Reportable Segments and Geographic Data

12 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Reportable Segments and Geographic Data

3. Reportable Segments and Geographic Data

In accordance with applicable disclosure guidance for enterprise segments and related information, the internal organization that is used by management for making operating decisions and assessing performance is used as the basis for our reportable segments.

The accounting policies of the segments are the same as those described in Note 1. Corporate expenses include wages and benefits for corporate headquarters personnel, costs related to information systems development and support, and professional fees related to legal, audit, and other activities. These costs are not allocated to the reportable segments because the decision-making for these functions lies outside of the segments.

Machine Clothing:

The Machine Clothing (MC) segment supplies customized, consumable permeable and impermeable belts used in the manufacture of paper, paperboard, nonwovens, fiber cement and several other industrial applications. We sell our MC products directly to customer end-users in countries across the globe. Our products, manufacturing processes, and distribution channels for MC are substantially the same in each region of the world in which we operate.

We design, manufacture, and market paper machine clothing (used in the manufacturing of paper, paperboard, tissue and towel) for each section of the paper machine and for every grade of paper. Paper machine clothing products are customized, consumable products of technologically sophisticated design that utilize polymeric materials in a complex structure.

Albany Engineered Composites:

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 commercial and defense aerospace 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 either a market rent or 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 were $186.3 million in 2018, $119.2 million in 2017, and $88.9 million in 2016. The total of invoiced receivables, Contract assets and Noncurrent receivable due from Safran amounted to $96.2 million and $58.6 million as of December 31, 2018 and 2017, respectively. Other significant programs served by AEC include the F-35, Boeing 787, and the fan case for the GE9X engine. In 2018, approximately 25 percent of AEC sales were related to U.S. government contracts or programs.

As described in Note 2, effective January 1, 2018, the Company adopted the provisions of ASC 606, “Revenue from contracts with customers”, using the cumulative effect method for translation. Periods prior to 2018 have not been restated. The following tables show data by reportable segment, reconciled to consolidated totals included in the financial statements:

(in thousands)	2018		2017		2016		Year ended December 31, 2018 Increase/(decrease) attributable to application of ASC 606
Net Sales
Machine Clothing	$611,858		$590,357		$582,190		$(3,970	)
Albany Engineered Composites	370,621		273,360		197,649		(3,150	)
Consolidated total	$982,479		$863,717		$779,839		$(7,120	)
Depreciation and amortization
Machine Clothing	30,813		33,527		36,428		—
Albany Engineered Composites	43,205		33,533		24,211		—
Corporate expenses	5,018		4,896		6,822		—
Consolidated total	$79,036		$71,956		$67,461		$—
Operating income/(loss)
Machine Clothing	169,836		153,980		152,505		(1,605	)
Albany Engineered Composites	16,647		(31,657	)	(15,363	)	4,930
Corporate expenses	(49,075	)	(43,647	)	(43,010	)	—
Operating income	$137,408		$78,676		$94,132		$3,325
Reconciling items:
Interest income	(2,118	)	(1,511	)	(2,077	)	—
Interest expense	20,242		18,602		15,541		—
Other expense, net	4,037		6,877		2,402		—
Income before income taxes	$115,247		$54,708		$78,266		$3,325

As described in Note 4, effective January 1, 2018, the Company adopted an accounting update that affects the classification of components of pension and postretirement benefit costs. As a result of adopting that update, some costs that were previously included in operating expenses shall now be included in Other expense, net. Periods prior to 2018 have been restated to conform to the current year presentation (see Note 4).

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

(in thousands)	2018	2017	2016
Restructuring expenses, net
Machine Clothing	$12,278	$3,429	$6,181
Albany Engineered Composites	3,048	10,062	2,314
Corporate expenses	244	-	(7	)
Consolidated total	$15,570	$13,491	$8,488

In the measurement of assets utilized by each reportable segment, we include Inventories, Accounts receivable, Contract assets, Noncurrent receivable, net property, plant and equipment, intangibles and goodwill. At the January 1, 2018 date of adoption of ASC 606, Machine Clothing (MC) assets increased by $22.5 million, and Albany Engineered Composites (AEC) assets decreased by $14.1 million. Excluded from segment assets are cash, tax related assets, prepaid and other current assets, and certain other assets not directly associated with segment operations.

The following table presents assets and capital expenditures by reportable segment:

(in thousands)	2018	2017	2016
Segment assets
Machine Clothing	$453,836	$464,468	$454,010
Albany Engineered Composites	633,394	584,076	514,527
Reconciling items:
Cash	197,755	183,727	181,742
Income taxes prepaid, receivable and deferred	70,095	74,914	74,078
Other assets	62,912	54,013	39,076
Consolidated total assets	$1,417,992	$1,361,198	$1,263,433
Capital expenditures and purchased software
Machine Clothing	$20,230	$20,522	$15,651
Albany Engineered Composites	60,121	63,865	54,678
Corporate expenses	2,535	3,250	3,163
Consolidated total	$82,886	$87,637	$73,492

In 2018, AEC finalized a modification to the lease of its primary manufacturing facility in Salt Lake City, Utah, which is accounted for as a build-to-suit lease with a failed sale-leaseback. The modification, which includes additional manufacturing space, extends the minimum lease period until December 31, 2029. The lease modification resulted in a non-cash increase of $12.7 million to both Property, plant and equipment, net, and to Long-term debt in the Consolidated Balance Sheets. Due to the non-cash nature of the transaction, those increases are excluded from amounts reported in the Consolidated Statements of Cash Flows.

The following table shows data by geographic area. Net sales are based on the location of the operation recording the final sale to the customer. Net sales recorded by our entity in Switzerland are derived from products sold throughout Europe and Asia, and are invoiced in various currencies.

(in thousands)	2018	2017	2016
Net sales
United States	$519,349	$459,525	$396,238
Switzerland	157,339	147,601	145,479
France	85,386	57,195	42,862
Brazil	62,093	60,535	60,287
China	50,923	48,920	48,043
Mexico	48,534	31,902	27,526
Other countries	58,855	58,039	59,404
Consolidated total	$982,479	$863,717	$779,839
Property, plant and equipment, at cost, net
United States	$272,584	$252,639	$245,626
China	48,686	61,840	65,987
France	50,245	58,196	42,272
Mexico	40,343	22,981	7,781
Korea	12,396	14,558	15,585
United Kingdom	12,042	14,256	14,591
Canada	8,154	10,230	11,455
Other countries	17,605	19,602	19,267
Consolidated total	$462,055	$454,302	$422,564