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Revenue Recognition | 12 Months Ended
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Dec. 31, 2019
Revenue Recognition [Abstract] |
Revenue Recognition | 2. Revenue Recognition Effective January 1, 2018, the Company adopted the provisions of ASC 606, Revenue from contracts with customers, using the modified retrospective (or cumulative effect) method for transition. Under this transition method, periods prior to 2018 were not restated and the cumulative effect of initially applying the new standard was recorded as an adjustment to Retained earnings at January 1, 2018. 59 Index ALBANY INTERNATIONAL CORP. Notes to Consolidated Financial Statements 2. Revenue Recognition — (continued) For periods ending after December 31, 2017, we account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Revenue is measured based on the consideration specified in the contract with the customer, and excludes any amounts collected on behalf of third parties. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service, or a series of distinct goods or services, to the customer which occurs either at a point in time, or over time, depending on the performance obligation in the contract. A performance obligation is a promise in the contract to transfer a distinct good or service to the customer, and is the unit of account under ASC 606. “Control” refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from the product. A contract’s transaction price is allocated to each material distinct performance obligation and is recognized as revenue when, or as, the performance obligation is satisfied. In our MC segment, our primary performance obligation in most contracts is to provide solution-based, custom-designed fabrics and belts to the customer. We satisfy this performance obligation upon transferring control of the product to the customer at a specific point in time. Contracts with customers in the MC segment have various terms that can affect the point in time when revenue is recognized. Generally, the customer obtains control when the product has been received at the location specified by the customer, at which time the only remaining obligations under the contract may be fulfillment costs, in the form of shipping and handling, which are accrued when control of the product is transferred. In the MC segment, contracts with certain customers may also obligate us to provide various product-related services at no additional cost to the customer. When this obligation is material in the context of the contract with the customer, we recognize a separate performance obligation and allocate revenue to those services on a relative estimated standalone selling price basis. The standalone selling price for these services is determined based upon an analysis of the services offered and an assessment of the price we might charge for such services as a separate offering. As we typically provide such services on a stand-ready basis, we recognize this revenue over time. Revenue allocated to such service performance obligations is the only MC revenue that is recognized over time. In our AEC segment, we primarily enter into contracts to manufacture and deliver highly engineered advanced composite products to our customers. A significant portion of AEC revenue is earned under short duration, firm-fixed-price orders that are placed under a master agreement containing general terms and conditions applicable to all orders placed under the master agreement. To determine the proper revenue recognition method, we evaluate whether two or more orders or contracts should be combined and accounted for as one single contract, and whether the combined or single contract contains single or multiple performance obligations. This evaluation requires significant judgment, and the decision to combine a group of contracts, or to allocate revenue from the combined or single contract among multiple performance obligations, could have a significant impact on the amount of revenue and profit recorded in a given period. For most AEC contracts, the nature of our promise (or our performance obligation) to the customer is to manage the contract and provide a significant service of integrating a complex set of tasks and components into a single project or capability, which will often result in the delivery of multiple highly interdependent and interrelated units. At the inception of a contract, we estimate the transaction price based on our current rights, and do not contemplate future modifications (including unexercised options) or follow-on contracts until they become legally enforceable. Many AEC contracts are subsequently modified to include changes in specifications, requirements or price, which may create new or change existing enforceable rights and obligations. Depending on the nature of the modification, we consider whether to account for the modification as an adjustment to the existing contract or as a separate contract. Generally, we are able to conclude that such modifications are not distinct from the existing contract, due to the significant integration of the obligations, and the interrelated nature of tasks, provided for in the modification and the existing contract. Therefore, such modifications are accounted for as if they were part of the existing contract, and we accumulate the values of such modifications in our estimates of contract value. 