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AIN Albany International

Participants
John Hobbs Director of IR
William Higgins President and CEO
Stephen Nolan CFO and Treasurer
Peter Arment Baird
Caitlin Dullanty Bank of America
Gautam Khanna Cowen
Pete Skibitski Alembic Global
Patrick Baumann JPMorgan
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Albany International First Quarter 2020 Earnings Call. [Operator Instructions] And as a reminder, your conference is being recorded.

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

John Hobbs

Thank you, Lois, and good morning, everyone.

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

morning, and our where this of call, same verbal conference pandemic that remarks markets operations, to forward-looking potential number this which on will For contain the purposes results. the COVID-XX the we are we statements those of statements uncertainties make a apply and the serve are financial our effects and of among risks our

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

the Bill will now Bill? provide call who And over opening International, and turn Higgins, Chief Officer Albany to I'll remarks. of Executive President

William Higgins

you Good Thank call. Welcome, everyone. our joining you, John. quarter Thank first morning. for earnings

couldn't job safe, proud each more great for them, I'd around These the of around our for other, our like thanking and my be efforts. I humbled a and individual helping employees send commitment to sincere employees. all facilities To doing First, customers. I our to unprecedented and making stress collective world. start despite gratitude the I'm their their by of us, all are our by times,

and a is the time of uncharted navigating most rapidity of historic. The different. Stephen and a our our let the is This remarks, COVID-XX impact couple QX severe the globally spread to the details than on the performance. of months, slowdown aviation discuss my history. we've breadth in witnessed of After less make In coronavirus pandemic me Now will waters. these few comments and approach

markets end based constantly information So the assess best have. we and our we on operations adjust need to our

to experienced I'm our serve leadership that have needed And as capability demonstrated customers months. we over do the with of our We ability to just things and change. the couple past operational happy

So how Right to Machine to of working in January, the our are what start, are the us First, tirelessly well-being our ensure waters? China. and the these our leadership we happening safety, health alerted navigating in plants from Clothing we uncharted employees. was and around in business of

the to employees around action We immediate put facilities communicated for should And how the took world place approaching there. for we other in pandemic. our prepare for safeguards

across accelerate we As lines put of manage a communications to organized company, in decision-making. and communication opened an to both process segments and place

recommending cross-business. a formed charged corporate We and with to practices deploy prepares and training COVID-XX and as force task on company-wide cross-functional responsibility outside is best is for The a finding managers the level The we and materials. that lines that well communication our as experts safeguard task communicates employees. at force and the front with force task employees

keep beginning, the a can with adapt force plant on few our quickly by and ground, in the is procedures basis, world. plant the leadership the meets on facilities expedite review to every work Senior days task we so safe. We what modify decision-making regular happening to around people

briefings. information Directors from flowing We with also a basis of COVID-XX update our Board regular force our on task

is home, working has we are profound, take changes from collectively to we teams. short work level. well, our with remotely that Any a continue a improvements to in time great such which employee can made and The IT worked have support these new from

safely can as them new as procedures of we run operating Our plants have adopted a possible. host so

how lock we zone social distancing, extra how into run adjusted temperatures used. defense. cafeterias work call segmented are at employees taking the In gates, rooms shifts, we've and We've changed I cleaning, addition to zones, masks, meetings plants wearing what in

Each dedicated crossing by points, work zones. within we've stations. cleaning added another And restrooms, limiting of feel that travel and a facilities. Employees aren't hand specific layer knowing wash and stations safe and entry exit protection within people for zone tracking that has zone and

and In one we authorities, appropriate after employees had It where worked communication facility. employees work because of who our an rest facilities we recommended work employee didn't with all work, the who beforehand. from period case, it the tested-positive, all to back the We with home the managed self-isolation, period. And disrupt were of would of our the zone deep-cleaned the and knew been it the according the planning that to self-isolation had health at plan. how sent exactly

our me make We about near fast-changing comments approach a marketplace. let the managing a such visibility few don't beyond to have in term. clear Now

we they preparing respond So to are business conditions to as evolve.

adjust differently that our affected at months intention to to be anticipate We end may our demand, forward. for our to long and of levels meet to risks over build term our operations manage and markets new is the different quarters. Therefore, on looking strengths times coming and

when closely products XXXX and and MAX to had Safran, adjust partner, of example, January. our year, workforce was our workforce with planned for reduced low our in for levels the manufacturing We early of last Boeing already operations in customer Composites, XXX Engineered had and delayed In LEAP-XB we accordingly. worked

and in most the of lead latest taking levels reopen Safran, the production commercial to to France to close as our plants we currently likely to continue account into times spread in jointly agreed QX, well. coordination coronavirus rework We manufacturing evolve. three sites these expect plan and production accelerated different aviation depending temporarily with Safran on LEAP-XA furlough at Hampshire, production for Composite will a plan, which Albany employees. lower to hit New continue in close We the our With and Mexico

to is coordination continue our operations takeaway our close Safran and work all with of modify The customers here plans in and that we to production accordingly.

