Albany International Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter earnings call of Albany International. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. At the request of Albany International, this conference call on Tuesday, February 12, 2019, will be webcast and recorded. I would now like to turn the conference call over to Chief Financial Officer and Treasurer John Cozzolino for introductory comments. Please go ahead.

John Cozzolino Thank you, Operator, and good morning, everyone. As a reminder for those listening on the call, please refer to our detailed press release issued last night regarding our quarterly financial results with particular reference to the Safe Harbor Notice contained in the text of the release about our forward-looking statements and the use of certain non-GAAP financial measures and associated reconciliation of GAAP. And for purposes of this conference call, those same statements also apply to our verbal remarks this morning. And for a full discussion, please refer to that earnings release as well as our SEC filings, including our 10-K. Now I will turn the call over to Olivier Giraud, our Chief Executive Officer, who will provide some opening remarks.

Olivier? Olivier Giraud Thank you, John. Good morning. Welcome, everyone, and thank you for joining our fourth quarter earnings call. We'll follow today's similar format of past calls. I will begin with an overview of the quarter. Then John will take you through our financial results in more detail, after which I will provide an update to our outlook, and we will then take your questions. Q4 2018 was once again a very good quarter for Albany International as strong performance continued across both businesses. Total company net sales increased 11% or 15% excluding the impact of ASC 606 and currency translation effects. Compared to Q4 2017, Net income and adjusted EBITDA both increased sharply. Net income increased to $17 million, while adjusted EBITDA grew to $58 million due to higher sales and productivity improvements in both MC and AEC. MC sales in the fourth quarter, excluding the impact of ASC 606 and currency translation effects, increased 4% compared to Q4 2017. Globally, MC sales grew in both the packaging and publication grades, with a particular strength in North America. MC gross margin in Q4 increased to 48.6% compared to 45% in Q4 2017, primarily due to higher sales and improved plant utilization. Operating income and adjusted EBITDA both increased significantly compared to Q4 2017, with adjusted EBITDA improving to $51 million in the quarter. For the full year, MC net sales, excluding the impact of ASC 606 and currency translation effects, increased 3% compared to 2017, with increases in all major paper grades. The increase in net sales reflects our continued leadership in product innovation, our superior customer service levels, and our commitment to outstanding application engineering. Operating income and adjusted EBITDA both increased sharply compared to 2017, with adjusted EBITDA growing to $212 million, reflecting strong process productivity improvements and the impact of our continuous focus on cost reduction initiatives. Q4 was another quarter of strong, improving performance for AEC with significant growth in net sales, operating income, and adjusted EBITDA compared to Q4 2017. Net sales, excluding the impact of AEC 606 and currency translation effects, increased 34%. while profitability continued to improve compared to Q4 2017. The increase in sales in Q4 was substantially driven by the LEAP program. Sales of fan cases, fan blades, and spacers for LEAP engines, which represented about 44% of AEC Q4 2018 sales, grew 31% compared to Q4 2017, reflecting AEC's continued execution related to the unprecedented steep ramp-up of this jet engine program. Higher sales of Boeing 787 fuselage frames, as well as F-35 and CH-53K components also contributed to the growth in sales. Combined sales for these three programs grew 43% compared to Q4 2017. AEC operating income continued to improve as it grew to $6.7 million in Q4 compared to $0.6 million in Q4 2017. Adjusted EBITDA also continued to improve in the quarter as it increased to $18.1 million or 17.9% of net sales compared to $10.8 million or 14.1% of net sales in Q4 2017. The increase in both operating income and adjusted EBITDA reflects not only higher sales volume, but also productivity improvements resulting from the deployment of a disciplined, standardized operational system across our AEC plants, as well as the favorable impact of our continuous improvement program. the AEC team is improving quality and on-time delivery to our customers despite increasing demand and record shipment levels. For the full year 2018, AEC net sales, excluding the impact of AEC 606 and currency translation effects, increased 36% compared to 2017, exceeding the upper end of the 20% to 30% range we discussed in past quarters. Cells related to the LEAP program were the largest driver of this increase, along with growth in cells of Boeing 787 fuselage frames and F-35 and CH-53K components. AEC's profitability also showed strong improvement in 2018 with sharp increases in operating income and adjusted EBITDA. Adjusted EBITDA in 2018 grew to $63 million, or 17.1% of net sales. In R&D, our new product development activities which focus on existing, derivative, and new technologies. And our process improvement projects, which aim to optimize our operational performance across AEC, continued in Q4 to build upon the progress of prior quarter. Our continued execution on our major existing contracts, as well as on anticipated new contract wins, provides the potential for AEC to reach annual sales of $500 million to $550 million in 2020. As I have stated in previous quarters, the potential for AEC beyond 2020 will be based not only on executing on the continued ramp-up of existing programs on which we are already well-established, but also on increasing share or acquiring first-time content on ramping programs, while at the same time winning new contracts on future commercial and defense airframe and engine platforms. Now, let's go back to John for more details on the quarter. John?