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Edited Transcript of AIN earnings conference call or presentation 11-Feb-20 2:00pm GMT

·51 min read

Q4 2019 Albany International Corp Earnings Call ROCHESTER Jun 3, 2020 (Thomson StreetEvents) -- Edited Transcript of Albany International Corp earnings conference call or presentation Tuesday, February 11, 2020 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Andrew William Higgins Albany International Corp. - President, CEO & Director * John B. Hobbs Albany International Corp. - Director of IR * Stephen M. Nolan Albany International Corp. - CFO & Treasurer ================================================================================ Conference Call Participants ================================================================================ * Gautam J. Khanna Cowen and Company, LLC, Research Division - MD & Senior Analyst * John Edward Franzreb Sidoti & Company, LLC - Senior Equity Analyst * Kristine Tan Liwag BofA Merrill Lynch, Research Division - VP * Patrick Michael Baumann JP Morgan Chase & Co, Research Division - Analyst * Peter J. Arment Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst * Peter John Skibitski Alembic Global Advisors - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. Welcome to the Albany International Fourth Quarter 2019 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, John Hobbs, Director of Investor Relations. Please go ahead. -------------------------------------------------------------------------------- John B. Hobbs, Albany International Corp. - Director of IR [2] -------------------------------------------------------------------------------- Thank you, Grace, 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. For purposes of this conference call, those same statements also apply to our verbal remarks this morning. 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 that earnings release as well as our SEC filings, including our 10-K. Now I turn the call over to Bill Higgins, Chief Executive Officer, who will provide opening remarks. Bill? -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, John. Good morning. Welcome, everyone, and thank you for joining our fourth quarter earnings call. I'm happy to be here on my first earnings call as CEO of Albany. As I'm sure you saw in last night's press release, we delivered another strong quarter, capping a great year. While I'll let Stephen go through the details, let me point out a few highlights from the quarter and then give my perspective on our strategy and my priorities. The company delivered strong results in the fourth quarter and met or exceeded all the revenue and profitability guidance we had issued on our third quarter earnings announcement. I'm particularly pleased with the adjusted EBITDA margins in both segments. In the fourth quarter, we delivered margins of 35.1% in Machine Clothing and 22.6% in Engineered Composites. I'm also proud of the company's cash performance this year. The company generated over $130 million in free cash flow. And for the first time since beginning on our growth trajectory several years ago, the Engineered Composites segment delivered positive free cash flow for the year. I'd like to thank our employees across the globe for their contribution to the growth and success of the company. And while on the Board, I've had the opportunity to visit our operations around the world, and I've been impressed with the talent and dedication I've seen. I'd also like to thank my predecessor, Olivier Jarrault, for his pursuit of operational excellence and contributions. As you may know, I've been on the Albany Board since 2016 and was appointed Chairman last year. I appreciate the trust the Board has now placed in me, and I'm honored to be responsible for the success of this great company. In parallel with my transition and to ensure continuity and consistency at the Board level, my predecessor, Erkie Kailbourne, is stepping back into the role of Chairman. I've known Albany for a long time. In fact, when I completed engineering school, what is now way too many years ago, I had a job interview with Albany in upstate New York. Preferring aerospace at the time, I went to work as a jet engine engineer at Pratt & Whitney aircraft in their advanced technology group. Since then, I held a variety of technical, manufacturing and business roles within Allied Signal and Honeywell. And after Honeywell, I was privileged to serve as CEO and Chairman of CIRCOR International, a public company that is similar size to Albany and, like Albany, has global manufacturing businesses that serve both aerospace and industrial end markets. So I bring to this role not only prior experience as a public company CEO and as a Director on multiple public company Boards, but also considerable experience with our markets, technology and operational excellence. With the full support of the Board, I intend to continue executing on the two-pronged strategy that was first established by the company several years ago. First, we'll continue to focus on growing our Engineered Composites business. While there are obviously near-term challenges driven by the ongoing grounding of the Boeing 737 MAX fleet, our longer-term vision and objectives have not changed. Most important, we need to continue to perform on our lead contract with Safran to support both the continued ramp on the LEAP-1A engine for the Airbus A320neo family and the return to future ramp that will be required for the LEAP-1B engine once the Boeing 737 MAX returns to production. Safran is a critical customer of ours with whom we've had almost 20-year history. We deeply value the relationship with Safran and look forward to strengthening it further over time. We'll also continue to grow the balance of our Engineered Composites business by ramping with our existing platforms, by winning new competitions and by finding new applications for our industry-leading composite technologies across addressable market segments, including the next generation of commercial aircraft. The recent announcement of Albany's participation in the Airbus Wing of Tomorrow collaborative development effort is testament to the value that our technologies offer additional customers in the future. This proven strategy remains sound, and we believe it will deliver strong long-term returns to our shareholders. Second, we'll continue to solidify and build upon our leadership position in the Machine Clothing segment. We're the clear leader based on our technology and the strength of our offerings to our customers in the paper machine clothing market. That said, we're not resting on our laurels. In order to maintain our PMC's leadership position, we're constantly investing in this business, leading to new product solutions to meet our customers' changing needs to new manufacturing processes and to improve support for our customers. We expect to continue investing in Machine Clothing consistent with past investment levels to maintain our leadership position and profitability. This two-pronged strategy has served our shareholders well. Today, we have 2 strong profitable businesses. In 2019, our Machine Clothing segment performed extraordinarily well, delivering an even higher level of EBITDA than we had expected after a very strong 2018. The Engineered Composites business, even with the challenges caused by the 737 MAX situation in the back half of the year, delivered over $100 million of EBITDA and for the first time ever, delivered positive free cash flow. We continue to believe that at this time, given the technology overlap and resource sharing of people, ideas and funding between the 2 businesses, we're stronger as one Albany. So with that continuation of our existing strategies in my backdrop, my priorities for the business are threefold. First, I'll continue to focus on operational improvement across both segments that has helped drive the improvement in our financial results over the last few years. I'm fortunate to have 2 strong operational