Reportable Segments

9 Months Ended

Sep. 30, 2015

Reportable Segments [Abstract]

Reportable Segments

3. Reportable Segments

The following tables show data by reportable segment, reconciled to consolidated totals included in the financial statements:

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2015			2014			2015			2014
Net sales
Machine Clothing	$	154,522		$	157,891		$	463,577		$	494,788
Albany Engineered Composites		24,267			21,970			68,825			58,898
Consolidated total	$	178,789		$	179,861		$	532,402		$	553,686
Operating income/(loss)
Machine Clothing	$	41,956		$	33,308		$	110,969		$	103,329
Albany Engineered Composites		(4,191	)		(2,765	)		(26,635	)		(9,785	)
Corporate expenses		(11,922	)		(11,385	)		(35,304	)		(34,808	)
Operating income before reconciling items		25,843			19,158			49,030			58,736
Reconciling items:
Interest income		(428	)		(527	)		(1,205	)		(1,079	)
Interest expense		3,099			3,013			9,254			9,200
Other expense/(income), net		1,249			(1,864	)		784			(4,464	)
Income before income taxes	$	21,923		$	18,536		$	40,197		$	55,079

The table below presents restructuring costs by reportable segment (also see Note 5):

	Three months ended September 30,					Nine months ended September 30,
(in thousands)	2015		2014			2015		2014
Restructuring expense
Machine Clothing	$	3,717	$	968		$	13,929	$	3,127
Albany Engineered Composites		-		(49	)		-		931
Consolidated total	$	3,717	$	919		$	13,929	$	4,058

In the second quarter of 2015, the Company recorded a charge of $14.0 million associated with a revision in the profitability of a contract in the AEC segment. AEC has a long-term contract for the manufacture of composite components for the Rolls-Royce BR 725 engine (BR 725), which powers the Gulfstream G-650 business jet. These components are manufactured in AEC's Boerne, Texas, facility. The contract for this program was signed in 2007 and contains a very aggressive approach to pricing compared to AEC's other contracts. AEC was required to fund certain development costs for nonrecurring engineering and tooling and expected to recover those costs over the duration of the contract, which is anticipated to be more than 20 years. The deferred costs were included in Other assets on the Company's Consolidated Balance Sheets and, as of June 30, 2015, the Company had accumulated deferred contract expenses of approximately $10.9 million. The Company tests the recoverability of these deferred costs each quarter. During the second quarter of 2015, the Company revised its estimate of the profitability of this contract and determined that the entire balance of these deferred costs should be written off. The Company recorded an additional charge of approximately $3.1 million as a provision for anticipated contract losses. The total charge of $14.0 million is included in Cost of goods sold. In the Consolidated Statements of Cash Flows, the write-off of previously deferred costs is included in Other, net.

2015 Machine Clothing restructuring expense was principally related to the discontinuation of manufacturing operations at its press fabric manufacturing facility in Germany in April. Land and building related to the former manufacturing facility in Germany has been reclassified as Asset held for sale in the accompanying Consolidated Balance Sheets. Based on preliminary offers from active market participants we recorded a charge of $3.2 million in the third quarter of 2015 related to the write down of the land and building to the estimated fair market value. There were no other material changes in the total assets of the reportable segments during this period.

Machine Clothing restructuring costs in 2014 were principally related to restructuring actions in France.  Albany Engineered Composites restructuring expense in 2014 was related to organizational changes.