Segment Information

On December 31, 2016, the Company completed an acquisition of the nonwoven needle punch materials businesses, which include MGF Gutsche & Co GmbH KG, FRG and Gutsche Environmental Technology (Yixing) Co. Ltd., China, operating under Gutsche (“Gutsche”), a German based corporation. The Gutsche operations manufacture nonwoven needle punch materials and predominantly serve the industrial filtration and high performance nonwoven markets. The acquired businesses are included in the Company's Technical Nonwovens reporting segment.

On July 7, 2016, the Company completed an acquisition of the nonwoven and coating materials businesses primarily operating under the Texel brand (“Texel”) from ADS, Inc. (“ADS”), a Canadian based corporation. The Texel operations manufacture nonwoven needle punch materials and predominantly serve the geosynthetic, liquid filtration, and other industrial markets. The acquired businesses are included in the Company's Technical Nonwovens reporting segment.

On February 20, 2014, the Company acquired the Industrial Filtration business from Andrew Industries Limited, which is being reported as a separate reportable segment (now known as Technical Nonwovens) since the acquisition date. Segment information is consistent with how management reviews the businesses, makes investing and resource allocation decisions and assesses operating performance.

The Company’s reportable segments are Performance Materials, Technical Nonwovens, Thermal/Acoustical Metals, and Thermal/Acoustical Fibers. Other Products and Services (“OPS”) included Life Sciences Vital Fluids, which was sold on January 30, 2015.

Performance Materials Segment

The Performance Materials segment includes filtration media solutions primarily for air, fluid power, and industrial applications (“Filtration”), thermal insulation solutions for building products, appliances, and energy and industrial markets (“Thermal Insulation”) and air and liquid life science applications (“Life Sciences Filtration”). Filtration products include LydAir® MG (Micro-Glass) Air Filtration Media, LydAir® MB (Melt Blown) Air Filtration Media, LydAir® SC (Synthetic Composite) Air Filtration Media, and Arioso™ Membrane Composite Media. These products constitute the critical media component of clean-air systems for applications in clean-space, commercial, industrial and residential HVAC, power generation, and industrial processes. Lydall has leveraged its extensive technical expertise and applications knowledge into a suite of media products covering the vast liquid filtration landscape across the engine and industrial fields. The LyPore® Liquid Filtration Media series address a variety of application needs in fluid power including hydraulic filters, air-water and air-oil coalescing, industrial fluid processes and diesel fuel filtration.

Thermal Insulation products are high performance nonwoven veils, papers, mats and specialty composites for the building products, appliance, and energy and industrial markets. The Manniglas® Thermal Insulation brand is diverse in its product application ranging from high temperature seals and gaskets in ovens and ranges to specialty veils for HVAC and cavity wall insulation. The appLY® Mat Needled Glass Mats have been developed to expand Lydall’s high temperature technology portfolio for broad application into the appliance market and supplements the Lytherm® Insulation Media product brand, traditionally utilized in the industrial market for kilns and furnaces used in metal processing. Lydall’s Cryotherm® Super-Insulating Media, CRS-Wrap® Super-Insulating Media and Cryo-Lite™ Cryogenic Insulation products are industry standards for state-of-the-art cryogenic insulation designs used by manufacturers of cryogenic equipment for liquid gas storage, piping, and transportation.

Life Sciences is comprised of products which have been designed to meet the stringent requirements of critical applications including biopharmaceutical pre-filtration and clarification, lateral flow diagnostic and analytical testing, respiratory protection, potable water filtration and high purity process filtration such as that found in food and beverage and medical applications. Lydall also offers ultra-high molecular weight polyethylene membranes under the Solupor® trade name. These specialty microporous membranes are utilized in various markets and applications including air and liquid filtration and transdermal drug delivery. Solupor® membranes incorporate a unique combination of high mechanical strength, chemical inertness, gamma stability and very high porosity making them ideal for many applications.

