ROCHESTER, N.H.--(BUSINESS WIRE)--Albany International Corp. (NYSE:AIN) reported that Q2 2018 Net income attributable to the Company was $30.4 million, including a net benefit of $4.2 million from income tax adjustments. Net income attributable to the Company was increased by $1.4 million as a result of adopting ASC 606. Q2 2017 Net income attributable to the Company was $1.1 million, including a net charge of $0.8 million from income tax adjustments.
Q2 2018 Income before income taxes was $37.3 million, including $2.6 million of restructuring charges and $2.4 million of gains from foreign currency revaluation. Q2 2017 Income before income taxes was $3.0 million, including restructuring charges of $2.0 million and losses of $3.5 million from foreign currency revaluation. Q2 2017 Income before income taxes also included a $15.8 million charge to Cost of goods sold related to revisions in the estimated profitability of two contracts in the Albany Engineered Composites segment.
Effective January 1, 2018, the Company adopted the provisions of ASC 606, Revenue from Contracts with Customers, using the modified retrospective method for transition. Under this transition method, periods prior to 2018 are not restated. Table 1 summarizes the effect on various operational metrics that resulted from the adoption of the new standard:
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Table 1 |
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For the Three Months ended |
For the Six Months ended |
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Increase/(decrease) attributable to the adoption of ASC 606 (in thousands) |
Machine |
Albany |
Income Tax |
Total |
Machine |
Albany |
Income Tax |
Total |
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| Net sales | $ | 857 | $ | (1,257 | ) | $ | - | $ | (400 | ) | $ | 5,068 | $ | 2,966 | $ | - | $ | 8,034 | |||||||||||||||||||
| Gross profit | 1,781 | 123 | - | 1,904 | 2,820 | 992 | - | 3,812 | |||||||||||||||||||||||||||||
| Selling, technical, general and research expenses | (5 | ) | - | - |
(5 |
) |
55 | - | - |
55 |
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| Operating income and Income before income taxes | 1,786 | 123 | - |
1,909 |
2,765 | 992 | - | 3,757 | |||||||||||||||||||||||||||||
| Income taxes | - | - | 507 | 507 | - | - | 1,108 | 1,108 | |||||||||||||||||||||||||||||
| Net income | 1,786 | 123 | (507 | ) | 1,402 | 2,765 | 992 | (1,108 | ) | 2,649 | |||||||||||||||||||||||||||
| Net income attributable to noncontrolling interest in ASC | - | - | 27 |
27 |
- | - | 84 |
84 |
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| Net income attributable to the Company | $ | 1,786 | $ | 123 | $ | (534 | ) | $ | 1,375 | $ | 2,765 | $ | 992 | $ | (1,192 | ) | $ | 2,565 | |||||||||||||||||||
Table 2 summarizes Net sales and the effect of changes in currency translation rates:
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Table 2 |
Percent |
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Net Sales |
Impact of |
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Percent |
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| (in thousands, excluding percentages) |
2018 |
2017 |
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| Machine Clothing (MC) | $ | 162,635 | $ | 146,572 | 11.0 | % | $ | 3,145 | 8.8 | % | |||||||||||
| Albany Engineered Composites (AEC) | 93,590 | 68,999 | 35.6 | 1,215 | 33.9 | ||||||||||||||||
| Total | $ | 256,225 | $ | 215,571 | 18.9 | % | $ | 4,360 | 16.8 | % | |||||||||||
Table 3 summarizes Q2 Net sales excluding the impact of ASC 606 and currency translation effects:
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Table 3 |
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(in thousands, excluding percentages) |
Q2 2018 |
Increase/ |
Increase due |
Q2 2018 |
Percent |
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| Machine Clothing | $ | 162,635 | $ | 857 | $ | 3,145 | $ | 158,633 | 8.2 | % | |||||||||||
| Albany Engineered Composites | 93,590 | (1,257 | ) | 1,215 | 93,632 | 35.7 | |||||||||||||||
| Total | $ | 256,225 | $ | (400 | ) | $ | 4,360 | $ | 252,265 | 17.0 | % | ||||||||||
In Machine Clothing, when excluding the impact of ASC 606 and currency translation effects, Net sales increased 8.2% compared to Q2 2017. The increase was principally due to global growth in sales for the packaging and tissue grades, more than offsetting a continuing but small decline in publication grade sales.
AEC Net sales grew 35.7% compared to Q2 2017, when excluding the impact of ASC 606 and currency translation effects, primarily driven by growth in the LEAP, Boeing 787, F-35 and CH-53K programs.
Table 4 summarizes Gross profit by segment:
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Table 4 |
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Three Months ended |
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| June 30, 2018 | June 30, 2017 | |||||||||||||||||
| (in thousands, excluding percentages) | Gross profit | Percent of sales | Gross profit | Percent of sales | ||||||||||||||
| Machine Clothing | $ | 79,607 | 48.9 | % | $ | 70,832 | 48.3 | % | ||||||||||
| Albany Engineered Composites | 12,626 | 13.5 | (7,599 | ) | -11.0 | |||||||||||||
| Corporate expenses | (55 | ) | - | (55 | ) | - | ||||||||||||
| Total | $ | 92,178 | 36.0 | % | $ | 63,178 | 29.3 | % | ||||||||||
Second-quarter MC Gross profit as a percentage of sales improved to 48.9% as a result of higher sales and strong capacity utilization. AEC’s negative gross profit in Q2 2017 was principally due to the $15.8 million charge related to revisions in the estimated profitability of two contracts, as described above. The additional improvement in AEC Gross profit as a percentage of sales was driven by higher sales and improved labor productivity.
