Albany International Corporation

And ladies and gentlemen, thank you for standing by. Welcome to the Albany International Fourth Quarter Earnings 2020 Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. If you should require assistance during the call, please press star, then zero. As a reminder, today's conference is being recorded. I would now like to turn the conference over to John Hobbs, the Director of Investor Relations. Please go ahead, sir.

Thank you, Brad. And good morning, everyone. Welcome to Albany International's fourth quarter 2020 conference call. 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 notice contained in the text of the release about our forward-looking statements and the use of certain non-GAAP financial measures and their associated reconciliation to GAAP. For the purposes of this conference call, those same statements apply to our verbal remarks this morning, where we will make statements that are forward-looking, containing a number of risks and uncertainties, among which are the potential effects of the COVID-19 pandemic on our operations, the markets we serve, and our financial results. For a full discussion, including a reconciliation of non-GAAP measures we may use on the call to their most comparable GAAP measures, please refer to both our earnings release of February 10, 2021, as well as our SEC filings, including our 10-K. Now I'll turn the call over to Bill Higgins, President and Chief Executive Officer, who will provide some opening remarks. Bill?

Thanks, John. Good morning and welcome everyone. And thank you for joining our fourth quarter earnings call. Let me provide highlights on our 2020 performance, share my expectations for 2021, and comment on our strategy going forward. And then Stephen will cover our fourth quarter results and guidance for 2021 in more depth. We finished the year strong with fourth quarter results much better than expected. We delivered another solid quarter in a pandemic year that was challenging and unpredictable. Our operations demonstrated agility and a relentless focus to deliver great bottom line results, despite pressure on the top line and downturns in some of the end markets that we serve. And this was our story throughout the year. Beginning in early 2020, we took swift action to ensure the safety and well-being of our employees. Our teams worked tirelessly to reset our manufacturing and supply chains, and many times during the year to meet our customers' needs as they changed. We did a great job for customers and continued to drive efficiency and productivity improvements. We took early action to manage our costs well. And consequently, we were able to deliver outstanding margins for our shareholders and generate solid free cash flow and add to our strong balance sheet. Also notable, our customer performance metrics are at record levels for service, on-time delivery, and quality. Our safety performance ended the year as the best in the history of the company. Our factory productivity and supply chain initiatives contributed to our bottom line success, and we managed to launch a number of employee training and development initiatives. I'm most proud of how our employees found ways to work safely and how they've innovated to not only do our work, but to improve how we do it. It's not an accident that we completed well over 100 Lean Kaizen improvement projects in 2020, despite the restraints of social distancing, working remote, and following precautions for COVID-19. In December, we recognized these accomplishments by our employees, and we're pleased to award all of our employees around the world, excluding the executive team, with a $1,000 bonus of gratitude. As I've said, I'm proud of how our employees pulled together to support one another and work safely during this pandemic and continue to do a great job for customers. Now let me make a few comments about the outlook for this year and beyond. Our machine clothing segments and markets appear to be gaining strength. We exited last year with a solid order book, which bodes well for this year and beyond as the global economy improves. As a leader in machine clothing, we're well positioned to grow with our customers, especially in the higher growth areas of tissue and packaging. Our longstanding strategy of continuous investment in technology and product development, along with our operating discipline, has served us well during the worst market downturn in more than a decade. Consider this, in the middle of a global pandemic recession, our MC segment expanded its adjusted EBITDA margin by 170 basis points in 2020. And more impressive, since 2015, our MC segment has expanded its adjusted EBITDA margin by more than 500 basis points. We're also optimistic about our engineering composite segment's future, although its longer term since 2021 still pretends to face headwinds from the pandemic and the downturn in commercial aerospace and airline travel. Through 2021, we're planning for slower production on some lines in AEC because of excess inventory in our facilities and inventory in the supply chain of our customers, particularly for components for the Boeing 737 MAX, the 787, and to a lesser degree, the F-35. To continue managing our costs, and because of the recent downward revision by Boeing for 787 demand, We just yesterday implemented a reduction in our Salt Lake City workforce where we produced 787 frames. While 2021 is expected to be slower because of inventory destocking, we expect growth in engineer composites to resume longer term. We're well positioned in both military and commercial markets with solid programs such as the CH-53K, the JASM missile, the F-35, and LEAP. And our position on LEAP engines with Safran should see early growth in the recovery. since narrow-body aircraft, which the LEAP engine powers, are expected to lead commercial aerospace out of the recession, as domestic air travel is expected to recover first. Next, let me say a few words about our strategy. Albany International is a 125-year history of innovation in developing new materials that add value for our customers. We're committed to continuing this legacy with a focus on developing the next generation of engineering materials and advanced composites to help our customers improve their products and production processes. Our machine clothing segment is the leader in PMC because it offers a full range of the most advanced material belts used on paper machines, which operate at high speeds in a severe environment. We've earned a reputation for constantly improving our belts' technology, durability, and performance. And because of our advancements, our customers are able to produce higher quality paper products reliably at lower overall cost of production under demanding conditions. This is a technology-intensive collaborative partnership that our customers value. In our engineered composite segment, we continue to advance the state-of-the-art in advanced composites, including our proprietary 3D woven composite material used in the LEAP engine, fan blades, and fan cases. In 2020, despite the pandemic, we worked closely with Saffron to continue improving our 3D woven composite materials and to reduce our cost of manufacturing them. So as commercial aerospace rebounds will be even more competitive. We also expanded our collaboration with new customers and for new applications to diversify our customer base and develop future growth areas. Our technology development on the Wing of Tomorrow program with Airbus has continued through the pandemic. While this program is longer term, it's imperative that we get an early seat at the table. and bring our technologies to design the next generation of aircraft. In the medium and near term, we have other ongoing R&D and development efforts, what I call incubator projects, in both military and commercial areas. For example, our R&D team is supporting a major prime OEM in the development of next-generation hypersonic materials and structures using our proprietary 3D woven composite materials. We also have projects in unmanned vehicles, higher temperature materials, and thermoplastics. We believe the current downturn in commercial aerospace is transitory and that market forces in the long term will drive energy efficiency and ongoing replacement of metallic components with lighter composites. This trend will gain in importance as the industry seeks to reduce its environmental impact with the next generation of more efficient aircraft. Our 3D woven composite technology is commercially proven can meet the need for lighter weight and high strength, and we intend to grow our participation in the most demanding structural applications in aerospace. As a company, we remain committed to investing in technology and product development of advanced materials for organic growth. In fact, we're increasing our R&T budgets in both segments in 2021, and this is a critical part of our capital allocation strategy. Organic growth has been driven by not only our investment in hard capital, such as new products, tooling, and production equipment, but also by our investment in intellectual capital, the expertise, the time, and effort that are necessary for successfully developing new products and process know-how over time. We're disciplined in how we invest and the criteria we use to measure success. We guide our capital investment decisions based on expected returns to shareholders, and we direct capital to those programs with the best risk-adjusted returns. In summary, we're optimistic about the future. We have a solid balance sheet and strong free cash flow generation, which enables continued investment to grow. So with that, I'll hand it over to Stephen.