughly $5 million to $10 million per year by the end of this decade, it represents what could be the first of several emerging AEC opportunities aimed at the defense aerospace market.

“Turning to our short-term outlook, in MC the normal seasonal year-end slowdown is likely to be magnified by continued economic weakness in key markets, and so we expect Q4 Adjusted EBITDA to be at best comparable to, and quite possibly a bit lower than, Q4 2014. Full-year Adjusted EBITDA should be well ahead of full-year 2014.

“This expectation of full-year growth in Adjusted EBITDA in no way alters our long-term view of this business, just as it remained unaltered by the relatively weak Q2 results. While performance may continue to fluctuate from period to period and with general macroeconomic conditions, we maintain our long-term view of this business as capable of generating steady year-over-year Adjusted EBITDA and cash flow - with annual Adjusted EBITDA ranging from $180 million to $195 million, depending on currency translation effects.

“The short-term outlook for AEC is of course dominated by preparations for the LEAP ramp. Revenue could be subject to a good deal of quarter-to-quarter volatility over the next four quarters, as the rate at which Safran pulls parts out of our finished goods inventory fluctuates with their short-term need for parts during this final stage of development, testing, and certification. Assuming the LEAP program stays on schedule, we expect production to begin to ramp in Q4 of next year and then to increase rapidly, growing from roughly 200 shipsets in 2016 to at least 1,800 a year by the end of the decade.

“In sum, this was a good quarter for Albany; both businesses performed very well in Q3 and remain firmly on track toward their long-term objectives of steady Adjusted EBITDA and cash flow in MC, and rapid, profitable growth for AEC.”

The Company plans a webcast to discuss third-quarter 2015 financial results on Wednesday, October 28, 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

                                       

 

Impact of

Percent

Net Sales

 

Changes

Change

Nine Months ended

Percent

in Currency

excluding

 

September,

Change

Translation

Currency

(in thousands)

     

2015

     

2014

              Rates      

Rate Effect

Machine Clothing (MC)       $463,577       $494,788       -6.3 %       ($30,651 )       -0.1 % Albany Engineered Composites (AEC)       68,825       58,898       16.9 %       (906 )       18.4 % Total       $532,402       $553,686       -3.8 %       ($31,557 )       1.9 %                          

Table 9

                                Nine Months ended September 30, 2015

 

(in thousands)

     

MachineClothing

     

AlbanyEngineeredComposites

     

Corporateexpensesand other

     

TotalCompany

Net income       $110,969        

($26,635

)*

      ($64,535 )       $19,799   Interest expense, net       -         -         8,049         8,049   Income tax expense       -         -         20,398         20,398   Depreciation and amortization       30,077         8,845         6,359         45,281   EBITDA       141,046         (17,790 )       (29,729 )       93,527   Restructuring expenses, net       13,929         -         -         13,929   Foreign currency revaluation losses/(gains)       (4,534 )       (17 )       406         (4,145 ) Gain on sale of investment       -         -         (872 )       (872 ) Pre-tax income attributable to noncontrolling interest in ASC       -         (115 )       -         (115 ) Adjusted EBITDA       $150,441         ($17,922 )       ($30,195 )       $102,324  

*includes $14 million BR725 charge

 

Table 10

                               

Nine Months ended September 30, 2014

 

(in thousands)

     

 

MachineClothing

     

AlbanyEngineeredComposites

     

Corporateexpensesand other

     

 

TotalCompany

Net income       $103,329         ($9,785 )       ($59,900 )       $33,644   Interest expense, net       -         -         8,121         8,121   Income tax expense       -         -         21,435         21,435   Depreciation and amortization       34,069         7,382         6,290         47,741   EBITDA       137,398         (2,403 )       (24,054 )       110,941   Restructuring and other, net       3,127         931         -         4,058   Foreign currency revaluation (gains)/losses       (1,806 )       234         (3,815 )       (5,387 ) Gain on insurance recovery       -         -         (1,126 )       (1,126 ) Pretax loss attributable to noncontrolling interest in ASC       -         63         -         63   Adjusted EBITDA       $138,719         ($1,175 )       ($28,995 )       $108,549                                                  

Table 11

                                Three Months ended September 30, 2015

 

(in thousands, except per share amounts)

     

Pre-taxamounts

     

TaxEffect

     

After-taxEffect

     

Per ShareEffect

Restructuring and other, net       $3,717       $1,412       $2,305       $0 .07 Foreign currency revaluation gains       1,048       398       650       0 .02 Net discrete income tax charge       -       4,914       4,914       0 .15 Favorable effect of change in income tax rate       -       1,002       1,002       0 .03                          