Table 5 summarizes selling, technical, general and research (STG&R) expenses by segment:
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Table 5 |
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| Three Months ended | Three Months ended | ||||||||||||||||
| June 30, 2018 | June 30, 2017 | ||||||||||||||||
| (in thousands, excluding percentages) | STG&R Expense | Percent of sales | STG&R Expense | Percent of sales | |||||||||||||
| Machine Clothing | $ | 26,963 | 16.6 | % | $ | 31,602 | 21.6 | % | |||||||||
| Albany Engineered Composites | 7,976 | 8.5 | 8,998 | 13.0 | |||||||||||||
| Corporate expenses | 11,966 | - | 10,687 | - | |||||||||||||
| Total | $ | 46,905 | 18.3 | % | $ | 51,287 | 23.8 | % | |||||||||
Gains and losses from the revaluation of nonfunctional-currency assets and liabilities (primarily arising in the Machine Clothing segment) decreased total second-quarter STG&R expenses by $2.4 million in 2018, and increased STG&R expenses by $1.6 million in 2017.
Table 6 summarizes second-quarter expenses associated with internally funded research and development by segment:
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Table 6 |
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Research and development expenses |
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| June 30, | ||||||||
| (in thousands) | 2018 | 2017 | ||||||
| Machine Clothing | $ | 4,211 | $ | 4,525 | ||||
| Albany Engineered Composites | 3,183 | 2,778 | ||||||
| Total | $ | 7,394 | $ | 7,303 | ||||
Table 7 summarizes second-quarter operating income/(loss) by segment:
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Table 7 |
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| Operating Income/(loss) | ||||||||||
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| June 30, | ||||||||||
| (in thousands) | 2018 | 2017 | ||||||||
| Machine Clothing | $ | 50,843 | $ | 38,425 | ||||||
| Albany Engineered Composites | 4,092 | (17,828 | ) | |||||||
| Corporate expenses | (12,251 | ) | (10,742 | ) | ||||||
| Total | $ | 42,684 | $ | 9,855 | ||||||
Table 8 presents the effect on Operating income from restructuring and currency revaluation:
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Table 8 |
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Expenses/(gain) in Q2 2018 |
Expenses/(gain) in Q2 2017 |
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| resulting from | resulting from | |||||||||||||||||
| (in thousands) | Restructuring | Revaluation | Restructuring | Revaluation | ||||||||||||||
| Machine Clothing | $ | 1,800 | $ | (2,331 | ) | $ | 805 | $ | 1,650 | |||||||||
| Albany Engineered Composites | 558 | 116 | 1,231 | (63 | ) | |||||||||||||
| Corporate expenses | 231 | (179 | ) | - | 2 | |||||||||||||
| Total | $ | 2,589 | (2,394 | ) | $ | 2,036 | $ | 1,589 | ||||||||||
Restructuring charges for Q2 2018 included ongoing costs related to the closure of the Machine Clothing facility in Sélestat, France. The Company continues to assess whether property, plant and equipment in that location will be transferred to other facilities, or if their value can be recovered through a sale. Depending on the outcome of these assessments, additional restructuring charges could be recorded in future periods.
Q2 2018 Other income/expense, net, was expense of $0.7 million. Gains and losses related to the revaluation of nonfunctional-currency balances had a negligible impact. Q2 2017 Other income/expense, net, was expense of $2.6 million, including losses related to the revaluation of nonfunctional-currency balances of $1.9 million.
Table 9 summarizes currency revaluation effects on certain financial metrics:
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Table 9 |
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Income/(loss) attributable to currency revaluation |
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Three Months ended June 30, |
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| (in thousands) |
2018 |
2017 | |||||||
| Operating income | $ | 2,394 | $ | (1,589 | ) | ||||
| Other income/(expense), net | 9 | (1,948 | ) | ||||||
| Total | $ | 2,403 | $ | (3,537 | ) | ||||
The Company’s income tax rate based on income from continuing operations was 30.1% for Q2 2018, compared to 32.8% for Q2 2017. Discrete tax items and the effect of a change in the estimated income tax rate decreased income tax expense by $4.2 million in Q2 2018. Q2 2018 discrete tax items included a reduction to income tax expense of $5.0 million due to the reversal of a tax valuation allowance in Europe. Discrete tax items and the effect of a change in the estimated income tax rate increased income tax expense by $0.8 million in Q2 2017.
