| OPERATING SEGMENT INFORMATION AND CONCENTRATIONS OF RISK |
17.
OPERATING SEGMENT INFORMATION AND CONCENTRATIONS OF RISK
The Company has reported its operating segment information in
the format that the operating segment information is available
to and evaluated by the Company’s management team. USA and
Europe Fibre Cement manufactures fibre cement interior linings,
exterior siding products and related accessories in the United
States; these products are sold in the United States, Canada and
Europe. Asia Pacific Fibre Cement includes all fibre cement
manufactured in Australia, New Zealand and the Philippines and
sold in Australia, New Zealand, Asia, the Middle East (Israel,
Kuwait, Qatar and United Arab Emirates), and various Pacific
Islands. Research and Development represents the cost incurred
by the research and development centres.
The Company’s operating segments are strategic operating
units that are managed separately due to their different
products
and/or
geographical location. On 1 April 2008, the Company
realigned its operating segments by combining the previously
reported segments of USA Fibre Cement and Other into one
operating segment, USA and Europe Fibre Cement. On 22 May
2008, the Company ceased operation of its pipe business in the
United States.
Operating
Segments
The following are the Company’s operating segments and
geographical information:
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Net Sales to
Customers1
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Years Ended 31 March
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(Millions of US dollars)
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2011
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2010
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2009
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USA & Europe Fibre Cement
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$
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814.0
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$
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828.1
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$
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929.3
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Asia Pacific Fibre Cement
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353.0
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296.5
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273.3
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Worldwide total
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$
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1,167.0
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$
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1,124.6
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$
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1,202.6
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Income (Loss) Before Income Taxes
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Years Ended 31 March
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(Millions of US dollars)
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2011
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2010
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2009
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USA & Europe Fibre
Cement2
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$
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160.3
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$
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208.5
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$
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199.3
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Asia Pacific Fibre
Cement2
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79.4
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58.7
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47.1
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Research and
Development2
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(20.1
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(19.0
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(18.9
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)
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Segments total
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219.6
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248.2
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227.5
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General
Corporate3
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(114.9
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(269.2
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(53.9
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Total operating income (loss)
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104.7
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(21.0
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173.6
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Net interest
expense4
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(4.4
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(4.0
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(3.0
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Other (expense) income
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(3.7
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)
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6.3
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(14.8
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)
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Worldwide total
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$
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96.6
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$
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(18.7
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$
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155.8
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Total Identifiable Assets
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31 March
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(Millions of US dollars)
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2011
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2010
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USA & Europe Fibre Cement
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$
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752.0
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$
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780.8
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Asia Pacific Fibre Cement
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235.0
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216.9
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Research and Development
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14.4
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14.2
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Segments total
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1,001.4
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1,011.9
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General
Corporate5,6
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959.2
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1,166.9
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Worldwide total
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$
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1,960.6
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$
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2,178.8
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Net Sales to
Customers1
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Years Ended 31 March
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(Millions of US dollars)
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2011
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2010
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2009
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USA
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$
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789.2
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$
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808.9
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$
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912.2
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Australia
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266.4
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214.3
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193.2
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New Zealand
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52.9
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50.6
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50.0
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Other Countries
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58.5
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50.8
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47.2
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Worldwide total
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$
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1,167.0
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$
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1,124.6
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$
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1,202.6
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Total Identifiable Assets
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31 March
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(Millions of US dollars)
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2011
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2010
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USA
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$
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752.1
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$
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783.6
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Australia
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155.5
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131.6
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New Zealand
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45.8
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49.8
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Other Countries
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48.0
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46.9
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Segments total
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1,001.4
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1,011.9
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General
Corporate5,6
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959.2
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1,166.9
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Worldwide total
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$
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1,960.6
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$
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2,178.8
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1
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Export sales and inter-segmental
sales are not significant.
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2
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Research and development costs of
US$9.7 million, US$10.4 million and
US$8.0 million in fiscal years 2011, 2010 and 2009,
respectively, were expensed in the USA and Europe Fibre Cement
segment. Research and development costs of US$1.4 million,
US$1.0 million and US$1.2 million in fiscal years
2011, 2010 and 2009, respectively, were expensed in the Asia
Pacific Fibre Cement segment. Research and development costs of
US$16.9 million, US$15.7 million and
US$14.4 million in fiscal years 2011, 2010 and 2009,
respectively, were expensed in the Research and Development
segment. The Research and Development segment also included
selling, general and administrative expenses of
US$3.2 million, US$3.3 million and US$4.5 million
in fiscal years 2011, 2010 and 2009, respectively.
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Research and development
expenditures are expensed as incurred and in total amounted to
US$28.0 million, US$27.1 million and
US$23.8 million for the years ended 31 March 2011,
2010 and 2009, respectively.
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3
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The principal components of General
Corporate are officer and employee compensation and related
benefits, professional and legal fees, administrative costs, and
rental expense net of rental income on the Company’s
corporate offices. Included in General Corporate for the year
ended 31 March 2011 are unfavourable asbestos adjustments
of US$85.8 million, AICF SG&A expenses of
US$2.2 million and a net benefit of US$8.7 million
related to the ASIC proceedings. Included in General Corporate
for the year ended 31 March 2010 are unfavourable asbestos
adjustments of US$224.2 million, AICF SG&A expenses of
US$2.1 million and ASIC expenses of US$3.4 million.
Included in General Corporate for the year ended 31 March
2009 are favourable asbestos adjustments of
US$17.4 million, AICF SG&A expenses of
US$0.7 million and ASIC expenses of US$14.0 million.
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4
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The Company does not report net
interest expense for each operating segment as operating
segments are not held directly accountable for interest expense.
Included in net interest (expense) income is AICF interest
income of US$4.3 million, US$3.3 million and
US$6.4 million in fiscal years 2011, 2010 and 2009,
respectively. See Note 11.
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5
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The Company does not report
deferred tax assets and liabilities for each operating segment
as operating segments are not held directly accountable for
deferred income taxes. All deferred income taxes are included in
General Corporate.
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6
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Asbestos-related assets at
31 March 2011 and 2010 are US$819.7 million and
US$797.7 million, respectively, and are included in the
General Corporate segment.
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Concentrations of
Risk
The distribution channels for the Company’s fibre cement
products are concentrated. If the Company were to lose one or
more of its major customers, there can be no assurance that the
Company will be able to find a replacement. Therefore, the loss
of one or more customers could have a material adverse effect on
the Company’s consolidated financial position, results of
operations and cash flows.
The Company has two major customers that individually account
for over 10% of the Company’s net sales in one or all of
the past three fiscal years.
These two customers’ accounts receivable represented 20%
and 29% of the Company’s trade accounts receivable at
31 March 2011 and 2010, respectively. The following are
gross sales generated by these two customers, which are all from
the USA and Europe Fibre Cement segment:
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Years Ended 31 March
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(Millions of US dollars)
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2011
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2010
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2009
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%
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%
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%
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Customer A
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$
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208.9
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17.9
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$
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224.4
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20.0
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$
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277.1
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23.0
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Customer B
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134.0
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11.5
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144.5
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12.8
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149.6
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12.4
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$
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342.9
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$
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368.9
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$
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426.7
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Approximately 32% of the Company’s fiscal year
2011 net sales were derived from outside the United States.
Consequently, changes in the value of foreign currencies could
significantly affect the consolidated financial position,
results of operations and cash flows of the Company’s
non-US operations on translation into US dollars.
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