Albany International Reports Third-Quarter Financial Results

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Arcon Int.	LSE:AIN	London	Ordinary Share	IE00B01H3229	EUR0.10

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Arcon Int. (LSE:AIN)
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Third-Quarter Highlights ALBANY, N.Y., Oct. 21 /PRNewswire-FirstCall/ -- Albany International Corp. (NYSE: AIN; PCX/FWB: AIN) reported third-quarter net income per share of $0.58, after tax-related effects that reduced earnings by $0.09 per share. In the third quarter of 2004, net income per share was $0.33, after net income was reduced by restructuring charges of $0.06 per share and a tax valuation allowance of $0.03 per share. In the third quarter of 2005, the Company reduced its annual estimated tax rate from 30 percent to 28 percent. Had the 28 percent tax rate been in place at June 30, 2005, year-to-date earnings per share through that period would have been $0.03 higher than reported. The results for the third quarter of 2005 also included a charge of $0.12 per share related to the repatriation of undistributed foreign earnings. The combined impact of these two effects was a reduction in earnings per share of $0.09. Third-quarter net sales increased $19.5 million, or 8.7 percent compared to the same period last year. Excluding the effect of changes in currency translation rates, net sales increased 6.5 percent. Following is a table of net sales by segment and the effect of changes in currency translation rates: Increase in Percent Change third-quarter Net sales 2005 net sales as reported due to changes Excluding Three months ended in currency Currency September 30, translation As Rate (in thousands) 2005 2004 rates Reported Effect Engineered Fabrics $186,290 $169,513 $4,083 9.9% 7.5% Albany Door Systems 26,724 26,081 72 2.5% 2.2% Applied Technologies 29,316 27,254 865 7.6% 4.4% Total $242,330 $222,848 $5,020 8.7% 6.5% Gross profit was 41.1 percent of net sales in the third quarter of 2005, compared to 39.2 percent in the third quarter of 2004. The increase in gross profit as a percentage of net sales is due principally to higher net sales and the benefits derived from cost reduction initiatives. Selling, technical, general, and research expenses increased 9.0 percent compared to the same period last year and increased 7.6 percent excluding the effect of changes in currency translation rates. The increase is due principally to payments expected to be made under the Company's annual and long-term incentive bonus plans due to improved operating results and the increase in value of the Company's common stock. A portion of the increase is also related to compensation paid to the Company's new President, including an initial cash bonus. Operating income improved to $30.8 million in the third quarter of 2005 from $21.5 million in the same period last year. Operating income in the third quarter of 2004 included restructuring charges of $2.6 million. Year-to-date net sales were 7.3 percent higher than last year. Excluding the effect of changes in currency translation rates, net sales were up 4.1 percent. Following is a table of year-to-date net sales by segment and the effect of changes in currency translation rates: Net sales Increase in Percent Change as reported 2005 net sales Nine months due to changes Excluding ended in currency Currency (in thousands) September 30, translation As Rate 2005 2004 rates Reported Effect Engineered Fabrics $555,752 $517,873 $16,435 7.3% 4.1% Albany Door Systems 83,706 79,575 2,362 5.2% 2.2% Applied Technologies 91,342 83,915 2,810 8.9% 5.5% Total $730,800 $681,363 $21,607 7.3% 4.1% For the first nine months of 2005, gross profit as a percentage of net sales was 40.9 percent, compared to 39.2 percent for the first nine months of last year. The increase is due principally to higher net sales and the benefits derived from cost reduction initiatives. Liquidity and Capital Resources Net cash provided by operating activities was $46.6 million, after a $10 million contribution to the Company's United States pension plan during the quarter. In the same period last year, net cash provided by operating activities was $24.9 million, after a $20 million contribution to the pension plan. During the third quarter of 2005, excluding the effect of changes in currency translation rates, accounts receivable decreased $9.8 million, while inventories increased $4.7 million. Capital spending was $12.1 million during the third quarter and $30.5 million for the first nine months of 2005. Full-year capital spending is expected to be approximately $45 million, as compared to full-year depreciation and amortization of $52 million and $4 million, respectively. The Company reduced its outstanding debt by $76.1 million during the third quarter, while cash decreased by $41.4 million. Net debt, as defined in our principal credit facility, was $119 million at the close of the quarter. During the quarter, the Company did not purchase any additional shares of its Class A Common Stock. However, it remains authorized to purchase an additional 1,002,127 shares without further notice. The Company is scheduled to close on a $150 million borrowing from Prudential Capital Group on October 25, 2005. The principal will be due in three installments of $50 million each at the end of years 8, 10 and 12 for an average life of 10 years, and the interest rate will be fixed at 5.34 percent. The financing was arranged directly between the Company and Prudential