Tables 10 and 11 provide a reconciliation of Operating income and Net income to EBITDA and Adjusted EBITDA:
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Table 10 |
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Three Months ended June 30, 2018 (in thousands) |
Machine |
Albany |
Corporate |
Total |
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| Operating income/(loss) (GAAP) | $ | 50,843 | $ | 4,092 | $ | (12,251 | ) | $ | 42,684 | ||||||||||
| Interest, taxes, other income/expense | - | - | (12,378 | ) | (12,378 | ) | |||||||||||||
| Net income (GAAP) | 50,843 | 4,092 | (24,629 | ) | 30,306 | ||||||||||||||
| Interest expense, net | - | - | 4,621 | 4,621 | |||||||||||||||
| Income tax expense | - | - | 7,031 | 7,031 | |||||||||||||||
| Depreciation and amortization | 8,182 | 10,247 | 1,244 | 19,673 | |||||||||||||||
| EBITDA (non-GAAP) | 59,025 | 14,339 | (11,733 | ) | 61,631 | ||||||||||||||
| Restructuring expenses, net | 1,800 | 558 | 231 | 2,589 | |||||||||||||||
| Foreign currency revaluation (gains)/losses | (2,331 | ) | 116 | (188 | ) | (2,403 | ) | ||||||||||||
| Pretax loss attributable to non-controlling interest in ASC | - | 121 | - | 121 | |||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 58,494 | $ | 15,134 | $ | (11,690 | ) | $ | 61,938 | ||||||||||
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Table 11 |
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Three Months ended June 30, 2017 (in thousands) |
Machine |
Albany |
Corporate |
Total |
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| Operating income/(loss) (GAAP) | $ | 38,425 | $ | (17,828 | ) | $ | (10,742 | ) | $ | 9,855 | |||||||||
| Interest, taxes, other income/expense | - | - | (8,622 | ) | (8,622 | ) | |||||||||||||
| Net income (GAAP) | 38,425 | (17,828 | ) | (19,364 | ) | 1,233 | |||||||||||||
| Interest expense, net | - | - | 4,285 | 4,285 | |||||||||||||||
| Income tax expense | - | - | 1,779 | 1,779 | |||||||||||||||
| Depreciation and amortization | 8,431 | 8,218 | 1,184 | 17,833 | |||||||||||||||
| EBITDA (non-GAAP) | 46,856 | (9,610 | ) | (12,116 | ) | 25,130 | |||||||||||||
| Restructuring expenses, net | 805 | 1,231 | - | 2,036 | |||||||||||||||
| Foreign currency revaluation (gains)/losses | 1,650 | (63 | ) | 1,950 | 3,537 | ||||||||||||||
| Pretax (income) attributable to non-controlling interest in ASC | - | (144 | ) | - | (144 | ) | |||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 49,311 | $ | (8,586 | ) | $ | (10,166 | ) | $ | 30,559 | |||||||||
Payments for capital expenditures were $23.4 million in Q2 2018, compared to $21.7 million in Q2 2017. Depreciation and amortization was $19.7 million in Q2 2018, compared to $17.8 million in Q2 2017.
CFO Comments
CFO and Treasurer John Cozzolino said, “Second-quarter cash flow was slightly negative as cash generated by the Company’s strong operating results was utilized to fund the continued growth in AEC. Overall, total debt increased about $4 million to $525 million as of the end of the quarter and cash balances increased $3 million to $155 million. The combined effect of those two changes resulted in a $1 million increase in net debt (total debt less cash, see Table 22) to a balance of $370 million as of the end of the quarter. The Company’s leverage ratio, as defined in our revolving credit facility, was 2.23 at the end of Q2, as compared to 2.55 at the end of Q1, well below our current limit of 3.75.
“Capital expenditures during the quarter were about $23 million, as the Company continues to invest in equipment to support multiple ramp-ups in AEC. We continue to expect capital expenditures to range from $20 million to $25 million per quarter through the second half of the year.
“The Company’s income tax rate based on income from continuing operations was 30.1% in Q2 compared to 32.5% in Q1. The tax rate declined from Q1 due to a favorable shift in the estimated mix of pre-tax income in the countries in which the Company does business. Cash paid for income taxes was about $6 million in Q2 and $14 million through the first half of the year. We estimate cash taxes for the full year 2018 to range from $22 million to $25 million.”
CEO Comments
CEO Olivier Jarrault commented, “Q2 2018 was a very good quarter for Albany International with strong performance across both businesses. Total Company Net sales increased 19%, or 17% excluding the impact of ASC 606 and currency translation effects. Compared to Q2 2017, which included a $15.8 million pre-tax charge for revisions in AEC contract estimates, Net income and Adjusted EBITDA both increased sharply. Net income increased to $30 million while Adjusted EBITDA grew to $62 million due to higher sales and improved productivity in both MC and AEC.
“MC sales in the second quarter, excluding the impact of ASC 606 and currency translation effects, increased 8% compared to last year. The increase was principally due to global growth in sales for the packaging and tissue grades, more than offsetting a continuing but small decline in publication grade sales. A substantial amount of the sales growth was driven by North America, where sales increased across all paper grades.
“MC gross margin was strong during the quarter, rising to 48.9%, a nice improvement compared to 48.3% in Q2 last year. The increase was principally due to higher sales and strong capacity utilization. Operating income and Adjusted EBITDA both increased significantly compared to Q2 2017, with Adjusted EBITDA improving to $58 million in the quarter.
“The strong performance in MC over the first half of the year places the business on track to exceed the high end of our expected full-year Adjusted EBITDA range of $180 million to $195 million. Assuming no significant changes in global economic conditions or currency rates, we currently anticipate Adjusted EBITDA in Q3 and Q4 to be in the range of $47 million to $51 million per quarter.
“Q2 was another strong quarter for AEC with significant growth in Net sales, Operating income and Adjusted EBITDA compared to Q2 2017. Net sales, excluding the impact of ASC 606 and currency translation effects, increased 36%, while profitability continued to show improvement over last year.
“The increase in sales was primarily driven by the LEAP program. Sales of fan cases, fan blades and spacers for LEAP engines, which represented about 49% of AEC Q2 2018 sales, grew 49% compared to Q2 2017, reflecting the unprecedented steep ramp up of this jet engine program. Higher sales of Boeing 787 fuselage frames, as well as F-35 and CH-53K components, also contributed to the growth in sales.