the time over with will LEAP and resume production place engines. is narrow-body in believe a partner, we to be Safran, great general, In our

is this military the composite woven poised including technology, Martin's Fighter, the defense material about Joint we're larger industry. and growth advanced CH-XXK a And run. serves platforms, next-generation long the in Lockheed In missile JASSM segment the for X/X on Strike Sikorsky program. X-D solid AEC business, Our helicopter of

a that In we the it be have within has demonstrated marketplace. leadership Machine successful Clothing team can tough seasoned segment, at managing a

footprint XX declined. last capacity the locally and have in our years, adjusted established market footprint strong with serves on grades and end value-added our a the customers a For we've for higher and focuses regional favor as presence opportunities. writing publication that We've global global

our new paper coronavirus and XX%, immediate the MC's serve technology these product with markets. towels, financial demand improved and disruptions, outstripped point. supply, of at margins toilet the creating be edge and and results paper, packaging services. for in Currently, gross products to despite for the continued We've tissue, leading support QX, pulp excellent of companies demand particularly our the in industry customers customers has reinforced and who this paper strong

Orders fluctuate for as PMC all these to may are we around the support demand operating up. belts expect and carefully, supply markets MC this and are than world though, expected, our the open as demand. catches we stronger plants We're watching

communications. and shift with offices the accelerated digital the decline from and publication to because are working and continue to grades everyone schools expect We home of of closed

ability have of As leadership across under In We've it, to portion and segment's has short, can from our be in well have I This in we past, demonstrated we results. that the the we revenues. execute easy far experience confidence communicate, this we've of place tackle market business MC to is and our to great our say that work managing already noted plan, to the challenges as XX% together company. or to that in deliver shrunk predictable, demonstrated to will tough adjust our shift. not has to great have

quarter-over-quarter. off to our Stephen, expanding both results out point year-over-year the margins, were hand and I solid, call As me gross let quarter with first that sequentially

exited record a MC strong EBITDA in gross have balance in QX and sheet, and with XX% margin margins adjusted AEC. liquidity good of XX% of We

Stephen?

Stephen Nolan

everyone. Bill, good morning, you, Thank and

outlook will our the our the for business about then in quarter, results talk about and first I XXXX. current for

were currency for a translation by year-over-year For of net million, same $XXX.X net million year. the total X.X% publication adjusting the caused packaging grades, currency effects, in and in in sales decrease compared shrank grades the quarter, delivered by Clothing, engineered X.X% tissue quarter pulp, also growth last In by net and X.X%, declines shrank in the to fabrics. translation Adjusting first sales sales for quarter. $XXX.X partially in Machine effects, offset company by

significant and CH-XXK Composites currency sales, on revenue, platforms after adjusting primarily by by in effects, CirComp. of Engineered by declines and caused program LEAP partially shrank the growth F-XX again, acquisition the for offset X.X%, translation net

points last gross from over year. sales. company was $XX.X million, margin gross by reduction to XXX increased basis profit comparable the of quarter the XX.X% of overall The period net First for XX.X% X.X% a

to long-term margin the mix and AEC, principally the to net to XX.X% in MC favorable of net primarily profitability XX.X% Within gross from a driven sales, improved the improved contracts. change expense. million of XX.X% Within net under margin by little gross segment, reduced in benefits sales, $X due XX% depreciation from the estimated of

a research from slightly the $XX.X but of lower $X.X and assets prior million year in the to effect in QX in million selling, of just current expense XX.X% the quarter First million in negligible to quarter, period year, reduced sales most The primarily quarter of from recent was expenses by technical, compared liabilities, the XX.X%. expenses as quarter. in general last in nonfunctional in and R&D XXXX million net percentage increased declined of driven currency $X amount a to under and reduction $XX.X revaluation the by the resulted in expense same which

partially year $XX.X in XXXX. recognized standard by down adopted the in or and were million the the company additional credit CEO offset Total million, that million reserves from by operating accounting $XX.X January CECL, reductions XXX quarter. in new costs under million reserves These income the on was company prior for X, for ASC severance $X.X $X.X

