2010 Annual Report & 10-K

2010 Annual Report & 10-K 216 Airport Drive, Rochester, NH 03867 USA Tel: 518 445 2200 • Fax: 518 445 2250 • www.albint.com • [email protected] 211151_BNY_CVR_R1.indd 1 3/31/11 9:02 AM vision. mission. objective. Our vision is to continue the transformation of Albany International into a balanced, complementary portfolio of cash-generating and growth businesses. Our mission is to become the total leader in each market we serve—delivering differentiating products and service with the highest quality and reliability—while striving to achieve the lowest possible cost of operations. Our objective is to generate simultaneously the cash needed to fuel growth, pay down debt, and continue to deliver dividends, and the growth needed to drive shareholder returns. Albany International is a global advanced textiles and materials processing company. Our core business is the world’s leading producer of custom-designed fabrics and belts essential to the production of paper and paperboard. Our family of growth businesses extends our advanced textiles and materials capabilities into a variety of other industries, most notably aerospace composites, nonwovens, building products, high-performance industrial doors, and high-performance insulation and yarn. We are headquartered in Rochester, New Hampshire, operate in 13 countries, employ approximately 5,000 people worldwide, and are listed on the New York Stock Exchange (Symbol AIN). PrimaLoft and RapidRoll are both trade names of Albany International Corp. 211151_BNY_CVR_R1.indd 2 3/31/11 9:02 AM table of contents 1 Financial Highlights 2 Letter to Our Shareholders 6 Paper Machine Clothing 10 Albany Engineered Composites 12 Albany Door Systems 14 Albany Engineered Fabrics PrimaLoft® Products 16 Our Global Locations 17 Form 10-K financial highlights 2010 Q1 2010 Q2 2010 Q3 2010 Q4 Net sales: Paper Machine Clothing $144.4 $150.8 $155.0 $163.3 Albany Door Systems 33.8 33.8 36.2 44.8 except per share Engineered Fabrics 21.4 23.9 21.0 21.2 Engineered Composites 8.6 10.9 10.6 11.8 PrimaLoft® Products 5.6 8.1 5.6 3.6 Operating income 9.7 23.8 18.2 29.5 US $ million, Earnings per share - basic $0.18 $0.25 $0.12 $0.66 Earnings per share - diluted $0.18 $0.25 $0.12 $0.66 2008 2009 2010 US $ million, except per share data Net sales $1,086.5 $871.0 $914.4 Gross profit 361.6 294.3 345.3 Operating (loss)/income (68.6) (38.2) 81.2 Net (loss)/income (77.4) (33.5) 37.6 Earnings per share - basic ($2.60) ($1.09) $1.21 Earnings per share - diluted ($2.60) ($1.09) $1.21 Years ended December 31 Years 1 211151_BNY_NAR_R1.indd 3 3/31/11 9:03 AM letter to our shareholders Joseph G. Morone President & Chief Executive Officer The year 2010 was outstanding for Albany which realized dramatic improvements in operating International. The Company is fundamentally income. Last year was also a pivotal one for Albany stronger today than it was when I wrote to you a Engineered Composites (AEC): its long-term growth year ago. The improvement is evident in sales, prospects were underscored by our announcement profitability, orders, working capital, liquidity, the that we would build a new plant in Rochester, New long-term strategic position of each of our busi- Hampshire, to support the CFM LEAP-X engine, and nesses, and the condition of the markets in which by the Airbus announcement that it would re-engine they operate. The year-over-year performance was its single-aisle family of aircraft with LEAP-X as one particularly strong in Paper Machine Clothing (PMC), of two engine options. Albany Door Systems, and PrimaLoft® Products, 2 211151_BNY_NAR_R1.indd 4 3/31/11 9:03 AM The year 2010 was outstanding “ for Albany International. The Company is fundamentally stronger today than “it was when I wrote to you a year ago. In last year’s letter, I wrote that the Company was world, offers the broadest and deepest portfolio of emerging from the recession as a “cash and grow” products and services in the industry, enjoys product portfolio with three components: Paper Machine leadership in each major paper grade, and has an Clothing, our primary cash generator; Albany Engi- especially strong presence with new, world-class neered Composites, our long-term growth engine; facilities in the growth markets of Asia and South and a cluster of three businesses — Albany Door America. As for Albany Engineered Composites, its Systems, PrimaLoft® Products, and Engineered unique technology makes it a potential sole-source Fabrics — each with the potential to grow faster than supplier in a number of promising organic growth GNP, while also generating cash. In 2010, investors opportunities; it is well positioned to grow in the had a clear view of that portfolio in action. Together, largest segment of the aircraft engine industry; and these three groups of businesses generated the it enjoys a particularly strong relationship with the cash needed to sustain our core, invest in our SAFRAN