Reportable Segments

3 Months Ended

Mar. 31, 2019

Segment Reporting [Abstract]

Reportable Segments

2. Reportable Segments

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 Machine Clothing (MC) segment designs and manufactures fabrics and process felts used in the manufacture of all grades of paper products and other industrial products. 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.

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, is a designer and manufacturer of advanced materials-based engineered components for jet engine and airframe applications, supporting both commercial and military platforms 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 $56.0 million and $40.8 million in the first quarter of 2019 and 2018, respectively. The total of invoiced receivables, Contract assets and Noncurrent receivables due from Safran amounted to $107.8 million and $96.2 million as of March 31, 2019 and December 31, 2018, respectively.

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

	Three months ended March 31,
(in thousands)	2019	2018
Net sales
Machine Clothing	$144,334	$141,773
Albany Engineered Composites	107,039	81,830
Consolidated total	$251,373	$223,603
Operating income/(loss)
Machine Clothing	$44,243	$26,942
Albany Engineered Composites	9,522	2,275
Corporate expenses	(13,672)	(12,213)
Operating income	$40,093	$17,004
Reconciling items:
Interest income	(599)	(382)
Interest expense	5,016	4,670
Other (income)/expense, net	(1,208)	1,452
Income before income taxes	$36,884	$11,264

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

	Three months ended March 31,
(in thousands)	2019	2018
Machine Clothing	$401	$8,352
Albany Engineered Composites	83	221
Total	$484	$8,573

We disaggregate revenue earned from contracts with customers for each of our business segments and reporting units based on the timing of revenue recognition, and groupings used for internal review purposes.

The following table disaggregates revenue for each reporting unit by timing of revenue recognition:

		For the three months ended March 31, 2019
(in thousands)		Point in Time Revenue Recognition	Over Time Revenue Recognition	Total
Machine Clothing		$143,534	$800	$144,334
Albany Engineered Composites
	ASC	-	55,442	55,442
	Other AEC	6,245	45,352	51,597
Total Albany Engineered Composites		6,245	100,794	107,039
Total revenue		$149,779	$101,594	$251,373

		For the three months ended March 31, 2018
(in thousands)		Point in Time Revenue Recognition	Over Time Revenue Recognition	Total
Machine Clothing		$140,973	$800	$141,773
Albany Engineered Composites
	ASC	-	40,781	40,781
	Other AEC	6,040	35,009	41,049
Total Albany Engineered Composites		6,040	75,790	81,830
Total revenue		$147,013	$76,590	$223,603

The following table disaggregates MC segment revenue by significant product groupings (paper machine clothing (PMC) and engineered fabrics), and, for PMC, the geographical region to which the paper machine clothing was sold:

	For the three months ended March 31,
(in thousands)	2019	2018
Americas PMC	$75,341	$67,629
Eurasia PMC	51,438	53,811
Engineered Fabrics	17,555	20,333
Total Machine Clothing Net sales	$144,334	$141,773

In accordance with ASC 606-10-50-14, we do not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Contracts in the MC segment are generally for periods of less than a year. Most contracts in the AEC segment are short duration firm-fixed-price orders representing performance obligations with an original maturity of less than one year. Remaining performance obligations on contracts that had an original duration of greater than one year totaled $90 million and $115 million as of March 31, 2019 and 2018, respectively, and related primarily to firm contracts in the AEC segment. Of the remaining performance obligations as of March 31, 2019 we expect to recognize as revenue approximately $53 million during 2019, with the remainder to be recognized in between 2020 and 2021.

At the January 1, 2019 date of adoption of ASC 842, Leases, MC assets increased by $5.6 million, AEC assets increased by $0.5 million, and Corporate assets increased by $1.0 million.