LANCASTER, Pa., July 30 /PRNewswire-FirstCall/ -- Armstrong World
Industries, Inc. (NYSE: AWI) today reported second quarter 2009 net sales of
$705.7 million, down 24 percent, from $926.8 million in the same period for
2008. Excluding a $52.4 million, or 4 percent, impact of foreign exchange
rates, sales decreased 20 percent. Reported operating income from continuing
operations of $47.1 million compared to operating income of $96.7 million in
the second quarter of 2008. Adjusted operating income from continuing
operations of $48.5 million decreased 50 percent compared to $96.7 million on
the same basis.
The Company uses adjusted income from operations in managing the business
and believes the adjustments provide meaningful comparisons of operating
performance between periods. Adjusted income excludes the impact of
restructuring charges and related costs, and certain other gains and losses.
As detailed in the attached reconciliation to GAAP, these adjustments
increased operating income by $1.4 million in the second quarter of 2009.
There were no adjustments in the second quarter of 2008.
Reported income from continuing operations was $28.3 million, or $0.50 per
diluted share. This compared to income of $52.4 million, or $0.92 per diluted
share, in the second quarter of 2008. Adjusted income from continuing
operations was $25.8 million, or $0.46 per diluted share, compared to $52.7
million, or $0.92 per diluted share, on the same basis as 2008.
Second quarter results reflect the continuation of weak global market
conditions experienced in the first quarter. Adjusted operating income
decreased significantly year-over-year due to double-digit volume declines
across all businesses and geographies. Volume in global commercial and
residential markets continued to fall. The impact of 20 percent lower volume
was only partially offset by SG&A expense reductions of 13 percent.
2nd Quarter Segment Highlights
Resilient Flooring net sales were $270.3 million in the second quarter of
2009 compared to $343.9 million in the same period of 2008. Excluding the
impact of foreign exchange rates, net sales declined about 16 percent. Lower
volumes in all markets accounted for the decline. Reported operating income
was $7.5 million compared to $14.6 million in the second quarter of 2008.
Operating income included a loss related to European Resilient Flooring of
$5.8 million compared to a loss of $1.3 million in 2008. Adjusted operating
income for the segment of $8.9 million deteriorated from $14.6 million
calculated on the same basis in the prior year. Operating income declined due
to the margin impact of lower global volume and less profitable product mix in
the Americas, partially offset by raw material cost deflation, lower freight
costs and reduced manufacturing expenses.
Wood Flooring net sales of $127.8 million in the second quarter of 2009
declined 24 percent from $168.8 million in the prior year's quarter due to
continued declines in residential housing markets. Reported operating income
of $0.9 million in the second quarter was below $12.4 million reported in
2008, primarily due to the margin impact from significantly lower sales,
partially offset by reduced raw material, freight and SG&A costs.
Building Products net sales of $268.7 million in the second quarter of
2009 decreased from $365.2 million in the prior year's quarter. Excluding the
effects of foreign exchange rates of $28 million, sales decreased by 21
percent. Global volume declines in weaker commercial markets more than offset
modest price realization. Reported operating income decreased to $43.1
million from $70.9 million in the second quarter of 2008. The combination of
volume declines and lower income from WAVE offset the benefits of price
realization, lower SG&A expenses, and reduced manufacturing costs.
Cabinets 2009 second quarter net sales of $38.9 million were 20 percent
below sales of $48.9 million in 2008 due to lower volume. Volume declines
resulted from lower U.S. housing market demand. Reported operating loss for
the second quarter of $2.5 million was worse than the prior year's $0.9
million income, primarily due to the margin impact from lower sales, partially
offset by lower manufacturing costs.
Unallocated corporate expense of $1.9 million in the second quarter of
2009 compared to expense of $2.1 million in the second quarter of 2008.
Free cash flow of $86 million in the second quarter of 2009 compared to
$78 million in 2008. The impact of lower earnings was offset by reductions
in working capital.
Year-to-Date Results
For the six months ended June 30, 2009, net sales were $1,374.0 million
compared to $1,755.0 million in 2008. Excluding a $95 million favorable
impact from exchange rates, net sales decreased by 17 percent. Lower volumes
in declining markets accounted for the decline, slightly offset by modest
improvement in price.
Reported operating income for the first six months was $48.2 million
compared to operating income of $135.2 million for the same period in 2008.
Adjusted operating income of $51.7 million decreased 63 percent compared to
adjusted operating income of $140.5 million in the prior year period. The
margin impact from sales volume declines and lower earnings from WAVE more
than offset reduced manufacturing costs, lower selling, general and
administrative ("SG&A") expenses and input cost deflation.