STG&R lower Machine $X.X million, gross profit partially profit, expense, Clothing while income by by by expense. fell by and increased caused income $X.X operating gross driven higher lower offset lower million AEC by operating STG&R

a an to currency year, net $XX.X compared million resulted $X.X income other and gain the which but increase XXXX in balances, of was $X last of the same due expense million QX in loss of in had was of the The in $XX.X QX in period QX income expense revaluation last million a million nonfunctional to of XXXX. of year. primarily expense

loss from the effects loan much an Mexican for a higher the principally dollars period weaker same last of compared the peso XX.X% are year-over-year XXXX XX.X% the This income to rate items. tax nondeductibility in described, U.S. The potential payable which just I by carryforwards in loss by discrete a subsidiary. XX.X% in not loss in of a of The primarily in revaluation a where and rate a was recording other tax impact the on year. intercompany currency caused benefit we was resulted occurred jurisdiction the from foreign tax quarter change

QX the increased compared expense the and reduction of XX%. impact $XX.X in the quarter quarter was most items year. higher foreign income $X.X other tax $X.X the roughly XXXX was by was income Net for discrete reduction XX.X% from Other the million recent a the $X.X rate. rate the revaluation in by QX tax other to to expense The expense in company discrete million the XXXX. million, the higher and Absent last driven in million of currency a of attributable tax tax items, reduction

impact year. $X.XX After costs, adjusted period per quarter and with the last share year. to and quarter restructuring foreign in adjusting this associated in currency to the former last expenses compared $X.XX comparable of $X.XX compared was revaluation CEO earnings share the this per severance was $X.XX Earnings the gains expenses quarter integration, - for losses, CirComp last

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

at in debt, sheet which reported consists maturities debt an $XXX resulting debt the 'XX, million QX million. long-term as to increased million cash $XX about debt long-term increase debt quarter, about end $XXX XXXX the $XX million position. our the of QX at current and from Turning of balance by during net of in end of grew on our of Total to amounts or

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

our The netting, increase caused on million disclosed ratio $XX results of absolute cash facility. quarter the debt total on X.XX. the principally the in drawdown in was limitation leverage While disregarding credit an by previously during

seasonal cash of in the the principally the generation, cash debt traditionally by increase with of has foreign completion and where variation acquisition. normal The the net QX the rates point a on caused was our of year, facility cash in exchange equivalents, associated the purchase low value CirComp been in and impact

Capital as expenditures due Bill to markets, pleased business performance ongoing million QX of on the indicated, pandemic, given XXXX down year, principally were coronavirus million, program. we in expenditures last impact in from $XX in Overall, quarter. economy the were global last with LEAP our particular, the a the the of of on period $XX the almost capital and about the same reduction

Looking forward balance of to the XXXX.

have our press guidance. X release, As issued previously previously our April disclosed financial we in withdrawn

withdrawn too for this that our provide reliable markets year. full in the at replacing end uncertainty guidance be is not much will time. guidance simply There to We

do as we insight much and can. However, to we provide as want color

notwithstanding in tissue Machine recent packaging QX of from the and We were revenues particular period continue year, in to strong see and declines decline the In up which grades grades, from strength MC the with about in last in do XXXX, in most Clothing segment, represented fabrics. orders engineered our XX% same and X% of publication the revenue quarter. over were

It X Our publication trend end last of not throughout compared this grades for order trailing of see continue year. to the grades balance down to XXXX surprising that QX was be book close the at accelerate or to over the even in equivalent year. XX%, period quarters the publication would

While the the the first segment, strong which the we about for be quarter, bodes of down book to are sequentially quarter balance the but well order overall MC expect the cautious second from year-over-year, we in year. up

volume sales The products, the year is have likely PMC of with to previously, in XXXX. economic PMC the activity. is, of itself discussed tied correlated into this market and in later compression overall is pulp we global GDP our in generally As sales volume paper which of turn, manifest to current the and

All of facilities are Machine operational. Clothing currently our

which but facilities call, our online. discussed of are As earnings we X our few disruption, impacted see weeks now modestly, on plants QX did a last those back our Chinese results

We any material have to operations. disruptions not MC seen other

LEAP production We in and X all the announced Turning third situation to the quarter and France, resulting Engineered Composites, depressed closure production and quarter the a will to facilities, where AXXXneo Airbus New Mexico demand be from challenging. temporary the family. likely second of recently decrease the Hampshire, of of MAX in our due ongoing XXX

national operations The or state and with resumption of provincial compliance in and will at undertaken all Safran in local, coordination be these guidelines and with directives. facilities

some these However, into closures QX will continue much well QX. cases, that we through in and expect of do

a QX As the result, likely unfavorable. LEAP for very year-over-year in QX comparisons revenue and be will

full will that million year generate under generated some see the for revenue of expectations do $XXX program overall LEAP recovery year, that in expect in are the we to XXXX. part half we later from our in While of for the the it

pointed I impact in out contract nature of our revenues. of of as will some the LEAP cost-plus partially a However, drop the sizable mitigate profit such before,

pandemic-related, manufacturing While government-mandated there a in have our segment, aircraft, shutdown that facility small Boeing non-LEAP program Mexico, for commercial very the challenges much with supports other and other segment. been performance the in we Engineered the have such of tanks non-LEAP our small of wastewater some a demand most as relatively Composites pleased been of composites decline in

change see our know do likely impact since program. aircraft. recently focused, forward, X our yet not the rate primarily reduction only rate, the the on is Boeing's of We for announced content full on we Looking build build X particularly of of also XXX impact an the that from will variants in the