“AEC operating income improved to $4.1 million in the current quarter, compared to a loss in Q2 2017 which included the charge for contract revisions. Adjusted EBITDA also showed good improvement as it increased to $15.1 million in the quarter, or 16.2% of Net sales, as a result of volume increases and productivity improvement. Excluding the impact of the Q2 2017 charge for contract revisions, Q2 2018 Adjusted EBITDA more than doubled compared to last year.
“In R&D, our new product development activities – which focus on existing, derivative and new technologies – and our process improvement projects – which aim to optimize our operational performance across AEC – continued to progress well during the quarter. Our execution to date on our major existing contracts, along with anticipated new contract wins, continue to provide the potential for AEC to reach annual sales of $475 million to $550 million in 2020. The potential for AEC beyond 2020 will be based not only on executing on the continued ramp up of existing programs on which we are already well established, but also on increasing share or acquiring first-time content on ramping programs, while at the same time winning new contracts on future commercial and defense airframe and engine platforms.
“The LEAP engine continues to be the preferred choice for single-aisle aircraft, as evidenced at the Farnborough Air Show where new orders and commitments in excess of 800 LEAP and CFM56 engines were announced. This strengthens the already strong LEAP engine order backlog, which represents several years of production. It has also been reported that at least one-third of the A320neo-family aircraft in the Airbus backlog do not yet have engines selected, providing a deep reserve of additional potential orders.
“We expect AEC to continue to perform well over the second half of the year. For the full year 2018, we expect the increase in Net sales to end up closer to the upper end of the 20% to 30% range we discussed last quarter; and while profitability could fluctuate somewhat over the second half, full-year Adjusted EBITDA as a percentage of net sales should show strong incremental improvement compared to 2017. Beyond 2018, we remain on track toward our goal of 18% to 20% Adjusted EBITDA as a percentage of sales in 2020.
“So in summary, this was a very good quarter for the Company, with outstanding financial performance in MC and solid sales growth with good profitability in AEC. With the strong year-to-date results and our expectation of good performance over the second half of the year, our financial outlook for both businesses for the full year 2018 is for improvement compared to 2017, at levels in line with or better than previously discussed expectations.”
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 22 plants in 10 countries, employs 4,400 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 non-GAAP metrics, including: net sales, and percent change in net sales, excluding the impact of ASC 606 and/or currency translation effects (for each segment and the Company as a whole); EBITDA and Adjusted EBITDA (for each segment and the Company as a whole, represented in dollars or as a percentage of net sales); net debt; and net income per share attributable to the Company, excluding adjustments. Such items are provided because management believes that, when reconciled from the GAAP items to which they relate, they provide additional useful information to investors regarding the Company’s operational performance.
Presenting sales and increases or decreases in sales, after currency effects and/or ASC 606 impact are excluded, can give management and investors insight into underlying sales trends. EBITDA, or net income with interest, taxes, depreciation, and amortization added back, is a common indicator of financial performance used, among other things, to analyze and compare core profitability between companies and industries because it eliminates effects due to differences in financing, asset bases and taxes. An understanding of the impact in a particular quarter of specific restructuring costs, currency revaluation, inventory write-offs associated with discontinued businesses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect. Restructuring expenses in the MC segment, while frequent in recent years, are reflective of significant reductions in manufacturing capacity and associated headcount in response to shifting markets, and not of the profitability of the business going forward as restructured. Net debt is, in the opinion of the Company, helpful to investors wishing to understand what the Company’s debt position would be if all available cash were applied to pay down indebtedness. EBITDA, Adjusted EBITDA and net income per share attributable to the Company, excluding adjustments, are performance measures that relate to the Company’s continuing operations.
Net sales, or percent changes in net sales, excluding currency rate effects, are calculated by converting amounts reported in local currencies into U.S. dollars at the exchange rate of a prior period. The impact of ASC 606 is determined by calculating what GAAP net sales would have been under the prior ASC 605 standard, and comparing that amount to the amount reported under the new ASC 606 standard. These amounts are then compared to the U.S. dollar amount as reported in the current period. The Company calculates EBITDA by removing the following from Net income: Interest expense net, Income tax expense, Depreciation and amortization. Adjusted EBITDA is calculated by: adding to EBITDA costs associated with restructuring, and inventory write-offs associated with discontinued businesses; adding (or subtracting) revaluation losses (or gains); subtracting (or adding) gains (or losses) from the sale of buildings or investments; subtracting insurance recovery gains in excess of previously recorded losses; and subtracting (or adding) Income (or loss) attributable to the non-controlling interest in Albany Safran Composites (ASC). Adjusted EBITDA may also be presented as a percentage of net sales by dividing it by net sales. Net income per share attributable to the Company, excluding adjustments, is calculated by adding to (or subtracting from) net income attributable to the Company per share, on an after-tax basis: restructuring charges; inventory write-offs associated with discontinued businesses; discrete tax charges (or gains) and the effect of changes in the income tax rate; foreign currency revaluation losses (or gains); acquisition expenses; and losses (or gains) from the sale of investments.
