Reportable Segments

9 Months Ended

Sep. 30, 2017

Segment Reporting [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)	2017		2016		2017		2016
Net sales
Machine Clothing	$150,694		$143,248		$440,093		$437,445
Albany Engineered Composites (AEC)	71,447		48,024		196,896		129,348
Consolidated total	$222,141		$191,272		$636,989		$566,793
Operating income/(loss)
Machine Clothing	42,674		40,039		119,352		112,583
Albany Engineered Composites	(9,301	)	(4,529	)	(32,242	)	(14,083	)
Corporate expenses	(11,070	)	(10,690	)	(33,523	)	(33,554	)
Operating income	$22,303		$24,820		$53,587		$64,946
Reconciling items:
Interest income	(355	)	(675	)	(801	)	(1,347	)
Interest expense	4,784		4,356		13,843		10,957
Other expense/(income), net	(1,155	)	242		980		(2,103	)
Income before income taxes	$19,029		$20,897		$39,565		$57,439

There were no material changes in the total assets of the reportable segments in the first nine months of 2017.

In the third quarter of 2017, the Company decided to discontinue the Bear Claw® line of hydraulic fracturing components used in the oil and gas industry, which was part of the Harris aerostructures business acquired by AEC in 2016. This decision resulted in a non-cash restructuring charge of $4.5 million for the write-off of intangible assets and equipment, and a $3.2 million charge to Cost of goods sold for the write-off of inventory. 

In the second quarter of 2017, the Company recorded a charge to Cost of goods sold of approximately $15.8 million associated with revisions in the estimated profitability of two AEC contracts. The charge was principally due to second-quarter 2017 downward revisions of estimated customer demand for the components manufactured by AEC related to the BR 725 and A380 programs. The charge included a $4.0 million write-off of program inventory costs, and a reserve for future losses of $11.8 million, which is included in Accrued liabilities in the Consolidated Balance Sheets. Total reserves for future contract losses were $11.1 million as of September 30, 2017, and $0.1 million as of December 31, 2016.

The Albany Engineered Composites (AEC) segment, including Albany Safran Composites, LLC (ASC), in which our customer SAFRAN Group (Safran) owns a 10 percent noncontrolling interest, provides highly engineered, advanced composite structures to customers in the aerospace and defense industries. AEC’s largest program relates to CFM International’s LEAP engine. Under this program, AEC through ASC, is the exclusive supplier of advanced composite fan blades and cases under a long-term supply contract. The manufacturing spaces used for the production of parts under the long-term supply agreement are owned by Safran, and leased to the Company at a minimal cost.  All lease expense is reimbursable by Safran to the Company due to the cost-plus nature of the supply agreement. AEC net sales to Safran in 2017 were $25.6 million in the first quarter, $30.1 million in the second quarter, and $28.3 million in the third quarter. AEC net sales to Safran in 2016 were $17.1 million in the first quarter, $18.5 million in the second quarter, and $17.4 million in the third quarter. The total of invoiced receivables, unbilled receivables and contract receivables due from Safran amounted to $57.0 million and $37.1 million as of September 30, 2017 and December 31, 2016, respectively. 

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)	2017	2016		2017	2016
Restructuring expenses, net
Machine Clothing	$96	($212	)	$1,012	$5,921
Albany Engineered Composites	5,407	640		9,208	1,787
Corporate expenses	-	(102	)	-	(55	)
Consolidated total	$5,503	$326		$10,220	$7,653