Financial Data and Key Metrics Changes - Third-quarter revenue was $261.4 million, down from $298.4 million in the prior year, reflecting a $46 million revenue charge associated with the CH-53K program loss reserve and program adjustments [16][17] - GAAP net loss was $97.8 million, or $3.37 per diluted share, compared to net income of $18 million, or $0.57 per share in the prior year [17] - Adjusted EBITDA was $56.2 million, representing an 18.3% margin, down from 21.5% in the third quarter of 2024 [17][18] Business Line Data and Key Metrics Changes - Machine Clothing revenue was $175 million, a 4% decline from the prior year, with adjusted EBITDA margin at 31% compared to 33.2% last year [18] - Engineered Composites revenue was $86.5 million, down from $115.4 million last year, driven entirely by the CH-53K charge; excluding this impact, revenue was $132.5 million, up from $128.7 million in the prior year [18][19] Market Data and Key Metrics Changes - In North America, shipments improved sequentially, but order intake remained soft due to ongoing packaging and corrugator mill closures [12] - Europe showed signs of moderating recovery, while Asia faced challenges with overall demand at low levels due to overcapacity [12] Company Strategy and Development Direction - The company announced a strategic review of its structures assembly business, which may include the sale of the site, to focus on 3D woven technology and engineered components [4][5] - The company aims to exit lower-margin programs and concentrate on higher return opportunities, particularly in engineered composites and machine clothing [14][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the CH-53K program would not be profitable as originally bid, leading to a strategic decision to take a charge and explore options for the business [6][26] - The company expects underlying trends from the third quarter to persist into the fourth quarter, with a stable operating environment in the Americas and moderate recovery in Europe [22][23] Other Important Information - The company has deployed about $68 million in CapEx and $47 million in R&D over the past 12 months while returning more than $200 million to shareholders [11] - The company ended the quarter with $108 million in cash and $481 million in total debt, resulting in a net debt of approximately $372 million [21] Q&A Session Summary Question: Evaluation of the CH-53K program - Management upgraded leadership and planning capabilities but ultimately decided there was no path to profitability for the CH-53K program, leading to a strategic review [26][27] Question: Opportunities in 3D technology - There is significant activity in 3D woven technology, particularly in hypersonics and defense, with strong interest from OEMs [29][30] Question: 2026 targets after strategic review - The company remains focused on solid, profitable programs and has set guardrails for new contracts to ensure profitability [32] Question: Machine clothing margins - Margins have been affected by overproduction in Asia and strategic exits from unprofitable segments, but ongoing footprint rationalization is expected to improve margins [36][39] Question: LEAP program ramp-up - The LEAP program is expected to ramp significantly in 2026 and 2027, with steady margins due to the cost-plus contract structure [40][41]

Financial Data and Key Metrics Changes - Consolidated net sales were $311 million, down 6.2% from $332 million in the same quarter last year [18] - Consolidated gross profit was $98 million, or 31.3% of sales, down from $112 million, or 33.9% of sales, in the prior year [19] - GAAP net income attributable to the company for the quarter was $9.2 million compared to $24.6 million last year, with GAAP diluted EPS at $0.31 versus $0.39 in the same period last year [21] - Adjusted diluted EPS was $0.57 versus $0.89 in the same period last year [22] - Consolidated adjusted EBITDA was $52 million for the quarter versus $63 million in the prior year period [22] Business Line Data and Key Metrics Changes - Machine Clothing reported revenues of $181 million, a decrease of 6.5% versus the second quarter of last year [18] - Engineered Composites segment revenues for the quarter were $130 million, reflecting a sequential growth of 14% from the first quarter [12] - Machine Clothing gross profit decreased to $84 million from $89 million in the prior year, while gross margin improved by 40 basis points to 46.3% [19] - AEC gross profit was $14 million, down from $24 million, largely due to cumulative EAC adjustments [20] Market Data and Key Metrics Changes - North America experienced a slight decline in deliveries in the second quarter, mainly due to packaging machine production curtailments [10] - Europe showed solid signs of recovery with good deliveries and orders, offsetting weakening conditions in Asia, particularly in China where softer demand was noted [10] Company Strategy and Development Direction - The company is focused on optimizing its global production footprint and has commenced two additional facility closures [7] - Investments in operational excellence are aimed at transforming execution of current programs and driving process improvements [7] - The emerging advanced air mobility market is seen as a significant source of growth, with continued investment in capabilities [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in recovery despite second quarter results lagging expectations due to timing and operational issues [5] - The company expects global growth to continue as tariff environments become more predictable, with increased activity in the defense sector anticipated [6] - Full year guidance was reaffirmed, projecting stronger performance in the second half driven by ramping programs and operational efficiencies [23][24] Other Important Information - The company successfully completed its S4HANA upgrade across the entire organization, improving systems and operational efficiencies [15] - Will Station has been appointed as the new CFO, bringing extensive experience from McKesson and Boeing [16][17] Q&A Session Summary Question: Can you talk about overall build rates in aerospace? - Management noted that ramp-up is occurring as Boeing destocks and builds inventory, with momentum towards prior production levels [27] Question: What factors could affect revenue range in the second half? - Key factors include Machine Clothing synergies and increased commercial programs at AEC, with expectations for improved performance in the second half [28] Question: Can you provide updates on the CH-53K program? - The ramp-up is being managed carefully, with significant investments in training and resources, aiming for a two-per-month rate by year-end [32] Question: What are the drivers for reaffirming full year guidance? - Confidence in achieving performance levels with parts available and trained teams, alongside expected growth in both commercial and military programs [40][46] Question: Can you elaborate on the 3D woven composite parts replacing titanium? - The company is focused on developing 3D woven technology, with certification expected in the next 18 months, and positive reception noted at the Paris Air Show [54]