EBITDA, Adjusted EBITDA, and net income per share attributable to the Company, excluding adjustments, as defined by the Company, may not be similar to similarly named measures of other companies. Such measures are not 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 income tax rate based on income from continuing operations 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 12 summarizes Net sales and the effect of changes in currency translation rates:
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Table 12 |
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Impact of |
Percent |
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Net Sales |
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| Percent | ||||||||||||||||||||
| (in thousands, excluding percentages) | 2018 | 2017 | Change | |||||||||||||||||
| Machine Clothing (MC) | $ | 310,786 | $ | 289,399 | 7.4 | % | $ | 9,905 | 4.0 | % | ||||||||||
| Albany Engineered Composites (AEC) | 175,420 | 125,449 | 39.8 | 3,526 | 37.0 | |||||||||||||||
| Total | $ | 486,206 | $ | 414,848 | 17.2 | % | $ | 13,431 | 14.0 | % | ||||||||||
Table 13 summarizes year-to-date Net sales excluding the impact of ASC 606 and currency translation effects:
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Table 13 |
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(in thousands, excluding percentages) |
Net Sales |
Increase due |
Increase due |
2018 |
Percent |
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| Machine Clothing | $ | 310,786 | $ | 5,068 | $ | 9,905 | $ | 295,813 | 2.2 | % | ||||||||||
| Albany Engineered Composites | 175,420 | 2,966 | 3,526 | 168,928 | 34.7 | |||||||||||||||
| Total | $ | 486,206 | $ | 8,034 | $ | 13,431 | $ | 464,741 | 12.0 | % | ||||||||||
Tables 14 and 15 provide a reconciliation of Operating income and Net income to EBITDA and Adjusted EBITDA:
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Table 14 |
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Six Months ended June 30, 2018 |
Machine |
Albany |
Corporate |
Total |
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| Operating income/(loss) (GAAP) | $ | 81,613 | $ | 6,366 | $ | (24,464 | ) | $ | 63,515 | |||||||||||
| Interest, taxes, other income/expense | - | - | (22,727 | ) | (22,727 | ) | ||||||||||||||
| Net income (GAAP) | 81,613 | 6,366 | (47,191 | ) | 40,788 | |||||||||||||||
| Interest expense, net | - | - | 8,909 | 8,909 | ||||||||||||||||
| Income tax expense | - | - | 11,640 | 11,640 | ||||||||||||||||
| Depreciation and amortization | 16,544 | 21,404 | 2,673 | 40,621 | ||||||||||||||||
| EBITDA (non-GAAP) | 98,157 | 27,770 | (23,969 | ) | 101,958 | |||||||||||||||
| Restructuring expenses, net | 10,152 | 779 | 231 | 11,162 | ||||||||||||||||
| Foreign currency revaluation (gains)/losses | (813 | ) | 301 | 499 | (13 | ) | ||||||||||||||
| Pretax (income) attributable to non-controlling interest in ASC | - | (222 | ) | - | (222 | ) | ||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 107,496 | $ | 28,628 | $ | (23,239 | ) | $ | 112,885 | |||||||||||
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Table 15 |
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Six Months ended June 30, 2017 |
Machine |
Albany |
Corporate |
Total |
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| Operating income/(loss) (GAAP) | $ | 76,688 | $ | (22,942 | ) | $ | (21,213 | ) | $ | 32,533 | |||||||||
| Interest, taxes, other income/expense | - | - | (20,326 | ) | (20,326 | ) | |||||||||||||
| Net income (GAAP) | 76,688 | (22,942 | ) | (41,539 | ) | 12,207 | |||||||||||||
| Interest expense, net | - | - | 8,613 | 8,613 | |||||||||||||||
| Income tax expense | - | - | 8,329 | 8,329 | |||||||||||||||
| Depreciation and amortization | 16,718 | 16,022 | 2,386 | 35,126 | |||||||||||||||
| EBITDA (non-GAAP) | 93,406 | (6,920 | ) | (22,211 | ) | 64,275 | |||||||||||||
| Restructuring expenses, net | 916 | 3,801 | - | 4,717 | |||||||||||||||
| Foreign currency revaluation (gains)/losses | 3,313 | 34 | 2,052 | 5,399 | |||||||||||||||
| Pretax (income) attributable to non-controlling interest in ASC | - | (314 | ) | - | (314 | ) | |||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 97,635 | $ | (3,399 | ) |
