|3 Months Ended|
Mar. 31, 2016
|Subsequent Events [Abstract]|
Separation from AWI
On April 1, 2016, in connection with the completion of the Separation, we entered into several agreements with AWI that provide for the Separation and allocation between AFI and AWI of the assets, employees, liabilities and obligations of AWI and its subsidiaries attributable to periods prior to, at and after AFI’s Separation. These agreements also govern the relationship between AFI and AWI subsequent to the completion of the Separation.
These agreements include a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement, a Trademark License Agreement, a Transition Trademark Agreement and a Campus Lease Agreement. AFI does not expect the period of transition covered by these agreements to extend beyond December 31, 2017.
Under the Transition Services Agreement AFI and AWI will provide various services to each other including information technology, accounts payable, payroll, and other financial functions and administrative services.
The Tax Matters Agreement generally governs AFI’s and AWI’s respective rights, responsibilities and obligations after the separation and distribution with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and other matters regarding taxes for any tax period ending on or before the distribution date, as well as tax periods beginning after the distribution date. In addition, the tax matters agreement provides that AFI is liable for taxes incurred by AWI that may arise if AFI takes, or fails to take, certain actions that may result in the separation, the distribution or certain related transactions failing to qualify as tax-free for U.S. federal income tax purposes. AWI received an opinion from its tax counsel that the Separation qualified as a tax-free transaction for AWI and its shareholders.
The Employee Matters Agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of AFI and AWI. Pursuant to this agreement and in connection with the distribution, AWI will transfer assets and liabilities from the Shared Plans to AFI that relate to active AFI employees and certain former AFI employees to mirror plans established by AFI. Based on the analyses provided by our actuaries, approximately $33 million and approximately $95 million of defined benefit pension and postretirement benefit plan net liabilities under AWI’s plans as of April 1, 2016, respectively, will be transferred to mirror plans established by AFI. The approximately $33 million transfer of net pension benefit liabilities represents the underfunded status of the mirror pension plan to be established by AFI and is comprised of an approximately $383 million projected benefit obligation, partially offset by the fair value of approximately $350 million of pension assets.
Pursuant to the Trademark License Agreement, AWI will provide AFI with a perpetual, royalty-free license to use the “Armstrong” trade name and logo.
Pursuant to the Transition Trademark License agreement, AFI provided AWI with a five year royalty-free license to utilize the “Inspiring Great Spaces” tagline, logo and related color scheme.
Under the Campus Lease Agreement, AFI will lease certain portions of the AWI’s campus for use as AFI's corporate headquarters. The initial term of the campus lease agreement is for a period of five years from April 1, 2016. Minimum annual rent expense is expected to be approximately $5.6 million per year over the remaining life of the lease agreement, notwithstanding any renewals or additional charges.
On April 1, 2016, AFI entered into a $225 million asset-based revolving credit facility with a five-year maturity (“ABL Facility”).
Obligations under the ABL Facility are secured by qualifying accounts receivable, inventories, and select machinery and equipment of AFI’s wholly owned domestic subsidiaries. The ABL Facility includes a $50.0 million sublimit for the issuance of standby letters of credit. Borrowings under the ABL Facility bear interest at a rate equal to an adjusted base rate or the London Interbank Offered Rate (“LIBOR”) plus an applicable margin, which varies according to average excess credit availability and is currently 1.50%. We are required to pay a commitment fee, payable quarterly in arrears, on the average daily unused amount of the ABL Facility, which varies according to utilization and is currently 0.25%. Outstanding letters of credit issued under the ABL Facility are subject to fees which will be due quarterly in arrears based on an adjusted base rate.
Concurrent with the closing of the ABL Facility, AFI borrowed $100.0 million and used $50.0 million of the proceeds to fund a cash distribution to AWI. We intend to use the remaining proceeds for basic operating liquidity.
2016 Equity Awards
On April 11, 2016, AFI granted annual equity compensation awards to eligible employees of the Company. See our Current Report on Form 8-K dated April 14, 2016 for additional information about these awards.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
No definition available.