leaders who themselves are supported by strong teams. Daniel Halftermeyer has a long history of driving continuous improvement across the Machine Clothing segment. The strong margins that the segment has delivered demonstrate our commitment to delivering shareholder value. Leading the Engineered Composites segment, we're now -- we're fortunate to have Greg Harwell, who joined us late last year. Greg brings extensive experience managing and operating global aerospace businesses. Second, we'll continue to focus on growth within a renewed focus on winning new business in the Engineered Composites segment. Not too long ago, we were in a position where we had won so much business on LEAP, on the F-35, on the 787, on the CH-53K that we had to demonstrate to our customers our ability to ramp and execute on those programs before expecting them to trust us with additional work. We have accomplished a lot, are tracking well on existing programs and now are actively pursuing and winning new opportunities in aerospace. Third, I firmly believe in our long-term vision to advance the state-of-the-art and composite technologies and find new applications in aerospace and beyond as well as to maintain our leadership position in Machine Clothing. I believe that successfully executing on our vision represents a tremendous opportunity for our shareholders. We'll continue to deploy return-seeking capital to maintain our leadership positions and to drive organic growth. We've achieved strong returns for our shareholders from the investments we've made in working capital and capital expenditures across both of our segments. At the same time, we've got the balance sheet and wherewithal to complete acquisitions that extend our capabilities and support our strategy. In fact, we've recently completed a small high-tech acquisition in Germany, CirComp, which brings us new technologies and capabilities. However, our strategy doesn't depend on completing acquisitions, and we're not prepared to chase some of the pricing that we are seeing in the M&A market. We do not believe that it would be a prudent use of our shareholders' capital to overpay for assets. Looking forward to 2020, our strategy is continuing to bear fruit. We expect another strong year with continued high margins for our Machine Clothing business and -- but for the current production halt in the 737 MAX, we would be expecting to provide guidance for the AEC segment that meets in the case of revenue or even exceeds in the case of margin the long-term 2020 objectives we established and published for that segment several years ago. However, the continued grounding and the recent suspension and production of the Boeing 737 MAX will obviously have an impact on our 2020 financial results. The 737 MAX, through the work we perform on LEAP-1B engine components, is a very important program for Albany. While we're heartened by the public reports of Boeing's progress toward safely returning the 737 MAX platform into service, there continues to be a significant lack of clarity into the return to service time line and the subsequent production ramp for the aircraft. While we do not have any additional insight into the status of the program beyond public reports, we believe that our guidance for 2020 reflects a realistic approach with respect to demand for the LEAP-1B components in 2020. In 2019, we're able to overcome the impact of the 737 MAX grounding through a combination of overperformance elsewhere in AEC, build ahead of LEAP finished goods inventory and the structure of the LEAP contract with Safran. However, in 2020, the magnitude of the impact of the 737 MAX will be too large for us to overcome, resulting in a material reduction of AEC revenues in 2020 compared to the long-term 2020 objectives we established several years ago. It's important to note that notwithstanding this impact, the balance of AEC is continuing on its growth trajectory. And also, the guidance for 2020 reflects adjusted EBITDA margins for the segment higher than those that had been reflected in our long-term 2020 objectives. These are both strong indicators that our strategy for AEC remains sound, that the revenue reduction in our 2020 guidance is only because of the 737 MAX grounding and that the long-term outlook for the business remains strong. On a separate note, we're, of course, monitoring the coronavirus situation in China. As you may be aware, we have 2 large Machine Clothing manufacturing locations in China. Our first priority is the safety and well-being of our employees at those facilities, and we've taken actions that we felt were appropriate to help mitigate the risk to our employees. Both of our facilities have been significantly impacted by the ongoing situation, so we're seeing a real-time impact of the situation on our Machine Clothing segment's performance. If the travel and work restrictions were to continue for a meaningful period, not only would that significantly exacerbate the impact on Machine Clothing and force us to execute contingency plans but we would also likely see an impact on the aerospace industry demand and global supply chain, which could start to impact the Engineered Composites segment. At this time, it's too early and there are too many unanswered questions for us to size the full potential impact on the company's 2020 results. However, we have incorporated in the guidance Stephen will provide the direct impact we're seeing in the current disruption. With that, I'd like to turn the call over to Stephen, who will provide more details on the quarter and our initial guidance for 2020. Stephen? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [4] -------------------------------------------------------------------------------- Thank you, Bill. I will talk first about the results for the quarter and then about our initial outlook for our performance in 2020. For the fourth quarter, total company net sales were $257.7 million, an increase of 2.4% compared to the $251.6 million delivered in the same quarter last year. Adjusting for currency translation effects, net sales grew by 3% year-over-year in the quarter. In Machine Clothing, also adjusting for currency translation effects, net sales grew by 0.7%, driven by strong growth in tissue and packaging grades, partially offset by declines in publication and pulp grades and in engineered fabrics. Engineered Composites net sales, again after adjusting for currency translation effects, grew by 6.4%, primarily driven by growth in the CH-53K program. The acquisition of CirComp, which was completed in the back half of the fourth quarter, contributed an immaterial portion of fourth quarter AEC sales. Fourth quarter gross profit for the company was $96.6 million, an increase of 9.9% over the comparable period last year. The overall gross margin increased by 260 basis points from 34.9% to 37.5% of net sales. Within the MC segment, gross margin improved from 48.6% to 50.2% of net sales, principally due to reduced depreciation expense. Within AEC, the gross margin improved from 14.5% to 19.6% of net sales driven by a $3.3 million favorable net change in the estimated profitability of long-term contracts, by higher net sales driving increased fixed cost leverage and by improved labor productivity. Fourth quarter selling, technical, general and research expenses increased from $48.7 million in the prior year quarter to $51.3 million in the current quarter and also increased as a percentage of net sales from 19.3% to 19.9%. The increase in the amount of expense was driven primarily by the revaluation of nonfunctional currency assets and liabilities, which resulted in a loss of $1.4 million in Q4 2019 while it had only a negligible impact in the same period last year; and by $600,000 in expenses related to the acquisition of CirComp, including just over $100,000 of the deferred purchase price, which is being treated as an expense for GAAP purposes due to the fact that its payment is dependent on certain future obligations being met. These increases