$ |
(20,159 |
) | $ | 74,077 | |||||||||
Tables 16, 17, 18 and 19 contain per share effects of certain income and expense items:
|
Table 16 |
||||||||||||||||
|
Three Months ended June 30, 2018 |
Pretax |
Tax Effect |
After-tax |
Per Share |
||||||||||||
| Restructuring expenses, net | $ | 2,589 | $ | 779 | $ | 1,810 | $ | 0.06 | ||||||||
| Foreign currency revaluation gains | 2,403 | 723 | 1,680 | 0.05 | ||||||||||||
| Favorable effect of change in income tax rate | - | 359 | 359 | 0.01 | ||||||||||||
| Net discrete income tax benefit | - | 3,849 | 3,849 | 0.12 | ||||||||||||
| Favorable effect of applying ASC 606 | 1,909 |
534* |
1,375 | 0.04 | ||||||||||||
|
* Includes tax and noncontrolling interest effects |
||||||||||||||||
|
Table 17 |
||||||||||||
|
Three Months ended June 30, 2017 |
Pretax |
Tax Effect |
After-tax |
Per Share |
||||||||
| Restructuring expenses, net | $2,036 | $739 | $1,297 | $0.04 | ||||||||
| Foreign currency revaluation losses | 3,537 | 1,284 | 2,253 | 0.07 | ||||||||
| Unfavorable effect of change in income tax rate | - | 36 | 36 | 0.00 | ||||||||
| Net discrete income tax charge | - | 754 | 754 | 0.02 | ||||||||
| Charge for revision to estimated profitability of AEC contracts | 15,821 | 5,854 | 9,967 | 0.31 |
|
Table 18 |
||||||||||||||||
|
Six Months ended June 30, 2018 |
Pretax |
Tax Effect |
After-tax |
Per Share |
||||||||||||
| Restructuring expenses, net | $ | 11,162 | $ | 3,565 | $ | 7,597 | $ | 0.24 | ||||||||
| Foreign currency revaluation gains | 13 | 54 | 67 | 0.00 | ||||||||||||
| Net discrete income tax benefit | - | 4,139 | 4,139 | 0.13 | ||||||||||||
| Favorable effect of applying ASC 606 | 3,757 |
1,192* |
2,565 | 0.08 | ||||||||||||
|
* Includes tax and noncontrolling interest effects |
||||||||||||||||
|
Table 19 |
||||||||||||||||
|
Six Months ended June 30, 2017
|
Pretax |
Tax Effect |
After-tax |
Per Share |
||||||||||||
| Restructuring expenses, net | $ | 4,717 | $ | 1,718 | $ | 2,999 | $ | 0.09 | ||||||||
| Foreign currency revaluation losses | 5,399 | 1,964 | 3,435 | 0.11 | ||||||||||||
| Net discrete income tax charge | - | 1,585 | 1,585 | 0.05 | ||||||||||||
| Charge for revision to estimated profitability of AEC contracts | 15,821 | 5,854 | 9,967 | 0.31 | ||||||||||||
Table 20 contains the calculation of Net income per share attributable to the Company, excluding adjustments:
|
Table 20 |
||||||||||||||||||
|
Three Months ended June 30, |
Six Months ended June 30, |
|||||||||||||||||
|
Per share amounts (Basic) |
2018 |
2017 |
2018 |
2017 |
||||||||||||||
| Net income attributable to the Company, reported (GAAP) | $ | 0.94 |
$ |
0.03* |
$ | 1.26 |
$ |
0.37* |
||||||||||
| Adjustments: | ||||||||||||||||||
| Restructuring expenses, net | 0.06 | 0.04 | 0.24 | 0.09 | ||||||||||||||
| Discrete tax adjustments and effect of change in income tax rate | (0.13 | ) | 0.02 | (0.13 | ) | 0.05 | ||||||||||||
| Foreign currency revaluation (gains)/losses | (0.05 | ) | 0.07 | 0.00 | 0.11 | |||||||||||||
| Net income attributable to the Company, excluding adjustments (non-GAAP) | $ | 0.82 | $ | 0.16 | $ | 1.37 | $ | 0.62 | ||||||||||
|
*Includes charge of $0.31 per share for revisions in the estimated profitability of two AEC contracts. |
||||||||||||||||||
Table 21 contains the calculation of AEC Adjusted EBITDA as a percentage of sales:
|
Table 21 |
||||||||||||||||||||||||||||||
|
Adjusted EBITDA as a percentage of net sales |
||||||||||||||||||||||||||||||
|
(in thousands, except percentages) |
June 30, |
March 31, |
December 31, |
June 30, |
March 31, |
December 31, |
||||||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) |
$ |
15,134 |
$ |
13,495 |
$ |
10,794 |
$ |
(8,586 |
)* |
$ |
5,188 |
$ |
5,530 |
|||||||||||||||||
| Net sales (GAAP) | $ | 93,590 | $ | 81,830 | $ | 76,465 | $ | 68,999 | $ | 56,450 | $ | 68,302 | ||||||||||||||||||
| Adjusted EBITDA as a percentage of net sales | 16.2 | % | 16.5 | % | 14.1 | % | (12.4 | )% | 9.2 | % | 8.1 | % | ||||||||||||||||||
|
*Includes charge of $15.8 million in Q2 2017 for revisions in estimated profitability of two AEC contracts |
||||||||||||||||||||||||||||||
.
