Fourth-Quarter Highlights ALBANY, N.Y., Jan. 26
/PRNewswire-FirstCall/ -- Albany International Corp. (NYSE/PCX/FWB:
AIN) reported fourth-quarter net income per share of $0.44,
compared to $0.38 in the fourth quarter of 2004. Expenses
associated with the residual effects of previous programs for
consolidating manufacturing operations reduced fourth-quarter 2005
net income by $0.05 per share. Restructuring charges reduced
fourth-quarter 2004 net income by $0.20 per share. Fourth-quarter
net sales increased $9.5 million, or 4.0 percent, compared to the
fourth quarter of 2004. Excluding the effect of changes in currency
translation rates, net sales increased 6.7 percent. Following is a
table of net sales by segment and the effect of changes in currency
translation rates: (Decrease) in fourth- quarter 2005 Percent
Change Net sales as net sales reported due to Three months changes
in Excluding ended currency Currency December 31, translation As
Rate 2005 2004 rates Reported Effect (in thousands) Paper Machine
Clothing (formerly Engineered Fabrics) $185,876 $178,404 ($4,041)
4.2% 6.5% Applied Technologies 29,253 26,837 (531) 9.0% 11.0%
Albany Door Systems 32,781 33,198 (1,985) (1.3%) 4.7% Total
$247,910 $238,439 ($6,557) 4.0% 6.7% Gross profit was 37.5 percent
of net sales in the fourth quarter of 2005, compared to 39.8
percent in the fourth quarter of 2004. The decrease in gross profit
as a percentage of net sales is due principally to increased
material costs resulting from higher petroleum prices and to lower
prices for PMC in certain European markets that had the effect of
decreasing fourth-quarter 2005 net income per share by
approximately $0.11 and $0.09, respectively. Selling, technical,
general, and research expenses decreased 1.5 percent compared to
the same period of 2004, but increased 1.5 percent excluding the
effect of changes in currency translation rates. Operating income
was $23.4 million in the fourth quarter of 2005, compared to $15.5
million in the fourth quarter of 2004. Fourth-quarter 2005
operating income was reduced by expenses of $2.2 million from the
residual effects of previous programs for consolidating
manufacturing operations. Operating income in the fourth quarter of
2004 included restructuring charges of $8.8 million. Interest
expense, net, was $1.9 million in the fourth quarter of 2005,
compared with $3.6 million in the same period of 2004. The decrease
is principally due to lower debt and interest rates in 2005. Income
tax expense in the fourth quarter of 2005 was $3.6 million,
reflecting adjustments to deferred tax valuation allowances that
reduced income tax expense by $1.1 million. These adjustments had a
positive effect of $0.03 per share on net income. In the fourth
quarter of 2004, income tax expense was negative $3.3 million,
reflecting adjustments during 2004 related to the favorable
resolution of tax contingencies and a reduction in the annual tax
rate, which were partially offset by adjustments to deferred tax
valuation allowances. The net effect of these adjustments reduced
fourth-quarter 2004 income tax expense by $5.9 million and had a
positive effect of $0.19 per share on net income. Full-year net
sales were 6.4 percent higher than in 2004. Excluding the effect of
changes in currency translation rates, net sales were up 4.8
percent. Following is a table of full-year net sales by segment and
the effect of changes in currency translation rates: Increase in
2005 Percent Change net sales Net sales as due to reported changes
in Excluding Years ended currency Currency December 31, translation
As Rate 2005 2004 rates Reported Effect (in thousands) Paper
Machine Clothing $741,628 $696,277 $12,395 6.5% 4.7% Applied
Technologies 120,595 110,752 2,278 8.9% 6.8% Albany Door Systems
116,487 112,773 377 3.3% 3.0% Total $978,710 $919,802 $15,050 6.4%
4.8% For the full year, gross profit as a percentage of net sales
was 40.1 percent in 2005, compared to 39.4 percent in 2004. The
increase is due principally to higher sales and the benefits
derived from cost-reduction initiatives, which were partially
offset by the previously mentioned factors that negatively affected
the fourth quarter of 2005. Full-year operating income improved to
$116.0 million in 2005, compared to 2004 operating income of $40.5
million after restructuring charges of $54.1 million. Full-year
income tax expense in 2005 was $29.4 million as compared to $2.5
million in 2004 and the effective tax rate for the full year 2005
was 29.2 percent as compared to 19.9 percent in 2004. Liquidity and
Capital Resources Net cash provided by operating activities was
$25.9 million in the fourth quarter of 2005. Excluding the effect
of changes in currency translation rates, accounts receivable
increased $4.3 million during the fourth quarter of 2005, and
inventories decreased $1.7 million. For the full year, net cash
provided by operating activities was $122.4 million. As a result of
strong cash generation, the Company's balance sheet continued to
strengthen, as Total Debt and the Leverage Ratio (both as defined
in our principal credit agreement with banks) improved again. Total
Debt declined $13.7 million in the quarter and $72.0 million for
the full year. The Leverage Ratio at the end of 2005 was 0.6,
compared to 1.1 at the end of 2004. During the fourth quarter of
2005, the Company closed on a 10-year, $150 million borrowing from
Prudential Capital Group. Interest on the loan is fixed at 5.34
percent. Capital spending was $12.8 million during the fourth
quarter of 2005 and totaled $43.3 million for the full year.
