Ladies and gentlemen, thank you for standing by. And welcome to the Second Quarter Earnings Call of Albany International. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given to you at that time. At the request of Albany International, this conference call on Thursday, August 1, 2013, will be webcast and recorded. I would now like to turn the conference over to the Chief Financial Officer and Treasurer, John Cozzolino for introductory comments. Please go ahead.

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 Joe Morone, our Chief Executive Officer, who'll provide some opening remarks before we go to Q&A. Joe?

Thanks John. Good morning everyone. As always, I will provide a few introductory remarks that add some color to John’s and my commentary in the press release and then we will turn to your questions. I will comment on three of the topics that we addressed in the release, year-over-year Q2 performance, which we view as essentially comparable. Our outlook for the rest of the year which is unchanged even though year-to-date, we are ahead of last year and some thoughts about the long range outlook for AEC especially in light of the recently concluded Paris Air Show. So, let’s begin with year-over-year Q2 performance. Adjusted EBITDA declined from a very strong $40 million in Q2 last year to $36 million this year. But, when we look at the actual operating results we see similar year-over-year performance. Now probably the best way to view this is to compare tables 5 and 6 in the text of the earnings release. So, if you go to those tables that’s tables 5 and 6 on page 4 of the release. And then starts with the Machine Clothing column, you see the year-over-year adjusted EBITDA declined by $1 million or a bit less than 2%. Now keep in mind that Machine Clothing sales were virtually identical in the two quarters. The difference in adjusted EBITDA is entirely attributable to a slight drop in gross margin from 44.2% in Q2 2012 to 43.8% in Q2 2013. 43.8% is well within our target range and right at the full year gross margin for 2012. Moving next to the Engineered Composites column, you can see that year-over-year adjusted EBITDA in AEC dropped by about $900,000. Well, $900,000 is the cost of the inventory write-offs associated with the close out of the Legacy program in our Texas operation…

(Operator Instructions) Our first question this morning comes from the line of Jason Ursaner with CJS Securities. Please go ahead.

Good morning.

Good morning Jay.

I was just wondering first on the Machine Clothing business Joe, if you could talk about linearity month-to-month and some of the trends in Europe and Asia whether it was just a strong June or really sort of a month-to-month improvement. I guess, I’m just trying to gauge, how much of it is conservatism for the consignment to make the shift versus really too early to tell?

I think the trend in – what we can say with some confidence about Europe and Asia is the sales trend has been flat for several quarters and we had thought that Europe would be L-shaped with a big drop upfront which really anticipates the gradual tick out of capacity over time and that’s exactly what’s happened it dropped more than a year ago and its just hung down at the same level each quarter for about 4 or 5 quarters. Q2 was the first quarter where we actually saw an increase in orders above that flat level. Now, whether that’s because of short-term inventory adjustments or whether that’s an early sign of an uptick of the bottom, time will tell and its little too early to just to say but what we can say with confidence is, its been flat for quite some time and given the increase in orders there is no evidence that we are about to see another step down if anything there is evidence of -- in the last four months of the year once we get through the summer slowdowns in Europe, we might see an uptick. Asia is a similar story just not as long, I mean, there was a big drop more like 10% a year ago rather than the 20% in Europe. And we think from a macro economic point of view those two are connected. Then it stayed flat down there at little more than 10% below previous levels. And once again, in Q2 for the first time we saw strengthening of orders. And again, we think that that suggest that in the back half of Q3 and in Q4, we should see some strengthening.

Okay. And second question is more on the composites the S-curve in that $300 million to $500 million of revenue by 2020, I think you are talking about the first sort of threshold on LEAP being more closer in $150 million to $200 million range?

Right, right.

And today it’s, I think roughly half of the developmental revenue. So the legacy programs are running in the $40 millionish run rate. The subsequent improvements, I guess that first part whether some more confidence on that hitting, how many of those improvements or how much of that kind of can get you to the bottom end of that $300 million without the nozzle or other airframe occasionally?

