| Operating Segment Information and Concentrations of Risk |
18. Operating Segment Information and Concentrations
of Risk
During the year ended 31 March 2016, the Company changed the
name of its USA and Europe Fiber Cement segment to the North
America and Europe Fiber Cement segment to better reflect the
segment’s geographic nature; however, the composition of the
segment remained the same.
The Company has reported its operating segment information in the
format that the operating segment information is available to and
evaluated by the Chief Operating Decision Maker, and includes North
America and Europe Fiber Cement, Asia Pacific Fiber Cement and
Research and Development. North America and Europe Fiber Cement
manufactures fiber 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 Fiber Cement includes all fiber cement manufactured in
Australia, New Zealand and the Philippines and sold in Australia,
New Zealand, Asia, the Middle East (Israel, Saudi Arabia,
Lebanon and the United Arab Emirates) and various Pacific Islands.
Research and Development represents the cost incurred by the
research and development centers. General Corporate costs primarily
consist of 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.
Operating Segments
The following is the Company’s operating segment
information:
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Net Sales to Customers
Years Ended 31 March
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| (Millions
of US dollars) |
|
2016
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2015 |
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2014 |
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North America & Europe Fiber Cement
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$ |
1,386.3 |
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$ |
1,276.5 |
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$ |
1,127.6 |
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Asia Pacific Fiber Cement
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341.9 |
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380.4 |
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366.2 |
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Worldwide total
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$ |
1,728.2
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$ |
1,656.9 |
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$ |
1,493.8 |
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Income Before Income Taxes
Years Ended 31 March
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| (Millions
of US dollars) |
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2016
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2015 |
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2014 |
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North America & Europe Fiber Cement1
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$ |
340.6 |
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$ |
285.9 |
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$ |
237.0 |
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Asia Pacific Fiber Cement1, 6, 7
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80.9 |
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94.1 |
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81.1 |
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Research and Development1
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(23.9) |
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(26.0) |
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(24.4) |
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Segments total
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397.6 |
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354.0 |
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293.7 |
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General Corporate2
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(43.6) |
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(19.0) |
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(240.6) |
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Total operating income
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354.0 |
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335.0 |
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53.1 |
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Net interest expense3
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(25.6) |
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(7.5) |
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(1.1) |
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Other income (expense)
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2.1 |
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(4.9) |
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2.6 |
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Worldwide total
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$ |
330.5 |
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$ |
322.6 |
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$ |
54.6 |
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Total Identifiable Assets
31 March
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| (Millions
of US dollars) |
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2016
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2015 |
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North America & Europe Fiber Cement
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$ |
944.0 |
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$ |
959.3 |
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Asia Pacific Fiber Cement
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297.4 |
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279.8 |
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Research and Development
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13.6 |
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20.7 |
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Segments total
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1,255.0 |
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1,259.8 |
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General Corporate4, 5
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785.4 |
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784.7 |
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Worldwide total
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$ |
2,040.4
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$ |
2,044.5 |
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The following is the Company’s geographical information:
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Net Sales to Customers
Years Ended 31 March
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(Millions of US dollars)
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2016
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2015 |
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2014 |
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North America
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$ |
1,348.8 |
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$ |
1,238.5 |
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$ |
1,094.6 |
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Australia
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228.4 |
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267.7 |
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259.2 |
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New Zealand
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61.4 |
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64.7 |
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63.0 |
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Other Countries
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89.6 |
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86.0 |
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77.0 |
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Worldwide total
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$ |
1,728.2
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$ |
1,656.9 |
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$ |
1,493.8 |
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Total Identifiable Assets
31 March
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(Millions of US dollars)
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2016
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2015 |
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North America
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$ |
925.1 |
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$ |
956.4 |
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Australia
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232.4 |
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223.4 |
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New Zealand
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26.5 |
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25.8 |
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Other Countries
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71.0 |
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54.2 |
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Segments total
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1,255.0 |
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1,259.8 |
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General Corporate4, 5
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785.4 |
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784.7 |
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Worldwide total
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$ |
2,040.4
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$ |
2,044.5 |
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| 1 |
Research and development expenditures
are expensed as incurred and are summarized by segment in the
following table: |
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Years Ending
31 March |
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| (Millions
of US dollars) |
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2016 |
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2015 |
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2014 |
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North America & Europe Fiber Cement
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$ |
6.6 |
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$ |
6.1 |
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$ |
9.6 |
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Asia Pacific Fiber Cement
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1.2 |
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1.4 |
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1.3 |
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Research and Developmenta
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21.7 |
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24.2 |
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22.2 |
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$ |
29.5
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$ |
31.7 |
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$ |
33.1 |
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a The Research and Development
segment also included selling, general and administrative expenses
of US$2.2 million, US$1.8 million and US$2.2 million in fiscal
years 2016, 2015 and 2014, respectively. |
| 2 |
The principal components of General
Corporate costs are officer and employee compensation and related
benefits, professional and legal fees, administrative costs, and
rental expense on the Company’s corporate offices. Also
included in General Corporate costs are the following: |
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Years Ended
31 March |
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| (Millions
of US dollars) |
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2016 |
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2015 |
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2014 |
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Asbestos Adjustments
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$ |
5.5
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$ |
33.4 |
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$ |
(195.8 |
) |
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AICF SG&A expenses
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1.7 |
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2.5 |
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2.1 |
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| 3 |
The Company does not report net
interest expense for each operating segment as operating segments
are not held directly accountable for interest expense. All net
interest expense is included in the General Corporate costs.
Included in net interest expense is net AICF interest expense
(income) of US$0.3 million, US$(1.4) million and US$(2.9) million
in fiscal years 2016, 2015 and 2014, respectively. |
| 4 |
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
costs. |
| 5 |
Asbestos-related assets at
31 March 2016 and 2015 are US$619.8 million and US$657.3
million, respectively, and are included in the General Corporate
costs. |
| 6 |
Included in the Asia Pacific Fiber
Cement segment for the year ended 31 March 2016 was a gain on
the sale of the Australian Pipes business of US$1.7 million. |
| 7 |
Included in the Asia Pacific Fiber
Cement segment are adjustments to the provision for New Zealand
weathertightness claims. |
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Years Ended
31 March |
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| (Millions
of US dollars) |
|
2016 |
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2015 |
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2014 |
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New Zealand weathertightness claims
(expense) / benefit |
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$ |
(0.5)
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$ |
4.3 |
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$ |
(1.8) |
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Concentrations of Risk
The distribution channels for the Company’s fiber 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.
We have one customer who contributes greater than 10% of our net
sales in each of the past three fiscal years.
This customer’s accounts receivable represented 8.1% and 6.4%
of the Company’s trade accounts receivable at 31 March
2016 and 2015, respectively. The following is gross sales generated
by this customer, which is from the North America and Europe Fiber
Cement segment:
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Years Ended
31 March |
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| (Millions
of US dollars) |
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2016 |
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2015 |
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2014 |
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% |
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% |
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% |
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Customer A
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$ |
197.0
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10.1 |
% |
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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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Approximately 22%, 25% and 27% of the Company’s net sales in
fiscal year 2016, 2015 and 2014, 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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