- First quarter results were at the high-end of guidance
- Management reaffirms guidance for the year
LANCASTER, Pa., May 2 /PRNewswire-FirstCall/ -- Armstrong World
Industries, Inc. (NYSE: AWI) today reported first quarter 2008 net sales of
$828.2 million, down four percent, from $863.4 million in the same period for
2007. Excluding a $28 million, or three percent, benefit from foreign
exchange rates, sales decreased seven percent. Reported operating income from
continuing operations decreased to $38.5 million from $65.5 million in the
first quarter of 2007. Adjusted operating income from continuing operations
of $46.1 million decreased 30 percent compared to $66.1 million on the same
basis.
Reported earnings from continuing operations decreased to $15.1 million,
or $0.26 per diluted share, from $30.7 million, or $0.55 per diluted share in
the first quarter of 2007. Adjusted earnings from continuing operations of
$19.9 million, or $0.35 per diluted share, compared to $31.1 million, or $0.55
per diluted share, on the same basis on 2007.
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 $7.6 million in the first quarter of 2008 and by
$0.6 million in the first quarter of 2007.
As expected, operating results in the first quarter of 2008 were
significantly below the prior year when we had an especially strong first
quarter. Q1 2008 results reflect continued declines in the U.S. residential
housing market, a moderate slowdown in U.S. commercial construction market,
and the timing of SG&A spending in first quarter of 2008. Lower volume and
increased SG&A more than offset improved manufacturing performance. Price
realization largely offset raw material inflation.
1st Quarter Segment Highlights
Resilient Flooring net sales were $292.7 million in the first quarter of
2008 compared to $290.6 million in the same period of 2007. Excluding the
favorable impact of foreign exchange rates, net sales declined about three
percent. High-single digit domestic volume declines, primarily in residential
vinyl products, and lower international volume offset modest price and mix
improvements in North America. Reported operating loss was $7.2 million
compared to income of $10.8 million in the first quarter of 2007. The
adjusted operating result was a loss of $6.4 million compared to income of
$10.3 million calculated on the same basis in the prior year. Operating
income decreased significantly due to lower sales volume and higher European
SG&A expenses to support new product introductions and increases to the sales
force.
Wood Flooring net sales of $160.3 million in the first quarter of 2008
declined 20 percent from $199.2 million in the prior year quarter as volume
declines reflected a significant exposure to new residential housing activity,
and difficult comparisons to a relatively strong first quarter in 2007.
Reported operating income in the first quarter was $2.5 million compared to
$8.4 million reported in the first quarter of 2007. Adjusted operating income
of $2.8 million decreased from $8.4 million on the same basis in the prior
year period. Operating income declined because lower sales volume and higher
promotional expense more than offset improved manufacturing productivity.
Building Products net sales of $331.1 million in the first quarter of 2008
increased from $313.9 million in the prior year quarter. Excluding the
effects of favorable foreign exchange rates of $15 million, sales increased by
one percent. International volume growth, price realization and improved
product mix offset volume declines in North America. Reported operating
income increased to $55.0 million from $53.7 million in the first quarter of
2007. Adjusted operating income of $56.0 million grew from $52.1 million on
the same basis in the prior year. Inflation in direct production costs was
more than offset by sales growth and improved manufacturing productivity.
Increased SG&A expense was offset by higher income from our joint venture,
WAVE.
Cabinets net sales in the first quarter of 2008 of $44.1 million decreased
26 percent from $59.7 million in 2007 primarily due to lower volume resulting
from the declines in the U.S. housing market. Reported operating loss for the
first quarter of $3.7 million was below income of $0.9 million in the prior
year primarily due to lower sales. There were no adjustments to operating
income in either period.
Unallocated corporate expense of $8.1 million in the first quarter of 2008
was slightly below $8.3 million in the first quarter of 2007. Adjusted
expense of $2.6 million decreased from $5.6 million on the same basis in the
prior year primarily due to lower compensation expenses.
Free cash flow was a use of $93 million in the first quarter of 2008
compared to a use of $5 million in 2007. 2008 had a significantly increased
investment in working capital. In addition, the first quarter of 2007
benefited from the receipt of a special dividend from WAVE that was not
repeated in 2008.
Special Cash Dividend
The Company returned $256 million to shareholders in a special cash
dividend paid on March 31, 2008 to shareholders of record on March 11, 2008.
Outlook
Global macroeconomic forecasts indicate a challenging outlook for most key
markets in 2008. Growth in Building Products' North American and European
commercial markets is expected to slow, to a low single digit decline and low
single digit growth, respectively. The outlook for the Flooring segment
varies. North American commercial floor markets are expected to be flat,
while North American residential floor markets are expected to shrink
approximately 15 percent due to an anticipated 25 percent to 30 percent
decline in U.S. housing starts and 5 percent to 10 percent less renovation
activity. On a consolidated basis, Armstrong expects that improved pricing
and increased manufacturing productivity will continue to offset cost
inflation.