Right. I think that’s a really interesting question. And if you -- the more certain or the more likely S-curve is the next version of LEAP because history tells us that every new engine program has repeated technology in service and upgrades every two to three years depending on competitive conditions and in this case the competitive environment is pretty intense. So, there is a pretty good likelihood that sometime at the end of the decade there is going to be an upgraded version of the LEAP engines this is the way there will be an upgraded version of the gear turbo fan. We are working a lot of possible applications, the only real uncertainty is when do they get, they get folded in to the first upgrade or future upgrades. There are so much volume on these Single-Aisle engines on the LEAP engine, that it only takes one good part, one significant additional part to get us from $150 million to $200 million with LEAP plus the 40 of Legacy to get us up into the bottom end of the range, bottom of that $300 million to $500 million objective range. So, it only takes one good solid application on the first upgrade to LEAP to get us to the low-end. And how you get to the high-end, as you get more parts on to that first version or quickly following version plus we get some content on 777X plus we get some airframe -- smaller airframe content and a few other platforms that’s the way it would, that’s what brings you up towards the higher end of that objective range.

Okay. And let me ask --

You can’t understate the importance of the volume associated with -- volume of engine associated with the LEAP program. So any kind, you just get one more part, you are talking 1800 engines, 1600 to 1800 a year or 1000 engines to 1800 engines a year. Big, there is a big revenue impact of additional content.

Okay. I appreciate that. I will jump back in the queue. Thanks.

Okay.

Our next question comes from the line of John Franzreb with Sidoti. Please go ahead. John Franzreb - Sidoti & Company: Good morning, guys.

Hey, John. John Franzreb - Sidoti & Company: Could you -- just discuss that $8 million (inaudible) revenues, how does that play out in the second half of the year, is it all embedded in one quarter, it’s evenly distributed?

It will spread out over the two quarters or probably be more heavily loaded in Q3 than Q4. John Franzreb - Sidoti & Company: And you alluded to the fact that the EBITDAs are going to improve noticeably in composites for the balance of the year. Why is that? What’s driving that and what kind of targets you are really thinking about by year end on composites?

What’s driving it is primarily in the short-term. Well, it’s the same two variables. It’s improving profitability in some of these Legacy programs and Texas, which has been dragging down our profitability and continued incremental growth in LEAP, which improves the margins as well. So, it’s the combination of both of those trends. So, if those two, I mean, you should certainly if you just interpret our comments on Q2, we’re saying the right way to think about that run rate it’s just added back the cost of termination so that that brings EBITDA to a little over a $1 million at this level of sales and we don't think that’s good enough. We think it should be at least double that. So, I think if you use this as a base line and then do some incremental improvement in EBITDA from this quarter; you’re heading in the right direction. And then as revenue grows incrementally growth in revenue should drop through. John Franzreb - Sidoti & Company: Okay. And Joe, just discuss the seasonality that you’re seeing now in PMC, it’s been kind of lumpy over the past couple of years, what is the second half is going to look like as far as the revenue trends for the year?

That’s a really interesting question. And let me get at it in a couple of ways. So, let me first answer your the specific question and then go back to the bigger picture. The most important seasonal effect in Machine Clothing occurs at the end of the year as holiday slowdowns around the world lead to lower production of paper which leads to lower consumption of paper machine clothing which leads to lower orders for our products. The effect of those seasonal slowdowns at the end of the year don't really hit our earnings until Q1, but the effect of that seasonal slowdown is that there is actually less, we have fewer shipments going out in the backend of Q4 and most of those shipments going out in the backend of Q4, they don’t really get recognized as revenue to Q1. So, you’ve got less flow of shipments from one quarter to the new quarter at the end of the year, the beginning of the next year than you do at any other time of the year. So, Q1 historically is the low quarter. The second seasonal effect is the summer slowdowns particularly in Europe. And it means typically that July and August are soft. And how soft that turns out to be depends on how bigger of run up we get in September and we never really know until the end of the quarter but there is definitely seasonally effect in the summer particularly in Europe. These seasonal effects are magnified in the last few years because customers in the Americas and Europe have been -- have gotten much more efficient at managing inventory and that’s squeezing down inventory. And so, you get greater fluctuation, they’ll run down their inventory more as you get slowdowns and then they will…

