Discontinued Operations

9 Months Ended

Sep. 30, 2020

NOTE 5. DISCONTINUED OPERATIONS

EMEA AND PACIFIC RIM BUSINESSES

On November 17, 2017, we agreed to sell certain subsidiaries comprising our businesses in EMEA and the Pacific Rim to Knauf. The Sale was completed on September 30, 2019. Prior to completion of the Sale, each quarter, we compared the anticipated sales proceeds from Knauf to the carrying value of EMEA and Pacific Rim net assets. We recorded an estimated loss when the carrying value exceeded the anticipated sales proceeds. Net gains were only recorded to the extent of previous estimated losses.

During the three and nine months ended September 30, 2019, we recorded a loss on sale of $27.3 million and $31.9 million, respectively. During the three and nine months ended September 30, 2020, we recorded a loss of $0.2 million and $5.2 million, respectively, representing working capital and other adjustments.

See Note 1 for further discussion of the Sale.

FLOORING BUSINESSES

Separation and Distribution of AFI

On April 1, 2016, we completed our separation of Armstrong Flooring, Inc. (“AFI”) by allocating the assets and liabilities related primarily to our Resilient and Wood Flooring segments to AFI and then distributing the common stock of AFI to our shareholders at a ratio of one share of AFI common stock for every two shares of AWI common stock.

European Resilient Flooring

During the second quarter of 2020, we recorded a gain of $0.8 million related to Accumulated Other Comprehensive Income (“AOCI”) adjustments from a previously discontinued foreign flooring entity, which was dissolved in the second quarter of 2020. The AOCI adjustments related to accumulated foreign currency translation amounts.

Summarized Financial Information of Discontinued Operations

The following tables detail the businesses and line items that comprise discontinued operations on the Condensed Consolidated Statements of Operations and Comprehensive Income.

	EMEA and Pacific Rim Businesses
Three Months Ended September 30, 2020
(Loss) from disposal of discontinued businesses, before income tax	$	(0.2	)
Income tax (benefit)		-
(Loss) from disposal of discontinued businesses, net of tax	$	(0.2	)

Net (loss) from discontinued operations	$	(0.2	)

	EMEA and Pacific Rim Businesses			Flooring Businesses		Total
Nine Months Ended September 30, 2020
(Loss) gain from disposal of discontinued businesses, before income tax	$	(5.2	)	$	0.8	$	(4.4	)
Income tax (benefit)		(1.4	)		-		(1.4	)
(Loss) gain from disposal of discontinued businesses, net of tax	$	(3.8	)	$	0.8	$	(3.0	)

Net (loss) earnings from discontinued operations	$	(3.8	)	$	0.8	$	(3.0	)

	EMEA and Pacific Rim Businesses			Flooring Businesses			Total
Three Months Ended September 30, 2019
Net sales	$	115.5		$	-		$	115.5
Cost of goods sold		86.8			-			86.8
Gross profit		28.7			-			28.7
Selling, general and administrative expenses		20.4			-			20.4
Operating income		8.3			-			8.3
Other non-operating expense, net		1.0			-			1.0
Earnings from discontinued operations before income tax		7.3			-			7.3
Income tax expense		2.5			-			2.5
Net earnings from discontinued operations, net of tax	$	4.8		$	-		$	4.8

(Loss) from disposal of discontinued businesses, before income tax	$	(27.3	)	$	-		$	(27.3	)
Income tax (benefit)		-			(5.0	)		(5.0	)
(Loss) gain from disposal of discontinued business, net of tax	$	(27.3	)	$	5.0		$	(22.3	)

Net (loss) earnings from discontinued operations	$	(22.5	)	$	5.0		$	(17.5	)

	EMEA and Pacific Rim Businesses			Flooring Businesses			Total
Nine Months Ended September 30, 2019
Net sales	$	319.1		$	-		$	319.1
Cost of goods sold		245.7			-			245.7
Gross profit		73.4			-			73.4
Selling, general and administrative expenses		61.6			-			61.6
Operating income		11.8			-			11.8
Other non-operating expense, net		1.6			-			1.6
Earnings from discontinued operations before income tax		10.2			-			10.2
Income tax expense		7.2			-			7.2
Net earnings from discontinued operations, net of tax	$	3.0		$	-		$	3.0

(Loss) from disposal of discontinued businesses, before income tax	$	(31.9	)	$	-		$	(31.9	)
Income tax (benefit)		-			(4.9	)		(4.9	)
(Loss) gain from disposal of discontinued businesses, net of tax	$	(31.9	)	$	4.9		$	(27.0	)

Net (loss) earnings from discontinued operations	$	(28.9	)	$	4.9		$	(24.0	)

The following is a summary of total gains and losses, capital expenditures and operating lease information related to our former EMEA and Pacific Rim businesses, and gains on the dissolution of our previously discontinued flooring entity, which are presented as discontinued operations and included as components of operating and investing cash flows on our Condensed Consolidated Statements of Cash Flows.

	Nine Months Ended
	September 30,
	2020			2019
Loss on sale to Knauf ⁽¹⁾	$	5.2		$	-
Estimated loss on sale to Knauf ⁽²⁾		-			31.9
Gain on dissolution of flooring entity ⁽³⁾		(0.8	)		-
Purchases of property, plant and equipment		-			(3.0	)
Operating lease cost ⁽⁴⁾		-			7.4
Right-of-use assets obtained in exchange for lease obligations ⁽⁵⁾		-			24.6

(1)

Represents working capital and other adjustments.

(2)

Represents comparison of the EMEA and Pacific Rim net assets to the expected final sales proceeds.

(3)

Represents AOCI adjustments related to accumulated foreign currency translation amounts.

(4)

The amount of cash paid for amounts included in the measurement of lease liabilities was not materially different from the operating lease cost for the nine months ended September 30, 2019.

(5)

Represents initial right-of-use assets recognized upon adoption on January 1, 2019. We did not obtain any new right-of-use assets in exchange for lease obligations during the nine months ended September 30, 2019.