Albany International Corp Class A Status update

Karen, please go ahead. Good morning, and thank you for joining us today.

As a reminder for those listening on the call, please refer to our press release issued yesterday detailing the conclusion of our strategic review, along with our updated guidance. Contained in the text of the release is a notice regarding our forward-looking statements. Today, we will make statements that are forward-looking and contain a number of risks and uncertainties which could cause actual results to differ from those expressed or implied. For a full discussion of these risks and uncertainties, please refer to yesterday's press release, as well as our SEC filings, including our 10-Q and our 10-K. Now, I will turn the call over to Gunnar Kleveland, our President and CEO.

Gunnar? Thank you, Karen. Good morning, and welcome everyone.

From the outset of this strategic review, our objective has been clear: to evaluate options through a balanced lens of maximizing long-term shareholder value and strategic positioning. That has meant applying financial discipline, aligning execution and strategy, and ensuring that any outcomes strengthen the business while delivering the best value for our shareholders. At the end of October 2025, we announced that we were exploring strategic alternatives for our structures assembly business, including a potential sale of all or part of the business at the Amelia Earhart facility in Salt Lake City, Utah. We undertook that process with a disciplined view of the portfolio, capital allocation, and the long-term value creation potential of the site. At that time, we also communicated that we're engaged with discussions with Sikorsky on CH-53K regarding potential contract modifications to address increased material and labor cost.

Over the past 10 months, our dedicated team has worked tirelessly to meet our customers' expectations, executing at a high level, which enabled ongoing discussions with our customers. After completing the review, we believe the amended agreement represents the best outcome for Albany and its shareholders. It enables us to retain the Salt Lake City facility, continue participating in the CH-53K program under an amended contract that reduces the program risk while ensuring that we continue to support our largest customer. We also maintain a facility that has strong growth and profitable contracts with current and new customers, as well as capacity to continue to support the increased demand we're seeing in both aerospace and defense. This decision provides several important benefits.

The new CH-53K contract results in stabilized aircraft production while offsetting projected losses, thus improving the overall profitability of the site and keeping business in place with our largest customer, with whom we continue to add new programs, like the recently announced teaming agreement on hypersonic development. The amended contract is accelerating cash into 2026, and the contract is expected to deliver positive cash flow beginning in 2027. The amended contract also further reduces risk on the program by shortening the production horizon commitment and total aircraft deliveries, and limits risk related to material cost inflation.

Overall, for the Amelia Earhart Drive operations, the amended contract, combined with a contract extension for the composite fuselage frames on the Boeing 787 Dreamliner, two new recently secured defense contracts with a strategic customer, BETA Technologies aircraft advanced composite parts, and F-35 advanced composite parts, establish a business with a healthy and sustainable financial profile. These programs beyond CH-53K fit squarely within our areas of expertise in advanced composite manufacturing. Lastly, it solidifies the value in retaining a well-capitalized facility that continues to attract new business opportunities. It's important to note that the Amelia Earhart Drive facility delivers on a number of profitable ramping programs beyond the CH-53K program, and we're pleased to continue work achieving great outcomes for all of our customers at the facility.

We're extremely pleased with this outcome and grateful for the efforts of our employees, whose dedication and performance have been integral in achieving this positive outcome. In addition, we would like to thank Guggenheim Securities, who served as exclusive financial advisor to Albany in connection with the strategic review, and Sikorsky for their continued support and collaboration throughout the process. In short, this outcome reflects the same disciplined objective that guide the review from the beginning, aligning our strategy, execution, and capital allocation with a goal of creating long-term shareholder value. It allows us to build on the momentum in our Engineered Composites business, retain important strategic capabilities at Salt Lake City facility, and to continue delivering value for our customers and stakeholders on the CH-53K program. As announced on Monday, Will is currently on medical leave. I know he would want to be here today.

Our thoughts are with Will and his family during this time. I will now turn the call over to Sean Valashinas, our acting CFO in Will's absence, to talk about the outlook for the remainder of 2026. Sean has served as the company's primary accounting officer since June of 2025 and is well-positioned to support continuity of operations during this time.

Sean? Thank you, Gunnar, and good morning.

As Gunnar said, we are pleased with the results of this process. Following our comprehensive review of all available alternatives, the amended agreement provides an attractive path forward by improving program profitability, enabling the continuation of the site's other strong existing programs, and ensuring capacity for additional business in the future. As a result, we are retaining a strategically important facility with strong customer relationships, improved economics, and a growing pipeline of opportunities. Now, turning to an update on our guidance following these developments. During the third quarter, we expect revenue in our Machine Clothing segment to be between $165 million and $170 million, and we continue to expect revenue in our Engineered Composites segment for the third quarter to be between $155 million and $160 million. On a consolidated basis, we continue to expect total company revenue of approximately $320 million to $330 million for the quarter.

In addition, we have increased our adjusted earnings per share forecast to be between $1.40 and $1.50, from the previously announced $0.60 to $0.70. The increase to our forecast is based on the reversal of the reach-forward loss and the associated changes to depreciation and amortization that are a result of the amendment that we announced today. We expect the third quarter effective tax rate to remain at 31.5%. Turning to fourth quarter guidance, we expect revenue in our Machine Clothing segment to be between $170 million and $175 million. In our Engineered Composites segment, we expect revenue to be between $155 million and $160 million. On a consolidated basis, total company revenue is expected to be approximately $325 million to $335 million for the fourth quarter.

We expect adjusted earnings per share to be between $0.65 and $0.75 for the fourth quarter, with an effective tax rate remaining at 31.5%. In conclusion, we are happy to have concluded the strategic review in a way that allowed us to reduce program risk and generate positive cash flow on the program beginning in 2027, while continuing to perform for our largest customer, while maintaining a well-capitalized site and the associated revenue. We remain focused on executing against our operating priorities, delivering for our customers, and creating long-term value for our shareholders. With that, we will be happy to take your questions.