AIN Albany International

John Hobbs Director of Investor Relations
William Higgins President and Chief Executive Officer
Stephen Nolan Chief Financial Officer and Treasurer
John Franzreb Sidoti & Company
Kristine Liwag Bank of America Merrill Lynch
Pete Skibitski Alembic Global Advisors
Peter Arment Robert W. Baird
Gautam Khanna Cowen & Company
Call transcript
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Ladies and gentlemen, thank you for standing by and welcome to the Albany International Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator instructions].

As reminder this conference is being recorded.

to conference like host, to now Mr. would turn over the our I of Relations. Hobbs, Investor John Director Please go ahead.

John Hobbs

Grace, you, Thank and good morning everyone.

GAAP. for associated detailed Forward-Looking the non-GAAP last the text reminder, refer Statements reference to financial and a those the reconciliation contained the particular measures on financial As in notice call, results, to with our certain regarding release Press use night issued of to of the Release and our quarterly listening please about our

the conference remarks also morning. For this apply to statements of those same purposes call, our this verbal

a of call may For including full GAAP both measures, discussion, most well their release reconciliation including measures, this filings, non-GAAP as on earnings XX-K. refer SEC to a that our use comparable please we to as our

over Higgins, the Chief opening Now, our Officer, provide turn remarks. who Bill. I would to Bill will some call Executive

William Higgins

my call. CEO delivered you fourth-quarter you, night's we to another be morning, joining Thank Good press great capping saw John. strong on year. our earnings everyone and for I'm a I'm release, sure happy Albany you as first thank call earnings last welcome quarter, here of as

will let point a and through highlights the Stephen details, out strategy quarter perspective let then priorities. from me the on my go few give our I my While, and

Engineered with of the in and both pleased we delivered The issued particularly quarter, on had we Machine quarter XX.X% Composites. segments. Company quarter all and announcement. In strong in Clothing and results I'm profitability guidance fourth EBITDA the fourth our delivered adjusted in met revenue margin margins XX.X% the or exceeded earnings the third in

the Company flow, on year. performance $XXX the cash time the free and generated ago, trajectory over Engineered cash beginning in also I'm million Composites segment of positive proud Company's for cash growth years delivered since this flow first several for free our year. the The

have operations Company of and like growth to and I with thank globe the Jarrault and have his contributions. opportunity board, I the and talent impressed would for excellence would also contribution our Olivier success our my seen. for thank predecessor, to the and operational their while been around have the pursuit the the to world like the on visit of had I employees across I dedication to I

Erkie As been you the I may I since appreciate the great Chairman ensure In responsible my have trust level, be year. XXXX. for predecessor the on was to Chairman. transition know, stepping the Board Board back into me role in my Albany is the last Board I of placed with success Kailbourne parallel I'm honored the consistency and and Company. this is at appointed into continuity of

I ago, known in a when technology I Albany I that long their Albany had in & went time, to way engineering aircraft New upstate, too school now I for have is time, at as group. what many engineer Pratt completed advanced at a Whitney years a Preferring jet interview job York. fact, in at work aerospace

Honeywell after of that to a and AlliedSignal and end CIRCOR and as Albany, markets. both like and it of Since to CEO technical, then, public Chairman roles manufacturing a business and was Albany that I held global within industrial variety aerospace and Honeywell, manufacturing strides similar company privileged businesses has has I serve International, serve

public our company a with experience but multiple offer Director to CEO bring public boards, and only technology and as company on role prior this I So, operational not as experience markets, excellence. considerable

intend on I continue to support of executing first ago. several two-pronged years that the Board, strategy the by our full was established the With Company

our growing continue will I Engineered First, on business. to focus Composites

the by not driven and fleet, changed. grounding objectives ongoing challenges, Boeing the Max of near-term have vision obviously XXX our are there While longer-term

continued the LEAP XXX be the required with we We whom contract to value Airbus will to support continue LEAP-XB forward almost further ramp on that for A-XX Boeing engine ramp to have Neo for engine the need our Safran return a and XX-year on perform family future Safran LEAP-XA a critical to important, of we the Most both relationship with customer deeply the overtime. Max once had and the strengthen returns production. history. is look to ours it to with Safran

Composites our technologies new the balance next continue addressable of will to generation competitions market across by new existing segments, winning commercial and We by for ramping also by grow business platforms industry-leading the composite our our with finding including of aircraft. Engineered applications

effort in the the offer sound development is recent Tomorrow shareholders. proven Wing future. testament returns long-term Airbus our in value of to of that The our will and the strategy believe deliver This we Albany's to collaborative that technologies strong announcement participation customers additional remains

Second, we will our solidify to position build Machine and upon segment. continue in leadership Clothing

of are strength the leader We clear on customers the offerings technology in based market. our and paper our Machine Clothing our to

we our position, new leadership constantly in In to maintain business. to solutions on customers to our to laurels. product we needs our said, changing processes support into not improved this customers. That order our resting are new Leading meet manufacturing investing are PMC’s for

invest to past Clothing and consistent with to expect position leadership in investment profitability. maintain our Machine We levels continue to

segment have we Clothing profitable EBITDA our higher even This XXXX, two extraordinarily strategy a has our Machine XXXX. than very delivering well. two-pronged after businesses. served strong expected shareholders performed well, strong of we had level Today, In

The and back $XXX Engineered caused even year, ever, Composites by over delivered the MAX challenges positive delivered business the half first EBITDA cash situation the of of the time with free million for in XXX the flow.