Capital Group. Comments on Operations Chairman and Chief Executive Officer Frank Schmeler commented, "We are pleased with the operating results for the quarter, which reflect sales growth and the effects of our continued focus on efficiency improvements. Our paper and paperboard customers experienced swings in demand by region and paper grade; however, demand for our products improved in Europe and remained strong in other regions. "Although market conditions in our Albany Door Systems segment were mixed, with slow economic growth continuing to affect our customers in Europe, demand for our products in the Applied Technologies segment remained strong. As compared to the third quarter of last year, sales increased in both segments." Engineered Fabrics This segment includes Paper Machine Clothing and Process Belts (PMC) used in the manufacture of paper and paperboard products. Third-quarter net sales for the Engineered Fabrics segment increased 9.9 percent compared to the same period last year. Excluding the effect of changes in currency translation rates, net sales increased 7.5 percent. Net sales were positively affected by strong demand for our products in each of our primary markets, resulting from new product performance and value-focused solutions for our customers. Year-to-date net sales increased 7.3 percent and increased 4.1 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. Third-quarter Door Systems net sales increased 2.5 percent compared to the third quarter of 2004 and 2.2 percent excluding the effect of changes in currency translation rates. The improvement in net sales during the quarter is due to distribution channel improvements and new product introductions in North America as well as growth in the European service business. Door sales in Europe, in particular in Germany, continue to be affected by weak economic conditions. Efficiency improvements in all Door Systems operations contributed to improved earnings. Year-to-date net sales increased 5.2 percent and increased 2.2 percent excluding the effect of changes in currency translation rates. 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); industrial insulation products (High Performance Materials); and fabrics, wires and belting products for the nonwovens and pulp industries (Engineered Products). Third-quarter Applied Technologies net sales increased 7.6 percent compared to the same period in 2004 and 4.4 percent excluding the effect of changes in currency translation rates. Strong results in Engineered Products and PrimaLoft in both North America and Europe, and demand for our filtration products in China and Brazil, contributed to the sales increase. As with the other business segments, earnings improved due to sales growth as well as continuing efficiency improvements. Year-to-date net sales increased 8.9 percent and increased 5.5 percent excluding the effect of changes in currency translation rates. Looking Ahead Mr. Schmeler continued, "Our focus on growth in each of our business segments allowed us to build on the efficiency gains in our operations with solid revenue improvements. However, in the Engineered Fabrics segment, there is increased concern about sustainable paper and paperboard demand in the current energy-influenced economic environment. Because of the continuing restructuring by some global paper manufacturers, ongoing weakness in the North American market, and recent announcements by some of our customers regarding production curtailments in Europe, we are unlikely to maintain recent rates of PMC sales growth in the near term. Despite this short-term outlook, we remain committed to growth in PMC. "Albany Door Systems will continue to pursue growth strategies that lead to innovative custom door solutions, value-focused sales, and increased service and support activities. In addition, continuing efforts to improve efficiencies should further contribute to earnings. "Growth in the Applied Technologies segment should result from our continued investments in new products and the application of existing technologies to new markets. Our opportunities for filtration products in power generation applications and for composites and advanced materials in aircraft are encouraging. In addition, we are pleased by the increased demand for PrimaLoft personal insulation products and expansion of our Engineered Products in the nonwovens industry. "We expect that investments for growth will increase in the coming quarters, and will impact our capital expenditures and people costs in 2006. These strategic investments will likely include new hires in key areas, capital expenditures for all business segments, and potential acquisitions in the Applied Technologies segment. We expect capital spending next year will be between $70 and $80 million. These investments support our long-term growth plans and may positively impact operations as early as late 2006. "Our growth strategies include the continued focus on important value drivers for our customers, which improve their operations and increase their profitability. In doing so, we believe we are providing superior value to our customers and creating value for our shareholders. "As with all of our customers, increased costs resulting from higher energy prices will continue to impact our operations in the fourth quarter. We do not expect these increases to exceed $12 million for the full-year 2005." The Company plans a live webcast to discuss third-quarter 2005 financial results on Monday, October 24, 2005, 