The pricing environment in Europe which is always the high risk area is okay right now in that sense we are past the contract season -- contract renegotiation season and won’t really open up that window for another year and a half to two year and three quarters. And as far as we can tell the pricing impact of that last contract negotiation season is already built in to our revenue. So that’s the good news but the unchanged news though is that the underlying structural conditions the over capacity in our industry Europe has not changed. We still see pricing behavior that makes scratch our head, the underlying structural condition hasn’t changed but we think we are in a more stable period right now. I think we lost John, we lost the last questioners line. So he will probably queue back on, you go to the next –

My apologies. Our next then comes the line of (inaudible). Please go ahead.

Hi, Joe.

Hi, Mark.

Just a couple of things. We know that airplane companies never fall behind schedule with their new planes. But with respect to the 5300 LEAP orders that your referenced, if we didn’t have anything go wrong how would that play out time wise?

The easiest way to think about this is the LEAP engine replaces the current CFMs current generation of engine, the CFM 56. And the CFM 56, they are making about 1500-1550 engines per year. And they expect CFM expects to have completely displaced CFM with LEAP by 2019. So it’s get introduced in 2016 Leap and gradually those CFM engine were displaced by LEAP and by the time they get out to 2019, all of the CFM engine are LEAP engines. So that was three year phase out except for may be a 100 engines a year of the old type just repairs. So you would see a rapid increase in LEAP engines at least to the current volume of CFM engines 1500-1550 a year. And then CFM and Boeing and Airbus all expect there will be more increase in demand for those kind of engines incremental increase for those engines between now and 2019. So that 1500 gradually moves up to 1700 or 1800 a year. The other way to look at this is to look at the per month production of Single-Aisle aircraft 737 and the A320. And both Boeing and Airbus are now at or committed to 42 planes a month, so 84 engines, they need 84 engines a month each of them. And there is a fair amount of speculation which they are fueling that per month production of planes is going to increase from 42 to something more than 42 to 45, 50 and if you do that math and assume CFM holds a chair of 100% of Boeing and half of Airbus, you get back to that 1600, 1700, 1800 engines per year.

Okay, okay that helps. Now with respect to your comments about EBITDA, I wonder if we could try to take that to cash flow a little bit as we think about the impact of the next generation, LEAP technology, can you remind us, how the development and investment ramp would look and obviously its early because you don’t know parts we are talking about. But I’m trying to get a order of magnitude impact of the layering in the cost of development of the new LEAP project into our existing cash flow.

I think the approach we take back of it which you can summarize with some back of the envelope map or something like this. Take last year’s adjusted EBITDA, which you think was about $145 million and then subtract out $70 million for CapEx, which is roughly amortization and depreciation. And which set for the next on average between 12 and 16 CapEx will be about $70 million. We think it will be right about $70 million this year. So $145 million minus $70 million and take out $15 million for interest, $15 million for taxes and $15 million for dividends. And that leaves you on the order of $30 million, $35 million left over basically excess cash, so roughly a $1 per share of excess cash after the CapEx, interests, dividends and taxes. The $70 million a year assumes about $45 million a year for AEC and we are right in the middle of a very heavy the peak investment this year and especially next year and the year after, peak investment for the LEAP program, two big plants that we are going to fully equip over the next couple of years. So assuming if you just make the assumption of – we are going to hold that high level of investment it would mean we are equipping two big plants every year. So, we think, if you go up through the decade at $70 million a year of CapEx that’s a pretty conservative way of thinking about it.