resource funding technology the as one and were businesses stronger this at ideas two to between Albany. time, sharing continued the We believe and given overlap people, of that,

business existing to for threefold. my strategy my backdrop, priorities So of are that with the continuation our

in teams. last strong across First, who have I supported leaders, to financial fortunate will continue years. has I'm results operational over helped to two that the strong improvement are our on focus improvement both few drive the themselves operational by segments

delivered improvement commitment our shareholder the to continuous across the margins driving of Machine - Clothing history segment demonstrated strong The delivering long a value. has Halftermeyer segment. Daniel has at

Leading and businesses. managing the operating brings late Greg year. Harwell we aerospace fortunate are last us to Engineered extensive who global Composite experience segment, have Greg joined

Second, we a LEAP, too work. ramp the business position to won Not within before F-XX, with will winning on in them had much ago, on those that focus segment. our in we programs, renewed continue where the had on focus on execute the we our to new XXX, business we on a so to on long Engineered demonstrate were growth on Composite us expecting the trust additional to ability CH-XXK customers, and to

aerospace. new are programs We existing well have tracking pursuing opportunities are now on in and a actively lot, and accomplished winning

firmly leadership shareholders. advance in state tremendous find opportunity that the art aerospace believe the long-term in for in Clothing. I to as our on as a vision composite technologies Third, vision beyond, of to believe successfully and executing Machine our position and in well our represents maintain I new applications our

capital will positions return seeking to our deploy to to maintain growth. and We drive organic continue leadership

investments have We shareholders of working achieved strong returns our across made and we our segments. expenditures have capital both the for capital from in

At our sheet capabilities the balance and we acquisitions same extend time, complete have got support that to and strategy. the our wherewithal

have which brings high we completed CirComp, tech new capabilities. in Germany In and us technologies small fact, acquisition a recently

acquisitions chase shareholders’ would capital be we that of assets. the completing on M&A some depend We prudent overpay our in the we do not seeing pricing a use prepared are it and to of doesn't market. strategy our are for However, not to believe

strategy XXXX, to is forward fruit. to Looking continuing bear our

objectives We with for would case the Clothing we to the our guidance the for in high business expect provide of needs that even expecting continued margins XXX in years in of and we segment segment and another AEC established exceeds published for production case strong year the be for the long-term thus halts Machine revenue the that XXXX several current or ago. MAX, margin,

the recent LEAP-XB The XXX grounding work very is components MAX the and of obviously suspension the program financial will Albany. production an MAX Boeing XXXX impact we continued perform on XXX for a results. on in engine important However, have our the through

XXX there and lack production a the the platform into the While our safely to for reports subsequent into return the of to ramp toward continues Boeing's hardened MAX public service, timeline be service returning clarity of significant aircraft. progress

reports. approach to reflects do for XXXX. not into additional have beyond of respect the LEAP-XB guidance any demand believe for in the realistic our XXXX the public We program components We a with insight status that

of ahead with of build are we overcome grounding MAX the to inventory LEAP LEAP over-performance AEC Safran. XXXX, In impact through contract structure the XXX finished and the a able in goods combination elsewhere of of

resulting However, in XXXX, us long-term the to the reduction XXXX magnitude of material ago. years several will XXXX, we MAX a be of in large compared impact of AEC established in too overcome, revenues to the objectives the for XXX

adjusted reflected its AEC EBITDA growth that, than objectives. withstanding not this important those long-term the in continuing for XXXX for XXXX guidance had is reflects also note been segment balance is the and our the that trajectory on higher It to margins of impact,

remains for and the These are revenue strong. only MAX the both AEC XXX long-term reduction in grounding sound of is strategy our for XXXX strong outlook because guidance business that remains that indicators that the our the

are note, separate a situation of the monitoring we course On Virus China. Corona in

be two manufacturing Clothing have we in may locations you aware, As Machine China. large

we Our first actions felt priority is our the risk that our have employees were to well-being we those facilities, appropriate to taken at mitigate of employees. help the and safety and

industry and which contingency segments the likely Engineered restrictions the facilities by period, performance. so an only aerospace impact meaningful we seeing Machine the start would were to impact on continue that a global Machine significantly our not could supply a demand situation, impact to and would our real work situation to impacted chain, of significantly plans, execute to we are of Both impact the ongoing segment. have Clothing enforces travel and the time see If but been on for exacerbate Composite the also on Clothing

too impact is results. for the too the At this full size time, on unanswered there questions us of potential it and are Company's early many XXXX

have are will the the the we disruption. provide impact direct with of current Stephen seeing guidance, However, incorporated we

Stephen. more the like With of initial details who guidance to provide quarter to that, would our XXXX. call Stephen, and the will for over turn I

Stephen Nolan

talk results our first Thank initial quarter about then for outperformance XXXX. about in the the and you, Bill. I our outlook for will

sales quarter, net an XXX.X X.X%, Company quarter XXX.X same in year. were the of For the million, delivered total of compared the to million increase fourth last

tissue for the and by Clothing, adjusting strong in partially net growth for also Adjusting Machine X% in engineered by declines quarter. and by translation driven in X.X% offset translation year-over-year grades and currency net in sales grades fabrics. by pup packaging grew In currency effects, grew effects, publication sales

for quarter growth a The AEC after immaterial Engineered by quarter, sales. completed of Composites portion net in back of currency CirComp, which sales, by was the X.X%, half primarily grew an program. translation adjusting fourth contributed driven in CH-XXK of the effect, again the fourth acquisition

points from increase Fourth an The over Company by was overall million, quarter to comparable the increased basis of of XX.X% gross $XX.X the year. margin profit last X.X% period XX.X% XXX gross sales. net for