Technical Nonwovens Segment

The Technical Nonwovens segment primarily produces needle punch nonwoven solutions for myriad industries and applications. Products are manufactured and sold globally under the leading brands of Lydall Industrial Filtration, Southern Felt, Gutsche, and Texel. The Industrial Filtration products include nonwoven rolled-good felt media and filter bags used primarily in industrial air and liquid filtration applications. Nonwoven filter media is the most effective solution to satisfy increasing emission control regulations in a wide range of industries, including power, cement, steel, asphalt, incineration, mining, food, and pharmaceutical. The Advanced Materials products include nonwoven rolled-good media used in commercial applications and predominantly serves the geosynthetics, automotive, industrial,medical, and safety apparel markets. The automotive media is provided to Tier I/II suppliers and as well as the Company's Thermal/Acoustical Fibers segment.

Technical Nonwovens segment products include air and liquid filtration media sold under the brand names Fiberlox® high performance filtration felts, Checkstatic™ conductive filtration felts, Microfelt® high efficiency filtration felts, Pleatlox® pleatable filtration felts, Ultratech™ PTFE filtration felts, Powertech® and Powerlox® power generation filtration felts, Microcap® high efficiency liquid filtration felts, Duotech membrane composite filtration felts, along with our porotex® family of high temperature filtration felts including microvel® and optivel® products. Technical Nonwovens Advanced Materials products are sold under the brand names Thermofit® thermo-formable products, Ecoduo® recycled content materials, Duotex® floor protection products, and Versaflex® composite molding materials. Technical Nonwovens also offers extensive finishing and coating capabilities which provide custom engineered properties tailored to meet the most demanding applications. The business leverages a wide range of fiber types and extensive technical capabilities to provide products that meet our customers’ needs across a variety of applications providing both high performance and durability.

Thermal/Acoustical Metals Segment

The Thermal/Acoustical Metals segment offers a full range of innovative engineered products tailored for the transportation sector to thermally shield sensitive components from high heat, improve exhaust gas treatment and lower harmful emissions as well as assist in the reduction of powertrain and road noise. Lydall products are found in the underbody (tunnel, fuel tank, rear muffler, spare tire) and underhood (outer dash, powertrain, catalytic converter, turbo charger, manifolds) of cars, trucks, SUVs, heavy duty trucks and recreational vehicles.

Thermal/Acoustical Metals segment products are formed on production lines capable of efficiently combining multiple layers of metal and thermal - acoustical insulation media to provide an engineered thermal and acoustical shielding solution for an array of application areas in the global automotive and truck markets. The flux® product family in Thermal/Acoustical Metals includes several patented or IP-rich products that address applications which include: Direct Exhaust Mount heat shields, which are assembled to high temperature components like catalytic converters, turbochargers or exhaust manifolds using aluminized and stainless steel high performance and high temperature heat insulating materials; Powertrain heat shields that absorb noise at the source and do not contribute to the engines noise; and durable, thermally robust solutions for temperature sensitive plastic components such as fuel tanks that are in proximity to high temperature heat sources.

Thermal/Acoustical Fibers Segment

The Thermal/Acoustical Fibers segment offers innovative engineered products to assist primarily in noise vibration and harshness (NVH) abatement within the transportation sector. Lydall products are found in the interior (dash insulators, cabin flooring), underbody (wheel well, aerodynamic belly pan, fuel tank, exhaust) and under hood (engine compartment) of cars, trucks, SUVs, heavy duty trucks and recreational vehicles.

Thermal/Acoustical Fibers segment products offer thermal and acoustical insulating solutions comprised of organic and inorganic fiber composites for the automotive and truck markets primarily in North America. Lydall’s dBCore® is a lightweight acoustical composite that emphasizes absorption principles over heavy-mass type systems. Lydall’s dBLyte® is a high-performance acoustical barrier with sound absorption and blocking properties and can be used throughout a vehicle’s interior to minimize intrusive noise from an engine compartment and road. Lydall’s ZeroClearance® is an innovative thermal solution that utilizes an adhesive backing for attachment and is used to protect vehicle components from excessive heat. Lydall’s specially engineered products provide a solution that provides weight reduction, superior noise suppression, and increased durability over conventional designs.