Perfect. That’s great. Thank you.

We don’t think it will be that high. But –

Okay, okay. But, that’s very helpful. Thank you.

(Operator Instructions) And we do have a question from the line is Steve Levenson with Stifel. Please go ahead.

Thanks. Good morning, Joe and John.

Hey, Steve.

I appreciate you are being conservative what you said about Safran, the near technology, I think they had a dozen or so, parts including a number of static parts that were made with 3D woven materials. Could you give us an idea of what it would take or in airframe to replace some metal part with a 3D woven part with the price performance differences might be including things like changes in maintenance procedures and such?

On the airframe side?

Yes.

Well, we think the -- if you think in terms of the skeletal structure of a wing or an airframe and you look for low bearing, impact bearing components of that structure, those are natural applications for us. And we believe that there are performance advantages relative to conventional composites because we can bear load. And weight advantages compared to metals. So it’s going to be component by component, a normal economic analysis to the weight advantages of our composites offset any economic disadvantage compared to metals and sometimes the magic works and sometimes it doesn’t. We are encouraged by initial progress we’re making, working with the Tier-1 supplier on airframe application auto wing, it’s a relatively small from a revenue point of view application but it is a great first demonstration of what we’re capable of doing on the airframe. We do think that the airframe becomes a major source of potential application for us -- that growth that’s out there in time and it is highly dependent on as you know when a new platform gets introduced. That’s why the 777X is an interesting platform. Anybody who is serious about composites is going to try to figure out a way of seeing if they can compete for part to that wing. The next big platform will create opportunities for airframe applications for composites is probably the next generation Single-Aisle, maybe there is some derivatives of A350.

Okay. Thanks. I guess Single-Aisle (inaudible) even think about right now.

Right.

You did mention 777X and we spoke to the GE people at the show because they’ve been talking about the fourth generation composite blade and case for the engine and well, of course, they wouldn’t name the supplier, I guess nobody has been chosen, they did say, it would be 3D woven. So, assuming that it might be you, that’s an engine, that’s 132 engines in diameter against 79 for the LEAP, for the big LEAP I think, it’s the total part that you can make on your equipment that you’re installing or would it require an additional investment?

Well, let’s backup here. The short direct answer is, if we got to that, it would require additional investment. Those are bigger parts but we would be, will be up full capacity just meeting the requirements for a week. But let met step back from that answer. The GE9X engine will indeed from everything that said have a composite fair module. We believe that our technology would do well on that application and we know because of GE's involvement in CFM that they know about our technology. Now, whether GE and Safran reach an agreement to use our technology on the fan module of the GE9X remains to be seen. And as far as I know those conversations have, if they’ve taken place, they are taking place in a very preliminary way, there is no agreement that I know about GE will have orientation to see if they can have as much work in-house as possible on that engine. On the other hand, we are the only supplier capable of doing 3D woven parts. So, it’s an interesting application, it’s a potentially big application, it will require more investment but my view was anybody who is telling you that there is an agreement here, is a way ahead of themselves. I don't think --

Oh no, nobody said there is an agreement.

Yes, right.

They said, you might assume that these suppliers on LEAP might be the same for GE9X.

I know we told (inaudible). And I don't think we’ll know --

You’re talking to the wrong guys, just a joke.

Great. I think, I don't think that gets clarified until the end of next year. That would be my --

Okay.

Yes.

Got it. Thanks. And last, you talked about the CMC blade for the low pressure turbine. Are CMCs or do you expect CMCs to be covered in the proposed joint venture agreement with Safran or is that something you expect to retain 100% up?

It would be part of the agreement.

Okay. Thank you very much.

Thanks Steve.

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

Okay. Thank you everyone for listening in on the call. And I thank you for the questions. And now as always John and I look forward to meeting you at the next shows or in between when we are out on the road or if you were on the call -- on phone the when we talk to each other. So thanks again and talk to everybody soon.