LANCASTER, Pa., Oct. 30 /PRNewswire-FirstCall/ -- Armstrong World Industries,
Inc. (NYSE: AWI) today reported third quarter 2006 net sales of $973.6 million
that were 4% higher than third quarter net sales of $937.0 million in 2005,
including a $13 million favorable impact from foreign exchange rates. Reported
operating income for the quarter increased to $67.4 million from $66.5 million
in the third quarter of 2005. Adjusted operating income for the quarter of
$82.5million increased 27% compared to adjusted operating income of $65.2
million in the prior year quarter.
Adjusted numbers exclude spending on restructuring charges and related costs,
impacts from legal settlements, environmental charges, foreign exchange and
certain other gains and losses to allow meaningful comparisons of operating
performance. A reconciliation of these adjusted numbers to comparable GAAP
measures is included in this release.
The year-over-year growth in third quarter 2006 adjusted operating income
benefited from price increases in excess of manufacturing cost inflation,
improved product mix in European businesses, improved direct manufacturing costs
in all businesses, and lower manufacturing period expense in our floor
businesses. Increased earnings in our WAVE joint venture also contributed to the
growth. Notably, the growth was achieved despite significant volume declines in
North American resilient business where vinyl declines offset laminate growth.
Segment Highlights
Resilient Flooring net sales were $304.8 million in the third quarter of 2006
and $311.5 million in the same period of 2005. Excluding the favorable impact of
foreign exchange rates, net sales decreased 4%. The decline was primarily due to
decreased volume for vinyl products in North America. A reported operating loss
of $2.9 million in the quarter compared to reported income in the third quarter
of 2005 of $7.7 million. Adjusted operating income of $4.5 million compared to
$5.9 million on the same basis in the prior year period. The decline is
primarily attributable to lower sales. The benefits of increased manufacturing
efficiency were greater than the impact of cost inflation in the period.
Wood Flooring net sales of $217.2 million in the current quarter declined 1%
from $220.2 million in the prior year as weakness in the U.S. housing markets
drove volume declines in both engineered and solid wood floors. Reported
operating income of $16.5 million in the quarter was below the $25.7 million
reported in the third quarter of 2005. The reduction in operating income was due
to the sales volume decline combined with higher lumber prices and increased
promotional spending. Production costs improved during the period.
Textiles and Sports Flooring net sales in the third quarter of 2006 increased
to $86.3 million from $79.7 million. Excluding the effects of favorable foreign
exchange rates of $3.9 million, sales grew 3% primarily on higher volume in
carpet tiles and better price realization in broadloom carpet. Reported
operating income of $4.2 million in 2006 increased from $3.2 million in 2005 on
the growth in sales.
Building Products net sales of $304.5 million in the current quarter
increased from $268.2 million in the prior year. Excluding the effects of
favorable foreign exchange rates of $5.0 million, sales increased by 12%,
primarily due to price increases made to offset inflationary pressures, and
improved product mix in both the U.S. and European markets. Volume increased in
North America and the Pacific Rim. Reported operating income increased to $59.7
million from operating income of $43.1 million in the third quarter of 2005. The
growth was driven by improved price realization, better product mix and
increased equity earnings in WAVE.
Cabinets net sales in the third quarter of 2006 of $60.8 million increased 6%
from $57.4 million in 2005 on higher selling prices and improved product mix.
Volume decreased slightly. Reported operating income for the third quarter of
$3.8 million improved from the prior year's $0.3 million operating loss,
primarily driven by the sales growth, and lower SG&A spending.
Year-to-Date Results
For the nine-month period ending September 30, 2006, net sales were $2,795.7
million compared to $2,696.7 million reported for the first nine months of 2005.
Excluding the $10.4 million impact from unfavorable foreign exchange rates, net
sales increased by 4%. The sales growth was due to improved price and product
mix on flat volume, and all segments grew sales except Resilient Flooring.
Operating income in the first nine months of 2006 was $188.1 million compared
to operating income of $110.2 million for the same period in 2005. Adjusted
operating income of $209.9 million increased 59% compared to adjusted operating
income of $131.9 million in the prior year period. The improvement in operating
income was primarily due to higher sales, improved manufacturing productivity
and reduced SG&A expenses.
Outlook
For the fourth quarter of 2006, commercial markets are expected to remain
strong, while the decline in the U.S. housing market will continue to reduce
volumes in our residential businesses. On a consolidated basis, improved prices
are anticipated to continue to offset cost inflation, and reductions in direct
manufacturing costs are expected to be sustained.
Due to fresh start reporting adjustments associated with our October 2, 2006
emergence from Chapter 11, reported fourth quarter operating income will not be
comparable to prior periods. The following outlook table includes adjusted
operating income on a pre-fresh start reporting basis to facilitate comparison
to 2005 fourth quarter adjusted operating income.
Fourth Quarter 2006 Operating Income Outlook
($ millions)
2005 2006E Growth
---- ----- ------
Adjusted Operating Income - Pre-Fresh
Start 35 37 to 42 9% to 24%
Estimated Fresh Start Reporting NA (4)
Adjusted Operating Income -
Post-Fresh Start NA 33 to 38
Emergence-related expenses NA (5)
Manufactured Profit in Inventory NA (36)
Reported Operating Income -
Post-Fresh Start NA (8) to (3)
Note: Reported operating loss in the fourth quarter of 2005 was $11.1
million, a reconciliation to adjusted operating income of $34
million is included in this release.