Reported earnings from continuing operations were $17.1 million, or $0.30
per diluted share, compared to $67.5 million, or $1.19 per diluted share in
the first half of 2008. Adjusted earnings from continuing operations of $25.6
million, or $0.45 per diluted share, compared to $75.6 million, or $1.33 per
diluted share, on the same basis as 2008.
Free cash flow for the first six months was $41 million compared to a use
of $15 million for 2008. The impact of lower earnings was more than offset by
reductions in working capital.
IRS Approval of 10-Year Carryback Refund
In July 2009, the Joint Committee on Taxation of the U.S. Congress
approved the tax refund, received in October 2007, of $178.7 million for
federal income taxes paid over the preceding ten years. The refunds resulted
from the carryback of a portion of net operating losses created by the funding
of the Asbestos PI Trust in October 2006. Therefore, in the third quarter of
2009, a reduction to income tax expense of $10.0 million and a decrease in
non-current deferred tax assets of $144.6 million will be recorded. A
corresponding decrease in the liability for previously unrecognized tax
benefits of $154.6 million will also be recorded.
Outlook
Global macroeconomic forecasts indicate a very difficult outlook for all
key markets over the remainder of 2009. There have been unprecedented
declines in Building Products' North American commercial markets, and
year-over-year declines are expected to continue at approximately 20 percent
for the remainder of the year. While performance varies widely between
European countries, aggregate European market declines are anticipated to
continue at a rate of about 25 percent, through 2009. North American
commercial floor markets are expected to decline 15 percent to 20 percent for
the year. 2009 declines in North American residential floor markets are
estimated to be at least 20 percent, with an anticipated decline in U.S.
housing starts in excess of 40% and mid-double-digit declines in renovation.
Based on the above assumptions and expected benefits from on-going cost
reduction efforts, management reaffirmed the 2009 outlook for sales to decline
to between $2,700 million and $2,800 million. With better visibility halfway
through the year, management narrowed the outlook for adjusted operating
income to the upper end of prior guidance. Adjusted operating income is now
forecast to be $115 million to $135 million, compared to $253 million earned
in 2008. 2009 adjusted EPS is expected to be $1.02 to $1.22 per diluted
share, compared to $2.37 per diluted share in 2008. 2009 cash taxes are
estimated to be less than $5 million. A 42 percent tax rate will be utilized
for adjusted earnings to facilitate comparability from period to period. The
outlook for free cash flow has improved and is now anticipated to be
approximately level with 2008.
Adjusted figures are reconciled to GAAP in tables at the end of this
release.
Investor Day Webcast
Management will conduct a discussion for shareholders during a live
Internet broadcast beginning at 8:30 a.m. Eastern time today. This event will
be broadcast live on the Company's Web site, www.armstrong.com. From the
homepage, click "For Investors" to access the call and the accompanying slide
presentation. The replay of this event will be available on the Company's Web
site for 90 days.
Forward Looking Statement
These materials contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act. Such statements provide
expectations or forecasts of future events. Our outcomes could differ
materially due to known and unknown risks and uncertainties, including: lower
construction activity reducing our market opportunities; availability and
costs for raw materials and energy; risks related to our international trade
and business; business combinations among competitors, suppliers and
customers; risks related to capital investments and restructurings; reduced
business with key customers; and other factors disclosed in our recent reports
on Forms 10-K, 10-Q and 8-K filed with the SEC. We undertake no obligation to
update any forward-looking statement.
About Armstrong and Additional Information
More details on the Company's performance can be found in its Form 10-Q,
filed with the SEC today. To supplement its consolidated financial statements
presented in accordance with accounting principles generally accepted in the
United States (GAAP), Armstrong provides additional measures of performance
adjusted to exclude foreign exchange and certain costs, expenses, and gains
and losses. The Company uses these adjusted performance measures in managing
the business, including communications with its Board of Directors and
employees, and believes that they provide users of this financial information
with meaningful comparisons of operating performance between current results
and results in prior periods. The Company believes that these non-GAAP
financial measures are appropriate to enhance understanding of its past
performance as well as prospects for its future performance. A reconciliation
of these adjustments to the most directly comparable GAAP measures is included
in this release and on our website. These non-GAAP measures should not be
considered in isolation or as a substitute for the most comparable GAAP
measures. Non-GAAP financial measures utilized by the Company may not be
comparable to non-GAAP financial measures used by other companies.
Armstrong World Industries, Inc. is a global leader in the design and
manufacture of floors, ceilings and cabinets. In 2008, Armstrong's
consolidated net sales totaled approximately $3.4 billion. Based in Lancaster,
Pa., Armstrong operates 37 plants in nine countries and has approximately
11,200 employees worldwide. For more information, visit www.armstrong.com.
