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Reportable Segments and Geographic Data | 12 Months Ended
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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

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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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