QX However, is seen line segment. XXXX. any be impact and AEC in likely into challenging QX for a to will performance the Overall, be it in year and top

reduction the in continued drive such as measures of flow actions taking the cost expenditures are segment. cash certain we generation profitability help and and to indicated, Bill a As reduction capital potential

company Turning the to level.

accumulation that allocation We the million have spend focused million expenditures for year. this capital ensure to million year largely to expected capital to significant priorities $XX a cash million. now We previously buffer we relative requirements. current $XX guided $XX to expect on to any are of $XX Our

expect and monitoring Notwithstanding the We on generate as capital free still areas continued our year. strong are cash, also of flow do, of cash in the we the needs carefully several usage. working that challenge significant and certain businesses focus a face, result to ongoing this performance

rather the The that the and for facility unexpected funds, any recent need down from help to we drawdown should available drew credit due need our to it of expected cash immediately. those we near-term have had was caution that not ensure for on cash, abundance we an out

deploying not current have M&A Additionally, for activities. do plans we any cash any for

I sufficient million QX $XXX with million almost hand, our would remains significant like that liquidity, almost and credit have we $XXX end and our on undrawn facility, balance to highlight of sheet balance an cash at the of strong. in

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

Operator

is And our Please from the of question Instructions] from [Operator go line Peter ahead. first Arment Baird.

Peter Arment

Thanks how it the not line start top first quarter for better three I the AEC, close actually than nice that down guess, officially impact on just anticipated. and you When top kind we quarter to line results? LEAP impacted? details did all because with of the facilities was and Or results. the the did

William Higgins

in the worked since had. been prior X had weeks closed that we we facilities. to It's a beginning reduce January now workloads couple the We of to

ongoing kind and the So down. was an of then close it discussion

Stephen Nolan

closures impact April, in but slight a the the first so at solidified end QX, being of QX. was end but the hit at Peter, impact there tail tail closures, March, of in slight full the here a were there The month of

Peter Arment

what just obviously, alluded to these on probably of was - when and shutdowns even the going at feel QX brunt to the that for looking that that's So you of because, is QX line. I kind we're top

Stephen Nolan

a expect Yes, see sequential we significant decline QX would in QX. revenue to to from AEC

Peter Arment

if on And just I MC. ask could Okay. quickly then the

So that's helpful.

of about paper growth MC volume always being You've correlation talked good a to belt.

from we're So you the going half is why just Any cautious a just you're the have you seeing to second and pickup economic weaker? lockdown? in activity be of of think sequential that is in - visibility it a don't Or kind basis. currently aspect the on based QX the

William Higgins

think think, if the general, but full there now of now running right maintenance there demand it's plants probably I maintenance. question caution, for There's mode is large stoppage full-scale, There's ongoing out out. I a right a - are less programs.

there's economic And when see planned see - end demands the those might we But in more downtimes, regularly get driven as it's how belts. think different the with the consumption by catching of markets and I supply we large maintenance filled. in general, demand sometimes channels up

Stephen Nolan

don't Machine have we Peter, backlog of certainly before, delivery discussed in Clothing, for the but we huge is a some QX. we've backlog carry typically. now, think I backlog Right As bulk in the

good into first insight And will QX now, like. have and QX approximation. lot into what of insight not a the into a flow so order right order we terms QX in But to almost none of look

point, packaging burst we of don't in of decline activity year half right the it that only we the cool to activity with concerned in we're or are - seeing tissue down economic is, activity grades could given but the publication back could that know of the broadly. see not could we sorry, line publication, the the yet, in part level now of and So economic certainly big declines but your just

Peter Arment

Bill, lastly, have just I of guys kind that But early there's disruptions? across you in that's businesses this of impacted - that on had any your know supply have you it's chain far? you so any seen And Understood. lockdown.