FINANCIAL HIGHLIGHTS
Armstrong World Industries, Inc., and Subsidiaries
(amounts in millions, except for per-share amounts)
(unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
Net sales $705.7 $926.8 $1,374.0 $1,755.0
Cost of goods sold 541.7 701.6 1,078.6 1,343.9
Selling, general and
administrative expenses 127.3 147.0 264.5 306.8
Restructuring charges, net - - - 0.8
Equity (earnings) from
joint ventures (10.4) (18.5) (17.3) (31.7)
----- ----- ----- -----
Operating income 47.1 96.7 48.2 135.2
Interest expense 4.5 7.8 9.0 16.2
Other non-operating expense 0.2 0.1 0.3 0.4
Other non-operating (income) (0.6) (2.1) (1.7) (6.4)
---- ---- ---- ----
Earnings from continuing
operations before
income taxes 43.0 90.9 40.6 125.0
Income tax expense 14.7 38.5 23.5 57.5
---- ---- ---- ----
Earnings from continuing
operations 28.3 52.4 17.1 67.5
Gain from discontinued
operations, net of tax of
$0.0, $0.0, $0.0 and $0.4 0.0 0.0 0.0 0.1
--- --- --- ---
Net earnings $28.3 $52.4 $17.1 $67.6
===== ===== ===== =====
Earnings per share of
common stock, continuing
operations:
Basic $0.50 $0.92 $0.30 $1.19
Diluted $0.50 $0.92 $0.30 $1.19
Earnings per share of
common stock, discontinued
operations:
Basic $0.00 $0.00 $0.00 $0.00
Diluted $0.00 $0.00 $0.00 $0.00
Net earnings per share of
common stock:
Basic $0.50 $0.92 $0.30 $1.19
Diluted $0.50 $0.92 $0.30 $1.19
Average number of common
shares outstanding:
Basic 56.5 56.4 56.5 56.3
Diluted 56.5 56.4 56.5 56.4
SEGMENT RESULTS
Armstrong World Industries, Inc., and Subsidiaries
(amounts in millions)
(unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
Net sales:
----------
Resilient Flooring $270.3 $343.9 $511.5 $636.6
Wood Flooring 127.8 168.8 249.6 329.1
Building Products 268.7 365.2 535.6 696.3
Cabinets 38.9 48.9 77.3 93.0
---- ---- ---- ----
Total Net Sales $705.7 $926.8 $1,374.0 $1,755.0
====== ====== ======== ========
Operating income (loss):
------------------------
Resilient Flooring $7.5 $14.6 $(5.4) $7.4
Wood Flooring 0.9 12.4 (6.9) 14.9
Building Products 43.1 70.9 74.9 125.9
Cabinets (2.5) 0.9 (7.0) (2.8)
Unallocated Corporate (1.9) (2.1) (7.4) (10.2)
---- ---- ---- -----
Total Operating Income $47.1 $96.7 $48.2 $135.2
===== ===== ===== ======
Selected Balance Sheet Information
(amounts in millions)
(unaudited)
June 30, December 31,
2009 2008
---- ----
Assets:
-------
Current assets $1,296.6 $1,261.5
Property, plant and equipment, net 926.2 954.2
Other noncurrent assets 1,123.7 1,136.1
------- -------
Total assets $3,346.5 $3,351.8
======== ========
Liabilities and equity:
-----------------------
Current liabilities $370.4 $385.4
Other noncurrent liabilities 1,192.9 1,215.1
Equity 1,783.2 1,751.3
------- -------
Total liabilities and equity $3,346.5 $3,351.8
======== ========
Selected Cash Flow Information
(amounts in millions)
(unaudited)
Six Six
Months Months
Ended Ended
June 30, June 30,
2009 2008
---- ----
Net earnings $17.1 $67.6
Other adjustments to reconcile net earnings to net
cash provided by operating activities 50.2 71.6
Changes in operating assets and liabilities, net (16.9) (124.9)
----- ------
Net cash provided by operating activities 50.4 14.3
Net cash used for investing activities (1.2) (33.2)
Net cash used for financing activities (8.7) (258.7)
Effect of exchange rate changes on cash and cash
equivalents 7.3 3.5
--- ---
Net increase (decrease) in cash and cash
equivalents 47.8 (274.1)
Cash and cash equivalents, beginning of period 355.0 514.3
----- -----
Cash and cash equivalents, end of period $402.8 $240.2
====== ======
Reconciliation to GAAP (unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
CONSOLIDATED June 30, June 30, June 30, June 30,
(amounts in millions) 2009 2008 2009 2008
------------------------ ---- ---- ---- ----
Operating Income (Loss),