Table 22 contains the calculation of net debt:
|
Table 22 |
||||||||||||||||||||||||
|
(in thousands) |
June 30, |
March 31, |
December 31, |
June 30, |
March 31, |
December 31, |
||||||||||||||||||
| Notes and loans payable | $ | 26 | $ | 226 | $ | 262 | $ | 249 | $ | 274 | $ | 312 | ||||||||||||
| Current maturities of long-term debt | 1,844 | 1,821 | 1,799 | 51,732 | 51,699 | 51,666 | ||||||||||||||||||
| Long-term debt | 523,186 | 518,656 | 514,120 | 444,030 | 428,477 | 432,918 | ||||||||||||||||||
| Total debt | 525,056 | 520,703 | 516,181 | 496,011 | 480,450 | 484,896 | ||||||||||||||||||
| Cash and cash equivalents | 154,744 | 151,426 | 183,727 | 138,792 | 143,333 | 181,742 | ||||||||||||||||||
| Net debt | $ | 370,312 | $ | 369,277 | $ | 332,454 | $ | 357,219 | $ | 337,117 | $ | 303,154 | ||||||||||||
Table 23 contains the reconciliation of MC 2018 projected Adjusted EBITDA to MC 2018 projected net income:
|
Table 23 |
|||||||||||||||||
|
Machine Clothing Full-Year 2018 Outlook |
Actual, six |
Results for |
Results for |
Estimated |
|||||||||||||
| Net income (non-GAAP) | $ | 81 | $ | 56 | $ | 71 | $ | 137 - $152 | |||||||||
| Depreciation and amortization | 17 | 17 | 17 | 34 | |||||||||||||
| EBITDA (non-GAAP) | $ | 98 | $ | 73 | $ | 88 | $ | 171 - $186 | |||||||||
| Restructuring expenses | 10 | * | * | * | |||||||||||||
| Foreign currency revaluation (gains) | (1 | ) | * | * | * | ||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 107 | $ | 73 | $ | 88 | $ | 180 - $195 | |||||||||
|
*Due to the uncertainty of these items, management is currently unable to project restructuring expenses and foreign currency revaluation gains/losses for 2018. |
|||||||||||||||||
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 2018 and in future years; expectations in 2018 and in future periods of sales, EBITDA, Adjusted EBITDA (both in dollars and as a percentage of net sales), income, gross profit, gross margin, cash flows 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 the sales growth potential of key AEC programs, as well as AEC as a whole; 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 impact of the new revenue recognition standard on financial results for each business segment and for the Company as a whole; the impact of the U.S. tax legislation passed in Q4 2017; the timing and impact of the restructuring in France; 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 amounts) (unaudited) |
|||||||||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||
| $ | 256,225 | $ | 215,571 | Net sales | $ | 486,206 | $ | 414,848 | |||||||||||||||
| 164,047 | 152,393 | Cost of goods sold | 312,377 | 275,642 | |||||||||||||||||||
| 92,178 | 63,178 | Gross profit | 173,829 | 139,206 | |||||||||||||||||||
| 36,707 | 41,314 | Selling, general, and administrative expenses | 78,637 | 81,721 | |||||||||||||||||||
| 10,198 | 9,973 | Technical and research expenses | 20,515 | 20,235 | |||||||||||||||||||
| 2,589 | 2,036 | Restructuring expenses, net | 11,162 | 4,717 | |||||||||||||||||||
| 42,684 | 9,855 | Operating income | 63,515 | 32,533 | |||||||||||||||||||
| 4,621 | 4,285 | Interest expense, net | 8,909 | 8,613 | |||||||||||||||||||
| 726 | 2,558 | Other expense, net | 2,178 | 3,384 | |||||||||||||||||||
| 37,337 | 3,012 | Income before income taxes | 52,428 | 20,536 | |||||||||||||||||||
| 7,031 | 1,779 | Income tax expense | 11,640 | 8,329 | |||||||||||||||||||
| 30,306 | 1,233 | Net income | 40,788 | 12,207 | |||||||||||||||||||
| (59 | ) | 116 | Net income/(loss) attributable to the noncontrolling interest | 178 | 251 | ||||||||||||||||||
| $ | 30,365 | $ | 1,117 | Net income attributable to the Company | $ | 40,610 | $ | 11,956 | |||||||||||||||
| $ | 0.94 | $ | 0.03 | Earnings per share attributable to Company shareholders - Basic | $ | 1.26 | $ | 0.37 | |||||||||||||||
| $ | 0.94 | $ | 0.03 | Earnings per share attributable to Company shareholders - Diluted | $ | 1.26 | $ | 0.37 | |||||||||||||||
| Shares of the Company used in computing earnings per share: | |||||||||||||||||||||||
| 32,257 | 32,166 | Basic | 32,239 | 32,147 | |||||||||||||||||||
| 32,273 | 32,200 | Diluted | 32,255 | 32,182 | |||||||||||||||||||
| $ | 0.17 | $ | 0.17 | Dividends declared per share, Class A and Class B | $ | 0.34 | $ | 0.34 | |||||||||||||||
|
ALBANY INTERNATIONAL CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited) |
||||||||||
|
June 30, 2018 |
December 31, 2017 |
|||||||||
| ASSETS | ||||||||||
| Cash and cash equivalents | $ | 154,744 | $ | 183,727 | ||||||
| Accounts receivable, net | 249,482 | 202,675 | ||||||||
| Contract assets | 59,244 | - | ||||||||
| Inventories | 97,659 | 136,519 | ||||||||
| Income taxes prepaid and receivable | 6,087 | 6,266 | ||||||||
| Prepaid expenses and other current assets | 19,559 | 14,520 | ||||||||
| Total current assets | 586,775 | 543,707 | ||||||||
| Property, plant and equipment, net | 450,694 | 454,302 | ||||||||
| Intangibles, net | 52,322 | 55,441 | ||||||||
| Goodwill | 165,474 | 166,796 | ||||||||
| Deferred income taxes | 81,237 | 68,648 | ||||||||
| Noncurrent receivables | 36,981 | 32,811 | ||||||||
| Other assets | 48,978 | 39,493 | ||||||||