William Higgins

- that haven't extra in. team, on, a We supply around did things great seen couple really we of we've our worked minor bringing a and of job early supply

not supply, materials that pretty raw as And complicated inventories raw able probably So to a you we a and few know, well. have deal we've so it's larger-than-normal of it on our depends been materials. with

Operator

ahead. line of next question of from Caitlin Bank is the from America. our Please Dullanty go And

Caitlin Dullanty

potentially mentioned, as discuss macroeconomic customer defense? any seeing there. your you are and clearly position expand is demand As bright for in a spot guys relatively insulated to defense Can you pressures opportunities is you

William Higgins

That - to a too I on early think right now defense. say it's little

we're But example, great a can and ramping If programs, we're our now, watching good with and been can do for to working relatively we've we some the them. our have defense new these job We the expand up. possibly them. work we programs, that we're right with customers, CH-XXK,

on wait So we're we'll that's gone, and love work happy we'd and with see. have more just But it. to to how do

Caitlin Dullanty

Fair And on just question enough. quick Okay. margins gross MC. then one at

by You driven the that mainly guys mentioned depreciation. lower expansion was

not expansion how So there? do margins should this understand about think much the forward? you to help but just gross I'm we sustainable, us think profitability - And going wondering trying just profit left, is there profile level maybe

Stephen Nolan

still Bill we an gross of As with within the was the from Clothing. pleased as it, mix margins That's significant We mentioned, a point. high to this Underlying in all-time margins. first depreciation. while very Machine year-over-year, business are good the benefiting we're close discussed, really one business, and are changes of

point is business. of the to gross sales Second in sensitive the that is volume margin

market on Bill that managing in concerned done gone are materially for are years if back obviously, the has as team half year so that, we that We downs significant the used sales gross certainly a put fantastic mentioned, pressure and to past as ups changes. margin. were place have could through in XX of who decline So and to through have the

on a remain wouldn't But them believe maintain confidence historically will we gross strong higher to margins. at to maintain That the I But in them was on go-forward a we've go-forward realistic certainly a XX% certainly - So than forward, I basis. basis. in their if ability is level. seems good looking expect I

Operator

Khanna go And from ahead. we'll Cowen. [Operator Gautam Please Instructions] go to

Gautam Khanna

a couple of had questions. I

production is on are the cost? reimbursed X cost-plus just talk get about there volumes you get a that some you'll relief restart unit can by contract. mechanism the it's you'll intervening in a you you Is First, the facilities closed. volume? period when Or lower which up Just, higher made get the once for it weak

does how mechanically? that work Just

Stephen Nolan

question, Good Yes. Gautam.

collection So are separate revenue this X to a required recognition revenue because program. on here, XXX, are different revenue basis cash on quite recognize they things Under ASC we standard, this we from need percent on program. complete to the

costs, to those we the revenue cost of year. incur, costs we incur recognize the each equal expected the on level as for So period for separate we the the as deal plus year profit contract. We with LEAP purposes a accounting overall

how costs, mentioned, So in or our - fixed costs as whether be we bulk some so employees but roles. which they at critical ongoing still there we to revenue, of are plants of during to furloughed the are are some related have employees, the remaining extent the working we as work, shutdown period, the themselves who those

period, incurring folks be those we are revenue While those the we will in recognizing on shutdown costs during still costs.

top full every make those We for the for applying year we're our full rate sure to recognition. of cost and expected year costs look the that for will, are purpose obviously, right the on incurring the of quarter, revenue revenue at our profit we

the spread works. how our costs It that's revenue over So with is year.

to - In Cash of from the this what At to expected demand and to produce And has Safran, the our work expected Safran then year, year we is customer, at the we demand will that the our look for talk the will generally with a different. year Safran. identify the I'll start works. identified. are how for costs little general,

and expected that price level expected costs. our then will unit based the on demand calculate We

that We year. will the we appropriate throughout happens bill then the add on ship as that we and of the contract. as that allowed will And unit, profit Safran each for top amount,

what to we or volume will what if during go at volume, were was a additional where true-up our actual a year. we the our At what total the Safran our actual at we and the Safran, the year we we supplied back year, for on were we write the amount we've actual start below or invoice collected expected of based to of extent during collected end more costs to on look price the check the end and the Safran costs either costs year, of the above at year, based - actual there's the the the than

So different is revenue. little cash a from

you be want drop no through each building unit as it, will is of unbilled receivable Safran a in that true-up think that effect, to we about are we unexpectedly, charging there an deliver, go part you the as period price where in as if volumes the adjustment at we of if the the And recognizing unit end year. we for collected

on business, would get you end and our until flow be our the not conversion great portion that So the payment. of that of a cash year to collect through

Gautam Khanna

think with the it you've losing that you up facility that the longer than challenging. the like is or online, more duration did about actually else? time, explanation. Is developed when weeks you equipment? of go very How The you it we shutting there working of So effectively already becomes not facilities closure? re-ramp end a That's curve can't a up maximum much staff of the for back on learning period down X kind - helpful is time bring went which there a about X frame by do if you