Depreciation was $51.3 million and amortization was $4.1 million
for the full-year 2005, and is expected to be approximately $53
million and $4 million, respectively, in 2006. The Company
currently expects that capital expenditures for ongoing operations
will be approximately $50 million per year in 2006, 2007, and 2008.
Also, the Company announced an additional strategic investment of
$150 million for PMC growth projects in Asia and Latin America,
approximately $40 million of which will be invested in 2006. The
balance of that investment will occur over the following three
years, with the largest impact in 2007. During the quarter, the
Board of Directors increased its authorization for the purchase of
the Company's Class A common stock to 3.5 million shares from the
previous authorization of approximately 1.0 million shares. The
Board's action authorizes management to purchase shares from time
to time, in the open market or otherwise, at such prices as
management considers to be advantageous to the Company's
shareholders. Comments on Operations President and CEO Joe Morone
commented, "While we are not at all satisfied with the earnings for
the quarter, we are encouraged by the strong net sales and cash
generation, and the record sales and earnings for the year 2005.
"Fourth-quarter earnings were positively affected by strong sales
and negatively affected by lower operating margins in PMC primarily
due to increased material costs resulting from higher petroleum
prices, price competition in Europe, and expenses associated with
the residual effects of previous programs for consolidating
manufacturing operations. "On January 17, 2006, we announced a
major strategic investment program for paper machine clothing
growth. Approximately $150 million will be invested over the next
four years in the construction of a new PMC manufacturing facility
in Hangzhou, China, in additional forming fabric capacity in Korea
and Brazil, and in additional dryer fabric capacity in our plant in
Panyu, China. The new facility in Hangzhou will serve as the
headquarters of the Pacific Business Corridor and will house
world-class manufacturing operations for forming and press fabrics.
These investments reflect our commitment not only to reinvest in
our core business, but also to preserve and extend our market
leadership. "The Company also announced the strategic acquisition
of Texas Composite Inc., a designer and manufacturer of
lightweight, high-strength composite structures for aerospace
applications. The acquisition will complement our existing strength
in advanced composites and will accelerate our growth in the
aerospace market. While the current investment is likely to be
neutral to slightly dilutive to earnings in 2006, we expect it to
be accretive in 2007. The purchase is expected to be completed in
two separate transactions; the first has just been completed and
the second will occur before year-end. The acquisition reflects our
confidence that our proprietary technology in advanced composites
represents a sustainable basis for long-term competitive
advantage." Paper Machine Clothing This segment includes Paper
Machine Clothing and Process Belts (PMC) used in the manufacture of
paper and paperboard products. This segment was formerly called
"Engineered Fabrics." Fourth-quarter net sales of PMC increased 4.2
percent compared to the same period last year. Excluding the effect
of changes in currency translation rates, net sales increased 6.5
percent. Full-year net sales increased 6.5 percent and increased
4.7 percent excluding the effect of changes in currency translation
rates. The decline in average prices and margins of PMC
manufactured in Europe during the quarter was the result of
aggressive pricing tactics by some European competitors,
particularly in their home markets, and sales growth of PMC
manufactured in Europe and sold into high-growth emerging markets
that have lower average prices. Our new European management team,
now firmly in place, is committed to applying the Albany Value
Concept to European markets. The Albany Value Concept is a strategy
being successfully employed in the Americas to build leadership in
highly competitive markets. Applied Technologies This segment
includes materials and structural-component businesses including
insulation for personal outerwear and home furnishings
(PrimaLoft(R)); specialty materials and composite structures for
aircraft and other applications (Techniweave); specialty filtration
products for wet and dry applications (Industrial Process
Technologies); industrial insulation products (High Performance
Materials); and fabrics, wires, and belting products for the
nonwovens and pulp industries (Engineered Products). Fourth-quarter
Applied Technologies net sales increased 9.0 percent compared to
the same period in 2004 and 11.0 percent excluding the effect of
changes in currency translation rates. Led by strong performance in
Engineered Products, PrimaLoft, and Techniweave, full-year net
sales increased 8.9 percent and increased 6.8 percent excluding the
effect of changes in currency translation rates. Albany Door
Systems This segment includes sales and service of High Performance
Doors and after-market sales to a variety of industrial customers.