were partially offset by a decline in R&D expense for the quarter. Total operating income for the company was $43.6 million, an increase of 16.5% from $37.4 million in the prior year quarter. Machine Clothing operating income increased by $3.4 million driven by higher gross profit and lower restructuring expense, partially offset by higher STG&R expense, while AEC operating income grew by 63.8% to $10.9 million driven by higher gross profit, partially offset by higher restructuring and STG&R expense. The income rate for the quarter was 24.8% compared to 37.9% in the same period last year. Discrete tax items and the change in the estimated annual income tax rate reduced income tax expense by $1.3 million in Q4 2019, while the same factors had increased the expense by $1.8 million in Q4 2018. Net income attributable to the company for the quarter was $29.1 million, an increase of 65.7% from $17.6 million last year. The increase was driven by the improved operating income and a lower tax rate. Earnings per share was $0.90 in this quarter compared to $0.55 last year. After adjusting for restructuring expenses, the impact of foreign currency revaluation gains and losses, pension charges related to derisking initiatives and expenses associated with the CirComp acquisition, adjusted earnings per share was $0.97 this quarter compared to $0.69 in the comparable period last year. Adjusted EBITDA grew 10.8% from last year to $63.9 million for the most recent quarter. Machine Clothing adjusted EBITDA was $52.8 million or 35.1% of net sales this year, up from $51.2 million or 34% of net sales in the prior year quarter. AEC adjusted EBITDA grew from $18.1 million or 17.9% of net sales last year to $24.2 million or 22.6% of net sales this quarter. Turning to our debt position. Total debt, which consists of amounts reported in our balance sheet as long-term debt or current maturities of long-term debt, remained steady at $424 million at the end of Q4. And cash increased by about $22 million during the quarter, resulting in a reduction in net debt of about $22 million. Under the definition of leverage ratio used in our credit agreement, which limits us to $65 million of cash netting against gross debt, we finished the quarter with a leverage ratio of 1.35, while disregarding the limitation on cash netting results in an absolute leverage ratio of 0.89. Our reduction in net debt this year has been in part driven by our working capital initiatives, partially offset by a significant working capital investment in the LEAP program primarily to support the build-up of finished goods inventory in the back half of the year. For the full year, net cash provided by operating activities increased from $132 million in 2018 to $200 million in 2019. Also, for the full year, free cash flow, which we define as net cash provided by operating activities less capital expenditures, increased from $50 million in 2018 to $132 million this year. I would like to point out that, as Bill alluded to in his remarks, this cash performance included AEC delivering positive free cash flow for the year in spite of the LEAP working capital investment. Capital expenditures in Q4 2019 were about $19 million, reflecting continued investments in equipment to support multiple ramp-ups in AEC. We mentioned last quarter that capital expenditures for the full year would be lower than initially expected, driven by the timing of some projects, some of which will now be completed in 2020, and that the lower level of spending does not represent any material change in our investment plans or priorities. Overall, across both segments and all metrics, we were very pleased with the performance of the business last year. Looking forward to 2020. As previously discussed on prior calls, Machine Clothing faces ongoing weakness in its end use markets, where the latest RISI data suggests that in the third and fourth quarters of 2019, global production of paper and board products declined by between 2% and 2.5% on a year-over-year basis, with declines in North America, Albany's most important market, of over 5%. As Bill indicated earlier, while we cannot yet anticipate the full impact to the segment of the coronavirus situation in China, we have also incorporated into our expectations a modest impact from the current disruption to those operations, assuming that those operations face some degree of disruption for about 4 weeks. To put this impact to our Chinese operations in perspective, we disclosed in our 2018 10-K that our sales directly to customers from operations in China were around $50 million. And while we have yet to disclose them, our equivalent sales in 2019 were roughly similar. Our overall expectations for the Machine Clothing segment take into account the anticipated impact of machine clothing demand, of the lower level of paper production globally over the last few quarters, the current impact of the coronavirus situation I just referenced and the impact of ongoing currency weakness in several markets where we generate Machine Clothing revenues in local currencies. As a result, we are guiding 2020 revenues for the segment of between $570 million and $590 million. However, notwithstanding the slightly weaker revenue compared to 2019, we still expect the margins to remain very robust and are guiding 2020 adjusted EBITDA for the segment of $190 million to $200 million. Before I provide 2020 guidance for AEC, it may be helpful to highlight a few items from AEC's 2019 results. First, in 2019, including the impact recognized in the fourth quarter, we recorded a cumulative total of over $12 million in net favorable changes in estimated long-term contract profitability. This resulted in both recognized revenue and gross profit of $12 million in 2019. While we review the estimated profitability of long-term contracts every quarter, any changes recognized as a result of that process may be either favorable or unfavorable, and we've seen changes in both directions over the last several years. These adjustments to profitability are usually difficult to forecast. However, these types of benefits are unlikely to be recorded in the same magnitude in 2020 as we recognized in 2019. Second, in 2019, the full impact of the grounding of the MAX fleet and Boeing's subsequent decision to suspend production of the aircraft had yet to be felt in our results. In 2019, we recognized LEAP revenues in our Albany-Safran joint venture of just over $210 million. Of this, just over 60%, or almost $130 million, was recognized on LEAP-1B components destined for the 737 MAX, with the balance related to the LEAP-1A engine. The outlook for components for the LEAP-1A variant that powers the A320neo family remains strong. However, as Bill mentioned earlier, there is a continuing lack of clarity into the return to service time line and subsequent production ramp for the 737 MAX. We believe that our assumption with respect to demand from our customer for LEAP-1B components this year, which is at a level much lower than in 2019, is realistic, but it remains uncertain. This reduced demand expectation will drive significantly lower levels of production of LEAP-1B components. A secondary, but less important driver of our LEAP fan blade -- fan case, blade and spacer production levels in 2020 relates to the finished goods inventory we had on hand at the end of 2019. As we have previously disclosed, in the second half of 2019, we made the decision, with the full support of our customer, Safran, and based on our mutual expectation that the return to service of the 737 MAX was only months away, that in order to minimize any workforce disruption at our ASC facilities, we would maintain a production rate of components for both LEAP-1A and LEAP-1B variants at a rate higher than would meet Safran's immediate demand and would allow for a modest increase in finished goods inventories. Due to the current GAAP revenue recognition requirements for contracts like our LEAP contract with Safran, we were required to recognize