William Higgins

lose And behind to Gautam, developing technology looking as really is process, don't Yes, production a good our that that We've at the those want technology, the we it and product, each up, - varies and we and individual it. discussions. that's great job processes done part of by And also it. bring a back question. facilities we're

and technology, process. minimum is and technology optimum, an improve keep efficiency strategy deciding format looking cost a forward So to that only the to but the but we the of production what's production can and process rate part still the not of and the continue,

So And as improve through work we jointly, with - that the to we're technology. of we we're want fully continue to discussions cognizant Safran.

the we spreading on woven last material. improving and X-D products. growing the run, of the reducing that's and year, throughput, it composites, of future across believe a As costs yield, important the other - to the quality of end the were at great the And we

technical that capability. So it's we important to us maintain that

Gautam Khanna

guess I frame that you is? defined But what Like... time haven't yet

William Higgins

- we defined of up of each the back think expect over come product I to each facilities time. when and we that certain periods of the have lines

may some may them up line. of period run And continue bring then a the kind to back we and - low of a that earlier period so we them where have there's

a date, and so the process are So we have maintain we And planning we particularly back do we we the ramp forward go drop-dead capability. technology but up. into to also, - future, as ability the don't the

Gautam Khanna

X to AXXX Airbus others, so please, comments then rate, XX Boeing we down rate - Okay. can has And so comes given you discern if When and made it us wouldn't yesterday. mind. production an

because like of XX is. just on the guys on shutdown us content mean when a expect what you're us actually to production, above higher? be by MAX you Lake X much get some up At level see content? what then a flat level year, So And rate? back the obviously, low your the that in a that's be if remind it growth or fairly for some separately, obviously, if point to And ratchet frame Salt this you production? when a back like off way - low facility, experiencing of you the were will at unit year to case, looks just XX%. that of to you price rate were have the - drop help of And we going I you last you curious, year-over-year each then Because to it what actually year back I'm period time. stays But ramp. do could headed can looks revenue per do XXX - that will units you it's for

William Higgins

Sure.

start production detail. in was going and left here year into program to - from where there. XXX Salt come And next and with chime demand and going a the program, we'll frames Lake me grow look - the we'll let Stephen So at to then and off obviously, I out that I future. LEAP the to like exactly rate can through wish and where we with is what The knew we get when

the and our saying Safran go numbers, and going and forward. we're Airbus are Boeing We're all as releases watching we to their what work and that plans in into

we've year So we into LEAP year. plans we the And are with what are. recommunicate adjust a program communicated, we'll relatively is more next what as and some go expect know they as clearly those low we the year, for this when forward growth

So good unit and our significantly as pace, we goes lower cost down of efficiency. these go price process and were as last improving the said, yes. to unit volumes, operations as the a we obviously, And at running price up and significantly. in our the end achieved had per per at year, We goals come I

as yes, less there price were be will so of lower higher these unit general. more and So per absorption overhead in cost volumes, there's

program a it's So work And that. term. through longer great we'll

program? see we're on we're will So it you and don't that partner, you again, add comment if growth when know LEAP exactly but on we aircraft want glad the Stephen, I the I a narrow-body Safran tell as with will can't any be. to

Stephen Nolan

No.

not yet plane when challenge back start, to right But production. question like answering gets your do rate little said Boeing it they look into that you've They have obviously, when, your now. would over a not think that will it slope build into insight in we We there answer difficult it's uncertainty Gautam, still have And correctly. at. slope insight. reenters. have obviously I There's at which what question, rate put they ramp up, do once out also so our the like to a they the

where insight to back have you'd more question that me And take your know, LEAP wanted and we'll to if didn't the go portion to XXX I'm you able we or we'll answer hoping the today. is, can't a like But it? answer Bill, if I to now, better from Boeing question. be quarter into

William Higgins

expected, just was pointed of remarks, add on going I Stephen the they production. news opening I two on I on want XXX? Yes. that the and to what little to you than commentary the don't we But for watched - They're the XXX we're the add us discern from we'll variants. actually numbers, Boeing know, to as that, We've to work three in out we mean think. as if Stephen, better adjust a

Stephen Nolan

for publicly thousand the in thing sure but Yes. value I'm The it's shipset. few add, dollars not we've the disclosed XXX, I'll shipset only per hundred Gautam, ever

Operator

go Global. Our from Please next question from Alembic Pete ahead. Skibitski is

Pete Skibitski

is Just seeing a to remind But you're aviation small. kind fairly couple We've could the of Can us of you seen your quick and is there? exposure I you from know questions. business us what what remind - that results uneven pretty OEMs.

William Higgins

Yes. It's fairly small. Stephen...

