Annual report pursuant to Section 13 and 15(d)

Nature of Operations

v3.7.0.1
Nature of Operations
12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
Nature of Operations
NATURE OF OPERATIONS
Resilient Flooring — Our Resilient Flooring segment designs, manufactures, sources and sells a broad range of floor coverings primarily for homes and commercial buildings under various brands, including the Armstrong brand. Manufactured products in this segment include vinyl sheet, vinyl tile, and luxury vinyl tile (“LVT”) flooring. In addition, our Resilient Flooring segment sources and sells laminate flooring products, vinyl tile products, vinyl sheet products, LVT products, and linoleum products, as well as installation and maintenance materials and accessories. Resilient Flooring products are offered in a wide variety of designs, colors and installation options. We sell these products to independent wholesale flooring distributors, large home centers, retailers, flooring contractors and to the manufactured homes industry, and secured specifications for these products through architects, designers and end users. When market conditions and available capacity warrant, we also provide products on an original equipment manufacturer (“OEM”) basis to other flooring companies.
Wood Flooring — Our Wood Flooring segment designs, manufactures, sources and sells branded hardwood flooring products, including the Armstrong and Bruce brands, for use in residential construction and renovation, with some commercial applications in stores, restaurants and high-end offices. The product offering includes pre-finished solid and engineered wood floors in various wood species, and dimensions, as well as related accessories. Our Wood Flooring products are generally sold to independent wholesale flooring distributors, large home centers, retailers, and flooring contractors, and through secured specifications with regional and national builders. When market conditions and available capacity warrant, we also provide products on an OEM basis to other flooring companies.





NOTE 3. NATURE OF OPERATIONS (continued)
 
Resilient Flooring
 
Wood Flooring
 
Total
2016
 
 
 
 
 
Net sales to external customers
$
707.1

 
$
486.1

 
$
1,193.2

Operating income
15.1

 
3.8

 
18.9

Total assets (1)
514.3

 
354.7

 
869.0

Depreciation and amortization
32.5

 
14.1

 
46.6

Purchases of property, plant and equipment
25.7

 
11.9

 
37.6

 
 
 
 
 
 
2015
 
 
 
 
 
Net sales to external customers
$
713.3

 
$
475.4

 
$
1,188.7

Operating income (loss)
11.2

 
(25.2
)
 
(14.0
)
Total assets
539.5

 
331.1

 
870.6

Depreciation and amortization
26.1

 
12.0

 
38.1

Purchases of property, plant and equipment
40.8

 
20.8

 
61.6

 
 
 
 
 
 
2014
 
 
 
 
 
Net sales to external customers
$
712.3

 
$
508.1

 
$
1,220.4

Operating income (loss)
39.0

 
(17.2
)
 
21.8

Total assets
485.7

 
372.3

 
858.0

Depreciation and amortization (2)
29.6

 
16.5

 
46.1

Asset impairment

 
15.4

 
15.4

Purchases of property, plant and equipment (2)
51.5

 
26.0

 
77.5

_____________
(1) Total assets for 2016 will differ from the totals on our Consolidated Balance Sheets due to unallocated assets which primarily consist of cash and deferred income taxes.
(2) Totals for 2014 will differ from the totals on our Consolidated Statement of Cash Flow by the amounts that have been classified as discontinued operations.

Segment operating income (loss) is the measure of segment profit reviewed by our Chief Operating Decision Maker. The sum of the segments’ operating income (loss) equals the total operating income (loss) as reported on our Consolidated Statements of Operations and Comprehensive Income (Loss). The following reconciles our total operating income (loss) to income (loss) from continuing operations before income taxes, which are only measured and managed on a combined basis:
 
Year Ended December 31,
 
2016
 
2015
 
2014
Operating income (loss)
$
18.9

 
$
(14.0
)
 
$
21.8

Interest expense
1.5

 

 

Other expense, net
5.8

 
3.6

 
4.4

Income (loss) from continuing operations before income taxes
$
11.6

 
$
(17.6
)
 
$
17.4



NOTE 3. NATURE OF OPERATIONS (continued)
Accounting policies of the segments are the same as those described in the summary of significant accounting policies.

The sales in the table below are allocated to geographic areas based upon the location of the customer.

Geographic Areas
 
Year Ended December 31,
 
2016
 
2015
 
2014
Net trade sales
 
 
 
 
 
United States
$
1,015.9

 
$
1,017.9

 
$
1,027.4

Other
177.3

 
170.8

 
193.0

Total Net trade sales
$
1,193.2

 
$
1,188.7

 
$
1,220.4


 
2016
 
2015
Property, plant and equipment, net at December 31,
 
 
 
United States
$
347.4

 
$
327.7

China
85.6

 
94.7

Other
12.2

 
12.1

Total Property, plant and equipment, net
$
445.2

 
$
434.5



Impairment testing of our tangible assets occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In 2014, we disposed of certain idle equipment at five of our wood flooring manufacturing facilities in the United States and as a result we recorded a $4.4 million impairment charge in cost of goods sold.

During 2014, we decided to close our resilient flooring plant in Thomastown, Australia and our engineered wood flooring plant in Kunshan, China. We recorded $2.2 million in cost of goods sold for accelerated depreciation due to the closure of the Thomastown, Australia plant. We subsequently sold the Thomastown, Australia plant in 2015 for a gain of approximately $2.0 million. We also recorded $4.0 million in cost of goods sold for accelerated depreciation and $0.8 million for the impairment of intangible assets due to the closure of the Kunshan, China plant in 2014.

During 2014, we recorded an asset impairment charge of $11.9 million related to AWI’s DLW subsidiary, which was our former European flooring business, due to continued disappointing operating results.

Information about Major Customers

In 2016, total revenues from The Home Depot, Inc. and J.J. Haines and Company, Inc., included within our Resilient Flooring and Wood Flooring segments, were $288.7 million. Net sales to each of these customers exceeded 10% of our total net sales. We monitor the creditworthiness of our customers and generally do not require collateral.