the principally expense. segment margin XX.X% MC XX.X% from gross net of to reduced improved depreciation Within to sales due

by Within net leverage productivity. the improved to gross net fixed contracts driven favorable the margin in AEC, by of change XX.X% improved labor a net million $X.X estimated and XX.X% higher profitability from increased of long-term by driving sales cost sales

general million of quarter net prior to Fourth quarters from sales increased and XX.X% selling, current technical, the XX.X as in quarter and expenses in to the XX.X%. percentage XX.X also year increased million research from a

just to the increase related deferred the on The expense in while the of expenses being same including purposes was of resulted as and loss to an payment future it over had the QX negligible treated met. $XXX,XXX assets being a the in by certain fact of is of for price, acquisition currency period has purchase due $XXX,XXX driven in is of which last non-functional by CirComp XXXX revaluation expense dependent X.X year obligations which gap impact in and in million the only that amount the liabilities primarily that

was increases These for expense XX.X% Total for decline million, million of increase offset the quarter. in income Company an a operating XX.X by from prior partially quarter. XX.X year R&D the were the in

XX.X by higher and million Machine and operating expense, offset by by while our restructuring profit gross million grew STG partially Clothing AEC STG X.X lower operating and driven income expense partially offset XX.X% by driven increased expense. profit, higher higher and income restructuring by by our to gross higher

XXXX. items rate million by XX.X% income same was QX Income expense in X.X compared million tax the income estimated the QX X.X the the annual same factors tax and Discrete for the rate change quarter reduced XX.X% by to tax in in XXXX increased period the expense while had year. in last

rate increase and Net increase income tax attributable to the fourth XX.X% an Company last was quarter operating income year. lower of the from was million, by for the XX.X earnings. million the driven improved The XX.X

$X.XX quarter to to associated of impact share Earnings expenses the restructuring adjusted period was this quarter currency last per revaluation, related compared and this the CirComp $X.XX $X.XX in pension acquisition year to with year. gains charges compared de-risking initiatives last $X.XX the expenses, losses, after share per comparable and adjusting for was in earnings foreign

year grew Adjusted XX.X was EBITDA million the of adjusted million from from Clothing XX.X% year or last EBITDA to XX.X% Machine for net sales most this year XX.X quarter. recent the year of up or to from quarter. or million XX.X% $XX.X XX% quarter. or AEC EBITDA sales of $XX.X net in million last grew prior $XX.X sales XX.X% of net this sales net million adjusted

about at $XX position. maturities which sheet in a about the of of of debt long-term reported amounts end debt as cash $XX debt $XXX Turning during in steady of in Total or reduction to the current our consists million. and net quarter, debt debt resulting million balance QX at remains by million our increased long-term

in the to quarter leverage which we million debt, netting with agreement, $XX ratio us a X.XX. credit limits Under of of definition against leverage finished used cash our gross ratio of the

While limitation cash disregarding absolute netting the ratio of results X.XX. leverage in on an

Our significant working back our in capital by the to buildup initiatives, by the capital half year year. offset inventory program, net goods in working the the a a primarily debt investment of LEAP in has support reduction finished part of driven been this partially

as provided increased million by flow, activities in capital million million we provided expenditures, to activities, $XXX in full-year, from to cash year. less cash net million the free $XX cash Also $XXX by $XXX for full-year, in which the increased XXXX. operating For XXXX from operating this XXXX net defined

million, point spite in the were of in his included for capital expenditures ups to performance alluded XXXX LEAP equipment ramp that, multiple like this remarks, investment. delivering year in support in QX, investments positive the would as $XX continued I out cash Bill to Capital cash working about AEC flow AEC. in to reflecting free

expected, and full-year performance that year. We of change the mentioned be of metrics, with would that XXXX initially investment projects, now segments spending driven across than completed priorities. timing last quarter, level were of lower be lower capital both for pleased Overall, does some expenditures some the will represent the which in the of very we material our or any the on last in not all plans by business

in weakness and data in RISI in prior end-use Looking calls, Machine markets of forward faces production to the of the discussed paper previously products markets third most Clothing XXXX, America fourth XXXX, and board with a by over on as its over year-over-year between important X% declined on latest ongoing quarters and global X%. suggest that, X.X% basis North of with these declines

modest that segment cannot indicated of it China, to the current about the degree earlier, weeks. some of Bill As the into operations, disruption four those we yet impact in to disruption operations our anticipate Virus face full the incorporated a from also while for expectations assuming impact Corona those

in our we $XX perspective, our to operations from impact similar. and disclosed to in around have our in we customers sales them, put China XXXX disclose equipment million, our in sales directly were To XX-K while XXXX roughly were to operations this yet Chinese that

in and for of Clothing currencies. last expectations Virus the segment take I impact globally Machine The account we of situation our lower overall Clothing level few impact in weakness Machine just of into referenced of demand several generate local the Our currency anticipated where the the current of paper the Clothing, ongoing over production revenues Machine Corona quarters. the impact markets

million we of a XXXX the and guiding between result, segment million. for $XXX As $XXX are revenues

weaker XXX XXXX to for million and expect slightly are guiding very XXX the compared remain adjusted margins of still revenue EBITDA to the notwithstanding segment million. the However, robust we XXXX, to

XXXX to it items from I be AEC, AEC’s for XXXX few a may guidance Before, provide highlight helpful results.

