Noncontrolling Interest

6 Months Ended

Jun. 30, 2019

10. Noncontrolling Interest

Effective October 31, 2013, Safran S.A. (Safran) acquired a 10 percent equity interest in a new Albany subsidiary, Albany Safran Composites, LLC (ASC). Under the terms of the transaction agreements, ASC is the exclusive supplier to Safran of advanced 3D-woven composite parts for use in aircraft and rocket engines, thrust reversers and nacelles, and aircraft landing and braking systems (the “Safran Applications”).

Index

AEC may develop and supply parts other than advanced 3D-woven composite parts for all aerospace applications, as well as advanced 3D-woven composite parts for any aerospace applications that are not Safran Applications (such as airframe applications) and any non-aerospace applications.

The agreement provides Safran an option to purchase Albany’s remaining 90 percent interest upon the occurrence of certain bankruptcy or performance default events, or if Albany’s Engineered Composites business is sold to a direct competitor of Safran. The purchase price is based initially on the same valuation of ASC used to determine Safran’s 10 percent equity interest, and increases over time as LEAP production increases.

In accordance with the operating agreement, Albany received a $28 million preferred holding in ASC, which includes a preferred return based on the Company’s revolving credit agreement. The common shares of ASC are owned 90 percent by Albany and 10 percent by Safran.

The table below presents a reconciliation of income attributable to the noncontrolling interest and noncontrolling equity in the Company’s subsidiary Albany Safran Composites, LLC:

Six months ended June 30,

(in thousands)

2019

2018

Net income of Albany Safran Composites (ASC)

$4,884

$2,419

Less: Return attributable to the Company's preferred holding

652

635

Net income of ASC available for common ownership

$4,232

$1,784

Ownership percentage of noncontrolling shareholder

10%

10%

Net income attributable to noncontrolling interest

$423

$178

Noncontrolling interest, beginning of year

$3,031

$3,247

Decrease attributable to 2018 adoption of ASC 606

—

(327)

Net income attributable to noncontrolling interest

423

178

Changes in other comprehensive income attributable to noncontrolling interest

(6)

4

Noncontrolling interest

$3,448

$3,102