Group, one of the largest and most diverse growth, pay down debt, and deliver dividends, OEMs in the aerospace industry. The same applies while at the same time continuing to lay the to the businesses in the third group in our portfolio: foundation for steady growth in the near- to each enjoys a product advantage in the markets it mid-term and potentially dramatic growth in the serves, is developing new products to expand that second half of the decade. advantage, has successfully developed an array of strategic partnerships, and is developing the capac- We begin 2011 with each of these three groups ity and presence required to serve rapidly growing strategically well positioned in their respective mar- emerging markets. kets. Our PMC business has strong relationships with the leading papermakers in each region of the 3 211151_BNY_NAR_R1.indd 5 3/31/11 9:03 AM The improvement is evident in “ sales, profitability, orders, working capital, liquidity, the long-term strategic position of each of our businesses, and the condition of the “markets in which they operate. Our ability to convert this favorable strategic posi- the same time moving aggressively to head off the tioning into sustained margins and growing cash growing threat of inflation and to continue to protect flow, in 2011 and beyond, hinges on how effectively against the long-term background risk of price we manage what we refer to internally as “the two- erosion. In a slow-growth business like PMC, front war.” Despite the obvious differences in their inflation is enemy number one, and evidence respective markets, each of our businesses faces suggests that inflation in materials and in wages the same underlying challenge: to continue to make outside North America will be a significant issue the investments in equipment, R&D, talent, and over the next several years. The only way to master business development required to differentiate on this twin challenge is by accelerating productivity the basis of superior performance, while at the same improvements enabled by our recent advances in time continuously improving productivity and striving process and product technology and investments for the lowest costs possible. in new plant and equipment. In PMC, over the past four years, we have In AEC, the twin challenge results not from inflation- invested a quarter of a billion dollars in new plant ary pressures in a slow-growth environment, but and equipment, strengthened our talent even during from the nature of long-term, sole-source contracts the recession, spent roughly 4 percent of sales on in the aerospace industry. AEC must continue to R&D, and maintained a strong and growing portfo- identify and develop new applications for our ad- lio of intellectual property. The two-front challenge vanced composites technology, while at the same in this business is to sustain these efforts to bring time driving down the learning curve once those new superior products and services to market, while at applications reach production-readiness. As exciting as the future growth prospects of this business are, 4 211151_BNY_NAR_R1.indd 6 3/31/11 9:03 AM ...our focus now is on... reducing“ costs and improving productivity without in any way compromising our commitment to advancing our “technology and differentiating ourselves in the marketplace. it will only realize its potential for attractive margins As we turn from a very successful 2010 to 2011, and sharply growing cash generation if it successfully recession and restructuring are well behind us, the masters the process of continuously driving down cash-and-grow portfolio is fully in place, and our costs as volumes increase. It is for this reason that focus now is on the two-front war — on reducing we are placing a priority on reaching positive EBITDA costs and improving productivity without in any in 2011 and break-even operating income in 2012, way compromising our commitment to advancing even as we continue to expand our pursuit of new our technology and differentiating ourselves in the growth opportunities. marketplace. Particularly in the face of growing inflation, how well we manage this twin challenge will The twin challenge for the Albany Door Systems, determine whether or not we are able to meet our Engineered Fabrics, and PrimaLoft® Products seg- investors’ expectations for 2011 and beyond. ments is to accelerate growth beyond the baseline growth fueled by a positive GNP, while at the same As always, I would like to thank all 5,000 members time holding or improving percentage margins. In of the global Albany International community for their 2011, this will translate into a continued emphasis outstanding efforts in 2010, and for their continuing on new product development and expansion of stra- commitment to our customers, to each other, and of tegic alliances, coupled with accelerating efforts to course, to you, our shareholders.

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