revenue on those components at the time of production rather than at the future point of delivery, resulting in the recognition of those revenues in 2019 and the reporting of the finished goods inventory on the balance sheet as a contract asset. As a result of this action and in line with our expectations from the time we made the decision, we finished 2019 with sufficient finished goods inventory on hand to support 50 aircraft from the Airbus A320 family and 100 737 MAX aircraft. However, as you all know, our expectation for a near-term return to service for the 737 MAX was not met. And in fact, Boeing announced a pause in production of the aircraft in December. Following Boeing's announcement in early 2020, we reluctantly began to implement reductions in force at our ASC facilities. We are now assuming that during 2020, we will start to burn down the excess finished goods inventory for both LEAP-1A and LEAP-1B in place at the end of 2019, which will flip the impact we saw in the back half of 2019. This finished goods inventory burn-down will result in recognized revenues in 2020, lower than actual shipments to our customer in the same period. I would like to point out that the structure of our contract with Safran, where we recover actual costs, means our revenues will not go down directly proportionally to any reduction in the quantity of produced LEAP-1B components since a portion of the revenue recognized on those components in 2019 was related to fixed costs and associated fee. If, as expected, we deliver fewer LEAP-1B components in 2020, those fixed costs will be absorbed by and recovered on the remaining LEAP-1A and LEAP-1B components that are produced in 2020. However, we will experience a reduction in ASC revenue caused by the absence of the variable costs and associated fee that we had incurred in producing the higher quantity of LEAP-1B components in 2019. Third, outside of the ASC joint venture, we do also support the LEAP program with traditional laminated composites under another small, fixed-price contract. While we would have previously expected revenues from this program to grow in 2020 in line with the expected ramp for both LEAP-1A and LEAP-1B engines, we now expect 2020 revenues from this program to decline by $5 million to $10 million compared to 2019. I would like to point out that much of AEC is performing in line with or ahead of expectations. In fact, as Bill mentioned earlier, were it not for the 737 grounding and production pulls, our AEC guidance for 2020 would be at or above the prior long-term objectives we had set for the segment. For non-LEAP programs overall, we are experiencing significant improvements in 2020. Additionally, we expect that the segment overall, even after the impact of the 737 MAX slowdown, will, for the second year in a row, generate positive free cash flow in 2020. However, the impact of the 3 factors I just discussed, the absence of net favorable changes in estimated long-term contract profitability and our expected 2020 performance, the lower revenues for the ASC joint venture and the lower revenues from the smaller fixed price LEAP program, are too great for those other improvements to offset. As a result, for 2020, we are guiding AEC revenue of $400 million to $420 million and AEC adjusted EBITDA of $80 million to $90 million. At the total company level, we are also providing initial 2020 guidance as follows: revenue of between $970 million and $1.01 billion; adjusted EBITDA of between $210 million and $235 million; an effective income tax rate including tax adjustments of 26% to 28%; depreciation and amortization of between 750 -- or sorry, between $75 million and $80 million; capital expenditures in the range of $75 million to $85 million; GAAP earnings per share of between $2.69 and $3.08; and adjusted earnings per share of between $2.75 and $3.15. The difference between our GAAP and adjusted EPS guidance ranges represents a known charge, which will be recorded in Q1 of $3 million related to severance payments for our outgoing CEO. While we do not formally guide R&D spending, I would like to note that we do expect to increase R&D expenditures in 2020. Most notably in the Engineered Composites segment, we will continue to demonstrate the applicability of our advanced and unique composite solutions to the production of a variety of aircraft components to support our customers' needs. As Bill mentioned earlier, our long-term vision for success in that market has been unaffected by the current 737 MAX situation, and we are continuing to invest in support of that vision. We continue to believe that the strategic outlook for both of our segments remains strong and will lead to significant long-term value creation. With that, I would like to open the call for questions. Grace? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question is from John Franzreb with Sidoti & Company. -------------------------------------------------------------------------------- John Edward Franzreb, Sidoti & Company, LLC - Senior Equity Analyst [2] -------------------------------------------------------------------------------- My first question is embedded in your guidance. How long you assume the production halt will continue for the MAX? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [3] -------------------------------------------------------------------------------- So John, thanks for the question. In terms of the 737 MAX, in our guidance -- and John, I don't know -- if you can put your phone on mute because we're getting some background noise. Our guidance is based not on necessarily any expectation of what Boeing does with the 737 MAX program either in terms of its return to service and the subsequent production ramp. Our guidance is based more on an expectation of demand we anticipate seeing from our direct customer, Safran. So it is somewhat removed -- our various levels of removal from what Boeing does, what Safran does in terms of as we're saying, not only Boeing's return to service and Boeing's clearing of the backlog of existing aircraft out in the fleet and also aircraft that is yet to deliver, but also clearing through of the backlog of finished goods inventory that lies not only on our books that I discussed, but also within the supply chain within the Safran and CFM joint venture. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- And next, we'll go to the line of Kristine Liwag with Bank of America. -------------------------------------------------------------------------------- Kristine Tan Liwag, BofA Merrill Lynch, Research Division - VP [5] -------------------------------------------------------------------------------- For the 737 MAX, what production rates will you be producing through 2020? And then at what point do you restart production? And at what rate are you producing? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [6] -------------------------------------------------------------------------------- Yes. So look, as we've discussed before, at the request of our customer, we do not talk about our specific build rates after the 737 MAX and so I can't answer that question directly. We are still in production for LEAP-1B components. Sitting here today, we are still producing but, obviously, at a much lower rate than we had previously been producing, which is not only a result of the demand from our customer, but also exacerbated, as I mentioned, by the finished goods inventory we already have on hand, on which we've already recognized revenue. -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [7] -------------------------------------------------------------------------------- I think, Stephen, it's probably important to emphasize, too, just as we noted in our comments, the lack of clarity. It really is difficult as we look at the year to try and fair out exactly what it will be. So we've taken an approach we think is a realistic approach, and it's probably something we'll just have to update everyone on as we go through the year. -------------------------------------------------------------------------------- Kristine Tan Liwag, BofA Merrill Lynch, Research Division - VP [8] -------------------------------------------------------------------------------- And in the non-AEC portion of Engineered Composites, can you discuss your cost-cutting initiatives there? And how we should expect you to balance growing F-35 rates, but declining 787 rates, how does that net out? -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [9] -------------------------------------------------------------------------------- Yes. As we mentioned, we have a number of programs that we're ramping up on right now. So we're watching each of those. We're watching the 787 and how that will play out, but we also have growth programs. So we'll be shifting appropriate workforce as needed as the growth shifts. -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [10] -------------------------------------------------------------------------------- I will point out that outside of LEAP-1B and the impact of that program on our AEC results, the balance of AEC, we anticipate double-digit revenue growth in 2020, and that is embedded in our guidance. -------------------------------------------------------------------------------- Kristine Tan Liwag, BofA Merrill Lynch, Research Division - VP [11] -------------------------------------------------------------------------------- And then switching gears to Machine Clothing. Bill, you mentioned that you have 2 facilities in China that could have been affected by coronavirus. Can you quantify the magnitude of the possible effect of this? And when -- should we see some resolution on when activities normalize? Is there a dollar amount that you can say, too, in terms of per quarter? Or -- and then also, once things normalize, do you expect to recover all of that so that the full year is intact? -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [12] -------------------------------------------------------------------------------- It's really hard to make a call right now because the situation is so fluid. We do have 2 facilities there. One is basically shut down, the other is running at a very small rate. And then there's the logistics problem of ships and shipping that is just not running yet. So we're just going to watch it as we go. I don't know if we... -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [13] -------------------------------------------------------------------------------- Yes. In terms -- so Christine, to answer your dollar question, as I've mentioned in my remarks, last year, we disclosed we've generated roughly $1 million a week of sales from Chinese operations directly to customers. We're seeing kind of 2 types of impacts right now. One, we're seeing reduced sales, obviously. So not only are we shut down, but our Chinese customers have shut down. So sales to Chinese paper mills or any of our other Chinese customers, obviously on hold, and that's causing a direct revenue impact. The secondary impact we're seeing is there are some products which go from outside of China from those Chinese facilities, some elsewhere in Asia and some even to Europe. Those customers still need those products. We are having to come up with contingency plans for production of those product, which is causing that product to be produced at a higher cost than it would have been produced in China, which has caused the additional EBITDA impact beyond the revenue hit we're seeing from just the overall slowdown in China. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- And next, we'll go to the line of Peter Skibitski with Alembic Global. -------------------------------------------------------------------------------- Peter John Skibitski, Alembic Global Advisors - Research Analyst [15] -------------------------------------------------------------------------------- So understanding confidentiality with the customer and stuff. But to that end, to go further on the LEAP-1B, guys, should we expect first half revenue -- or just talk about timing, should first half revenue at AEC be fairly meaningfully below second half revenue? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [16] -------------------------------------------------------------------------------- That depends on too many unknowns, quite frankly, Pete, because we really don't know, as Bill had alluded to, when we're going to be able to step up production rate. So I don't think -- I think it's too early to say that given the uncertainty around LEAP-1B. -------------------------------------------------------------------------------- Peter John Skibitski, Alembic Global Advisors - Research Analyst [17] -------------------------------------------------------------------------------- Okay. Okay. And then I was just curious about free cash flow conversion, Stephen, just given it sounds like you did have the big working capital build that it sounds like it'll reverse. I'm not exactly sure of the timing. But are you expecting free cash conversion to be maybe greater than 1 this year given the working capital build from last year? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [18] -------------------------------------------------------------------------------- We obviously had very strong free cash flow conversion in 2019. We expect another strong year in 2020. We don't guide free cash flow, so I'm not going to tell you whether it's above or below 1. But it should be a strong year. We certainly will see some unwinding of the working capital position we've taken in LEAP. And obviously, the balance of AEC delivered very meaningful cash in 2019 given the segment overall was positive free cash flow. And obviously, as always, Machine Clothing was a very strong cash generator, and we expect that to continue in 2020. -------------------------------------------------------------------------------- Peter John Skibitski, Alembic Global Advisors - Research Analyst [19] -------------------------------------------------------------------------------- Okay. Okay. Great. And maybe one for Bill. Bill, in your opening remarks, you kind of were alluding to the M&A market being a little pricy, but it sounded like you were really looking at kind of new bids on projects on kind of current aerospace platforms, and I'm not sure whether that's more commercial or military or not. But how kind of active is the new bid opportunity set? How -- in terms of the size, how big is in the opportunity set? I'm just curious because a lot of these programs are very long-lived. And so we don't necessarily see a lot of new opportunities at the high level. But maybe at your level, they're more active. So I'm just curious as to what you're seeing there. -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [20] -------------------------------------------------------------------------------- Well, and as we announced, Pete, the Wing of Tomorrow, it's a long-term program. So it really speaks to the long-term technology investment and our belief in the technology and our customers, expected benefits from the composite technology. So we'll keep working, though. As we're working on other long-term opportunities, we'll disclose them when our customers are ready to do that. But in nature, I would say they're longer term. They're not something that's going to happen within the year. -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [21] -------------------------------------------------------------------------------- But there is a fairly full pipeline, though, and we were successful in some opportunities in 2019. But to put these in context, these tend to be ones which are either military in nature, which means they're, by somewhat definition, smaller because the build rate is lower or their takeaways from another supplier. And these programs tend to be smaller. These are certainly not LEAP-type programs that we're pursuing and winning right now in terms of its revenue impact. But they are meaningful. Some of them are certainly in that $10 million to even $30 million of revenue per year we could potentially get out of these programs that we're chasing today. And given the size that you see, we only need to win a handful of those every year to have a meaningful impact on our growth rate. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- And next, we'll go to the line of Peter Arment with Baird. -------------------------------------------------------------------------------- Peter J. Arment, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [23] -------------------------------------------------------------------------------- Stephen, just a quick one on the forecast for Machine Clothing. The global production, you said down 2% to 2.5%, 5% down in North America. Have you already started to see weakening order rates from North American customers? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [24] -------------------------------------------------------------------------------- It's tough to tell right now here in Q1, I do say. The early part of Q1 is always fairly weak in order flow. It's a quarter where -- and I haven't lived through this before, but typically the corporate staff just starts to feel panic at the lack of order flow, and it all comes into the back half of Q1. So it's a little early to tell right now. It is a little weaker at this point in Q1 that we would ordinarily expect certainly. But it's not very meaningful at this point. And obviously, again, this is not like aerospace where we get orders with very long lead times. These are fairly quick turning orders. And so it's not -- we don't typically carry a large backlog. -------------------------------------------------------------------------------- Peter J. Arment, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [25] -------------------------------------------------------------------------------- Okay. That's helpful. And then just quickly on AEC. I know we've talked a lot about LEAP. Are you getting more pull out of LEAP to fill in on -- for the LEAP-1A from your customer? I know there was expectations that they were going to accelerate some production on their end. -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [26] -------------------------------------------------------------------------------- So LEAP-1A is certainly up from 2019, absolutely. And we're seeing some modest increases in LEAP-1A demand. I think there are a couple of factors going on. One, as we've discussed before, if you look at some of the more recent orders for the A320neo family, the proportion of those aircraft which are LEAP-powered as opposed to being powered by the alternative engine is -- has increased over time. And therefore, we would expect to see even for the same A320neo build rate a larger number of LEAP-1A engines being produced. And secondarily, Airbus has talked about increasing the actual build rate of the A320neo. Now that's -- that takes time. I don't think it's reason to expect to see the impact of a higher build rate of A320neo in our current numbers. The global supply chain for aerospace takes time to move. And I'm sure Airbus will trickle it up over time, but we're not seeing that impact today. -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [27] -------------------------------------------------------------------------------- Yes. I was going to ask, Stephen, I don't -- to answer the question, I don't think we're seeing an impact to the MAX order rate slowdown or the production rate slowdown and is there a competitive reaction on the A320. We're not seeing that yet. There is an increase in the LEAP business, the LEAP-1A business. -------------------------------------------------------------------------------- Peter J. Arment, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [28] -------------------------------------------------------------------------------- Okay. That's helpful. Yes, Bill, maybe just a quick one for you. Given that you were on the Board, you've had kind of a front row seat of the improvements, you mentioned the operational improvements that you're expecting for both segments to continue. Maybe just give some perspective on kind of the runway that's still in front of the -- from your seat now. -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [29] -------------------------------------------------------------------------------- Yes. We're going to continue to focus on operational improvements. We've got strong teams in place, a number of leaders put in place last year. There's still plenty of opportunity to continue improving the quality, performance, cost, productivity, service to our customer. We've got the, I'll say, the foundation there, but there's still a lot more work to do on top of that. -------------------------------------------------------------------------------- Operator [30] -------------------------------------------------------------------------------- And next, we'll go to the line of Patrick Baumann with JPMorgan. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [31] -------------------------------------------------------------------------------- Just maybe starting with the mid-term 2020 targets that you guys had provided some time ago. I think you had mentioned that you'd be at or above those numbers absent these MAX issues. Is there any reason to believe that when MAX gets back to where it was supposed to be that you will be able to achieve those levels? I guess I'm asking, is the supply chain impaired in any way from the issues such that it will make it difficult to normalize back to what you thought the entitlement might be for that business? I'm talking about the $500 million to $550 million in revenue and $100 million in EBITDA that you guys had put out there, I guess, a couple of years ago. -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [32] -------------------------------------------------------------------------------- Certainly -- just taking them in reverse order. Certainly, the EBITDA guidance range of the 18% to 20%, our guidance that we are providing for 2020 certainly implies a rate above that 18% to 20% range. So we don't see a challenge with that. In terms of the $500 million to $550 million of revenue, we do not see anything which has permanently impaired the business in any way. We do see this as a short-term effect. Obviously, we're not guiding beyond 2020 so I'm not going to predict the future. But there's nothing in what we're seeing right now which should be lasting in nature. It is directly driven by reduced demand for LEAP-1B engines caused by the 737 grounding and production pause, and that should reverse itself once the 737 comes back online. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [33] -------------------------------------------------------------------------------- Okay. Any update on progress for the GE9X for the 777? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [34] -------------------------------------------------------------------------------- So we are obviously in low-rate production for the aircraft. We are very pleased to see the first flight of the 777X here a month ago or so from the -- and so we expect to be producing that this year. There was a delay in that program. It slipped about 12 months to the right, which obviously impacted our production ramp. But we are expecting to increase production this year in that program in line with our customer's demand. We are facilitizing for that ramp, and there are no particular challenges in that program today. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [35] -------------------------------------------------------------------------------- And then what about the 787, what's the outlook for that within your business for 2020? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [36] -------------------------------------------------------------------------------- Yes. Obviously, there've been the 2 step-downs, 14 to 12, 12 to 10, and that will not be -- have any material impact here in 2020. There could be some impact in 2021, but it does depend on the mix of aircraft. As you know, there are 3 variants for the 787. We provide frames for 2 of the 3 variants today. And so it really depends on the production mix in a given year how significant that impact would be. Even worth, though, to all be felt in our variance, it is not as if it would have a material impact on our overall AEC revenues. It's an important program, but it is much, much smaller than LEAP, obviously. And one of a handful of other significant programs in that, but not significant enough that any reduction of that program is going to materially drive revenues up or down. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [37] -------------------------------------------------------------------------------- Well, maybe if you could just -- and the last one for me. By order of importance -- I think you mentioned the double-digit revenue growth you expect for the segment -- your segment excluding Safran business for 2020. What was -- so by order of importance, what are the big drivers? Maybe you said this earlier and I just missed it. What are the big drivers of that double-digit growth program-wise? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [38] -------------------------------------------------------------------------------- Yes. So we don't get into guiding specifically by program. But outside of LEAP, the other big programs we have in AEC are 787; CH-53K; the F-35 program; JASSM, which is the joint air-to-surface standoff missile for Lockheed Martin; our wastewater tanks program for Boeing aircraft; and then a variety of smaller programs. Those are our most significant programs, and the bulk of the growth will be coming out of those programs. -------------------------------------------------------------------------------- Operator [39] -------------------------------------------------------------------------------- And we do have another question from John Franzreb. -------------------------------------------------------------------------------- John Edward Franzreb, Sidoti & Company, LLC - Senior Equity Analyst [40] -------------------------------------------------------------------------------- Yes. I'll ask quickly and mute myself again. But could you just discuss -- it's been over a year that Xerium was taken in. How has that impacted the pricing environment in Machine Clothing? And secondly, recycled pulp has come down considerably in pricing. Has that impacted your customer spending with -- end at all? Just talk to those issues, the margin profile. And Machine Clothing remains outstanding. I just want to get a read on it. -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [41] -------------------------------------------------------------------------------- So thanks, John. So in terms of the Xerium acquisition, obviously, that was, as you say, completed some time ago. We have not yet seen a significant impact in the market. It obviously strengthens that competitor of ours. Xerium is a strong competitor, and they remain a strong competitor in the market. There's -- the pricing environment in Machine Clothing has been fairly stable, but we are always very mindful of that and watch it. We have not seen significant impact of that yet. In terms of your question about pulp -- and the pricing is obviously down. Our -- we've seen a bit of a shift with some of our pulp customers. The market for our products that they acquire being down somewhat at various points in time during the year, but not material at the top line level when we roll it all up. It hasn't met a material shift for the year. Overall, during the most recent year, pulp was up for the year compared to 2018, slightly low single-digit growth in pulp for the year on a constant currency basis. The bulk of the growth, as we typically see in the Machine Clothing business, was driven by primarily growth in packaging and tissue with, again, for the full year, as you would expect, full year declines on a constant currency basis in publication grades of roughly 10% for the year. But we did see some growth in pulp for the year. So while there were a specific customer impact of what you talked about overall, it didn't affect our top level sales. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- And next, we'll go to the line of Gautam Khanna with Cowen and Company. -------------------------------------------------------------------------------- Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD & Senior Analyst [43] -------------------------------------------------------------------------------- So a couple of questions just for clarification. First, in terms of EAC adjustments, Stephen, what are you expecting in the guidance for 2020? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [44] -------------------------------------------------------------------------------- We typically take a neutral stance on EAC adjustments. Really don't embed them either positive or negative in our planning. As we have seen in the past, we've had years where we've had significant unfavorable adjustments. We were very fortunate -- and fortunate is probably the wrong word because it's due to the hard work of our employees and leaders of the business. But we enjoyed some very favorable adjustments this year. But in a typical year, we would assume a neutral position. -------------------------------------------------------------------------------- Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD & Senior Analyst [45] -------------------------------------------------------------------------------- Okay. And then you gave some color on the LEAP-1B revenue last year at $130 million. And then you made a couple of comments. Something was down $5 million to $10 million, and I wasn't clear if that was the 1B components that was not in the $130 million. And maybe can you just frame what you're anticipating, what revenue expectation is embedded in the EAC guidance for 1B revenue in 2020? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [46] -------------------------------------------------------------------------------- Thanks, Gautam. So to answer your 2 questions, the first part, the reduction of $5 million to $10 million. We have a small program that at customer request, we don't typically talk about externally and don't divulge the exact nature of the program, which is a fixed-price contract for traditional laminated, so 2D composites. So this is outside of the Albany-Safran joint venture. We would have expected that program to grow from calendar '19 to calendar '20 in line with just the ramp of LEAP. In fact, that program is declining by about $5 million to $10 million from '19 to '20. So that's the first question. So this was not in the $130 million because the $130 million was only LEAP-1B revenues within the Albany-Safran joint venture. To answer your second question, in terms of LEAP-1B revenues for calendar '20, we're not going to break those out. They are clearly down appreciably, very significantly from the $130 million we recognized in 2020. But we don't want to get into issuing guidance down at the product line or business unit level. At the segment level is as low as we're comfortable going. -------------------------------------------------------------------------------- Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD & Senior Analyst [47] -------------------------------------------------------------------------------- Okay. Can you give us some framework on how much the EBIT dollars associated with the 1B reduction compares to that of the revenue decline? Obviously, it won't be as big, but any order of magnitude? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [48] -------------------------------------------------------------------------------- So look, as you see -- so if we look at 2019 and if you strip out $12 million of profit and revenue associated with the EAC adjustments we just talked about, you're going to come out with, depending exactly how you do the calculation, an EBITDA margin for the year somewhere north of 20%, in that 20.3% to 20.5%. The midpoint of our guidance on AEC for 2020 implies an EBITDA margin for 2020 of 20.7%, so north of 2019. So basically what that tells you, since we said we weren't assuming EAC pickups in 2019, we're assuming that the margin overall expands. Embedded in that is an assumption that while the revenue will go down within ASC a result of LEAP-1B productions, our EBITDA margin, certainly our gross margin that, that business will generate, will not decline appreciably. As we've talked before, given the cost-plus nature of that business, our gross margin percentage is relatively immune to shifts in volume. And I think relatively, it -- there can be slight changes. But relatively, it's fairly stable. So our dollars of profit, gross profit dollars that the ASC business generates, will go down, but effectively pro rata with the revenue line. So we will see a percentage reduction in gross profit consistent with the percentage reduction in revenue we're seeing, and that's because we will still absorb our fixed cost over the remaining business. So we'll not see any margin compression within that business. -------------------------------------------------------------------------------- Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD & Senior Analyst [49] -------------------------------------------------------------------------------- Okay. And my last one, sorry, is just on re-ramping. Now that you've had some workforce reductions, what is your level of concern about Albany's ability to re-ramp? Obviously, these decisions are made with some production ramp in mind, what that profile looks like. But in terms of your ability to kind of hire those folks back, preserve learning curves, I'm just wondering how this impacts kind of your longer-term thinking on the margin profile of this contract. I mean does it severely impair the ability to get to a point where you're in a position to negotiate a fixed-price contract down the road? Or I mean, I'm just curious how do you think about how you ramp a potential given this? -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [50] -------------------------------------------------------------------------------- Yes. Let me try that a little bit. The -- I think the words we used were our reluctance to reduce the workforce was precisely because of some of the reasons you state. We -- it's a growing business. It's a developing technology we have a lot of promise with, so we wanted to keep the expertise that we've developed and continue to develop. We -- as Stephen went through in detail, the production of the inventory at the end of 2019 provides us with some time. As we burn off that in our assumption, we're producing today LEAP-1B, but we'll also have the inventory that we can burn off as we go through 2020, we believe it gives us enough time to look ahead and see as the ramp comes to shift people around and bring people back on as needed. So we feel -- we've given that a lot of thought. If it was a more normal business, we probably would have taken deeper cuts, but we're trying to protect the production capability and the technology as we go forward. -------------------------------------------------------------------------------- Operator [51] -------------------------------------------------------------------------------- We'll go back to the line for Patrick Baumann. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [52] -------------------------------------------------------------------------------- Just have one quick follow-up. When you said the aero business was free cash flow positive for '19 and you expect it to be for '20, I just want to be clear on the definition. How do you build to that? Is it EBITDA minus CapEx? And if it's more than that, how do you treat like all the other components like corporate? And how do you allocate all the other stuff, working capital, taxes and all that stuff? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [53] -------------------------------------------------------------------------------- It's very good question. No, very good question. So our free cash flow for this purpose is just the free cash flow from operations for that business less CapEx for that business. So that does not include the corporate element. And so it's -- leaving aside from -- that free cash flow is not a GAAP measure. This is even kind of less of a GAAP measure, which is why we're not giving you actual hard numbers. Because it is somewhat artificial at the business level. What it just says, at the end of the day, that business sans corporate, a check for cash at the end of the year, which was very positive. In prior years, it has consumed as much as $50 million of cash in a given year. So it has been a remarkable turnaround for that business. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [54] -------------------------------------------------------------------------------- Okay. So the statement is basically an EBITDA minus CapEx number? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [55] -------------------------------------------------------------------------------- No, no, no. Not EBITDA. It's free cash flow from operations less CapEx. So not EBITDA. So it's much more of a true cash flow measure, EBITDA minus CapEx. So it is -- the operating profit less all of the changes in working capital for that business less CapEx. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [56] -------------------------------------------------------------------------------- Oh, got it. Okay. Okay. But it's excluding the corporate is what you said. Got it. -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [57] -------------------------------------------------------------------------------- Exactly. Yes. -------------------------------------------------------------------------------- Patrick Michael Baumann, JP Morgan Chase & Co, Research Division - Analyst [58] -------------------------------------------------------------------------------- Understood. And then as you look at 2021, like as you ramp back up, hopefully, with Safran with the MAX, would you expect to be able to say that again at that point? Or is this a function of kind of a little bit of a pause in the growth trajectory more than kind of a statement on the business itself? -------------------------------------------------------------------------------- Stephen M. Nolan, Albany International Corp. - CFO & Treasurer [59] -------------------------------------------------------------------------------- So obviously, we're not guiding 2021 and beyond. But I would say that the positive cash flow we expect in 2020 is not really a result of the pause. It's more a result of the underlying strength of the business. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- And I have no further questions in queue at this time. -------------------------------------------------------------------------------- Andrew William Higgins, Albany International Corp. - President, CEO & Director [61] -------------------------------------------------------------------------------- All right. Thank you, Grace. This is Bill Higgins. If I can, I'd like to thank you all for joining the call. We appreciate your time today and your continued interest in Albany International. I'd like to conclude today's call by recognizing the entire Albany team for another very strong quarter of performance. Thank you, everyone. -------------------------------------------------------------------------------- Operator [62] -------------------------------------------------------------------------------- Thank you. Ladies and gentlemen, this conference will be available for replay after 12:45 p.m. today through Monday, May 11, 2020. You may access the AT&T teleconference replay system at any time by dialing 1 (866) 207-1041 and entering the access code 6910760. International participants may dial (402) 970-0847. That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.