NOTE 3. NATURE OF OPERATIONS

Building Products — produces suspended mineral fiber, soft fiber and metal ceiling systems for use in commercial, institutional and residential settings. In addition, our Building Products segment sources complementary ceiling products. Our products, which are sold worldwide, are available in numerous colors, performance characteristics and designs, and offer attributes such as acoustical control, rated fire protection and aesthetic appeal. Commercial ceiling materials and accessories are sold to resale distributors and to ceiling systems contractors. Residential ceiling products are sold in North America primarily to wholesalers and retailers (including large home centers). Our Worthington Armstrong Venture (“WAVE”) joint venture with Worthington Industries, Inc. manufactures suspension system (grid) products which are sold by both us and WAVE.

Resilient Flooring — designs, manufactures, sources and sells a broad range of floor coverings primarily for homes and commercial and institutional buildings. 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, linoleum products, adhesives, and installation and maintenance materials and accessories. Resilient Flooring products are offered in a wide variety of types, designs, colors and installation options. We sell these products to independent wholesale flooring distributors, large home centers, retailers, contractors and to the manufactured homes industry, and secure specifications for these products through architects, designers and end users. When market conditions and available capacity warrant, we also provide product on an original equipment manufacturer (“OEM”) basis to other flooring companies.

Wood Flooring — designs, manufactures, sources and sells hardwood flooring products for use in new 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 related accessories. Virtually all of our Wood Flooring sales are in North America. Our Wood Flooring products are generally sold to independent wholesale flooring distributors, large home centers, retailers and flooring contractors. When market conditions and available capacity warrant, we also provide product on an OEM basis to other flooring companies

Unallocated Corporate — includes assets, liabilities, income and expenses that have not been allocated to the business units. Balance sheet items classified as Unallocated Corporate are primarily income tax related accounts, cash and cash equivalents, the Armstrong brand name, the U.S. pension and long-term debt. Expenses for our corporate departments and certain benefit plans are allocated to the reportable segments based on known metrics, such as specific activity or headcount. The remaining items, which cannot be attributed to the other reportable segments without a high degree of generalization, are reported in Unallocated Corporate.


	Building Products	Resilient Flooring	Wood Flooring	Unallocated Corporate	Total
For the year ended 2015
Net sales to external customers	$1,231.3	$713.3	$475.4	-	$2,420.0
Equity (earnings) from joint venture	(66.1)	-	-	-	(66.1)
Segment operating income (loss)	264.8	42.2	19.2	($138.8)	187.4
Segment assets	1,068.9	510.2	337.4	775.4	2,691.9
Depreciation and amortization	67.6	26.1	12.0	12.6	118.3
Investment in joint venture	130.8	-	-	-	130.8
Purchases of property, plant and equipment	86.7	40.8	20.8	22.4	170.7


	Building Products	Resilient Flooring	Wood Flooring	Unallocated Corporate	Total
For the year ended 2014
Net sales to external customers	$1,294.3	$712.9	$508.1	-	$2,515.3
Equity (earnings) from joint venture	(65.1)	-	-	-	(65.1)
Segment operating income (loss)	264.7	61.6	(14.9)	($72.3)	239.1
Segment assets	1,079.7	492.7	329.8	704.0	2,606.2
Depreciation and amortization (1)	66.0	29.6	16.5	11.3	123.4
Asset impairment(1)	0.4	-	15.4	-	15.8
Investment in joint venture	129.0	-	-	-	129.0
Purchases of property, plant and equipment (1)	128.1	51.6	26.0	11.4	217.1


	Building Products	Resilient Flooring	Wood Flooring	Unallocated Corporate	Total
For the year ended 2013
Net sales to external customers	$1,264.6	$728.8	$534.0	-	$2,527.4
Equity (earnings) from joint venture	(59.4)	-	-	-	(59.4)
Segment operating income (loss)	263.1	69.8	6.0	($73.3)	265.6
Segment assets	1,071.9	462.9	335.2	852.0	2,722.0
Depreciation and amortization (1)	56.3	25.8	11.4	9.0	102.5
Investment in joint venture	132.0	-	-	-	132.0
Purchases of property, plant and equipment (1)	134.5	50.7	8.0	15.8	209.0

(1) – Totals for 2014 and 2013 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 or loss reviewed by the chief operating decision maker. The sum of the segments’ operating income (loss) equals the total consolidated operating income as reported on our income statement. The following reconciles our total consolidated operating income to

earnings from continuing operations before income taxes. These items are only measured and managed on a consolidated basis:


	2015	2014	2013
Segment operating income	$187.4	$239.1	$265.6
Interest expense	45.3	46.0	68.7
Other non-operating expense	23.5	10.5	2.0
Other non-operating income	(5.3)	(2.6)	(3.8)
Earnings from continuing operations before income taxes	$123.9	$185.2	$198.7

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.


	2015	2014	2013
Geographic Areas
Net trade sales
Americas:
United States	$1,738.5	$1,728.3	$1,743.8
Canada	131.5	164.9	176.6
Other	31.8	33.5	33.9
Total Americas	1,901.8	1,926.7	1,954.3

Europe, Middle East & Africa:
United Kingdom	85.8	80.1	82.3
France	43.6	55.9	55.6
Russia	37.9	64.9	68.0
Saudi Arabia	10.8	20.8	18.1
Other	109.8	125.0	127.3
Total Europe, Middle East & Africa	287.9	346.7	351.3

Pacific Rim:
China	85.5	92.4	81.3
India	54.0	50.5	40.3
Australia	53.9	64.2	66.2
Other	36.9	34.8	34.0
Total Pacific Rim	230.3	241.9	221.8
Total net trade sales	$2,420.0	$2,515.3	$2,527.4


	2015	2014
Property, plant and equipment, net at December 31,
Americas:
United States	$769.8	$715.8
Other	4.4	5.4
Total Americas	774.2	721.2

Europe, Middle East & Africa:
Russia	48.3	62.7
Germany	28.5	29.9
France	27.6	18.8
United Kingdom	21.8	19.1
Other	18.8	16.2
Total Europe, Middle East & Africa	145.0	146.7

Pacific Rim:
China	163.8	179.1
Other	13.3	15.4
Total Pacific Rim	177.1	194.5
Total property, plant and equipment, net	$1,096.3	$1,062.4

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 made the decision to dispose of certain idle equipment at five of our wood flooring manufacturing facilities 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 resilient flooring plant in Australia. We sold this facility in January 2015 for a gain of approximately $2 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 wood flooring plant in China in 2014.