Earning Conference Call
Third quarter results will be discussed in a live Internet broadcast at 5:00
p.m. Eastern time today. This event will be broadcast live on the company's
website,
http://www.armstrong.com/. Once on the homepage, click "Investor Relations."
The replay of this event will be available on the company's website through Nov
10, 2006.
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. 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 2005, Armstrong's net sales
totaled nearly $4 billion. Based in Lancaster, PA, Armstrong operates 43 plants
in 12 countries and has approximately 14,800 employees worldwide. More
information about Armstrong is available on the Internet at
http://www.armstrong.com/.
Forward-Looking Statement
These materials may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act. Such statements provide
expectations or forecasts of future events. Our results 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.
Reconciliation of Adjusted Operating Income to GAAP
Consolidated
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2006 2005 2006
Operating Income, Adjusted $65.2 $82.5 $131.9 $209.9
Environmental 3.1 - 3.1 -
Legal Settlements (8.8) 2.8 (8.8) (5.8)
Pension Changes - - - 8.5
Restructuring and Related
Costs 4.4 7.3 27.4 27.8
Sale of Assets - - - (17.0)
Other - 5.0 - 8.3
Operating Income, Reported $66.5 $67.4 $110.2 $188.1
Three Months Ended
December 31,
2005
Operating Income, Adjusted $33.1
Fixed Asset Impairment 3.2
Legal Settlements (1.1)
Pension Changes 16.9
Restructuring and Related
Costs 25.2
Operating Loss, Reported $(11.1)
Resilient
Three Months Ended
September 30,
2005 2006
Operating Income, Adjusted $5.9 $4.5
Environmental 3.1 -
Legal Settlements (7.6) -
Restructuring and Related
Costs 2.7 7.4
Operating Income/(Loss),
Reported $7.7 $(2.9)
FINANCIAL HIGHLIGHTS
Armstrong World Industries, Inc. and Subsidiaries
(amounts in millions)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Net sales $973.6 $937.0 $2,795.7 $2,696.7
Cost of goods sold 747.1 720.8 2,169.1 2,101.5
Selling, general and
administrative expenses 173.7 158.2 469.9 496.2
Restructuring (reversals)
charges, net (0.5) 1.4 10.0 17.0
Equity (earnings) from joint
ventures (14.1) (9.9) (41.4) (28.2)
Operating income 67.4 66.5 188.1 110.2
Interest expense (unrecorded
contractual interest of
$19.3, $20.5, $57.6, $63.6) 2.1 2.2 5.8 6.4
Other non-operating expense 0.4 1.1 1.0 1.4
Other non-operating (income) (3.2) (5.5) (7.3) (9.8)
Chapter 11 reorganization
costs, net 4.4 1.5 10.9 4.5
Earnings before income taxes 63.7 67.2 177.7 107.7
Income tax expense 24.5 21.1 70.3 47.5
Net earnings $39.2 $46.1 $107.4 $60.2
SEGMENT RESULTS
Armstrong World Industries, Inc. and Subsidiaries
(amounts in millions) (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
Net sales: 2006 2005 2006 2005
Resilient Flooring $304.8 $311.5 $893.9 $914.0
Wood Flooring 217.2 220.2 645.0 624.9
Textiles and Sports
Flooring 86.3 79.7 222.6 211.4
Building Products 304.5 268.2 859.8 784.5
Cabinets 60.8 57.4 174.4 161.9
Total net sales $973.6 $937.0 $2,795.7 $2,696.7
Operating income (loss):
Resilient Flooring $(2.9) $7.7 $11.3 $(5.8)
Wood Flooring 16.5 25.7 46.2 54.4
Textiles and Sports
Flooring 4.2 3.2 (4.9) (3.2)
Building Products 59.7 43.1 152.9 116.0
Cabinets 3.8 (0.3) 6.1 (9.5)
Unallocated
Corporate
(expense) (13.9) (12.9) (23.5) (41.7)
Total operating income $67.4 $66.5 $188.1 $110.2
Selected Balance Sheet Information
(amounts in millions)
Unaudited
September 30, December 31,
2006 2005
Assets:
-------
Current assets $1,567.8 $1,561.3
Property, plant and equipment, net 1,164.0 1,145.3
Other noncurrent assets 1,989.0 1,899.4
Total assets $4,720.8 $4,606.0
Liabilities and shareholder's equity:
Current liabilities $435.6 $433.3
Liabilities subject to compromise 4,868.1 4,869.4
Other noncurrent liabilities 621.3 623.2
Shareholder's deficit (1,204.2) (1,319.9)
Total liabilities and
shareholder's equity $4,720.8 $4,606.0
Selected Cash Flow Information
(amounts in millions) (unaudited)
Nine Months Ended
September 30,
2006 2005
Net earnings $107.4 $60.2
Other adjustments to reconcile net
earnings to net
cash provided by operating activities 68.8 65.7
Changes in operating assets and
liabilities, net (118.2) (62.4)
Net cash provided by operating activities 58.0 63.5
Net cash (used for) investing activities (113.7) (41.1)
Net cash (used for) provided by financing
activities (31.3) 7.8
Effect of exchange rate changes on cash
and cash
equivalents 5.4 (5.3)
Net (decrease) increase in cash and cash
equivalents (81.6) 24.9
Cash and cash equivalents, beginning of
year 602.2 515.9
Cash and cash equivalents, end of period $520.6 $540.8