Management reaffirmed its outlook for 2008, with sales expected to be
between $3,500 million and $3,650 million. Adjusted operating income is
forecast to be in the range of $260 million and $320 million, compared to $306
million in 2007. 2008 adjusted EPS is expected to be $2.30-$2.90 per diluted
share, compared to $2.79 per diluted share in 2007, on a higher tax rate. The
2008 tax rate is anticipated to be 44 percent to 45 percent. Free cash flow
for the year is anticipated to be $175 million to $200 million.
Adjusted figures are reconciled to GAAP in tables at the end of this
release.
Earnings Conference Call
Management will conduct a discussion for shareholders during a live
Internet broadcast at 10:00 a.m. Eastern time today. This event will be
broadcast live on the Company's Web site, www.armstrong.com. From the
homepage, click "Investor Relations" to access the call and the accompanying
slide presentation. The replay of this event will be available on the
Company's Web site through May 16, 2008.
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; the loss of 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 yesterday. 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 2007, Armstrong's
consolidated net sales totaled approximately $3.5 billion. Based in Lancaster,
Pa., Armstrong operates 40 plants in 10 countries and has approximately 12,800
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 Months Three Months
Ended Ended
March 31, March 31,
2008 2007
Net sales $828.2 $863.4
Cost of goods sold 641.4 661.8
Selling, general and administrative expenses 160.7 146.6
Restructuring charges, net 0.8 0.1
Equity (earnings) from joint ventures (13.2) (10.6)
Operating income 38.5 65.5
Interest expense 8.4 16.5
Other non-operating expense 0.3 0.5
Other non-operating (income) (4.3) (3.0)
Earnings from continuing operations before
income taxes 34.1 51.5
Income tax expense 19.0 20.8
Earnings from continuing operations 15.1 30.7
Earnings (loss) from discontinued operations,
net of income tax of $0.4 and $0.3 0.1 (4.7)
Net earnings $15.2 $26.0
Earnings per share of common stock, continuing
operations:
Basic $0.27 $0.55
Diluted $0.26 $0.55
Earnings (loss) per share of common stock,
discontinued operations:
Basic $0.00 $(0.08)
Diluted $0.00 $(0.08)
Net earnings per share of common stock:
Basic $0.27 $0.47
Diluted $0.27 $0.46
Average number of common shares outstanding:
Basic 56.3 55.7
Diluted 57.0 56.3
SEGMENT RESULTS
Armstrong World Industries, Inc., and Subsidiaries
(amounts in millions) (unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
Net sales:
Resilient Flooring $292.7 $290.6
Wood Flooring 160.3 199.2
Building Products 331.1 313.9
Cabinets 44.1 59.7
Total Net Sales $828.2 $863.4
Operating income (loss):
Resilient Flooring $(7.2) $10.8
Wood Flooring 2.5 8.4
Building Products 55.0 53.7
Cabinets (3.7) 0.9
Unallocated Corporate (8.1) (8.3)
Total Operating Income $38.5 $65.5
Selected Balance Sheet Information
(amounts in millions)
(unaudited)
March 31, December 31,
2008 2007
Assets:
Current assets $1,239.5 $1,501.0
Property, plant and equipment, net 1,009.3 1,012.8
Other noncurrent assets 2,138.5 2,136.1
Total assets $4,387.3 $4,649.9
Liabilities and shareholders' equity:
Current liabilities $445.8 $497.3
Noncurrent liabilities 1,724.7 1,715.4
Shareholders' equity 2,216.8 2,437.2
Total liabilities and shareholders' equity $4,387.3 $4,649.9
Selected Cash Flow Information
(amounts in millions) (unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2008 2007
Net earnings $15.2 $26.0
Other adjustments to reconcile net earnings
to net cash (used for) provided by
operating activities 43.2 84.7
Changes in operating assets and liabilities,
net (140.5) (103.7)
Net cash (used for) provided by operating
activities (82.1) 7.0
Net cash (used for) investing activities (14.1) (19.5)
Net cash (used for) provided by financing
activities (261.2) 6.9
Effect of exchange rate changes on cash and
cash equivalents 3.1 0.9
Net decrease in cash and cash equivalents (354.3) (4.7)
Cash and cash equivalents, beginning of year 514.3 263.8
Cash and cash equivalents, end of period 160.0 259.1
Cash and cash equivalents, end of period from
discontinued operations - 6.0
Cash and cash equivalents, end of period from
continuing operations $160.0 $253.1