gross over $XX First in net including in fourth contract estimated in recorded long-term and million XXXX the This in a we profit XXXX. the of impact quarter, revenue recognized recognized total of in result in profitability. favorable cumulative both million changes $XX

have estimates process, in to or both changes quarter, to over contracts adjustments seen a favorable and recognized we are last several result long-term every profitability usually maybe that of the While any years. These as changes review difficult the either unfavorable, we directions profitability of of forecast.

be of in we to are benefits in unlikely the these However, as recognize XXXX. in same XXXX, recorded types magnitude

in the joint impact decision XXXX subsequent aircraft fleet Boeing’s $XXX be just in venture over and grounding Second felt LEAP to of the production of XXXX, full our Safran MAX of in at results. recognize the yet billion. our to the revenues suspend we In Albany had

Of this, a The components variant XXX NEO recognized for the the engine. powers remains to the LEAP-XA related outlook components A-XXX for or family LEAP-XB with that just over million almost the LEAP-XA was MAX destined XX% balance on for $XXX strong.

mentioned is continuing subsequent service for into production However, there to the ramp XXX lack as earlier, of MAX. a and return Bill timeline the clarity

from We this components at realistic year, with believe our level much assumption remains XXXX is that demand it but LEAP-XB uncertain. than our which respect in a lower to is customer for

significantly lower spacer but reduced on-hand case, levels goods our finished the to inventory This secondary fan of will the important expectation LEAP XXXX. of blade we levels components. at drive of production of production A demand LEAP-XB driver XXXX and have in end less relates

mutual only previously the XXX we the we expectation and the half decision in support the with to the that our XXXX As away. of full return second based MAX of customer service made months have Safran on disclosed was our at

inventories. LEAP-XA at meet order facilities, higher we and demand of That workforce maintain for would would disruption any for rate to rate components goods ASC increase allow than production a our and immediate variance in both a Safran's in would minimize a at finished modest LEAP-XB

of like contract on in we point future balance recognize of of in components a the under were to revenue those time the on the those GAAP for resulting the revenue goods rather LEAP than the recognition delivery sheet our with contracts as Safran, finished at reporting current at the required asset. of XXXX, revenues production, to Due inventory requirements contract recognition

As time on-hand Airbus MAX this we action, made and a finished decision, XX from XXX the sufficient from goods XXXX inventory family in-line aircraft. XXX finished of to with we the result A-XXX and aircraft the expectations our with support

a pause December. aircraft our and service not a announced to you for know, near-term for MAX the However, met, as was expectation the XXX of Boeing in production fact all in return in

XXXX, early reductions in Following Boeing's to facilities. implement reluctantly began our announcement we ASC in-force

impact XXXX now on in finished burn goods start XXXX, place will back both to during period. will in half for the excess our actual inventory are in and end finished we to down flip XXXX. burn-down assuming the of goods than we We XXXX, result the in saw of the This the at will that lower our which LEAP-XA revenues LEAP-XB same recognized inventory shipments customer of

recover I costs a will actual those would was like where Safran, our means structure not in of portion out to of LEAP-XB since produced in contract costs, revenue related components that we directly go the XXXX and to point recognized proportionally to any fixed our quantity the down of with reduction on components, revenues the associated fee.

expected LEAP-XA costs LEAP-XB on in that components as recovered be produced If XXXX. the components are and remaining fixed absorbed those by deliver will fewer LEAP-XB we in XXXX, and

of quantity in in of the the higher reduction fees associated caused a that experience we costs XXXX. and absence LEAP-XB had components will in the we producing incurred variable ASC However, by revenue

another laminated we joint Third. under venture, composites contract. fixed support with program of small price ASC Outside LEAP do traditional also the the

now XXXX program LEAP-XA we from for grow engines, this have with we the both in decline program While revenues to by XXXX. previously LEAP-XB compared expected million this million ramp expect would to from $XX expected and XXXX to $X revenues to in-line

in-line or would of performing like with much to expectations. that point AEC ahead is of I out

set the mentioned In fact, work segment. XXX production XXXX grounding the long-term for AEC as we for at our and pause, had Bill or guidance prior be the above for not earlier, would objectives

are overall, XXXX. improvements programs non-LEAP significant For we in experiencing

in the even of segment the after overall, free for XXX MAX Additionally, generate XXXX. a impact cash we flow the year positive the second that slowdown expect in row will

offset. estimated just the expected long-term I the revenues impact price the of XXXX favorable contracts for in too of from program venture joint discussed, the and those performance. are three factors net LEAP smaller absence improvements profitability other the fixed the changes However, lower for to our ASC great in revenues Lower

AEC As we for million adjusted to of XX million. a result to revenue of guiding AEC XX XXXX, are EBITDA XXX XXX and

are Company of tax and to Revenue income initial XX total follows. million. the guidance also of million. including and billion. million At level, XXXX effective are million and the to between XX tax The XX%. Depreciation $X.XX providing of XX% as million. range Capital XX XX and EBITDA of between in million adjustments Adjusted XXX expenditures rate we $XXX amortization between XXX

between and $X.XX. GAAP share between of guidance The our (Ph) and represents share $X.XX severance earnings CEO. difference ranges $X.XX earnings of per to million QX will adjusted [$X] charge payments known adjusted be $X.XX, and for and our a of outgoing EPS recorded between per which in GAAP related

R&D our While R&D to of formally to variety Most demonstrate production in Composites support continue notably aircraft will expenditures to unique of segment, needs. we the not to solutions guide like customers' increase the the composite we XXXX. Engineered spending, do of and a applicability do that to in our expect note components would advanced I we

been market vision MAX our we to current situation long-term continuing earlier, Bill by invest in to mentioned for support has vision. success XXX and are that in that unaffected As the

outlook creation. We continue to the lead value of will both long-term segments and believe our for significant that to strategic strong remains

to would call I like that, With the for questions. Grace. open


& [Operator from first John question Franzreb instructions] ahead. you. Sidotti Company. Thank go And Please our is with

