Segment Information

12 Months Ended

Dec. 31, 2019

The Company’s reportable segments as of December 31, 2019 were Performance Materials, Technical Nonwovens, Thermal Acoustical Solutions.

Performance Materials Segment

The Performance Materials segment includes filtration media solutions primarily for air, fluid power, life science and industrial applications (“Filtration”), and sealing and gasket solutions, thermal insulation, energy storage, and other engineered products (“Sealing and Advanced Solutions”).

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, respiratory protection, 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 transportation 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. LyPore® media and Solupor® ultra-high molecular weight polyethylene membranes also serve critical liquid filtration/separation applications such as biopharmaceutical pre-filtration and clarification, lateral flow diagnostic and analytical testing, potable water filtration and high purity process filtration such as those found in food and beverage and medical applications.

Sealing and Advanced Solutions products include nonwoven specialty engineered materials for a multitude of applications. Interface fiber-reinforced gasket materials serve the heavy-duty diesel, automobile, small engine, transmission and compressor markets. These products handle demanding sealing challenges with a diverse range of metallic, non-metallic, rubber-coated and laminate materials that comprise the extensive Sealing materials portfolio. Interface Engineered Components are ready to use soft and hard gasket parts sold directly to OEMs and aftermarket applications. An example is Select-a-Seal® rubber-edged composite (REC) technology that provides robust sealing, compression, adhesion, and shear strength for driveline applications. Advanced Solutions’ nonwoven veils, papers and specialty composites for the building products, appliance, energy and industrial markets include Manniglas® Thermal Insulation Papers, and Lytherm® Insulation Media for high temperature technology applications. 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. Additional specialty composite materials include specialty fiber calendar bowl products to service the printing and textile industries and press pad materials for industrial lamination processes.

Technical Nonwovens Segment

The Technical Nonwovens segment primarily produces needle punch nonwoven solutions for a multitude of industries and applications. Products are manufactured and sold globally under the leading brands of Lydall Industrial Filtration, Southern Felt, Gutsche, and Texel. 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 an effective solution to satisfy increasing emission control regulations in a wide range of industries, including power, cement, steel, asphalt, incineration, mining, food, and pharmaceutical. Advanced Materials products include nonwoven rolled-good media

used in commercial applications and predominantly serves the geosynthetics, automotive, industrial, medical, and safety apparel markets. Automotive media is provided to Tier I/II suppliers as well as the Company's Thermal Acoustical Solutions 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 Solutions Segment

The Thermal Acoustical Solutions segment offers a full range of innovative engineered products tailored for the transportation and industrial sectors to thermally shield sensitive components from high heat, improve exhaust gas treatment and lower harmful emissions as well as assist in the reduction of noise, vibration and harshness (NVH). Within the transportation sector, Lydall’s products are found in the interior (dash insulators, cabin flooring), underbody (wheel well, aerodynamic belly pan, fuel tank, exhaust, tunnel, spare tire) and under hood (engine compartment, outer dash, powertrain, catalytic converter, turbo charger, manifolds) of cars, trucks, SUVs, heavy duty trucks and recreational vehicles.

Thermal Acoustical Solutions segment products offer thermal and acoustical insulating solutions comprised of organic and inorganic fiber composites that provide weight reduction, superior noise suppression and increased durability over conventional designs, as well as products that efficiently combine multiple layers of metal and thermal - acoustical insulation media to provide an engineered shielding solution for an array of application areas. 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 flux® product family 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 and high performance and high temperature heat insulating materials; Powertrain heat shields that absorb noise at the source and do not contribute to the engine's noise budget; and durable, thermally robust solutions for temperature sensitive plastic components such as fuel tanks that are in proximity to high temperature heat sources.

Net sales by segment, as well as reconciling items, to equal consolidated net sales for the years ended December 31, 2019, 2018, and 2017 were as follows:



Consolidated Net Sales	For the Years Ended December 31,

In thousands	2019			2018			2017
Performance Materials Segment (1):
Filtration	$	93,314		$	93,089		$	87,173
Sealing and Advanced Solutions	152,166			76,128			29,496
Performance Materials Segment net sales	245,480			169,217			116,669
Technical Nonwovens Segment (2):
Industrial Filtration	144,320			157,606			147,087
Advanced Materials (3)	111,026			119,465			121,990
Technical Nonwovens net sales	255,346			277,071			269,077
Thermal Acoustical Solutions Segment:
Parts	326,436			328,057			318,217
Tooling	35,141			37,370			23,888
Thermal Acoustical Solutions Segment net sales	361,577			365,427			342,105
Eliminations and Other (3)	(25,005		)	(25,818		)	(29,414		)
Consolidated Net Sales	$	837,398		$	785,897		$	698,437

Operating income by segment and Corporate Office Expenses for the years ended December 31, 2019, 2018, and 2017 were as follows:



