Discontinued Operations

6 Months Ended

Jun. 30, 2015

Discontinued Operations [Abstract]

Discontinued Operations

NOTE 3. DISCONTINUED OPERATIONS

European Resilient Flooring

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 insolvency 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	Six Months Ended
	June 30, 2015	June 30, 2015
Loss before income tax	($0.3)	($0.9)
Income tax benefit	-	43.4
Net (loss) earnings from disposal of discontinued business	($0.3)	$ 42.5

	Three Months Ended	Six Months Ended
	June 30, 2014	June 30, 2014
Net sales	$ 50.9	$ 95.3
Loss before income tax	($5.6)	($6.8)
Income tax benefit	-	-
Net loss from discontinued operations	($5.6)	($6.8)

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.

In June 2015, the Administrator announced that the business operations of DLW, including its two German manufacturing plants, were sold to a third party investment firm.  We do not believe this transaction will have a material adverse impact on our financial condition, results of operations or cash flows.  The insolvency proceedings continue as the Administrator works to sell remaining assets and resolve creditor claims.

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 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 amount of the net liability was $12.3 million at June 30, 2015.

We have agreed 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.

Cabinets

In September 2012, we entered into a definitive agreement to sell our cabinets business to American Industrial Partners (“AIP”). The sale was completed in October 2012. In February 2013, we received a demand notice from the Carpenters Labor-Management Pension Fund (the “Fund”) of a deemed withdrawal relating to the sale of our cabinets business to AIP in 2012.

During the third quarter of 2013, we recorded an estimated liability of $7.5 million for a potential withdrawal liability related to a multi-employer pension plan. During the second quarter of 2014, we recorded an additional $3.3 million expense to increase the total estimated remaining liability to $10.0 million. In August 2014, we entered into a settlement agreement with the Fund to resolve this matter for $10.3 million, and as a result, we recorded an additional charge of $0.3 million during the third quarter of 2014.

The following is a summary of the results related to the cabinets business, which are included in discontinued operations. 

	Three and Six
	Months Ended
	June 30, 2014
Loss before income tax	($3.3)
Income tax benefit	1.2
Net loss from disposal of discontinued operations	($2.1)

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