John Franzreb

Hi good Stephen, morning back and both. Bill welcome

William Higgins

John. Thanks

Stephen Nolan

morning. Good

John Franzreb

long is MAX? embedded will for your in guidance. My halt first you How do the continue assume production question

Stephen Nolan

So John, the for question. thanks

John guidance, our because MAX we on background please your of phone and mute, noise. some terms getting In are on put XXX the

Boeing MAX with service is of its in to returning expectation program XXX based terms does the ramp. of any guidance production either Our necessarily and the not what on subsequent

our direct on of more we anticipate based front. expectation Our seeing guidance customers from an is demand

deliver. of in levels and Safran our in from as Boeing service as Boeing's not say, return various what that to removed and clearing discussed, of I the CFM does, But also also joint chain, through the aircraft inventory we but within on somewhat Boeing lies that our also, not removal yet of that goods to and of terms supply of backlog within does venture. the only fleet backlog Safran clearing only aircraft has books it finished existing So, what the the is


you. will Thank to ahead. line with America. Kristine Please next Bank we the of And go go Liwag of

Kristine Liwag

morning Hi. Good guys.

William Higgins

morning. Good

Kristine Liwag

production For producing do the XXX what XXXX? are will through you rates production be point you MAX, producing? restart And then what at at rate you what and

Stephen Nolan


So, our request as we MAX. have our we at build not for do discussed XXX after the before, of about customer, rates specific talk

answer I that directly. question so, And can't

components. goods still have only than we customer, rate are finished production been for recognized lower still mentioned previously demand obviously revenue. producing, a result of from but are already we we here have already the as at on the which on-hand, producing, exacerbated inventory had LEAP-XB a We in also but by I not Sitting which is today, we much our

William Higgins

think, of I be. exactly Stephen. really it difficult look the It year what emphasize noted our lack the too, important to we is to just at clarity. as It time as travel comments, will we in is

on to taken just approach have something a it think we will go have year. as we through is the and an So, is we everyone update approach probably realistic we

Kristine Liwag

there does how should How you declining rates and rates. that but growing F-XX net the in cutting to And we portion of cost you XXX expect non-AEC discuss Engineered Thanks. out? of initiatives balance can Composites, your

William Higgins


of As we ramping right we programs have now. mentioned, up number are we on a that

we So of watching are those. each

growth the XXX and We that But, also out. are how play watching programs. will have we

workforce be as we as appropriate shifts. growth the So, needed shifting will

Stephen Nolan

impact AEC results, growth the double-digit out on our of and of point in embedded guidance. and that program outside is I of XXXX anticipate our the will balance revenue LEAP-XB we AEC, that in that

Kristine Liwag

of that we to And possible Corona the of that Can two magnitude been should normalize? of China facilities some per mentioned have then amount Clothing. the you resolution and things a affected effect by you see gears full-year and Machine Bill, recover that in then you. so once could when Virus. Thank have normalize, switching you speak on the dollar quantify intact? this in can activities all that Is is there of do to you terms to quarter expect also you that

William Higgins

a there. hard call is now, And logistics It fluid. do We problem of make small and One rate. is at is really the other to then the very not so is just there running right have basically the facilities running shipping yet. because is situation ships two shutdown, is

we to watch know it just we are So, go. I we if don't going -. as

Stephen Nolan


as as my Kristine last directly million year to to your in we generated disclosed remarks, operations I week customers. So, have mentioned question, dollar Chinese $X we from roughly sales a of

types right reduced are are One, seeing now. We seeing of two a we sales kind of obviously. impacts

shutdown, So has not only are we but our customers Chinese shutdown.

revenue and obviously So causing sales to customers on Chinese Chinese that direct paper is mills impact. or other a any of holds

impact are Asian products. go from of still from products The customers those there China some Chinese facilities, some need some those outside is and into Europe. in seeing we Those are secondary which elsewhere

higher of the beyond which produced causing which have revenue cost We impact China, reduction in to than is are having that are we overall to seeing come up with from a is EBITDA produced plans at would causing be China. been in that it just product those contingency hit additional slowdown the products,

Kristine Liwag

much. very you Thank

William Higgins

Thank you Kristine.


go to with Please next And you. Alembic we the Global. Skibitski Thank line of Pete ahead. will go

Pete Skibitski

Good and Stephen. morning Bill Yes.

timing, you AEC So first end that half half about revenue and expect talk revenue just understanding, should just But stuff. LEAP-XB, guys second confidentiality fairly on with to go further half first the meaningfully below the be we know to customer revenue?