| Total assets | $ | 1,422,461 | $ | 1,361,198 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
| Notes and loans payable | $ | 26 | $ | 262 | ||||||
| Accounts payable | 54,752 | 44,899 | ||||||||
| Accrued liabilities | 125,255 | 105,914 | ||||||||
| Current maturities of long-term debt | 1,844 | 1,799 | ||||||||
| Income taxes payable | 14,620 | 8,643 | ||||||||
| Total current liabilities | 196,497 | 161,517 | ||||||||
| Long-term debt | 523,186 | 514,120 | ||||||||
| Other noncurrent liabilities | 97,563 | 101,555 | ||||||||
| Deferred taxes and other liabilities | 13,556 | 10,991 | ||||||||
| Total liabilities | 830,802 | 788,183 | ||||||||
| 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 37,447,819 in 2018 and 37,395,753 in 2017 |
37 | 37 | ||||||||
|
Class B Common Stock, par value $.001 per share; authorized 25,000,000 shares; issued and outstanding 3,233,998 in 2018 and 2017 |
3 | 3 | ||||||||
| Additional paid in capital | 429,635 | 428,423 | ||||||||
| Retained earnings | 558,639 | 534,082 | ||||||||
| Accumulated items of other comprehensive income: | ||||||||||
| Translation adjustments | (102,888 | ) | (87,318 | ) | ||||||
| Pension and postretirement liability adjustments | (48,422 | ) | (50,536 | ) | ||||||
| Derivative valuation adjustment | 8,155 | 1,953 | ||||||||
|
Treasury stock (Class A), at cost 8,418,620 shares in 2018 and 8,431,335 shares in 2017 |
(256,602 | ) | (256,876 | ) | ||||||
| Total Company shareholders' equity | 588,557 | 569,768 | ||||||||
| Noncontrolling interest | 3,102 | 3,247 | ||||||||
| Total equity | 591,659 | 573,015 | ||||||||
| Total liabilities and shareholders' equity | $ | 1,422,461 | $ | 1,361,198 | ||||||
|
ALBANY INTERNATIONAL CORP. CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) (unaudited) |
||||||||||||||||||||
|
Three Months Ended |
Six Months ended |
|||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||||||||
| $ | 30,306 | $ | 1,233 | Net income | $ | 40,788 | $ | 12,207 | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
| 17,114 | 15,201 | Depreciation | 35,416 | 29,845 | ||||||||||||||||
| 2,559 | 2,632 | Amortization | 5,205 | 5,281 | ||||||||||||||||
| (854 | ) | (758 | ) | Change in other noncurrent liabilities | (1,231 | ) | (2,354 | ) | ||||||||||||
| (6,118 | ) | (6,745 | ) | Change in deferred taxes and other liabilities | (6,902 | ) | (7,357 | ) | ||||||||||||
| 853 | 534 | Provision for write-off of property, plant and equipment | 1,124 | 830 | ||||||||||||||||
| 154 | 212 | Non-cash interest expense | 154 | 423 | ||||||||||||||||
| 1,047 | 681 | Compensation and benefits paid or payable in Class A Common Stock | 1,336 | 1,670 | ||||||||||||||||
| 34 | 75 | Fair value adjustment on foreign currency option | 71 | 129 | ||||||||||||||||
| Changes in operating assets and liabilities that (used)/provided cash: | ||||||||||||||||||||
| (12,903 | ) | (14,395 | ) | Accounts receivable | (44,370 | ) | (15,136 | ) | ||||||||||||
| (13,877 | ) | - | Contract assets | (11,761 | ) | - | ||||||||||||||
| (1,371 | ) | 1,655 | Inventories | (10,615 | ) | (13,266 | ) | |||||||||||||
| (1,157 | ) | (780 | ) | Prepaid expenses and other current assets | (5,220 | ) | (2,697 | ) | ||||||||||||
| (5 | ) | (2,817 | ) | Income taxes prepaid and receivable | 97 | (2,817 | ) | |||||||||||||
| 11,420 | (1,459 | ) | Accounts payable | 8,882 | 2,065 | |||||||||||||||
| 5,853 | 10,071 | Accrued liabilities | 4,668 | (900 | ) | |||||||||||||||
| 10,020 | 1,978 | Income taxes payable | 6,589 | (508 | ) | |||||||||||||||
| (1,643 | ) | (3,621 | ) | Noncurrent receivables | (4,170 | ) | (7,536 | ) | ||||||||||||
| (5,745 | ) | 4,692 | Other, net | (3,321 | ) | 3,938 | ||||||||||||||
| 35,687 | 8,389 | Net cash provided by operating activities | 16,740 | 3,817 | ||||||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||||||||
| (23,352 | ) | (21,360 | ) | Purchases of property, plant and equipment | (39,123 | ) | (46,405 | ) | ||||||||||||
| (23 | ) | (353 | ) | Purchased software | (52 | ) | (391 | ) | ||||||||||||
| (23,375 | ) | (21,713 | ) | Net cash used in investing activities | (39,175 | ) | (46,796 | ) | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||||||||
| 10,020 | 16,114 | Proceeds from borrowings | 23,031 | 32,259 | ||||||||||||||||
| (5,653 | ) | (540 | ) | Principal payments on debt | (14,143 | ) | (21,142 | ) | ||||||||||||
| - | - | Taxes paid in lieu of share issuance | (1,652 | ) | (1,364 | ) | ||||||||||||||
| 3 | 100 | Proceeds from options exercised | 150 | 175 | ||||||||||||||||
| (5,482 | ) | (5,467 | ) | Dividends paid | (10,956 | ) | (10,926 | ) | ||||||||||||
| (1,112 | ) | 10,207 | Net cash used in/(provided by) financing activities | (3,570 | ) | (998 | ) | |||||||||||||
| (7,882 | ) | (1,424 | ) | Effect of exchange rate changes on cash and cash equivalents | (2,978 | ) | 1,027 | |||||||||||||
| 3,318 | (4,541 | ) | (Decrease)/increase in cash and cash equivalents | (28,983 | ) | (42,950 | ) | |||||||||||||
| 151,426 | 143,333 | Cash and cash equivalents at beginning of period | 183,727 | 181,742 | ||||||||||||||||
| $ | 154,744 | $ | 138,792 | Cash and cash equivalents at end of period | $ | 154,744 | $ | 138,792 | ||||||||||||
