Albany International Corporation

Ladies and gentlemen, thank you for standing by. Welcome to the Albany International First Quarter Earnings Call. At this time, your telephone lines are in a listen-only mode. Later, there will be an opportunity for questions and answers with instructions given at that time. If you should require assistance during your call, please press star then zero, and an AT&T specialist will assist you offline. As a reminder, your conference call today is being recorded. I'll now turn the conference call over to your host, Director of Investor Relations, John Hobbs. Go ahead, please.

Thank you, Alan, and good morning, everyone. Welcome to Albany International's first quarter 2022 conference call. As a reminder for those listening on the call, please refer to our press release issued last night detailing our quarterly financial results. Contained in the text of the release is a notice regarding 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. Today, we will make statements that are forward-looking, that contain a number of risks, uncertainties, among which are the potential effects of the COVID-19 pandemic and the potential effects of the Russian invasion of Ukraine 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 in the call to their most comparable GAAP measures, please refer to both our earnings release of April 25, 2022, as well as our SEC filings, including our 10-K. Now I'll turn the call over to Bill Higgins, our President and Chief Executive Officer, who will provide opening remarks. Bill?

Thank you, John. Good morning. Welcome, everyone. And thank you for joining our first earnings call of 2022. Today, I'll comment on our first quarter results, our strategic progress and corporate governance. And Stephen will then cover our financial results in more detail. First, let me express our concern for the people of Ukraine following the Russian invasion. The will of the Ukrainian people and the resistance is inspiring. And we hope this senseless war comes to an end soon. Like many companies, Albany has ceased doing business in Russia. Specifically, we have stopped shipping machine clothing belts to paper companies in Russia, and we're withdrawing from a very small joint venture in Russia that produced belts for local paper manufacturers. Our business exposure in Ukraine is small. We have no employees there, and we typically export a modest amount of machine clothing to paper-making customers there, and we look forward to continue to support those customers in the future. The combined effects had a minor impact on our first quarter results, which Stephen will outline. Our 2022 outlook assumes no Russian sales moving forward. Suffice it to say, 2022 has already started out as another year with unpredictable events, the effects of which may not be entirely visible yet. Despite the unpredictable environment, I'm pleased to report strong revenue growth in the first quarter in both our business segments. In fact, our aerospace composite segment grew net sales by more than 20%, and our machine clothing segment posted mid-single-digit growth compared to the first quarter last year. In the first quarter, we achieved GAAP EPS of 87 cents per share, up 2 cents per share from last year's 85 cents, and adjusted EPS of 91 cents per share versus 87 cents per share adjusted EPS last year. Most impressive is our team's ability to be adaptive, to work together, to overcome difficult supply chain challenges, logistics barriers, material shortages while replanting operations to deliver to our customers on time. In machine clothing, for example, we continue to see delays of raw material deliveries from our suppliers, but we are still able to hit record levels of output, improve absorption and productivity, deliver to customers on time, and produce excellent financial results. This took a lot of extra effort working across the globe to share materials and to rebalance factory capacity and output. We have great teams that are performing exceptionally well. On the cost front, we're closely monitoring and actively managing inflationary pressures in materials, wages, logistics, and energy. We're passing through cost increases where we can. Inflationary cost increases continued into Q2 and are expected to impact our profitability for the year overall. For example, rail transport from China to Europe across Russia is no longer viable and has been replaced by boat transport, adding cost and doubling the shipping time. Truck transportation within China is stymied by pandemic lockdowns and driver quarantines, and truck availability in Europe is impacted by the loss of Ukrainian truck drivers who returned home, contributing to an estimated 10% reduction of truck transport capacity in Western Europe. On a positive note, AgConference will continue to be nimble and flexible. Our supply chain and operations teams have demonstrated their agility by navigating the challenges of the last two years and the first quarter remarkably well. Despite this unpredictable global environment, we're optimistic about our growth opportunities. Our strategy is to invest in R&D and product development to drive organic growth, to collaborate with key customers to design the next generation of advanced materials for long-term growth, and to position Albany as the technology leader and partner of choice in both of our segments. This means we must be good at both developing advanced material solutions and operational performance. In machine clothing, we have a strong operating culture. We've earned a reputation for producing products of exceptional quality and durability for our customers. We're the global technology and market share leader in paper machine clothing, a market whose underlying long-term demand trends are expected to grow with economic activity, e-commerce trends, and a secular shift toward renewable and recyclable materials as paper replaces plastic. In our engineered composite segment, our strategy is consistent to bring the next generation of advanced materials to market and to earn a reputation for operational excellence and great customer service. It started with our development of 3D woven composites in collaboration with Safran on LEAP engine fan blades and fan cases. The durability and performance of 3D woven composites exceed the performance of any other fan blade materials, titanium or 2D composite blades. Moreover, we achieved high rates of commercial production and demonstrated the commercial feasibility of 3D woven composite components. Our success with LEAP is a springboard to propagate the use of 3D woven structures across the aircraft. We're excited by the long-term opportunities for advanced 3D woven composites on the next generation airframe and engines, with a variety of OEM and Tier 1 customers and partners. In the near term, we're ramping up production on the LEAP program and preparing our factory for our most recent win, the aft transition for the Sikorsky CH-53K helicopter, which positions Albany as a major player in rotary aircraft. Layered into the future, these programs and opportunities lay the foundation for sustainable long-term organic growth. The strategy takes advantage of long-term secular trends driven by climate change and energy efficiency. Our aim is to be at the center of this shift to lighter composite aircraft that are fuel efficient. Now, let me make a couple of comments about recent changes in our corporate governance. First, we're pleased to welcome two new members to our board of directors, Christy Alvord and Russell Toney. As part of our board refreshment process, we're excited to have Christy and Russell join Albany. They bring strategic, operational, technical leadership experience to the board. With their collective experience in materials, aerospace, technology, and diversified global manufacturing, our governance, strategic planning, and growth capability is enhanced. And second, we've effectively transitioned Albany to a single-class share structure. 100% of Class B shares have now been converted to Class A shares, and all outstanding common stock is now Class A. Therefore, all shareholders now have equal voting rights. Our next step will be the formal retirement of the dual-class structure in our bylaws, which we intend to bring to a shareholder vote in 2023. So with that, I'll hand the call over to Stephen. Stephen?