Reconciliation to GAAP (unaudited)
CONSOLIDATED Three Months Ended
(amounts in millions) March 31,
2008 2007
Operating Income, Adjusted $46.1 $66.1
Fresh-Start:
Change in depreciation and amortization 2.3 -
Impact on hedging-related activity - (2.2)
Other Significant Items:
Cost reduction initiatives expenses 5.4 0.1
Chapter 11 related post-emergence expenses (1.3) 2.4
Review of strategic alternatives 1.2 0.3
Operating Income, Reported $38.5 $65.5
RESILIENT FLOORING Three Months Ended
(amounts in millions) March 31,
2008 2007
Operating Income, Adjusted $(6.4) $10.3
Fresh-Start:
Change in depreciation and amortization 0.8 -
Impact on hedging-related activity - (0.5)
Operating Income, Reported $(7.2) $10.8
WOOD FLOORING Three Months Ended
(amounts in millions) March 31,
2008 2007
Operating Income, Adjusted $2.8 $8.4
Fresh-Start:
Change in depreciation and amortization 0.3 -
Operating Income, Reported $2.5 $8.4
BUILDING PRODUCTS Three Months Ended
(amounts in millions) March 31,
2008 2007
Operating Income, Adjusted $56.0 $52.1
Fresh-Start:
Change in depreciation and amortization 1.0 -
Impact on hedging-related activity - (1.7)
Other Significant Items:
Cost reduction initiatives expenses - 0.1
Operating Income, Reported $55.0 $53.7
UNALLOCATED CORPORATE EXPENSE Three Months Ended
(amounts in millions) March 31,
2008 2007
Operating (Loss), Adjusted $(2.6) $(5.6)
Fresh-Start:
Change in depreciation and amortization 0.2 -
Other Significant Items:
Cost reduction initiatives expenses 5.4 -
Chapter 11 related post-emergence expenses (1.3) 2.4
Review of strategic alternatives 1.2 0.3
Operating (Loss), Reported $(8.1) $(8.3)
Reconciliation to GAAP (unaudited)
Earnings from Continuing Operations
CONSOLIDATED
(amounts in millions) Three Months Ended March 31,
2008 2007
Total Per Share Total Per Share
Earnings, Adjusted $19.9 $0.35 $31.1 $0.55
Fresh-Start (net of tax):
Change in depreciation and amortization 1.1 0.02 - -
Impact on hedging-related activity - - (1.3) (0.02)
Other Significant Items (net of tax):
Cost reduction initiatives expenses 2.6 0.05 0.1 -
Chapter 11 related post-emergence
expenses (0.6) (0.01) 1.4 0.02
Review of strategic alternatives 0.6 0.01 0.2 -
Tax rate - reported to adjusted 1.1 0.02 - -
Earnings, Reported $15.1 $0.26 $30.7 $0.55
Reconciliation to GAAP (unaudited)
2008 Estimate vs 2007 Actual
CONSOLIDATED Twelve Months Ended
(amounts in millions) December 31,
2008 Est Low 2008 Est High 2007 Act
Operating Income, Adjusted $260.0 $320.0 $305.7
Fresh-Start:
Change in depreciation and
amortization 9.3 9.3 2.7
Impact on hedging-related activity - - (5.8)
Other Significant Items:
Cost reduction initiatives expenses 5.4 5.4 0.2
Environmental accrual - - 1.1
Gain on insurance settlement - - (5.0)
Chapter 11 related post-emergence
expenses (0.8) (0.8) 7.1
Review of strategic alternatives 1.2 1.2 8.7
Operating Income, Reported $244.9 $304.9 $296.7
Reconciliation to GAAP (unaudited)
Earnings from Continuing Operations
2008 Estimate vs 2007 Actual
CONSOLIDATED
(amounts in millions) Twelve Months Ended December 31,
2008 Estimate 2008 Estimate
Low High 2007
Per Per Per
Total Share Total Share Total Share
Earnings, Adjusted $132.3 $2.30 $166.5 $2.90 $158.1 $2.79
Fresh-Start (net of tax):
Change in depreciation and
amortization 5.2 0.09 5.1 0.09 1.6 0.03
Impact on hedging-related
activity - - - - (3.4) (0.05)
Other Significant Items (net
of tax):
Cost reduction initiatives
expenses 3.0 0.05 3.0 0.05 0.1 -
Environmental accrual - - - - 0.6 0.01
Gain on insurance settlement - - - - (2.9) (0.05)
Chapter 11 related post-
emergence expenses (0.4) (0.01) (0.4) (0.01) 4.2 0.07
Review of strategic
alternatives 0.7 0.01 0.7 0.01 5.1 0.09
Earnings, Reported $123.8 $2.16 $158.1 $2.76 $152.8 $2.69
Reconciliation of Free Cash Flow
Three Months Ended
March 31,
2008 2007
NET CASH FROM OPERATIONS $(82) $7
Plus/(minus): Net Cash from Investing (14) (20)
Add back/(subtract):
Emergence related payments 3 8
Free Cash Flow $(93) $(5)
Note: May not add due to rounding
SOURCE Armstrong World Industries, Inc. 05/02/2008
CONTACT:
Investors:
Beth Riley, +1-717-396-6354, bariley@armstrong.com
or Media:
Jennifer Johnson
Senior Manager
Corporate Communication
Phone: 1-866-321-6677
Fax: 717-396-4598
E-mail: jenniferjohnson@armstrong.com