60 Index ALBANY INTERNATIONAL CORP. Notes to Consolidated Financial Statements 2. Revenue Recognition — (continued) Revenue is recognized over time for a large portion of our contracts in AEC as most of our contracts have provisions that, under the guidance in ASC 606, are deemed to transfer control to the customer over time. Revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided. We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs to produce the contract deliverables. Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue, including profit, is recorded proportionally as costs are incurred. Accounting for long-term contracts requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change. When any adjustments of estimated contract revenue or costs are required, any changes from prior estimates are included in revenues or earnings in the period in which the change occurs. In other AEC contracts, revenue is recognized at a point in time because the products are offered to multiple customers, or we do not have an enforceable right to payment until the product is shipped or delivered to the location specified by the customer in the contract. AEC’s largest source of revenue is derived from the LEAP contract (see Note 10) under a cost-plus-fee agreement. Beginning in 2018, the fee is variable based on our success in achieving certain cost targets. Revenue is recognized over time as costs are incurred. Under this contract, there is significant judgment involved in determining applicable contract costs and expected margin, and therefore, in determining the amount of revenue to be recognized. Payment terms granted to MC and AEC customers reflect general competitive practices. Terms vary with product, competitive conditions, and the country of operation. The following table provides a summary of the composition of each business segment:
Segment |  | Product Group |  | Principal Product or Service |  | Principal Locations
Machine Clothing (MC) |  | Machine Clothing |  | Paper machine clothing: Permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel, and pulp |  | World-wide
Engineered fabrics: Belts used in the manufacture of nonwovens, fiber cement and several other industrial applications
Albany Engineered Composites (AEC) |  | Albany Safran Composites (ASC) |  | 3D-woven, injected composite components for aircraft engines |  | Rochester, NH Commercy, France Queretaro, Mexico
Airframe and engine Components (Other AEC) | Composite airframe and engine components for military and commercial aircraft | Salt Lake City, UT Boerne, TX Queretaro, Mexico Kaiserslautern, Germany
61 Index ALBANY INTERNATIONAL CORP. Notes to Consolidated Financial Statements 2. Revenue Recognition — (continued) We disaggregate revenue earned from contracts with customers for each of our business segments and product groups based on the timing of revenue recognition, and groupings used for internal review purposes. The following table presents disaggregated revenue for each product group by timing of revenue recognition:
|  | For the year ended
|  | December 31, 2019
(in thousands) |  | Point in Time Revenue Recognition |  | Over Time Revenue Recognition |  | Total
Machine Clothing |  | $598,054 |  | $3,200 |  | $601,254
Albany Engineered Composites ASC |  | — |  | 220,188 |  | 220,188
Other AEC |  | 28,584 |  | 204,106 |  | 232,690
Total Albany Engineered Composites |  | 28,584 |  | 424,294 |  | 452,878
Total revenue |  | $626,638 |  | $427,494 |  | $1,054,132
|  | For the year ended
|  | December 31, 2018
(in thousands) |  | Point in Time Revenue Recognition |  | Over Time Revenue Recognition |  | Total
Machine Clothing |  | $608,658 |  | $3,200 |  | $611,858
Albany Engineered Composites ASC |  | — |  | 182,699 |  | 182,699
Other AEC |  | 21,614 |  | 166,308 |  | 187,922
Total Albany Engineered Composites |  | 21,614 |  | 349,007 |  | 370,621
Total revenue |  | $630,272 |  | $352,207 |  | $982,479
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 years ended December 31,
(in thousands) |  | 2019 |  | 2018
Americas PMC |  | $316,355 |  | $303,768
Eurasia PMC |  | 210,961 |  | 227,493
Engineered Fabrics |  | 73,938 |  | 80,597
Total Machine Clothing Net sales |  | $601,254 |  | $611,858
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 $82 million as of both December 31, 2019 and 2018, and related primarily to firm contracts in the AEC segment. Of the remaining performance obligations as of December 31, 2019 we expect to recognize as revenue approximately $67 million during 2020, with the remainder to be recognized in 2021. 62 Index ALBANY INTERNATIONAL CORP. Notes to Consolidated Financial Statements 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 permeable and impermeable belts used in the manufacture of paper, paperboard, tissue and towel 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. In 2019, Safran leased manufacturing space from AEC for the GE9X program. Rent paid by Safran under this lease amount to $0.2 million in 2019. AEC Net sales to Safran were $226.8 million in 2019, $186.3 million in 2018, and $119.2 million in 2017. The total of Accounts receivable, Contract assets and Noncurrent receivable due from Safran amounted to $114.5 million and $96.2 million as of December 31, 2019 and 2018, respectively. Other significant programs served by AEC include the F-35, Boeing 787, Sikorsky CH-53K and JASSM, as well as the fan case for the GE9X engine. In 2019, approximately 25 percent of AEC sales were related to U.S. government contracts or programs. 63 Index ALBANY INTERNATIONAL CORP. Notes to Consolidated Financial Statements 3. Reportable Segments and Geographic Data — (continued) 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) |  | 2019 |  | 2018 |  | 2017 |  | Year ended December 31, 2018 Increase/(decrease) attributable to application of ASC 606