Adjusted $48.5 $96.7 $51.7 $140.5
Cost reduction initiatives
expenses 1.4 - 3.5 5.4
Chapter 11 related post-
emergence income - - - (1.3)
Review of strategic
alternatives - - - 1.2
------------------------ ----- ----- ----- ------
Operating Income (Loss),
Reported $47.1 $96.7 $48.2 $135.2
======================== ===== ===== ===== ======
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
RESILIENT FLOORING June 30, June 30, June 30, June 30,
(amounts in millions) 2009 2008 2009 2008
------------------------ ---- ---- ---- ----
Operating Income (Loss),
Adjusted $8.9 $14.6 $(1.9) $7.4
Cost reduction initiatives
expenses 1.4 - 3.5 -
------------------------ ---- ----- ----- ----
Operating Income (Loss),
Reported $7.5 $14.6 $(5.4) $7.4
======================== ==== ===== ===== ====
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
UNALLOCATED CORPORATE EXPENSE June 30, June 30, June 30, June 30,
(amounts in millions) 2009 2008 2009 2008
------------------------ ---- ---- ---- ----
Operating Income (Loss),
Adjusted $(1.9) $(2.1) $(7.4) $(4.9)
Cost reduction initiatives
expenses - - - 5.4
Chapter 11 related post-
emergence income - - - (1.3)
Review of strategic
alternatives - - - 1.2
------------------------ ----- ----- ----- ------
Operating Income (Loss),
Reported $(1.9) $(2.1) $(7.4) $(10.2)
======================== ===== ===== ===== ======
Three Months Ended Three Months Ended
June 30, 2009 June 30, 2008
CONSOLIDATED Total Per Share Total Per Share
-------------------------- ----- --------- ----- ---------
Operating Income, Adjusted $48.5 $96.7
Other Income / Expense (4.1) (5.8)
---------------------- ---- ----
Earnings (Loss) Before
Taxes, Adjusted 44.4 90.9
Adjusted Tax Benefit
(Expense) @ 42% (18.6) (38.2)
-------------------- ----- ----- ----- -----
Net Income (Loss), Adjusted $25.8 $0.46 $52.7 $0.92
Adjustment Items (1.4) -
Reversal of Adjusted Tax @ 42% 18.6 38.2
Ordinary Tax (17.5) (36.2)
Tax Adjustments 6.5 (1.5)
Unbenefitted Foreign Losses (3.7) (0.8)
------------------------------- ----- ----- ----- -----
Earnings (Loss) from continuing
operations, Reported $28.3 $0.50 $52.4 $0.92
=============================== ===== ===== ===== =====
Six Months Ended Six Months Ended
June 30, 2009 June 30, 2008
Total Per Share Total Per Share
-------------------------- ----- --------- ----- ---------
Operating Income, Adjusted $51.7 $140.5
Other Income / Expense (7.6) (10.2)
---------------------- ---- -----
Earnings (Loss) Before
Taxes, Adjusted 44.1 130.3
Adjusted Tax Benefit
(Expense) @ 42% (18.5) (54.7)
-------------------- ----- ----- ----- -----
Net Income (Loss), Adjusted $25.6 $0.45 $75.6 $1.33
Adjustment Items (3.5) (5.3)
Reversal of Adjusted Tax @ 42% 18.5 54.7
Ordinary Tax (18.6) (48.7)
Tax Adjustments 5.2 (3.2)
Unbenefitted Foreign Losses (10.1) (5.6)
------------------------------- ----- ----- ----- -----
Earnings (Loss) from continuing
operations, Reported $17.1 $0.30 $67.5 $1.19
=============================== ===== ===== ===== =====
Note: No adjustments necessary for Wood Flooring, Building Products, or
Cabinets.
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
CASH FLOW June 30, June 30, June 30, June 30,
(millions) 2009 2008 2009 2008
-------------- ---- ---- ---- ----
Free Cash Flow
Net Cash From Operations $90 $96 $50 $14
Plus / (minus): Net Cash
from Investing (4) (19) (1) (33)
Add back / (subtract):
Emergence related payments - - - 3
Divestiture - - (8) -
Acquisitions - 1 - 1
------------ --- --- --- ---
Free Cash Flow $86 $78 $41 $(15)
============== === === === ====
SOURCE: Armstrong World Industries, Inc.
- 07/30/2009
CONTACT: Beth Riley of Armstrong World Industries, Inc.,
bariley@armstrong.com,
Investors, +1-717-396-6354, or News media, +1-866-321-6677
Web Site: http://www.armstrong.com
( AWI AWI)
