Albany Sees $14 Mln Q2 Charge For Revision In Estimated Contract Profitability

(RTTNews) - Albany International Corp. (AIN), an advanced textiles and materials processing company, said it expects to record a second-quarter charge of $14 million associated with a revision in the estimated profitability of a legacy contract in the Albany Engineered Composites segment or AEC.

AEC has a long-term contract for the manufacture of composite components for the Rolls-Royce BR 725 engine, which powers Gulfstream's G-650 business jet. These components are manufactured in AEC's Boerne, Texas, operation.

The contract for this program was signed in 2007 and contains a very aggressive approach to pricing compared to AEC's other contracts. AEC was required to fund certain development costs for nonrecurring engineering and tooling and expected to recover those costs over the duration of the contract, which is anticipated to be more than 20 years.

The deferred costs were included in Other assets on the company's consolidated balance sheet and, as of June 30, the company had accumulated deferred contract expenses of about $11 million. The company tests the recoverability of these deferred costs each quarter.

During the second quarter, the company revised its estimate of the profitability of this contract and determined that the entire balance of these deferred costs should be written off.

Additionally, Albany has determined that an additional charge of $3 million should be recorded as a provision for anticipated contract losses. The anticipated total charge of $14 million is expected to be included in Cost of goods sold for the AEC segment.