Table 12

                                Three Months ended September 30, 2014

 

(in thousands, except per share amounts)

     

Pre-taxamounts

     

TaxEffect

     

After-taxEffect

     

Per ShareEffect

Restructuring and other, net       $919       $321       $598       $0 .02 Foreign currency revaluation gains       4,088       1,427       2,661       0 .08 Gain on insurance recovery       165       -       165       0 .01 Net discrete income tax charge       -       536       536       0 .02 Favorable effect of change in income tax rate       -       243       243       0 .01                          

Table 13

                                Nine Months ended September 30, 2015

 

(in thousands, except per share amounts)

     

Pre-taxamounts

     

TaxEffect

     

After-taxEffect

     

Per ShareEffect

Restructuring and other, net       $13,929       $5,280       $8,649       $0 .27 Foreign currency revaluation gains       4,145       1,597       2,548       0 .08 Gain on sale of investment       872       331       541       0 .02 Net discrete income tax charge       -       5,113       5,113       0 .16 Charge for revision in estimated contract profitability       14,000       5,180       8,820       0 .28                          

Table 14

                                Nine Months ended September 30, 2014

 

(in thousands, except per share amounts)

     

Pre-taxamounts

     

TaxEffect

     

After-taxEffect

     

Per ShareEffect

Restructuring and other, net       $4,058       $1,449       $2,609       $0 .08 Foreign currency revaluation gains       5,387       1,896       3,491       0 .11 Gain on insurance recovery       1,126       -       1,126       0 .04 Net discrete income tax charge       -       2,209       2,209       0 .07  

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

     

 

     

 

     

Table 15

     

 

     

 

       

Three Months ended

Nine Months ended

September 30,

September 30,

Per share amounts (Basic)

     

2015

     

2014

     

2015

 

   

2014

Net income/(loss) attributable to the Company, reported       $0.30         $0.37        

$0.62

*

      $1.06   Adjustments:                                   Restructuring charges       0.07         0.02         0.27         0.08   Discrete tax charges and effect of change in income tax rate       0.12         0.01         0.16         0.07   Foreign currency revaluation (gains)/ losses       (0.02 )       (0.08 )       (0.08 )       (0.11 ) Gain on insurance recovery       -         (0.01 )       -         (0.04 ) Gain on the sale of investment       -         -         (0.02 )       -   Net income attributable to the Company, excluding adjustments       $0.47         $0.31         $0.95         $1.06  

*includes $0.28 per share for BR725 charge

     

The following table contains the calculation of net debt:

                                   

Table 16

                                               

 

(in thousands)

     

September 30,2015

     

June 30,2015

     

March 31,2015

     

December 31,2014

     

September 30,2014

     

June 30,2014

Notes and loans payable       $390       $543       $496       $661       $551       $692 Current maturities of long-term debt       50,016       50,015       50,015       50,015       15       1,265 Long-term debt       220,084       252,088       232,092       222,096       283,100       283,104 Total debt       270,490       302,646       282,603       272,772       283,666       285,061 Cash and cash equivalents       171,780       182,474       170,838       179,802       195,461       206,836 Net debt       $98,710       $120,172       $111,765       $92,970       $88,205       $78,225  

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,” “look for,” 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 differ materially 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 Nine Months Ended September 30, September 30, 2015 2014 2015 2014   $178,789 $179,861 Net sales $532,402 $553,686 103,045 111,242   Cost of goods sold 325,382 334,915     75,744 68,619 Gross profit 207,020 218,771 35,509 33,618 Selling, general, and administrative expenses 110,674 112,787 10,675 14,924 Technical, product engineering, and research expenses 33,387 43,190 3,717 919   Restructuring expenses, net 13,929 4,058     25,843 19,158 Operating income 49,030 58,736 2,671 2,486 Interest expense, net 8,049 8,121 1,249 (1,864 ) Other expense/(income), net 784 (4,464 )   21,923 18,536 Income before income taxes 40,197 55,079 12,243 6,762   Income tax expense 20,398 21,435     9,680 11,774 Net income 19,799 33,644 22 (38 ) Net income/(loss) attributable to the noncontrolling interest 100 (8 ) $9,658 $11,812   Net income attributable to the Company $19,699 $33,652     $0.30 $0.37 Earnings per share attributable to Company shareholders - Basic $0.62 $1.06   $0.30 $0.37 Earnings per share attributable to Company shareholders - Diluted $0.62 $1.05   Shares of the Company used in computing earnings per share: 32,012 31,848 Basic 31,965 31,822   32,055 31,946 Diluted 32,028 31,924   $0.17 $0.16 Dividends per share $0.50 $0.47               ALBANY INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited)    