Fourth-quarter Door Systems net sales decreased 1.3 percent
compared to the fourth quarter of 2004, but increased 4.7 percent
excluding the effect of changes in currency translation rates.
Full-year net sales increased 3.3 percent and increased 3.0 percent
excluding the effect of changes in currency translation rates.
Earnings increased for both the quarter and the full-year due to
strong sales in North America and global efficiency gains. Looking
Ahead President and CEO Joe Morone continued, "The strong cash
flow, and the sales gains in both PMC and the emerging businesses,
validate our focus on growth. European PMC pricing will continue to
pressure margins through the next few quarters, even as our
management team works to promote the Albany Value Concept in our
European markets. "We expect margins to improve gradually later in
the year as a number of internal initiatives begin to take hold,
but the impact of increased material costs due to higher petroleum
prices, which decreased the Company's income during the fourth
quarter by $0.11 per share, is expected to continue for the
foreseeable future. "In addition, net sales and operating income
are expected to be reduced for the first quarter of 2006 only, by
$8 million and $3 million, respectively, due to an anticipated
change in inventory practices associated with a major customer.
"Longer term, the announced capital investments in PMC and in
Applied Technologies are essential to our plans for strategic
growth. The growth in paper and paperboard in Asia, especially in
China, requires world-class support. The new operations in Asia
will provide the strongest local supply base of PMC products
available to the industry. We expect this investment will fuel
significant long-term growth in PMC. "The investment in Texas
Composite Inc. enhances our capability to serve the aerospace
industry with high-value composite structures. The Company's
emerging strength in aerospace composites offers the potential for
significant growth in profit and cash flows, especially beginning
in 2010, and represents an important first step in the evolution of
Albany International into a family of advanced textiles and
materials-based businesses. "Over the past five years, under the
leadership of Frank Schmeler, Albany International took the
difficult steps necessary to restructure the organization,
strengthen the balance sheet, and position the company for long-
term growth. Now our focus is shifting from consolidation to
growth, from inwardly oriented restructuring to outwardly oriented
new market and business development. The disappointing earnings of
the past quarter are a stark reminder that the job of
transformation is never complete. But given the strength of our
balance sheet and our market position, we enter the new year with a
conviction that we can and will strengthen our market leadership in
the short term while investing for growth in the long term, all the
while continuing to provide attractive returns to our
shareholders." The Company plans a live web cast to discuss
fourth-quarter and year-end 2005 financial results on Friday,
January 27, 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 paper machine clothing and high-performance doors with
manufacturing 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, markets, acquisitions,
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 2004 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) Three Months Ended Years Ended
December 31, December 31, (unaudited) (unaudited) (unaudited) 2005
2004 2005 2004 $247,910 $238,439 Net sales $978,710 $919,802
155,051 143,542 Cost of goods sold 586,700 557,742 92,859 94,897
Gross profit 392,010 362,060 69,489 70,552 Selling, technical,
276,011 267,498 general and research expenses - 8,814
Restructuring, net - 54,058 23,370 15,531 Operating income 115,999
40,504 1,921 3,563 Interest expense, net 10,583 14,636 3,737 3,359
Other expense, net 4,653 13,539 17,712 8,609 Income before 100,763
12,329 income taxes 3,637 (3,303) Income tax 29,420 2,450
expense/(benefit) 14,075 11,912 Income before associated companies
71,343 9,879 9 131 Equity in earnings of associated companies 509
506 14,084 12,043 Net income 71,852 10,385 483,844 424,525 Retained
earnings, 434,057 433,407 beginning of period (2,910) (2,511)
Dividends declared (10,891) (9,735) $495,018 $434,057 Retained
earnings, $495,018 $434,057 end of period Earnings per share: $0.44