Net Sales |  |  |  |  |  |  |  |
Machine Clothing |  | $601,254 |  | $611,858 |  | $590,357 |  | $(3,970)
Albany Engineered Composites |  | 452,878 |  | 370,621 |  | 273,360 |  | (3,150)
Consolidated total |  | $1,054,132 |  | $982,479 |  | $863,717 |  | $(7,120)
Depreciation and amortization |  |  |  |  |  |  |  |
Machine Clothing |  | 21,875 |  | 30,813 |  | 33,527 |  | —
Albany Engineered Composites |  | 44,670 |  | 43,205 |  | 33,533 |  | —
Corporate expenses |  | 4,250 |  | 5,018 |  | 4,896 |  | —
Consolidated total |  | $70,795 |  | $79,036 |  | $71,956 |  | $—
Operating income/(loss) |  |  |  |  |  |  |  |
Machine Clothing |  | 191,965 |  | 169,836 |  | 153,980 |  | (1,605)
Albany Engineered Composites |  | 55,520 |  | 16,647 |  | (31,657) |  | 4,930
Corporate expenses |  | (53,909) |  | (49,075) |  | (43,647) |  | —
Operating income |  | $193,576 |  | $137,408 |  | $78,676 |  | $3,325
Reconciling items: |  |  |  |  |  |  |  |
Interest income |  | (2,729) |  | (2,118) |  | (1,511) |  | —
Interest expense |  | 19,650 |  | 20,242 |  | 18,602 |  | —
Other expense, net |  | (1,557) |  | 4,037 |  | 6,877 |  | —
Income before income taxes |  | $178,212 |  | $115,247 |  | $54,708 |  | $3,325
The table below presents restructuring costs by reportable segment (also see Note 5):
(in thousands) |  | 2019 |  | 2018 |  | 2017
Restructuring expenses, net |  |  |  |  |  |
Machine Clothing |  | $1,129 |  | $12,278 |  | $3,429
Albany Engineered Composites |  | 1,833 |  | 3,048 |  | 10,062
Corporate expenses |  | (57) |  | 244 |  | —
Consolidated total |  | $2,905 |  | $15,570 |  | $13,491
In the measurement of assets utilized by each reportable segment, we include Inventories, Accounts receivable, net, Contract assets, Noncurrent receivables, Property, plant and equipment, net, Intangibles, net and Goodwill. On November 20, 2019, the Company acquired CirComp GmbH, resulting in a $35.3 million increase in AEC assets. 64 Index ALBANY INTERNATIONAL CORP. Notes to Consolidated Financial Statements 3. Reportable Segments and Geographic Data — (continued) The following table presents assets and capital expenditures by reportable segment:
(in thousands) |  | 2019 |  | 2018 |  | 2017
Segment assets |  |  |  |  |  |
Machine Clothing |  | $441,072 |  | $453,836 |  | $464,468
Albany Engineered Composites |  | 693,799 |  | 633,394 |  | 584,076
Reconciling items: |  |  |  |  |  |
Cash |  | 195,540 |  | 197,755 |  | 183,727
Income taxes prepaid, receivable and deferred |  | 57,783 |  | 70,095 |  | 74,914
Prepaid and Other assets |  | 86,174 |  | 62,912 |  | 54,013
Consolidated total assets |  | $1,474,368 |  | $1,417,992 |  | $1,361,198
Capital expenditures and purchased software |  |  |  |  |  |
Machine Clothing |  | $16,707 |  | $20,230 |  | $20,522
Albany Engineered Composites |  | 48,753 |  | 60,121 |  | 63,865
Corporate expenses |  | 2,495 |  | 2,535 |  | 3,250
Consolidated total |  | $67,955 |  | $82,886 |  | $87,637
At the January 1, 2018 date of adoption of ASC 606, MC assets increased by $22.5 million, and 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. In 2018, AEC finalized a modification to the lease of its primary manufacturing facility in Salt Lake City, Utah, which increased the manufacturing space and extended 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 in 2018. Effective January 1, 2019, we adopted the provisions of ASC 842, Leases, which resulted in changes to the amount and classification of the associated assets and liabilities, as depicted in Note 20. Due to the non-cash nature of the modification and subsequent adoption of the new Lease accounting standard, changes during both 2018 and 2019 are excluded from amounts reported in the Consolidated Statements of Cash Flows. 65 Index ALBANY INTERNATIONAL CORP. Notes to Consolidated Financial Statements 3. Reportable Segments and Geographic Data — (continued) 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) |  | 2019 |  | 2018 |  | 2017
Net sales |  |  |  |  |  |
United States |  | $574,063 |  | $519,349 |  | $459,525
Switzerland |  | 146,571 |  | 157,339 |  | 147,601
France |  | 91,783 |  | 85,386 |  | 57,195
Mexico |  | 73,039 |  | 48,534 |  | 31,902
Brazil |  | 64,666 |  | 62,093 |  | 60,535
China |  | 48,586 |  | 50,923 |  | 48,920
Other countries |  | 55,424 |  | 58,855 |  | 58,039
Consolidated total |  | $1,054,132 |  | $982,479 |  | $863,717
Property, plant and equipment, at cost, net |  |  |  |  |  |
United States |  | $275,965 |  | $272,584 |  | $252,639
Mexico |  | 45,640 |  | 40,343 |  | 22,981
France |  | 43,986 |  | 50,245 |  | 58,196
China |  | 41,799 |  | 48,686 |  | 61,840
United Kingdom |  | 11,047 |  | 12,042 |  | 14,256
South Korea |  | 10,795 |  | 12,396 |  | 14,558
Germany (a) |  | 10,577 |  | 27 |  | 39
Canada |  | 9,509 |  | 8,154 |  | 10,230
Other countries |  | 17,144 |  | 17,578 |  | 19,563
Consolidated total |  | $466,462 |  | $462,055 |  | $454,302
(a) | In 2019, the Company acquired CirComp GmbH, which resulted in an increase in Property, plant and equipment of $10.6 million.

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