Stephen Nolan

rate. to I really still Pete, able don't are had know. alluded That depends step on to going frankly be when too because to unknowns many we quite up we production

So, that the uncertainty given it I say to around is LEAP-XB. think too early

Pete Skibitski

from like capital conversion. sure than this just working it last to be greater given reverse, cash sounds timing, sounds it Okay. cash year? you build exactly that you one And are conversion the the it just curious will about expecting given, not free free working like big build maybe then, year the Stephen had capital I'm flow - of but

Stephen Nolan

the we We balance a position XXXX. flow capital it very or free cash it obviously be XXXX. though day generation, always in taken not Machine another of obviously continue flow strong the conversion at but in below XXXX, tell guide free going cash in above XXXX was strong don't had one, very see segment flow, is meaningful the some year cash and in was cash is to so We whether and obviously you LEAP delivered year. unwinding positive I'm very the strong a strong given of as Clothing certainly overall We should we free have expect to that we cash working we in expect a

Pete Skibitski

great, it Bill as were kind the are set. maybe current sure very the the not how a opportunities long like it in opportunity new kind the - for you how of pricey, really lot lived. of whether of I'm know curious but remarks and I'm you size, these active of is new military kind in terms being aerospace platforms were at just more of your in but or little or set, big because not, M&A is commercial and looking is Okay sounds bid programs to you a one kind market projects opening Bill. of bids alluding on

high And are of they see at maybe at level active. a lot the so new opportunities we don't but level, your more

as So, curious seeing to what I'm are you there. just

William Higgins

The is Wing of long-term a Well, program. and Tomorrow, as is it we announced

and our the composite the the investment, and belief expected speaks in benefits our really from So, technology technology. it technology long-term customers to

keep working. So, we will

longer would not disclose on that. them our happen As long-term to are a is that are say going year. working in within They But other customers we when to are we ready will nature, term. are do something I opportunities, they

Stephen Nolan

is some context, to in in these smaller. either military There fairly build full though which the another definition But ones opportunities tend nature, XXXX. we were or means be and somewhat smaller, put be pipeline to successful are and because rate these by tend from a supplier, in there takeaways which these are lower is to in they are programs

right meaningful. in These winning revenue terms that are we pursuing now they are type programs and impact, not of LEAP certainly but its are

today. every $XX size our that need even win to these in meaningful growth that rate. are Some handful we impact We million see, And million of on programs get of per out given of a certainly only those have chasing are of year. could to revenue year we they them to $XX the a potentially

Pete Skibitski

makes it guys. sense. for the color is great. That Okay, Thanks

William Higgins

Pete. you Thank


Thank go Please to you. next we Arment ahead. Peter And line go of the will with Baird.

Peter Arment

on Yes, North X% forecast thanks. customers? Good for North X.X%, to in just America. already quick global to you rates Stephen, down from Bill weakening said the see one, morning and American production Have Clothing. started down Stephen. X% you order Machine The a

Stephen Nolan

a You lived typically, know, decent see the to and early of back right I corporate tough The starts comes order half QX. just haven't a before, part couldn’t flow in flow. through now tell is I here is is and this into quarter where, lack the it panic to say. stuff of It order always fairly QX. the it of all

- [Technical little this time. long difficulty] we carry at something quick And we not So, fairly weaker point. it not like orders terminal now. large the this is is not obviously know These this lead backlog. is - it orders where point and a so tell is aerospace very typically a right expect. Buts little are you get It at meaningful a to early it don't is

Peter Arment

have And the you Are they were fill expectations that pulled about quickly Okay. know on going from lot then in LEAP-XA I that to LEAP. was your No, their talked production customer? we accelerate some just getting LEAP of a there I end? is out more on helpful. for know to on AEC,

Stephen Nolan

up in seeing some LEAP-XA certainly demand. is modest we XXXX are increases absolutely, LEAP-XA from and So,

as increased alternative we LEAP-XA and by has therefore we the rate, NEO at of see LEAP-powered powered of same I produced. to factors build the - as to number for orders would engines before, you some aircraft for One, the discussed even more opposed the larger if are couple NEO overtime, look being recent which being A-XXX have of through think A-XXX are family, engine expect of a on. a proportion going there the those

the A-XXX of increasing the has actual secondarily, talked NEO. Airbus build And about rate

will time. impact expect Airbus supply overtime, numbers. for takes think chain that the of rate build in today. and NEO are a sure current time it move, aerospace not reasonable see The to up we that takes of don't seeing global Now is trickle our I'm A-XXX to I higher impact it to but

William Higgins

To order an going A-XXX. was MAX I down are slow lowdown, on Stephen. I or to question, don't seeing we rate Yes. and to reaction competitive the add, answer think rates impact production the there the is a

LEAP-XA business, yet. seeing the not that an There business. are is in increase LEAP We

Peter Arment

one Bill for is just Okay maybe quick you. a that helpful.

you now? give expecting your you Given the to maybe segments you Board operational on in runway the perspective front that a seat seat is row kind had that both of you just improvements, the mentioned kind that improvements of front are still on from and continue, for of have some were

William Higgins

going we Yes, to to on focus improvements. operational are continue

We lot performance, got place, to foundation still top a cost last customer, There is our there, plenty improving service on number to the teams I is of put opportunity place work have but will a productivity, still in we more got in leaders of to have continue that. the do strong quality of year. there say

Peter Arment

it. Thanks color. all appreciate I the for


next Thank to Please ahead. line And go of (Ph) Bowman] the we JP with you. will Morgan. [Patrick go

Unidentified Analyst

gentlemen. morning good Hi

ago. Just maybe provided had starting with XXXX guys targets some mid-term the time that you some

chain that I think able will reason MAX you when or Is be supposed was guess above numbers believe to that you asking what MAX to the I'm supply at where be these issues. be to impaired any is, those about I years way mentioned it such be would entitlement out those levels. that absent back I'm you there you to to of in achieve talking ago? XXX a what might in from to couple EBITDA normalize revenue a any hundred it that for the that the thought there, business? and that put make had difficult the I issue gets to guess in you or back XXX

