Ladies and gentlemen, thank you everybody for holding and welcome to the Albany International Conference Call -- Second Quarter Conference. And at this time, all participants are in a listen-only mode. We will have a question-and-answer session at later time which instructions will be provided. At this time, let me go ahead and transfer your conference call to Mr. John Hobbs, Director, Investor Relations. Go ahead Mr. Hobbs.

Thank you, Ernie, 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 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 to GAAP numbers. For the purpose of this conference call those statements also apply to our verbal remarks this morning where we will make statements that are forward-looking that contain a number of risks and uncertainties among which are the potential effect 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 this call to their most comparable GAAP measures, please refer to both the earnings release as well as our SEC filings including our 10-K. Now, I turn the call over to Bill Higgins, President, Chief Executive Officer who'll provide some opening remarks. Bill?

Thank you, John, and good morning, everyone. Welcome. Thank you for joining our second quarter earnings call. On multiple fronts, Albany completed an outstanding second quarter. In this pandemic environment, we continue to operate with health and safety as our top priority. We drove continuous improvement and efficiencies throughout operations. We managed the supply chain with discipline and adaptability. We continued to do a great job for our customers with outstanding performance and on-time delivery and quality. And we delivered record gross margins and adjusted EBITDA margins in both segments. Steve and I will provide more detail, but first I want to extend my gratitude to our employees around the world. Our teams have risen to the challenge and delivered great results while keeping health and safety at the forefront of everything we do. And this pandemic is not over. Unfortunately, we have to consider the marathon which requires stamina and resiliency. I'm proud of how our teams have responded and how they continue to work together to get the job done for customers and shareholders. Make no mistake, it was a challenging quarter, and I thank every member of the team for the extra efforts. Great job on a great quarter. Last quarter I spoke at some length about our management and operational response to a global pandemic. Today, our top priority remains maintaining the health and well-being of our employees. Our COVID-19 task force continues to meet on a regular basis reviewing each location's situation, upgrading safe procedures as we learn more and sharing best practices across the company. We've been relentless to ensure a safe working environment and cannot become complacent, particularly since a number of communities where our plants are located have become recent hotspots. I'm extremely proud of the Albany team and the outstanding operational…

Thank you, Bill, and good morning to everyone. I'll talk first about the results for the quarter and then about our revised outlook for our business for the balance of the year. For the second quarter, total company net sales were $226 million a decrease of 17.5% compared to the $273.9 million delivered in the same quarter last year. Adjusting for currency translation effects, net sales declined by 16.9% year-over-year in the quarter. In Machine Clothing, also adjusting for currency translation effects, net sales were flat year-over-year, with growth in tissue, pulp and packaging grades almost completely offset by declines in publication grades and in engineered fabrics. Engineered Composites net sales, again after adjusting for currency translation effects, declined by 39%, primarily caused by significant reductions in LEAP and GE9X program revenue, partially offset by growth on the F-35 and CH-53K platforms and the acquisition of CirComp. Second quarter gross profit for the company was $103 million, a reduction of 2.1% from the comparable period last year. The overall gross margin increased by 720 basis points from 38.4% to 45.6% of net sales. Within the MC segment, gross margin improved from 51.8% to 54.5% of net sales, principally due to foreign exchange impact, mix and efficiency gains and reduced depreciation expense. Within AEC, the gross margin improved from 20.9% to 26.7% of net sales, driven by a favorable mix in program revenues and the net favorable change in the estimated profitability of long-term contracts of over $7 million this year, compared to $5 million in the second quarter of 2019. Second quarter selling, technical, general and research expenses declined from $50 million in the prior year quarter, to $47.4 million in the current quarter, but increased as a percentage of net sales from 18.3% to 21%. The reduction in the…

Thank you everybody. And, yes, let’s start a question-and-answer session here. [Operator Instructions] We have a question from Caitlin Dullanty. Please go ahead.

Good morning, guys. Given the structural downturn and the significant headwinds that we are all seeing in the entire industry and commercial aerospace is facing possibly for the next several years, is there any change to how you are thinking about the growth strategy or the trajectory for AEC? Do you plan to shift? What type of programs or new business do you pursue? Or is there any change in your thinking there?

Yes, Good morning Caitlin and thanks for the question. It is a challenging time. And of course, we're looking at the strategy. We have a fundamental belief in the benefits that we can bring with our advanced materials and how we apply them. So the question is, where are the end markets, which end market's going to be the higher growth market going forward, where can we add benefit for our customers. So yes, we're continuing to look at our strategy, our technology and our product development. And with the strength of our balance sheet, we're going to continue to develop new materials and work on programs for the future. So in commercial aerospace, it will take longer to get there with new aircraft and new platforms coming online. We're also pursuing military and defense side, as well as we develop what we can be the next generation. I believe we can be the next generation of advanced composites.

Okay. Thank you. That's helpful. And then, just going back to MC a little bit. Can you talk about and provide a little bit more color on the demand environment, how it played out over the quarter specifically across the end market? Did you see any tailwind in tissue demand? And is there going to be destocking trends? Is that kind of what you're talking about? Just looking for a little bit more color into the trends that you mentioned.