Stephen Nolan

support where sorry, of our on support variety business Even engines percentages we revenue. some a be in of think, that small small. Gulfstream be would perform our programs Texas low overall and within jets, I terms we on revenue, really that overall our other Yes, it would our of very our but impact AEC, primary exposure in facility, Rolls-Royce Boerne, single-digit

Pete Skibitski

there? to the that that seems of XXXX, real I'm seeing kind that's on business-as-usual changes any And great. workflows just largely are on deliver seems maybe It late Okay, if your to wondering next track you year. on like a program. kind of

William Higgins

working still through We're that. Yes.

know, But We working if still in put that? Stephen, I We're guess, just through any it. haven't, big color to I tell. add yet. any don't want to changes It's to hard you

Stephen Nolan

Yes.

So significant pushed that slips our to have were program out. there which date, in revenue certainly

you'd see this And program a of have said. but program I our material revenue making that certainly XXXX, now XXXX a where driver we where of looks be reasonable is. stand the see you months X years of likely. end year. as of in we next would've we rates, production been to not XXXX, as year year. may where Back enter just think we if the we'll year cases dozens obviously in expected be position gone would it couple to It's fan ago, a We're this not where back of is,

XXX were the announced, build that guess, XXXX rates established lower has previous that for Boeing the than Obviously, much yesterday, deliveries combined I and they numbers.

So I the will when originally than that it be more program, gradual think anticipated. we'd ramp-up even in starts,

Pete Skibitski

Okay.

and out last quite the the half. thinking? like Is And out that a at I'm guess. the compression that defense facilities if the way to Is of for about because the sounds see second LEAP in to second as will And come to bit a because reasonable that LEAP - margin it of it? start that's AEC, it trough second we is we'll in is the I strength Or quarter margin quarter. it wrong cost-plus, question figure the reasonable line maybe to trying quarter? it's of about got think of you've me, for bit AEC and think I a to Okay. be closed think

Stephen Nolan

quarter. factors have the competing in X play at will we second So

will as is margin gross certainly is this the operating for say, LEAP LEAP off, average smaller. First recognizing are lower be Where you right segment. margin a LEAP little we now, on than gross the

of some in is certainly that slight mixed average. than And Not hundreds for ways, not that And I'd so it but there's results benefit basis benefit. lower, say, It's lower mix materially. a a in, segment. the points

However, compressed see. in QX we the we'll the compress in lower is cost result fixed going volume in of going our revenue, that a to margins as expect on more to overall is have SG&A segment. QX become the of challenge significantly we a that

over here challenging is in those the to seen I QX where competing fantastic really at be margins. EBITDA results. we year-to-date difficult, So It maintain delivered factors think, to going XX%, will play. be We've

be that to think the of going is to sort that I lower performance. a - it's challenge in replicate volumes,

Operator

is go Patrick JPMorgan. Our ahead. from question from next Please Baumann

Patrick Baumann

well. hope you're I

stuff, if detail to Sorry, I it. I kind on I'm rehash of but the missed call. you've got some into sure not beginning just of this want of the

quarter, for the there if segment. past, the drivers talked segment or margins by cost MC to in talk So adjustments could if mix you unusual is gross the impacting anything have you just about and results. the wondering, In the in segment aero the

margin near just in I like guess, gross how aero, within factors Just on margin that You the And seemed just want also we term? competing an that. to mentioned touch EBITDA should performance more comment. think about

you focus margin gross margin. on if also MC, within gross could curious the and the Just

Stephen Nolan

Absolutely. Sure.

you're correct. by segment looking So segment, completely Machine Clothing,

in the a mix have we talked benefits those benefits lot perspective, We past in that. in And saw mix that a continued. from about XXXX

change benefits So of we if missed because there It's didn't our was benefits. start a it's continuation one year-over-year. but the a call, mix the seeing I of mix good year. saw of you not of We're if out more performance, call drivers that's the last - as the

primary basis. concerned year-over-year XXXX. change mix reduced compared the to to quarter ago, But also few in are we depreciation charge moments on ability overall our We're a QX I And maintain that volumes. a called this about just go-forward we mentioned was of benefit as strong a about out concerned

significant have. the they obviously, Clothing, to have XX they facilities the with around fewer world, than Machine much used The

enterprise. is used fixed still And of our costs there so operation a to we a Clothing running lot leaner but have, with Machine significantly associated

volumes because we And so to of the deliver gross in of we are that terms sensitive fixed margins can cost.

little strong a year historic to sequential gross earlier, a feel all-time XX% Certainly, It's - in our cautious the high. now like the maintain were significantly a margins. on So right revenues ability we we as are does we but concerned is a basis, half about word, back have if, the over-earning discussed of that Machine drop market. Clothing to in

historical still can on are good. a basis which we very think I maintain numbers,

