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Reportable Segments | 9 Months Ended
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Sep. 30, 2018
Segment Reporting [Abstract] |
Reportable Segments | 3. Reportable Segments As described in Note 2, the Company adopted the provisions of ASC 606, “Revenue from contracts with customers”, effective January 1, 2018, using the cumulative effect method for transition. Periods prior to 2018 have not been restated. The following tables show data by reportable segment, reconciled to consolidated totals, and the impact that ASC 606 had on the three -and nine-month periods ended September 30, 2018:
| Three months ended September 30, |  | Three months ended September 30, 2018
(in thousands) | 2018 | 2017 |  | Increase/(decrease) attributable to application of ASC 606
Net sales |  |  |  |
Machine Clothing | $158,971 | $150,694 |  | $3,336
Albany Engineered Composites | 94,282 | 71,447 |  | (5,028)
Consolidated total | $253,253 | $222,141 |  | ($1,692)
Operating income/(loss) |  |  |  |
Machine Clothing | $50,310 | $42,679 |  | $2,158
Albany Engineered Composites | 3,612 | (9,301) |  | (960)
Corporate expenses | (12,477) | (10,450) |  | -
Operating income | $41,445 | $22,928 |  | $1,198
Reconciling items: |  |  |  |
Interest income | (579) | (355) |  | -
Interest expense | 5,200 | 4,784 |  | -
Other (income)/expense, net | (3,151) | (530) |  | -
Income before income taxes | $39,975 | $19,029 |  | $1,198
| Nine months ended September 30, |  | Nine months ended September 30, 2018
(in thousands) | 2018 | 2017 |  | Increase/(decrease) attributable to application of ASC 606
Net sales |  |  |  |
Machine Clothing | $469,758 | $440,093 |  | $8,404
Albany Engineered Composites | 269,701 | 196,896 |  | (2,062)
Consolidated total | $739,459 | $636,989 |  | $6,342
Operating income/(loss) |  |  |  |
Machine Clothing | $131,921 | $119,366 |  | $4,923
Albany Engineered Composites | 9,979 | (32,242) |  | 32
Corporate expenses | (36,940) | (31,663) |  | -
Operating income | $104,960 | $55,461 |  | $4,955
Reconciling items: |  |  |  |
Interest income | (1,399) | (801) |  | -
Interest expense | 14,929 | 13,843 |  | -
Other (income)/expense, net | (973) | 2,854 |  | -
Income before income taxes | $92,403 | $39,565 |  | $4,955
At the January 1, 2018 date of adoption of ASC 606, Machine Clothing (MC) assets increased by $22 million, and Albany Engineered Composites (AEC) assets decreased by $13 million. In the third quarter of 2018, AEC finalized a modification to the lease of its primary manufacturing facility in Salt Lake City, Utah. 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 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. 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 (income)/expense, net. Periods prior to 2018 have been restated to conform to the current year presentation (see Note 4). The 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, 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 ASC at either market rent or a minimal cost. All lease expense is reimbursable by Safran to ASC due to the cost-plus nature of the supply agreement. ASC net sales to Safran were $136.9 million in the first nine months of 2018 and $84.1 million in the first nine months of 2017. The total of Accounts receivable, Contract assets and Noncurrent receivables due from Safran amounted to $99.0 million and $58.6 million as of September 30, 2018 and December 31, 2017, respectively. 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. 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) | 2018 | 2017 | 2018 | 2017
Machine Clothing | $371 | $96 | $10,523 | $1,012
Albany Engineered Composites | 2,189 | 5,407 | 2,968 | 9,208
Corporate expenses | (8) | - | 223 | -
Total | $2,552 | $5,503 | $13,714 | $10,220

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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