Thermal/Acoustical Metals segment and Thermal/Acoustical Fibers segment operating results include allocations of certain costs shared between the segments.

Other Products and Services

The Life Sciences Vital Fluids business offered specialty products for blood filtration devices, blood transfusion single-use containers and the design and manufacture of single-use solutions for cell growth, frozen storage and fluid handling, as well as equipment for bioprocessing applications.

On January 30, 2015, the Company sold all of the outstanding shares of common stock of its Life Sciences Vital Fluids business for a cash purchase price of $30.1 million. The disposition was completed pursuant to a Stock Purchase and Sale Agreement, dated January 30, 2015, by and among the Company, and the buyer. The Company recognized an after-tax gain on the sale of this business of approximately $11.8 million in the first quarter of 2015.

Net sales by segment and for OPS, as well as reconciling items, to equal consolidated net sales for the years ended December 31, 2016, 2015, and 2014 were as follows:



Consolidated Net Sales	For the Years Ended December 31,

In thousands	2016			2015			2014
Performance Materials Segment:
Filtration	$	70,430		$	62,716		$	71,648
Thermal Insulation	27,783			28,311			31,404
Life Sciences Filtration	12,915			10,451			12,814
Performance Materials Segment net sales	111,128			101,478			115,866
Technical Nonwovens Segment (1):
Industrial Filtration	90,415			113,044			92,721
Advanced Materials (2)	65,090			26,089			19,499
Technical Nonwovens net sales	155,505			139,133			112,220
Thermal/Acoustical Metals Segment:
Metal parts	156,187			141,117			145,135
Tooling	18,787			19,815			19,130
Thermal/Acoustical Metals Segment net sales	174,974			160,932			164,265
Thermal/Acoustical Fibers Segment:
Fiber parts	144,345			135,595			124,458
Tooling	5,067			3,152			4,133
Thermal/Acoustical Fibers Segment net sales	149,412			138,747			128,591
Other Products and Services:
Life Sciences Vital Fluids (3)	—			1,671			19,682
Other Products and Services net sales	—			1,671			19,682
Eliminations and Other (2)	(24,167		)	(17,456		)	(4,795		)
Consolidated Net Sales	$	566,852		$	524,505		$	535,829

Operating income by segment and for OPS and Corporate Office Expenses for the years ended December 31, 2016, 2015, and 2014 were as follows:



Operating Income	For the Years Ended December 31,

In thousands	2016			2015			2014
Performance Materials Segment	$	12,339		$	6,790		$	9,706
Technical Nonwovens Segment (1)	15,584			13,431			6,412
Thermal/Acoustical Metals Segment	11,562			15,517			13,823
Thermal/Acoustical Fibers Segment	41,452			37,086			29,167
Other Products and Services (3)	—			118			1,582
Corporate Office Expenses	(26,145		)	(20,465		)	(26,642		)
Consolidated Operating Income	$	54,792		$	52,477		$	34,048

Operating results in 2016 were negatively impacted by $3.7 million of acquisition related expenses within Corporate Office Expenses, $3.5 million related to a settlement with the German Cartel Office in the T/A Metals segment and a $2.0 million purchase accounting adjustment related to inventory step-up in the Technical Nonwovens segment. Operating results in 2015 were negatively impacted by a $1.4 million long-lived asset impairment charge within the Performance Materials segment and unfavorable foreign currency translation of $2.0 million impacting the Performance Materials, T/A Metals and Industrial Filtration segments. Operating results in 2014 were negatively impacted by $2.1 million of purchase accounting adjustments relating to inventory step-up for the Technical Nonwovens segment and a $2.9 million sales commission settlement within the T/A Metals segment. Corporate Office Expenses in 2014 were negatively impacted by a $4.9 million non-cash pension plan settlement charge and $2.6 million of transaction related costs.