Yes. I can add color and then if Stephen wants he can add some commentary. We're seeing, what's the mix picture. If I start with tissue, tissue in general has been good and particularly the at-home business, but as you know the away-from-home business where people aren't going into offices and buildings and schools so far that business has been slow. We serve both markets. In fact, across the end markets, we serve all of them. So if things shift from one market to another, we can benefit from that. But the away-from-home market for tissue obviously hasn't been as strong as the at-home market which has been very strong. Around the world, it's a different -- things are behaving differently I would say. Publication is hurting. As you can imagine, the acceleration with video conferencing media as we mentioned, publication is going down strong very similar we think so far to what we saw in 2009 in publication. It's just an acceleration of a downturn and we'll see where that settles out. We're watching with all of our customers the machine time how -- if machines are going down, how longer down for closures. We are seeing kind of a different pace in Europe versus Americas versus China. Packaging has slowed down in some places. In China, China has gone through a change where they were slow earlier in the year, but that's picked up a little bit. So we see a little bit more strength in China than in the rest of the world. But it's a mixed picture. And we did I think see orders start to fall off in the middle of the quarter, so we're watching as we go through the end of this quarter into Q3. Steve, I don't know if you want to add to that yes.

Thank you. And our next question comes from Gautam Khanna. Please go ahead.

Yes, hey guys. This is Dan on for Gautam. Thanks for the question. So first, I was wondering if you could shed some light on what programs are driving EACs at AEC. And I'm guessing it's mostly defense if not all defense programs. Is that true?

Sure. Stephen, do you want to take that one? Stephen you may be on mute.

Can you hear me now?

Yes. Yes we can.

Sorry. I hadn't -- it was a variety of programs down across all of our operations in AEC. It was not just defense programs, although defense programs is a portion of it. It was actually both a mix of commercial and defense programs. So, we're not going to get down into the program level at detail on any specific programs, but it was several programs not just one or two.

Okay. Understood. That's good to know. And then, are you guys able to quantify in any fashion the additional content on the new 787 agreement?

At this stage, we're -- yes we're not in a position to disclose the revenue from those parts. We've disclosed before that we were generating a few hundred thousand dollars per shipset from the forward fuselage frames. We add to that now some significant content in the aft fuselage, but I can't give you a new dollar number.

Okay. Yes, that's fair. Sorry just one more then. What -- so what's the process for when the LEAP facilities come back online as far as like hiring and retraining goes? And then, I know it's going to be a slow ramp-up, but kind of what's the lead time on getting those processes back to up to speed and working efficiently again?

Yes. I'd take that one. The LEAP three facilities were temporarily closed. We did have one facility come up for a short period of time to manufacture a specific product line last – in the last month and that was a great learning experience for us on how to restart – how to restart effectively and it went very, very well. So the employees that are running those processes the technical know-how all those folks are on furlough. So some of them may come into the plant now and then depending upon their role. But we have a plan to ramp up some of it in this quarter and the rest of it in the beginning of probably September, October time frame. So we feel like we have a good manufacturing process to restart. We don't expect there to be a large learning curve. And as you can imagine the volumes aren't high volumes like we were running at last year. So – but we feel like we're in a good pretty good place to start back up and looking forward to it.

Okay. Thanks very much.

Thank you. And our next question comes from John Franzreb.

[Technical Difficult]

John we're getting a lot of background noise. I couldn't understand the question something about packages.

Yes what I'm looking for is your thoughts are on the office back-to-school market as we head into the – whether those things could be sizably weaker than [Technical Difficulty]

Yes maybe just a bit of color there. I mean they've already been very weak, so we've seen an order decline in publication that started earlier in the year with just a slowdown everywhere. So we don't expect that to get better soon if that's your question.

So John, yes in Q1 publication orders were down effectively double-digit year-over-year. We saw a repeat where they were well into the double-digit decline in Q2. Some of that could be exacerbated as we get back into the fall as we get a return to school. We really don't have full insight into that yet but our expectations are for a continued decline of the publication markets throughout the balance of the year.

Okay. And one paper company I was talking to yesterday had a sizable margin benefit – government-sponsored programs [Technical Difficulty]?

We lost you at the tail end of that John but I think you're asking about government-sponsored programs and if we had received any benefit.

Yes

I'm not aware that we have. As you know on the aerospace side, the French has offered a package that I think will benefit aerospace companies in France. But we haven't seen anything on the MC side so nothing I'm aware of no.

Okay. I guess one last question if you can understand me. Just on the convergence from white paper to packaging paper, are you seeing any acceleration in your customer base on conversions of equipment?

We're watching for the conversions of equipment. As you probably know it's very expensive and time-consuming to convert machines from one grade to another. And then you have to look at what the capability of the machines are, the size of the machines the width of the machines as well as, whether they're using virgin pulp or recycled pulp depending on what they're making a white paper or something with recycled paper. So we're watching that. It's very expensive and it takes time. So it probably will happen out there but it's not easy to do.

Okay. Thanks, guys. Sorry about the connection.

At this time we don't have any more questions. [Operator Instructions] Gentlemen, at this time we have no questions.

Thank you, Ernie and I'll make some closing remarks. I'd like to thank everyone for joining us on the call. We appreciate your continued interest in Albany International. As we noted earlier, these are challenging times and this pandemic is not over. We like to think of it as a marathon, where we all need to find our own stamina to remain diligent and demonstrate safe behaviors whether at work or at home or in our communities. I hope that all of you and your families are healthy and safe. And I'd like to conclude today's call by recognizing the entire Albany team for another strong quarter of performance in a challenging environment and thank them for their continued focus on health and safety. Thank you everybody.

And this concludes our conference for today. Thank you everybody for joining and for using AT&T Teleconference. Have a great day.