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, energy costs, growth, sales and earnings, markets, new products, 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. ALBANY INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (in thousands except per share data) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 $242,330 $222,848 Net sales $730,800 $681,363 142,689 135,603 Cost of goods sold 431,649 414,200 99,641 87,245 Gross profit 299,151 267,163 Selling, technical, general 68,842 63,134 and research expenses 206,522 196,946 - 2,576 Restructuring, net - 45,244 30,799 21,535 Operating income 92,629 24,973 1,848 3,533 Interest expense, net 8,662 11,073 (665) 2,053 Other (income)/expense, net 916 10,180 29,616 15,949 Income before income taxes 83,051 3,720 11,140 5,640 Income tax expense 25,783 5,753 Income/(loss) before 18,476 10,309 associated companies 57,268 (2,033) 32 158 Equity in earnings of associated companies 500 375 18,508 10,467 Net income/(loss) 57,768 (1,658) 468,235 416,594 Retained earnings, beginning of period 434,057 433,407 (2,899) (2,536) Dividends declared (7,981) (7,224) Retained earnings, $483,844 $424,525 end of period $483,844 $424,525 Earnings per share - basic: $0.58 $0.33 Net income/(loss) $1.82 ($0.05) Earnings per share - diluted: $0.57 $0.32 Net income/(loss) $1.79 ($0.05) Average number of shares used in basic earnings 32,063 32,160 per share computations 31,791 32,947 Average number of shares used in diluted earnings 32,513 32,732 per share computations 32,292 32,947 $0.09 $0.08 Dividends per share $0.25 $0.22 ALBANY INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited) September 30, December 31, 2005 2004 ASSETS Cash and cash equivalents $35,961 $58,982 Accounts receivable, net 130,484 144,950 Note receivable 18,751 18,955 Inventories 197,769 185,530 Deferred taxes 22,605 26,526 Prepaid expenses 10,617 8,867 Total current assets 416,187 443,810 Property, plant and equipment, net 338,666 378,170 Investments in associated companies 6,378 6,456 Intangibles 13,201 14,207 Goodwill 155,203 171,622 Deferred taxes 84,825 87,848 Cash surrender value of life insurance policies 36,977 34,583 Other assets 22,823 19,064 Total assets $1,074,260 $1,155,760 LIABILITIES AND SHAREHOLDERS' EQUITY Notes and loans payable $4,693 $14,617 Accounts payable 37,379 43,378 Accrued liabilities 118,377 120,263 Current maturities of long-term debt 1,010 1,340 Income taxes payable and deferred 26,216 29,620 Total current liabilities 187,675 209,218 Long-term debt 139,708 213,615 Other noncurrent liabilities 146,907 147,268 Deferred taxes and other credits 29,767 34,882 Total liabilities 504,057 604,983 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 34,045,574 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 3,236,476 in 2004 3 3 Additional paid in capital 317,654 296,045 Retained earnings 483,844 434,057 Accumulated items of other comprehensive income: Translation adjustments (64,996) (11,711) Derivative valuation adjustment - (2,785) Pension liability adjustment (38,369) (38,369) 698,170 677,273 Less treasury stock (Class A), at cost (5,050,319 shares in 2005 and 5,004,152 shares in 2004) 127,967 126,496 Total shareholders' equity 570,203 550,777 Total liabilities and shareholders' equity $1,074,260 $1,155,760 ALBANY INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended September 30, 2005 2004 OPERATING ACTIVITIES Net income/(loss) $57,768 ($1,658) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Equity in earnings of associated companies (500) (376) Depreciation 38,570 39,691 Amortization 2,877 2,710 Provision for deferred income taxes, other credits and long- term liabilities (1,326) (19,488) Provision for write-off of equipment 2,138 11,931 Provision for impairment of investment - 4,000 Increase in cash surrender value of life insurance (1,372) (1,141) Change in unrealized currency transaction gains and losses (3,058) 8,150 Gain on disposition of assets - 842 Shares contributed to ESOP 4,361 4,546 Tax benefit of options exercised 4,672 1,322 Changes in operating assets and liabilities: Accounts receivable 7,378 3,542 Note receivable 203 3,553 Inventories (18,840) (2,800) Prepaid expenses (807) (283) Accounts payable (466) (4,126) Accrued liabilities 10,767 19,131 Income taxes payable (3,659) 6,626 Other, net (2,267) 60 Net cash provided by operating activities 96,439 76,232 INVESTING ACTIVITIES Purchases of property, plant and equipment (30,541) (41,296) Purchased software (2,035) (489) Proceeds from sale of assets 5,067 3,944 Cash received from life insurance policy terminations - 863 Premiums paid for life insurance policies (1,022) (1,089) Net cash used in investing activities (28,531) (38,067) FINANCING ACTIVITIES Proceeds from borrowings 20,280 53,388 Principal payments on debt (103,965) (21,295) Purchase of treasury shares (1,576) (66,135) Proceeds from options exercised 12,531 5,303 Debt issuance costs - (1,555) Dividends paid (7,590) (7,034) Net cash used in financing activities (80,320) (37,328) Effect of exchange rate changes on cash flows (10,609) 1,557 (Decrease)/increase in cash and cash equivalents (23,021) 2,394 Cash and cash equivalents at beginning of year 58,982 78,822 Cash and cash equivalents at end of period $35,961 $81,216 DATASOURCE: Albany International Corp. CONTACT: Kenneth C. Pulver, Vice President-Global Marketing & Communications, Albany International Corp., +1-518-445-2214 Web site: http://www.albint.com/

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