William Higgins

reverse for implies range. our that the range the certainly rate XX% guidance are of EBITDA above XX XX% we to guidance to them order, certainly XXXX a taking providing XX%, that Just

that. see a with don't challenge we So

In as terms term of this business XXX, see XXX in billion of revenue, a we effect. do not see way. anything which short the has We do any permanently impaired

we production not by nature, now, online. and what it be right to the we seeing pause reduced beyond in directly demand not in itself once XXX driven should but so reverse going for predict lasting is future, Obviously are that comes guiding is which and I'm XXXX, nothing should there are caused LEAP-XB grounding the engines by the back XXX

Unidentified Analyst

on update GEXX for for XXX? Any Okay. progress the the

William Higgins

in obviously are production aircraft. for low we So, rate

pleased our ago expect that right, we that, we We month flight program, that producing was production in and our it are so at see be year increase first to XXXX, the in-line with expecting obviously this program delay slipped triple a to there about or impacted are demand. XX-months a to the customer's But very year which ramp. to in so this the production

We that are particular challenges there ramp and that no for today. are facilitizing in program

Unidentified Analyst

XXX, that And for then what is about XXXX? outlook what for the within your the business

William Higgins

been of any it mix depend have there XX but Obviously XX to downs, not there and aircraft. impact it Yes. in XX, that on here material some does be could - XXXX, two the XX step be to the XXXX, will has in impact

three We As frames of there variants are variants two XXX. for provide the today. three the for

other Even much not to is a or program our impact and if but the year, to a obviously, a that it that would so, as it material programs not given handful that AEC is would drive significant details up be. enough one down. is overall all depends how any our production in significant impact on in of reduction LEAP going It program, though really have revenues. revenues And smaller variance, materially than but works important an mix on it it in significant of that, is much, the

Unidentified Analyst

growth you mentioned you importance, and you your expect order the said this are for of if segment, through growth order wise? What one just last drivers? Safran maybe I excluding could from missed think and business earlier program - Maybe By Well that you me. of importance, double-digit big big drivers in are the just the XXXX. I By what double-digit it. revenue

William Higgins


Those is get other AEC, CH-XXK, big So, programs of program, the by the Air-to-Surface variety are our wastewater that F-XX Martin, Lockheed we programs. guiding Boeing coming have Joint programs. into significant are then of outside programs bulk XXX, will we be program an smaller of Standoff which program, of but growth for Missile don't out most and specifically JASSM a for the the those Aircraft tanks and LEAP, the

Unidentified Analyst

a Thanks lot. good. Very Good luck. Okay.

William Higgins

Thank you.


Franzreb. question We have you. ahead. go Thank from Please another John do

John Franzreb

Just up, could in Yes. Machine come environment year that those Machine that considerably again. impacted does talk I in has pulp profile difficulty]. been impacted myself just how will the down But ask Clothing discuss, has spending recycled issues, mute quickly you end and taking over your the all? secondly, it [Technical customers at pricing. And to Clothing? that in Is pricing margin

Stephen Nolan

So, thanks John.

that [Zurium] of terms time in as you So the acquisition, (Ph) was say ago. some obviously completed

and competitors seen Machine The has yet in of But, fairly of strong environment and market. watch not Clothing have market. been a the always strong in significant impact the obviously we mindful competitor, We very a that pricing ours. It a that are is stable. it. remain Zurium competitor strengthens in they

We have not seen significant impacts of that yet.

the of obviously pulp, is terms down. and pricing In question your about

of top-line level the the they not customers, a in various the but meant down points at products of bit our markets pulp hasn't material our the all during it somewhat up. have as time for year, shift with a being the year. acquire some seen roll We we It a material for when at shift

pulp Overall driven for packaging with and during typically in in Machine was slightly currency for year, primarily year up low the constant see by the as the tissue business in basis. on most growth But to growth bulk single-digit -. the the a year XXXX, growth recent pulp of was compared we Clothing

basis full-year expect, did some in But roughly currency a for XX% on as constant of year. publication Again, full-year, growth for for in the the would year. see we grades declines the you pulp

level talked of sales. overall, it So, you affect were customer about what specific impacts top while there our didn't


we the Gautam to next ahead. Please go & line Khanna will And Company. you. of go Thank Cowen with

Gautam Khanna

good morning thanks, Hey guys.

Stephen Nolan

Gautam. morning Good

William Higgins

Good morning.

Gautam Khanna

Great, thank you.

for questions a So just couple clarification.

guidance for in adjustments, expecting First, XXXX? in a you what EAC terms are Stephen, of the

Stephen Nolan

significant have seen had have fortunate, take years typically we negative we we We adjustments. EAC where in or the very neutral had planning, them, a adjustments, we either unfavorable is embed in don't as stand We have typical would on were we in But because past, positive favorable our enjoyed words in probably some leaders - the of business. wrong fortunate the year. But employees we work very position. a a year assume this the hard and neutral it adjustments of and our

Gautam Khanna

revenue revenue anticipating, was that revenue LEAP-XB on you not XXX EAC gave you what components XX then I a couple in the LEAP-XB made XXXX? you and you if million some are And embedded Okay. guidance what million maybe the year and five LEAP-XB wasn't just down and to last the in then frame something the expectations was XXX clear was for color at that can comments, in

Stephen Nolan

Thanks Gautam.

reduction as and five two to XX first the of the questions are part, million. So, there

small laminated the a We requests traditional about at which I nature contract so externally of talk fixed program, typically program, have customer we exact composites. don't divulge is price a for and the XD don't

So outside of this venture. Safran Albany, the is joint

the We to ramp LEAP. would XXXX calendar of calendar line have expected that grow program from to just in with XXXX

to from five to In fact, declining that XXXX. XXXX about program is by million XX

the that first So question. is

So was venture. Albany, only this was joint the LEAP-XB revenues XXX, not the within Safran because in XXX

XXXX, going. at break the from we out, are calendar those going product level segment unit to in we want clearly vary XXX low XXXX. line down But get appreciably into down question, as in to level LEAP-XB we not issuing your second are don't business guidance revenues comfortable terms as recognized at we is significantly to of the are or And they answer for

Gautam Khanna

of give framework LEAP-XB the compares EBIT any dollars that you us Obviously as won't much Okay. magnitude? Can revenue but be to the some on big, reduction order how associated of it with decline.