Operating Income	For the Years Ended December 31,

In thousands	2019			2018			2017
Performance Materials Segment (1)	$	(59,804	)	$	13,139		$	12,321
Technical Nonwovens Segment (2)	22,895			21,323			26,047
Thermal Acoustical Solutions Segment	23,590			38,085			53,132
Corporate Office Expenses	(25,506		)	(23,359		)	(25,300		)
Consolidated Operating Income	$	(38,825	)	$	49,188		$	66,200

Operating results in 2019 were negatively impacted by $64.2 million related to the impairment of goodwill and other long-lived assets in the Performance Materials segment, $12.2 million of incremental intangible assets amortization, $2.3 million of CEO transition expenses within Corporate Office Expenses, $1.9 million of reduction-in-force severance expenses across all segments, $1.5 million of corporate strategic initiatives expenses within Corporate Office Expenses, and $0.8 million of restructuring expenses in the Technical Nonwovens segment. Operating results in 2018 were negatively impacted by $3.6 million of corporate strategic initiatives expenses predominantly within Corporate Office Expenses, $2.3 million of restructuring expenses in the Technical Nonwovens segment, and a $2.0 million purchase accounting adjustment related to inventory step-up in the Performance Materials segment. Operating results in 2017 were negatively impacted by $1.7 million of expenses associated with the combination of the Company's former T/A Metals and T/A Fibers segments, a $1.1 million purchase accounting adjustment related to inventory step-up in the Technical Nonwovens segment, $0.7 million and $0.3 million related to severance expenses for a reduction in force in the Thermal Acoustical Solutions and Technical Nonwovens segments, respectively, $0.8 million of corporate strategic initiatives expenses predominantly within Corporate Office Expenses, a $0.8 million non-cash long-lived asset impairment in the Performance Materials segments and $0.7 million of restructuring expenses in the Technical Nonwovens segment.

Total assets by segment and the Corporate Office were as follows at December 31, 2019, 2018, and 2017:



Total Assets	December 31,

In thousands	2019		2018		2017
Performance Materials Segment (1)	$	325,164	$	414,211	$	72,837
Technical Nonwovens Segment (2)	242,787		242,007		271,713
Thermal Acoustical Solutions Segment	199,218		201,509		189,301
Corporate Office	18,768		14,959		27,020
Total Assets	$	785,937	$	872,686	$	560,871

The significant reduction in total assets in the Performance Materials segment was driven by $64.2 million of goodwill and other long lived asset impairment charges in the fourth quarter of 2019.

Total capital expenditures and depreciation and amortization by segment and the Corporate Office for the years ended December 31, 2019, 2018, and 2017 were as follows:



	Capital Expenditures						Depreciation and Amortization

In thousands	2019		2018		2017		2019		2018		2017
Performance Materials Segment (1)	$	8,914	$	11,288	$	3,610	$	25,118	$	9,006	$	3,996
Technical Nonwovens Segment (2)	9,345		5,864		2,903		12,702		13,877		12,625
Thermal Acoustical Solutions Segment	17,858		11,934		17,462		10,168		9,190		8,619
Corporate Office	316		544		940		635		658		699
Total	$	36,433	$	29,630	$	24,915	$	48,623	$	32,731	$	25,939

Net sales by geographic area for the years ended December 31, 2019, 2018 and 2017 and long-lived asset information by geographic area as of December 31, 2019, 2018, and 2017 were as follows:



	Net Sales						Long-Lived Assets

In thousands	2019		2018		2017		2019 (4)		2018		2017
United States (1)	$	478,720	$	422,222	$	376,086	$	138,265	$	136,448	$	93,583
France (1)	75,313		66,579		56,214		13,723		13,219		14,268
Germany (1)	124,402		125,796		105,828		44,116		25,873		20,872
United Kingdom	26,556		27,156		24,921		5,981		4,844		4,916
Canada (2)	76,535		87,622		84,701		29,667		25,614		30,739
China (1)	54,036		54,198		47,856		17,888		11,958		11,896
Other (1)	1,836		2,324		2,831		3,211		4,085		1,590
Total	$	837,398	$	785,897	$	698,437	$	252,851	$	222,041	$	177,864


(1)	The Performance Materials segment includes the results of Interface and PCC for the periods following the dates of acquisitions of August 31, 2018 and July 12, 2018, respectively.


(2)	The Technical Nonwovens segment includes results of Geosol through the date of disposition of May 9, 2019.


(3)	Included in the Technical Nonwovens segment and Eliminations and Other is $21.0 million, $22.2 million and $26.5 million of intercompany sales to the Thermal Acoustical Solutions segment for the years ended December 31, 2019, 2018 and 2017, respectively.


(4)	Effective January 1, 2019, the Company adopted ASU 2016-02, "Leases (Topic 842)", requiring the Company to recognize right-of-use assets totaling $23.1 million at December 31, 2019.

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 2019, 2018, and 2017 were $99.1 million, $116.1 million, and $120.7 million, respectively, and accounted for 11.8%, 14.8%, and 17.3% of Lydall’s consolidated net sales in the years ended

December 31, 2019, 2018, and 2017, respectively. These sales were reported in the Thermal Acoustical Solutions segment. No other customers accounted for more than 10.0% of total net sales in 2019, 2018, and 2017.