| Operating Segment Information and Concentrations of Risk |
18. 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 senior management. 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.
Operating Segments
The following are the Company’s operating segments and
geographical information:
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Net Sales to Customers1
Years Ended 31 March
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(Millions of US dollars) |
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2015
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2014 |
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2013 |
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USA & Europe Fiber Cement
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$ |
1,276.5 |
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$ |
1,127.6 |
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$ |
951.4 |
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Asia Pacific Fiber Cement
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380.4 |
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366.2 |
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369.9 |
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Worldwide total
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$ |
1,656.9
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$ |
1,493.8 |
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$ |
1,321.3 |
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Income Before Income Taxes
Years Ended 31 March
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(Millions of US dollars) |
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2015
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2014 |
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2013 |
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USA & Europe Fiber Cement2, 3
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$ |
285.9 |
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$ |
237.0 |
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$ |
145.6 |
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Asia Pacific Fiber Cement2, 8
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94.1 |
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81.1 |
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61.7 |
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Research and Development2
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(26.0 |
) |
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(24.4) |
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(26.0) |
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Segments total
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354.0 |
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293.7 |
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181.3 |
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General Corporate
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(19.0) |
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(240.6) |
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(151.8) |
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Total operating income
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335.0 |
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53.1 |
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29.5 |
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Net interest expense5
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(7.5) |
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(1.1) |
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2.4 |
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Other (expense) income
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(4.9) |
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2.6 |
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1.8 |
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Worldwide total
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$ |
322.6 |
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$ |
54.6 |
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$ |
33.7 |
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Total Identifiable Assets
31 March
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(Millions of US dollars) |
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2015
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2014 |
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USA & Europe Fiber Cement
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$ |
959.3 |
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$ |
782.6 |
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Asia Pacific Fiber Cement
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279.8 |
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235.1 |
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Research and Development
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20.7 |
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19.7 |
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Segments total
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1,259.8 |
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1,037.4 |
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General Corporate6, 7
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784.7 |
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1,066.6 |
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Worldwide total
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$ |
2,044.5 |
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$ |
2,104.0 |
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Net Sales to Customers1
Years Ended 31 March
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(Millions of US dollars) |
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2015
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2014 |
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2013 |
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USA
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$ |
1,238.5 |
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$ |
1,094.6 |
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$ |
923.8 |
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Australia
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267.7 |
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259.2 |
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272.0 |
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New Zealand
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64.7 |
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63.0 |
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56.1 |
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Other Countries
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86.0 |
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77.0 |
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69.4 |
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Worldwide total
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$ |
1,656.9
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$ |
1,493.8 |
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$ |
1,321.3 |
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Total Identifiable Assets
31 March
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(Millions of US dollars) |
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2015
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2014 |
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USA
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$ |
956.4 |
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$ |
785.8 |
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Australia
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223.4 |
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173.8 |
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New Zealand
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25.8 |
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29.4 |
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Other Countries
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54.2 |
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48.4 |
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Segments total
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1,259.8 |
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1,037.4 |
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General Corporate6, 7
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784.7 |
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1,066.6 |
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Worldwide total
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$ |
2,044.5
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$ |
2,104.0 |
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| 1 |
Export sales and inter-segmental
sales are not significant. |
| 2 |
Research and development expenditures
are expensed as incurred and are summarized by segment in the
following table: |
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Research & Development
Years Ending 31 March
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(Millions of US dollars) |
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2015 |
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2014 |
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2013 |
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USA & Europe Fiber Cement
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$ |
6.1 |
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$ |
9.6 |
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$ |
11.9 |
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Asia Pacific Fiber Cement
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1.4 |
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1.3 |
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1.7 |
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Research and Developmenta
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24.2 |
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22.2 |
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23.6 |
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$ |
31.7
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$ |
33.1 |
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$ |
37.2 |
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a The Research and Development
segment also included selling, general and administrative expenses
of US$1.8 million, US$2.2 million and US$2.4 million in fiscal
years 2015, 2014 and 2013, respectively. |
| 3 |
Included in the USA and Europe Fibre
Cement segment for the year ended 31 March 2013 are asset
impairment charges of US$16.9 million. See Note 7 for further
information. |
| 4 |
The principal components of the
General Corporate segment are officer and employee compensation and
related benefits, professional and legal fees, administrative
costs, and rental expense on the Company’s corporate offices.
Also included in the General Corporate segment are the
following: |
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Years Ended
31 March |
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(Millions of US dollars) |
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2015 |
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2014 |
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2013 |
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Asbestos Adjustments
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$ |
33.4 |
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$ |
(195.8 |
) |
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$ |
(117.1 |
) |
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AICF SG&A expenses
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2.5 |
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2.1 |
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1.7 |
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| 5 |
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 net AICF interest income of US$1.4
million, US$2.9 million and US$7.0 million in fiscal years 2015,
2014 and 2013, respectively. |
| 6 |
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 the General
Corporate segment. |
| 7 |
Asbestos-related assets at
31 March 2015 and 2014 are US$657.3 million and US$812.4
million, respectively, and are included in the General Corporate
segment. |
| 8 |
Included in the Asia Pacific Fibre
Cement segment for the years ended 31 March 2015, 2014 and
2013 are adjustments to the provision for New Zealand
weathertightness claims. See Note 14 for more information. |
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Years Ended
31 March |
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(Millions of US dollars) |
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2015 |
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2014 |
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2013 |
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New Zealand weathertightness claims
benefit / (expense)
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$ |
4.3
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$ |
(1.8) |
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$ |
(13.2) |
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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 14% of
the Company’s trade accounts receivable at 31 March 2015
and 2014. 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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2015 |
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2014 |
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2013 |
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% |
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% |
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% |
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Customer A
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$ |
177.4 |
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10.7 |
% |
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$ |
174.2 |
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11.7 |
% |
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$ |
223.0 |
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16.9 |
% |
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Customer B
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143.4 |
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8.7 |
% |
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139.6 |
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9.3 |
% |
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137.7 |
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10.4 |
% |
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$ |
320.8
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$ |
313.8 |
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$ |
360.7 |
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Approximately 25%, 27% and 30% of the Company’s net sales in
fiscal year 2015, 2014 and 2013, respectively, 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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