 

 

September 30,

December 31,

2015 2014 ASSETS Cash and cash equivalents $171,780 $179,802 Accounts receivable, net 151,908 158,237 Inventories 110,265 107,274 Deferred income taxes 6,979 6,743 Asset held for sale 5,112 9,102 Prepaid expenses and other current assets 8,410   8,074   Total current assets 454,454 469,232   Property, plant and equipment, net 365,742 386,011 Intangibles 212 385 Goodwill 67,590 71,680 Income taxes receivable and deferred 61,732 69,540 Other assets 25,704   32,456   Total assets $975,434   $1,029,304     LIABILITIES AND SHAREHOLDERS' EQUITY Notes and loans payable $390 $661 Accounts payable 28,668 34,787 Accrued liabilities 91,026 95,149 Current maturities of long-term debt 50,016 50,015 Income taxes payable and deferred 4,099   2,786   Total current liabilities 174,199 183,398   Long-term debt 220,084 222,096 Other noncurrent liabilities 99,845 103,079 Deferred taxes and other credits 3,546   7,163   Total liabilities 497,674   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 37,234,213 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 422,567 418,972 Retained earnings 459,813 456,105 Accumulated items of other comprehensive income: Translation adjustments (99,556 ) (55,240 ) Pension and postretirement liability adjustments (49,217 ) (51,666 ) Derivative valuation adjustment (2,296 ) (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 473,960 509,869 Noncontrolling interest 3,800   3,699   Total equity 477,760   513,568   Total liabilities and shareholders' equity $975,434   $1,029,304                             ALBANY INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (unaudited)     Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014

OPERATING ACTIVITIES

 

$9,680 $11,774

Net income

$19,799 $33,644

Adjustments to reconcile net income to net cash provided by operating activities:

12,953 13,737 Depreciation 39,850 42,120 1,790 1,999 Amortization 5,431 5,621 7,134 (2,637 ) Change in long-term liabilities, deferred taxes and other credits 937 95 (156 ) 557 Provision for write-off of property, plant and equipment 259 1,286 3,225 - Fair value adjustment on available-for-sale assets 3,225 - - - Gain on disposition or involuntary conversion of assets (1,056 ) (961 ) - (16 ) Excess tax benefit of options exercised (603 ) (161 ) 290 213 Compensation and benefits paid or payable in Class A Common Stock 1,285 1,160  

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

5,100 (4,368 ) Accounts receivable (4,387 ) 9,929 (3,626 ) (1,279 ) Inventories (10,757 ) (12,238 ) 133 661 Prepaid expenses and other current assets (857 ) 275 (518 ) 100 Income taxes prepaid and receivable (592 ) 114 (3,126 ) (2,128 ) Accounts payable (4,467 ) (2,867 ) 3,381 4,414 Accrued liabilities 861 (8,265 ) 3,910 1,819 Income taxes payable 3,987 760 1,723   (2,383 ) Other, net 6,330   (6,512 ) 41,893   22,463   Net cash provided by operating activities 59,245   64,000    

INVESTING ACTIVITIES

(9,023 ) (18,704 ) Purchases of property, plant and equipment (39,689 ) (46,106 ) (252 ) (189 ) Purchased software (589 ) (504 ) -   -   Proceeds from sale or involuntary conversion of assets 2,797   961   (9,275 ) (18,893 ) Net cash used in investing activities (37,481 ) (45,649 )  

FINANCING ACTIVITIES

5,198 5,420 Proceeds from borrowings 44,818 10,090 (37,354 ) (6,815 ) Principal payments on debt (47,100 ) (30,924 ) (41 ) - Debt acquisition costs (1,671 ) - 75 223 Proceeds from options exercised 1,799 610 - 16 Excess tax benefit of options exercised 603 161 (5,441 ) (5,094 ) Dividends paid (15,646 ) (14,633 ) (37,563 ) (6,250 ) Net cash used in financing activities (17,197 ) (34,696 )   (5,749 ) (8,695 )

Effect of exchange rate changes on cash and cash equivalents

(12,589 ) (10,860 )   (10,694 ) (11,375 )

Decrease in cash and cash equivalents

(8,022 ) (27,205 ) 182,474   206,836  

Cash and cash equivalents at beginning of period

179,802   222,666   $171,780   $195,461  

Cash and cash equivalents at end of period

$171,780   $195,461    

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Albany International Corp.InvestorsJohn Cozzolino, 518-445-2281john.cozzolino@albint.comorMediaSusan Siegel, 603-330-5866susan.siegel@albint.com