Discontinued Operations

3 Months Ended

Mar. 31, 2015

Discontinued Operations [Abstract]

Discontinued Operations

NOTE 3. DISCONTINUED OPERATIONS

On December 4, 2014, our Board of Directors approved the cessation of funding to our DLW subsidiary, which at that time was our European flooring business. As a result, DLW management filed for insolvency in Germany on December 11, 2014. The German insolvency court subsequently appointed an administrator (the “Administrator”) to oversee DLW operations through the preliminary insolvency period. As a result of the insolvency filing, the appointment of the Administrator and our resulting loss of control of DLW’s operations to the German insolvency court and the Administrator, effective December 11, 2014, we deconsolidated DLW from our financial statements and presented DLW for all historical periods as a discontinued operation.

The financial results of the DLW business have been reclassified as discontinued operations for all periods presented. 

The following is a summary of the results related to the DLW business, (previously shown within the Resilient Flooring reporting segment), which are included in discontinued operations. 

	Three Months Ended
	March 31, 2015
Loss before income tax	($0.6)
Income tax benefit	43.4
Net earnings from disposal of discontinued business	$ 42.8

	Three Months Ended
	March 31, 2014
Net Sales	$ 44.4
Loss before income tax	(1.2)
Income tax benefit	-
Net loss from discontinued operations	($1.2)

Based on the progress of DLW’s bankruptcy proceedings in Germany, we recorded a non-cash income tax benefit of $43.4 million during the first quarter of 2015.  The tax benefit resulted from DLW’s excess of liabilities over assets, combined with AWI’s foreign and U.S. federal income tax basis in DLW at the time of disposition.  Based on the U.S. federal income tax planning strategies employed by AWI related to DLW and the applicable U.S. federal income tax regulations, the tax benefit associated with the disposition of DLW was not available until certain procedural elements surrounding DLW’s bankruptcy process were complete.  Such procedural activities occurred during the first quarter of 2015.

At deconsolidation, DLW had a net liability of $12.9 million, representing assets of $151.9 million and liabilities of $164.8 million, which were removed from our balance sheet. This net liability of $12.9 million was recognized as a contingent liability on our consolidated balance sheet pending the closure and results of the insolvency proceedings. Any shortfall will be recognized immediately when identified and any excess will be reflected when insolvency proceedings are finalized, all through discontinued operations.

The Condensed Consolidated Statement of Cash Flows does not separately report the cash flows of the discontinued operation. 

We have agreed with the Administrator to continue to purchase linoleum and homogenous flooring products for sale in the Americas and the Pacific Rim, and to provide administrative support services to DLW for information technology and accounts receivables and payables for a limited transition period. These agreements are not material.