Stephen Nolan

to the out you about, we AEC come our revenue talked XXXX EBITDA the of you EAC at associated guidance margins of XX.X% if strip the XXXX, you to look, be XX the exactly going of midpoint of with XXXX EBITDA so are as and The adjustments if we So, implies you somewhere million XXXX. how on just and margin see, at with for profit calculation out XX.X%. here look so and for North XX% XX.X% North do to in an

will in revenue will as that XXXX, result go are margin, gross we basically EAC overall tells that appreciably. within in margin, assuming So, Embedded assumption since productions, a you, we expend. certainly pickups down our that decline business LEAP-XB our will not that assuming of is an generate said the what weren't EBITDA ASC while we margin the that that

talked have percentage can relatively we is new, think changes, before, our be And cost gross given As plus relatively nature immune business, stable. to fairly shifts slight relatively it the margin volume. I that of is in it but

generates business gross dollars So, profit, that go ASC the revenue will profit of our with the down effectively dollars line. but pro-rata

with we will in in a a and still we because is profit consistent our will percentage gross reduction seeing over percentage So, business. revenue the remaining see reduction fixed absorb that costs we are

not will see we any within So, margin compression that business.

Gautam Khanna

Okay. Last one, re-ramping. sorry, just a

how a get potential on you know, in concern some learning of your are ramp to to profile to longer-term or, does I'm this down the point fixed it impair impacts you I and think where this? negotiate mean, curious, this position thinking of severely just your do contract road contract. these new in margin the ability kind terms to a what made the that I’m ramp ability kind production reductions, given folks Albany's a decisions of about in those price looks of hire wondering ability like, You have profile to your you had what are just how with level workforce of back, mind, is preserve but some re-ramp? Now curves. about that obviously

William Higgins

a that try little me bit. let Yes,

to It a for was words workforce the is reluctance developing the It technology. stated. growing reasons of some is you think a we because the our precisely business. of - reduce used I

a have promise of lot We with.

keep to and developed to that we So, develop. expertise continue we have wanted the

LEAP-XB, As are bring shift through ramp through us believe the see burn-off at the back needed. inventory Stephen people to in people of the on to inventory can that provides XXXX, around burn and as as time the we we end went our of XXXX have also will in but the today, some go that and gives enough production us ahead assumption time we we comes with detail, we off as look we as producing

cuts, more trying technology a the we that have lot go thought. given to normal was would are capability we and probably taken deeper have as So we forward. the a It we of but production protect business,

Gautam Khanna

you. Thank

Stephen Nolan

you, John. Thank


Thank you.

We for will go Bauman. go back to ahead. Please the line Patrick

Unidentified Analyst

sneaking do free to said, for year do you definition, XXXX be have just quick the you Alright. wanted Is XXXX. that? you it stuff? minus in capital working other taxes and the was how business for I to on me other of to I and that you the like all positive Thanks and here. more and clear flow like for all When is cash that, components if it follow-up. one be expect stuff CapEx how it allocate and how just do build EBITDA corporate the than you treat

Stephen Nolan

Very good question.

purpose operations this business, free flow So CapEx from is for our free that for the for that just cash less cash business. flow

of know business given a free $XX not corporate that is cash prior are in measure But end the year, in giving you not that the is GAAP sense the very is even level. and it that corporate years as does cash at much a at positive artificial business has it include which check aside year. says elements the than it This that So million hard the it we end, was for at of consumed is cash kind somewhat as actual if the so just measure. - which not leaving of flow is numbers, a less why GAAP you because

that which remarkable has turnaround So, been business. a for

Unidentified Analyst


CapEx statement number? basically So the minus is EBITDA

Stephen Nolan

cash EBITDA. not it free not CapEx less from is and EBITDA. flow No, operations,

CapEx. a minus much than of flow is it the So true EBITDA measure cash more

the is business capital that for profit the changes So operating in working less it all CapEx. of less

Unidentified Analyst

Got it it. said. know excluding what is you okay, you but is Got corporate it the


Stephen Nolan

Yes. Exactly.

Unidentified Analyst

look as a hopefully business at more kind again then a the the statement kind in a point say you as you MAX, itself? you or function pause than the a of And bit with Understood. be of up with is XXXX to little able at expect would to Safran, that growth ramp this back like of of on that trajectory

Stephen Nolan

cash XXXX pause. is XXXX we results flow the that that not positive is It guiding say obviously underlying I business. a and would really in strength So the of the result beyond, more a expect not we of but are

Unidentified Analyst

so Thanks Okay. much.

Stephen Nolan

Thanks Pat.


Thank you. I And time. questions have this no at queue in further

William Higgins

Grace. call. time Higgins. joining Thank today very by interest Albany This for If you Bill all appreciate the conclude Alright. Thank you, Albany can, would another for continued International. like I call the I to you performance. team We would recognizing I your like to today's thank everyone. quarter entire and strong in your is


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