Albany International Reports Second-Quarter Results

Albany International Reports Second-Quarter Results

Second-Quarter Financial Highlights

  • Net sales were $198.0 million, compared to $191.9 million in Q2 2012, an increase of 3.1 percent.
  • Adjusted EBITDA for Q2 2013 was $36.1 million, compared to $40.5 million in Q2 2012 (see Tables 5 and 6). Year-to-date Adjusted EBITDA was $69.9 million in 2013, compared to $66.1 million in 2012 (see Tables 10 and 11).
  • Q2 2013 income from continuing operations was a loss of $0.22 per share. These results include restructuring charges of $0.47, foreign currency revaluation losses of $0.03, and net unfavorable income tax adjustments of $0.05 (see Table 7).
  • Q2 2012 income from continuing operations was a loss of $1.84 per share. These results included a pension settlement charge of $2.37, restructuring charges of $0.06, foreign currency revaluation gains of $0.11, and net unfavorable income tax adjustments of $0.01 (see Table 8).
  • The income tax rate excluding tax adjustments was 39.0 percent in Q2 2013, compared to 26.5 percent in Q2 2012.

ROCHESTER, N.H.--(BUSINESS WIRE)-- Albany International Corp. (NYS: AIN) , a global advanced textiles and materials processing company with core businesses in machine clothing and engineered composites, reported a Q2 2013 loss from continuing operations of $7.0 million. These results include restructuring charges of $24.3 million, foreign currency revaluation losses of $1.4 million, and net unfavorable income tax adjustments of $1.4 million (see Table 7).

Q2 2012 income from continuing operations was a loss of $57.8 million. These results included a pension settlement charge of $110.6 million, restructuring charges of $3.2 million, foreign currency revaluation gains of $5.8 million, and net unfavorable income tax adjustments of $0.4 million (see Table 8).

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

Table 1

            
   

 

  

Impact of

 

Percent

Net Sales

Changes

Change

Three Months endedin Currency

excluding

June 30,Percent

Translation

Currency

(in thousands)   

2013

 

2012

 Change 

Rates

 

Rate Effect

Machine Clothing (MC)   $177,536 $177,122 0.2% $50 0.2%
Engineered Composites (AEC)    20,438  14,818 37.9% - 37.9%
Total   $197,974 $191,940 3.1% $50 3.1%
 

Q2 2013 gross profit was $77.4 million, or 39.1 percent of net sales, compared to $78.5 million, or 40.9 percent of net sales, in the same period of 2012. The decrease in gross profit percentage was principally attributable to a higher portion of total net sales coming from the Engineered Composites segment, and $0.9 million of inventory write-offs associated with the termination of a legacy program at AEC's Boerne, Texas, facility. In Machine Clothing, the gross profit margin decreased slightly from 44.2 percent in 2012 to 43.8 percent in 2013.

Selling, technical, general, and research (STG&R) expenses were $56.6 million, or 28.6 percent of net sales, in the second quarter of 2013, including gains of $0.5 million related to the revaluation of non-functional-currency assets and liabilities. In the second quarter of 2012, STG&R expenses were $50.8 million, or 26.5 percent of net sales, including gains of $2.7 million related to the revaluation of non-functional-currency assets and liabilities. Q2 2013 compensation expense included $0.4 million of unfavorable accrual adjustments as a result of increases in the Company's share price, while comparable Q2 2012 expense included $1.5 million of favorable accrual adjustments for changes in the Company share price and other items. These accrual adjustments are all reflected in the Unallocated expenses segment.

The following table summarizes second-quarter operating income:

Table 2

      
   

Operating Income/(loss)

 

Three Months ended
June 30,

(in thousands)

   2013

 

2012

Machine Clothing   $20,699  $44,997 
Engineered Composites    (1,825)  (369)
Research expenses    (7,673)  (7,253)
Pension settlement charge - Unallocated    -   (110,560)
Unallocated expenses    (14,714)  (12,819)
Total    

($3,513

)

  ($86,004)
 

Operating results were affected by restructuring and currency revaluation as described below:

Table 3

          
   

Expenses/(income) in Q2

 

Expenses/(income) in Q2

 

2013 resulting from

2012 resulting from

 

(in thousands)

   

Restructuring

 

Revaluation

 

Restructuring

 

Revaluation

Machine Clothing   $24,230 ($452) $2,903 ($2,721)
Engineered Composites    91 -   - - 
Unallocated expenses    - 2   249 2 
Total   $24,321 ($450) $3,152 ($2,719)
  

During the second quarter of 2013, the Company completed consultations with employee works councils regarding the Company's Machine Clothing production facilities in Sélestat and St. Junien, France. As a result, the Company recorded a restructuring charge of $24 million in Q2. These restructuring charges are primarily severance and social costs. Under the terms of the restructuring plan, the Company will also provide training, outplacement, and other programs. The costs for those programs will be recorded as restructuring in future quarters when they are incurred.

Q2 2013 Other income/expense, net, was expense of $2.2 million, including losses related to the revaluation of non-functional-currency intercompany balances of $1.9 million. Other income/expense, net, in Q2 2012 was income of $2.6 million, including gains of $3.1 million related to the revaluation of non-functional-currency intercompany balances.

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

Table 4

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

 

June 30,

(in thousands)

   

2013

 

2012

Operating income   $450 $2,719
Other income/(expense), net   (1,894)3,128
Total   ($1,444)$5,847
 

The Company's income tax rate, excluding tax adjustments, was 39.0 percent for the second quarter of 2013, compared to 26.5 percent for the same period of 2012. The increase in the estimated tax rate, compared to Q2 2012, was primarily attributable to changes in the anticipated amount and distribution of income and loss among the countries in which we operate. Q2 2013 income tax expense included a charge of $0.9 million for the change in the estimated income tax rate, and a charge of $0.5 million for discrete tax adjustments. For Q2 2012, income tax expense was a benefit of $29.6 million, which included a tax benefit of $36.2 million related to the pension settlement charge, a net discrete tax charge of $0.7 million, and a favorable adjustment of $0.3 million related to the change in the estimated income tax rate.

The following tables summarize Adjusted EBITDA:

Table 5

          
Three Months ended June 30, 2013     

Research

 
MachineEngineered

and

Total

(in thousands)

   Clothing Composites 

Unallocated

 

Company

Income/(loss) from continuing operations   $20,699   ($1,825) ($25,902)  ($7,028)
Interest expense, net    -   -  3,547   3,547 
Income tax (benefit)    -   -  (2,243)  (2,243)
Depreciation and amortization    11,479   1,874  2,728   16,081 
EBITDA    32,178   49  (21,870)  10,357 
Restructuring and other, net    24,230   91  -   24,321 
Foreign currency revaluation losses/(gains)    (452)  -  1,896   1,444 
Adjusted EBITDA   $55,956  $140  ($19,974) $36,122 
 
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Table 6

          
Three Months ended June 30, 2012     

Research

 

Machine

Engineered

and

Total

(in thousands)

   

Clothing

 Composites 

Unallocated

 

Company

Income/(loss) from continuing operations   $44,997   ($369) ($102,403)  ($57,775)
Interest expense, net    -   -  3,969   3,969 
Income tax (benefit)    -   -  (29,643)  (29,643)
Depreciation and amortization    11,745   1,448  2,849   16,042 
EBITDA    56,742   1,079  (125,228)  (67,407)
Restructuring and other, net    2,903   -  249   3,152 
Foreign currency revaluation losses/(gains)    (2,721)  -  (3,126)  (5,847)
Pension settlement charge    -   -  110,560   110,560 
Adjusted EBITDA