And a in do. the top earlier largely But of go-forward volumes a QX of a QX, mentioned bit what the XX% good like less it's insight line dependent as range basis. while QX, are reach have we certain. we feels on call, But and into much overall

what kind of have there. So to see we'll develops

it's the the also AEC, cost-plus. largely margin, amount LEAP significant what cost that a of there Gross about. fact We equipment On I is a leaving talked they're of significant just fixed production do side. aside have facilities for AEC because the moment on

moments that perspective. in lower business. absorption to the gross ago, are absorbing volumes volumes. on mentioned of very SG&A a margin still cost I we capital-intensive LEAP, focusing those at fixed with gross But the sensitive outside few and margin from less challenge a of are We

we from gross for margins. our volumes If placement put example, for investments and automated other on inspection. to in you And have City it Salt about look significant in example, at order to our pressure fiber would operation, lay-up plays potentially if everything curing on equipment, XXX, Lake production talked the risk, to were drop, we in machines,

that business, they're under pressure if in be basis still strong go-forward of but on expect LEAP to drop margins to certainly were outside some a volumes So we significantly. gross

Patrick Baumann

first the in in adjustments contract quarter segment? any there Were that

Stephen Nolan

million We quarter. $X than this had less

some So there were was positive. there that

$X adjustments, So positive was there it were less some than million.

in saw million $X we quarter. think, quarters, numbers say, X a the I than let's lower averaged closer the the, last much So to where, we

margin over we positive. very the because are right programs level quarter. in time. But adjustments with positive not the they we're more indicate we're So direction still delivered and very And significant profitable driver the heading they there of were fact the becoming a that pleased still in

Patrick Baumann

big in And onetime? that How that? was Or is what was is the sustainable MC? a that depreciation And benefit?

Stephen Nolan

MC. In

a couple in XX A benefit in now the last of So depreciated to made the rolling ways to are books. Chinese a being related lot our this investment is we ago, XX and of year. depreciation fully we years where those off saw facilities,

was of a dollars So couple it think I year-over-year. million

Patrick Baumann

Okay. last one And cash. is me for then on

think and working Just should you - look of capital in how a year capital first if to if already working from drag know perspective? drivers you could talk I the to out don't - quarter rest for the at the of did, play that we the the that

Stephen Nolan

some is variation. this including fantastic building seasonal last the if had cash an quarter, was really you we aberration, first consume of look We working normal quarter a capital. But historically, typically year. first first just quarter, that Yes, in part

of let's So this have defense quarter. payments - a milestone particularly the in but beyond a on it's those expense was were unusual payments. which nothing quarter. in some the programs, milestone lot Where handful side, the of of our were incurred There quarter, end terribly

those programs. And built terribly in long-term is nothing larger sort during trend. the quarter of indicative that we I believe of asset so unusual a contract But any

still saw the cash changes I level company at nothing my opinion generate my And quarter the first flow this we significant free As remarks, in year. that. to I in of mentioned expect

Operator

ahead. Please go have Instructions] a Gautam [Operator question We do follow-up from Khanna.

Gautam Khanna

I recall, built to many - how well. give equivalents, do end year, inventory ask, the And them, guys to at wanted asking inventory program. in to equivalents you Sorry questions. have, if presumably LEAP I want just XA, as on many point aggregate? at you QX of But however, unit units shipset the building of in this on How you last - XB you - keep or were

William Higgins

as Bill. is changes internally week We that did it We weekly end shipsets number on year, we and it on X all of demand a at inventory year. up of of the this - what's a the talked worth. last for Gautam, basis. the about planned We as change build sort plans

are. looking And we're is inventory forward. into specifically released numbers we we plans. as inventory so taken at go our But going haven't the year, as account as that And some look at production we what of plans we those through we our - this develop

than bit Looking probably little a built we backward, have. more should we've

So of now, bit of year the part we all will little XXXX, which that's production plan. but have extra in down inventory we place into slow a this as go

Stephen Nolan

saw of as directionally Yes. we not but aircraft exact, today. what They're part you same directionally the add. Gautam. our the We quarter to to in numbers, similar alluded terms number in range results. of as of fourth It's then to, the released

Operator

time, are further at queue, in there questions please this And no continue.

William Higgins

everybody. safety. environment, hope joining I you conclude Thank that like continued Thank thank on the staying Albany strong families today's and challenging focus your and your and and we'll and call interest we in of International. you are call, in entire for you, a continued another their I'd Albany performance all we the by and time thank team everyone. recognizing quarter of to for today your appreciate them health for safe, you,

Operator

that Event our you. conclude today. you for AT&T conference using Conferencing. does participation and Thank for for Thank And your

disconnect. now may You