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Reportable Segments and Revenue Recognition | 9 Months Ended
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Sep. 30, 2023
Segment Reporting [Abstract] |
Reportable Segments and Revenue Recognition | Reportable Segments and Revenue Recognition 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. 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. On August 31, 2023, the Company completed the acquisition of Heimbach GmbH (“Heimbach”), a privately-held manufacturer of paper machine clothing and technical textiles, as further described in Note 17. Business Combination. The financial results of the acquired company are included in the Machine Clothing reportable segment. Albany Engineered Composites: The Albany Engineered Composites (“AEC”) segment provides highly engineered, advanced composite structures to customers in the commercial and defense aerospace industries. The segment includes Albany Safran Composites, LLC (“ASC”), in which our customer, the SAFRAN Group (“SAFRAN”) owns a 10 percent noncontrolling interest. AEC, through ASC, is the exclusive supplier to the LEAP program of advanced composite fan blades and fan cases under a long-term supply contract, where revenue is determined by a cost-plus-fee agreement. The LEAP engine is used on the Airbus A320neo, Boeing 737 MAX, and COMAC 919 aircraft. AEC's largest aerospace customer is the SAFRAN Group and sales to SAFRAN (consisting primarily of fan blades and cases for CFM International's LEAP engine) accounted for approximately 16 percent of the Company's consolidated Net revenues in 2022. AEC net sales to SAFRAN were $140.8 million and $125.4 million in the first nine months of 2023 and 2022, respectively. The total of Accounts receivable, Contract assets and Noncurrent receivables due from SAFRAN amounted to $90.0 million and $80.8 million as of September 30, 2023 and December 31, 2022, respectively. Other significant programs by AEC include the Sikorsky CH-53K, F-35, JASSM, and Boeing 787 programs. AEC also supplies vacuum waste tanks for the Boeing 7-Series programs, and specialty components for the Rolls Royce lift fan on the F-35, as well as the fan case for the GE9X engine. For the year ended December 31, 2022, approximately 46 percent of AEC revenues were related to U.S. government contracts or programs. The following tables show data by reportable segment, reconciled to consolidated totals included in the financial statements:
| Three months ended September 30, | Nine months ended September 30,
(in thousands) | 2023 | 2022 | 2023 | 2022
Net revenues |  |  |  |
Machine Clothing | $ | 166,588 |  | $ | 153,389 |  | $ | 479,027 |  | $ | 459,121 |
Albany Engineered Composites | 114,518 |  | 107,174 |  | 345,298 |  | 306,980 |
Consolidated revenues | $ | 281,106 |  | $ | 260,563 |  | $ | 824,325 |  | $ | 766,101 |
Operating income/(loss) |  |  |  |
Machine Clothing | $ | 50,710 |  | $ | 57,247 |  | $ | 153,400 |  | $ | 161,752 |
Albany Engineered Composites | 9,374 |  | 9,958 |  | 27,460 |  | 20,688 |
Corporate expenses | (20,014) |  | (13,561) |  | (54,747) |  | (39,327) |
Consolidated Operating income | $ | 40,070 |  | $ | 53,644 |  | $ | 126,113 |  | $ | 143,113 |
Reconciling items: |  |  |  |
Interest income | (1,826) |  | (965) |  | (4,770) |  | (2,463) |
Interest expense | 5,479 |  | 4,759 |  | 14,819 |  | 13,799 |
Pension settlement expense | — |  | 49,128 |  | — |  | 49,128 |
Other (income)/expense, net | 56 |  | (6,918) |  | (4,910) |  | (17,891) |
Income before income taxes | $ | 36,361 |  | $ | 7,640 |  | $ | 120,974 |  | $ | 100,540 |
Third quarter results include newly acquired Heimbach for the period of ownership, which began September 1, 2023. Heimbach's impact on third quarter results is described in Note 17. Business Combination. This acquisition impacted MC third quarter results by increasing Net revenues by $15.6 million and reducing Operating income by $(0.5) million, which included depreciation expense on Property, plant, and equipment, net of $1.1 million, and amortization expense on Intangibles, net of $0.1 million. Revenue Recognition: Products and services provided under long-term contracts represent a significant portion of revenues in the Albany Engineered Composites segment and we account for these contracts over time, primarily using the percentage of completion (actual cost to estimated cost) method. That method requires significant judgment and estimation, which could be considerably different if the underlying circumstances were to change. When adjustments in estimated contract revenues or costs are required, any changes from prior estimates are included in earnings in the period the change occurs. Changes in the estimated profitability of long-term contracts could be caused by increases or decreases in the contract value, revisions to customer delivery requirements, updated labor or overhead rates, factors affecting the supply chain, changes in the evaluation of contract risks and opportunities, or other factors. Changes in the estimated profitability of long-term contracts increased operating income by $0.9 million for the third quarter of 2023 and decreased operating income $4.1 million for the first nine months of 2023. Adjustments in the estimated profitability of long-term contracts increased operating income by $2.6 million and $2.0 million for the three and nine months ended September 30, 2022, respectively. 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 disaggregates revenue for each product group by timing of revenue recognition for the three months ended September 30, 2023:
| Three months ended September 30, 2023
(in thousands) | Point in Time Revenue Recognition | Over Time Revenue Recognition | Total
Machine Clothing | $ | 165,643 |  | $ | 945 |  | $ | 166,588 |
Albany Engineered Composites: |  |  |
ASC | — |  | 46,654 |  | 46,654 |
Other AEC | 4,955 |  | 62,909 |  | 67,864 |
Total Albany Engineered Composites | 4,955 |  | 109,563 |  | 114,518 |
Total revenues | $ | 170,598 |  | $ | 110,508 |  | $ | 281,106 |
The following table disaggregates revenue for each product group by timing of revenue recognition for the three months ended September 30, 2022:
| Three months ended September 30, 2022
(in thousands) | Point in Time Revenue Recognition | Over Time Revenue Recognition | Total
Machine Clothing | $ | 152,490 |  | $ | 899 |  | $ | 153,389 |
Albany Engineered Composites: |  |  |
ASC | — |  | 41,463 |  | 41,463 |
Other AEC | 5,819 |  | 59,892 |  | 65,711 |
Total Albany Engineered Composites | 5,819 |  | 101,355 |  | 107,174 |
Total revenues | $ | 158,309 |  | $ | 102,254 |  | $ | 260,563 |
The following table disaggregates revenue for each product group by timing of revenue recognition for the nine months ended September 30, 2023:
| Nine months ended September 30, 2023
(in thousands) | Point in Time Revenue Recognition | Over Time Revenue Recognition | Total
Machine Clothing | $ | 476,194 |  | $ | 2,833 |  | $ | 479,027 |
Albany Engineered Composites: |  |  |
ASC | — |  | 138,603 |  | 138,603 |
Other AEC | 14,259 |  | 192,436 |  | 206,695 |
Total Albany Engineered Composites | 14,259 |  | 331,039 |  | 345,298 |
Total revenues | $ | 490,453 |  | $ | 333,872 |  | $ | 824,325 |
The following table disaggregates revenue for each product group by timing of revenue recognition for the nine months ended September 30, 2022:
| Nine months ended September 30, 2022
(in thousands) | Point in Time Revenue Recognition | Over Time Revenue Recognition | Total
Machine Clothing | $ | 456,423 |  | $ | 2,698 |  | $ | 459,121 |
Albany Engineered Composites: |  |  |
ASC | — |  | 122,836 |  | 122,836 |
Other AEC | 14,750 |  | 169,394 |  | 184,144 |
Total Albany Engineered Composites | 14,750 |  | 292,230 |  | 306,980 |
Total revenues | $ | 471,173 |  | $ | 294,928 |  | $ | 766,101 |
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:
| Three months ended September 30, | Nine months ended September 30,
(in thousands) | 2023 | 2022 | 2023 | 2022
Americas PMC | $ | 84,405 |  | $ | 83,124 |  | $ | 261,937 |  | $ | 240,173 |
Eurasia PMC | 64,493 |  | 49,828 |  | 164,771 |  | 157,751 |
Engineered Fabrics | 17,690 |  | 20,437 |  | 52,319 |  | 61,197 |
Total Machine Clothing Net revenues | $ | 166,588 |  | $ | 153,389 |  | $ | 479,027 |  | $ | 459,121 |
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 and certain contracts in the AEC segment are relatively short duration firm-fixed-price orders. Remaining performance obligations on contracts that had an original duration of greater than one year totaled $759 million and $600 million as of September 30, 2023 and 2022, respectively, and related primarily to firm fixed price contracts in the AEC segment. Of the remaining performance obligations as of September 30, 2023, we expect to recognize as revenue approximately $38 million during 2023, $146 million during 2024, $146 million during 2025, and the remainder thereafter.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 22 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-22 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-15 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 31 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-31 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 42 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-42 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 40 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-40 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//280/tableOfContent Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 26 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-26 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 34 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-34 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 41 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-41 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-21 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 32 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482810/280-10-50-32 + Details
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