Total assets by segment and for OPS and the Corporate Office were as follows at December 31, 2016, 2015, and 2014:



Total Assets	December 31,

In thousands	2016		2015		2014
Performance Materials Segment	$	66,965	$	66,706	$	71,325
Technical Nonwovens Segment (1),(4)	268,104		89,566		100,201
Thermal/Acoustical Metals Segment	119,494		111,195		106,210
Thermal/Acoustical Fibers Segment	47,097		38,881		33,109
Other Products and Services (3)	—		—		11,580
Corporate Office	25,369		51,912		39,345
Total Assets	$	527,029	$	358,260	$	361,770

Total capital expenditures and depreciation and amortization by segment and for OPS and the Corporate Office for the years ended December 31, 2016, 2015, and 2014 were as follows:



	Capital Expenditures						Depreciation and Amortization

In thousands	2016		2015		2014		2016		2015		2014
Performance Materials Segment	$	4,098	$	3,519	$	4,124	$	4,023	$	4,499	$	4,654
Technical Nonwovens Segment (1)	1,248		968		1,804		6,778		4,996		4,536
Thermal/Acoustical Metals Segment	15,425		11,494		8,544		5,094		4,233		4,578
Thermal/Acoustical Fibers Segment	6,899		4,807		3,296		2,570		2,400		2,166
Other Products and Services (3)	—		22		574		—		45		804
Corporate Office	489		745		659		1,094		1,102		908
Total	$	28,159	$	21,555	$	19,001	$	19,559	$	17,275	$	17,646

Net sales by geographic area for the years ended December 31, 2016, 2015 and 2014 and long-lived asset information by geographic area as of December 31, 2016, 2015, and 2014 were as follows:



	Net Sales						Long-Lived Assets

In thousands	2016		2015		2014		2016		2015		2014
United States (3)	$	354,371	$	344,950	$	345,864	$	88,918	$	76,502	$	72,832
France	52,042		47,495		52,534		12,692		12,899		13,861
Germany (4)	63,301		68,861		77,896		15,649		10,149		12,366
United Kingdom	23,871		26,598		26,387		4,903		6,399		7,601
Canada (1)	40,871		—		—		30,911		—		—
China (4)	30,361		33,885		29,401		11,996		9,953		11,225
Other	2,035		2,716		3,747		1,301		815		795
Total	$	566,852	$	524,505	$	535,829	$	166,370	$	116,717	$	118,680


(1)	Technical Nonwovens segment includes results of Texel for the period following the date of acquisition of July 7, 2016 through December 31, 2016.


(2)	Included in the Technical Nonwovens segment and Eliminations and Other is $18.2 million, $13.8 million and $1.0 million of intercompany sales to the T/A Fibers segment for the years ended December 31, 2016, 2015 and 2014, respectively.


(3)	Other Products and Services reports results for the period preceding the date of disposition of the Vital Fluids Life Sciences business on January 30, 2015.


(4)	Technical Nonwovens segment includes results of Gutsche as of acquisition date of December 31, 2016.

Foreign sales are based on the country in which the sales originated (i.e., where the Company’s legal entity is domiciled). Sales to Ford Motor Company in 2016, 2015, and 2014 were $110.9 million, $95.4 million, and $88.4 million, respectively, and accounted for 19.6%, 18.2%, and 16.5% of Lydall’s net sales in the years ended December 31, 2016, 2015, and 2014, respectively. These sales were reported in the Thermal/Acoustical Metal and Thermal/Acoustical Fiber segments. No other customers accounted for more than 10.0% of total net sales in 2016, 2015, and 2014.