$0.38 Basic $2.25 $0.32 $0.43 $0.38 Diluted $2.22 $0.31 32,306
31,467 Average number of 31,921 32,575 shares used in basic
earnings per share computations 32,745 32,066 Average number of
32,402 33,174 shares used in diluted earnings per share
computations $0.09 $0.08 Dividends per share $0.34 $0.30 ALBANY
INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS (in thousands,
except share data) (unaudited) December 31, December 31, 2005 2004
ASSETS Cash and cash equivalents $72,771 $58,982 Accounts
receivable, net 132,247 144,950 Note receivable 17,827 18,955
Inventories 194,398 185,530 Deferred taxes 22,012 26,526 Prepaid
expenses 7,892 8,867 Total current assets 447,147 443,810 Property,
plant and equipment, net 335,446 378,170 Investments in associated
companies 6,403 6,456 Intangibles 12,076 14,207 Goodwill 153,001
171,622 Deferred taxes 75,875 87,848 Cash surrender value of life
insurance policies 37,778 34,583 Other assets 19,321 19,064 Total
assets $1,087,047 $1,155,760 LIABILITIES AND SHAREHOLDERS' EQUITY
Notes and loans payable $6,151 $14,617 Accounts payable 36,775
43,378 Accrued liabilities 116,395 120,263 Current maturities of
long-term debt 1,009 1,340 Income taxes payable and deferred 14,793
29,620 Total current liabilities 175,123 209,218 Long-term debt
162,597 213,615 Other noncurrent liabilities 144,905 147,268
Deferred taxes and other credits 29,504 34,882 Total liabilities
512,129 604,983 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 34,176,010
in 2005 and 33,176,872 in 2004 34 33 Class B Common Stock, par
value $.001 per share; authorized 25,000,000 shares; issued and
outstanding 3,236,476 in 2005 and 2004 3 3 Additional paid in
capital 319,372 296,045 Retained earnings 495,018 434,057
Accumulated items of other comprehensive income: Translation
adjustments (71,205) (11,711) Derivative valuation adjustment -
(2,785) Pension liability adjustment (40,340) (38,369) 702,882
677,273 Less treasury stock (Class A), at cost (5,050,159 shares in
2005 and 5,004,152 shares in 2004) 127,964 126,496 Total
shareholders' equity 574,918 550,777 Total liabilities and
shareholders' equity $1,087,047 $1,155,760 ALBANY INTERNATIONAL
CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(unaudited) Years Ended December 31, 2005 2004 OPERATING ACTIVITIES
Net income $71,852 $10,385 Adjustments to reconcile net income to
net cash provided by operating activities: Equity in earnings of
associated companies (509) (506) Depreciation 51,339 51,843
Amortization 4,106 3,372 Provision for deferred income taxes, other
credits and long-term liabilities 10,787 (16,652) Provision for
write-off of equipment 2,827 17,099 Provision for impairment of
investment - 4,000 Increase in cash surrender value of life
insurance (2,171) (1,958) Change in unrealized currency transaction
gains and losses (4,520) 8,004 Gain on disposition of assets -
(285) Shares contributed to ESOP 5,357 5,505 Tax benefit of options
exercised 3,469 1,473 Changes in operating assets and liabilities:
Accounts receivable 4,550 9,747 Note receivable 1,128 2,859
Inventories (17,155) 642 Prepaid expenses 2,285 (300) Accounts
payable (421) 3,029 Accrued liabilities (445) (5,518) Income taxes
payable (5,617) 9,638 Other, net (4,490) (552) Net cash provided by
operating activities 122,372 101,825 INVESTING ACTIVITIES Purchases
of property, plant and equipment (43,293) (57,129) Purchased
software (2,533) (879) Proceeds from sale of assets 5,067 5,416
Cash received from life insurance policy terminations - 863
Premiums paid for life insurance policies (1,022) (1,089) Net cash
used in investing activities (41,781) (52,818) FINANCING ACTIVITIES
Proceeds from borrowings 176,430 68,005 Principal payments on debt
(235,455) (60,724) Purchase of treasury shares (1,576) (81,135)
Proceeds from options exercised 14,455 8,284 Debt issuance costs -
(1,555) Dividends paid (10,489) (9,570) Net cash used in financing
activities (56,635) (76,695) Effect of exchange rate changes on
cash flows (10,167) 7,848 Increase/(decrease) in cash and cash
equivalents 13,789 (19,840) Cash and cash equivalents at beginning
of year 58,982 78,822 Cash and cash equivalents at end of period
$72,771 $58,982 First Call Analyst: FCMN Contact: DATASOURCE:
Albany International Corp. CONTACT: Kenneth C. Pulver, Vice
President-Global Marketing & Communications of Albany
International Corp., +1-518-445-2214 Web site:
http://www.albint.com/
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