LANCASTER, Pa., Feb. 24 /PRNewswire-FirstCall/ -- Armstrong Holdings, Inc. (OTC Bulletin Board: ACKHQ) today reported net sales for the year ending December 31, 2005 of $3,558.4 million, an increase of 1.7% from the $3,497.3 million reported for 2004. Excluding the favorable effects of foreign exchange rates of $22.2 million, consolidated net sales increased 1.1%.

Operating earnings were recorded for 2005 of $100.7 million compared to an operating loss of $43.8 million for 2004. During 2005, Armstrong recorded non-cash charges related to changes to the U.S. pension plan of $16.9 million, and $17.6 million of fixed asset impairment. During 2004, Armstrong recorded non-cash goodwill impairment charges of $108.4 million and a fixed asset impairment charge of $44.8 million related to European resilient flooring business.

For the fourth quarter 2005 net sales of $861.7 million were 0.7% higher than fourth quarter net sales of $855.3 million in 2004. Excluding the unfavorable effects of foreign exchange rates of $10.3 million, net sales increased 2.0%. An operating loss of $10.1 million was recorded for the fourth quarter of 2005 compared to an operating loss of $134.8 million in the fourth quarter of 2004. During the fourth quarter of 2005, Armstrong recorded non-cash charges related to changes to the U.S. pension plan of $16.9 million, and $17.6 million of fixed asset impairment. During the fourth quarter of 2004, Armstrong recorded a non-cash goodwill impairment charge of $48.4 million and a fixed asset impairment charge of $44.8 million related to the European resilient flooring business.

During 2004, Armstrong implemented several manufacturing and organizational changes to improve its cost structure and enhance its competitive position. The Company did not initiate any additional manufacturing or organizational changes in 2005 but did incur costs in 2005 related to previously announced cost reduction initiatives. In 2005, charges for cost reduction initiatives totaled approximately $53 million, of which approximately $21 million was for accelerated depreciation and fixed asset impairments. The charges for these initiatives incurred in 2004 totaled approximately $50 million, of which approximately $32 million was for accelerated depreciation and fixed asset impairments. The remaining amounts were primarily for severances and other related costs.

In addition to the above items, results for 2005 reflect increased selling prices that largely offset higher raw material and energy costs.

Segment Highlights for the Full Year 2005

Resilient Flooring net sales of $1,185.4 million in 2005 decreased from net sales of $1,215.1 million in 2004. Excluding the favorable impact of foreign exchange rates of $9.0 million, 2005 net sales declined approximately 3% versus 2004. The decline was related to lower laminate sales volume related to a decision by a major customer to increase purchases of non-Armstrong laminate flooring products, and by a decline in residential vinyl sales as consumer preference in the market continued to shift away from vinyl products. An operating loss of $25.8 million was recorded in 2005 compared to an operating loss in 2004 of $150.2 million. 2005 operating results reflect the negative impact of sales volume declines and increased cost to acquire petroleum-based raw materials. Contributing to the 2004 loss were a non-cash goodwill impairment charge of $108.4 million, a non-cash fixed asset impairment charge related to our European resilient business of $44.8 million and cost reduction initiative charges of $32.7 million.

Wood Flooring net sales of $833.9 million in 2005 were level with sales of $832.1 million in the prior year. Unit volume increased 2% while prices were lowered in response to declining lumber prices. Operating income grew to $60.9 million in 2005 compared to operating income of $51.4 million in 2004.

Operating results benefited from increased volume, manufacturing efficiencies related to cost reduction initiatives and improvements in productivity at some plant locations. The improvement was made despite fixed asset impairment charges of $15.4 million in 2005.

Textiles and Sports Flooring net sales of $279.0 million increased in 2005 compared to $265.4 million in 2004. Excluding the translation effect of changes in foreign exchange rates of $4.2 million, net sales increased by 3.5%, primarily due to strong volume and favorable mix in carpet tile and sports flooring. An operating loss of $4.4 million was recorded in 2005 compared to an operating loss of $7.1 million recorded for 2004. The reduced 2005 operating loss was primarily due to increased sales volume, improved product mix, manufacturing efficiencies and reduced overhead expenses.

Building Products net sales of $1,047.6 million in 2005 increased from $971.7 million in the prior year. Excluding the translation effect of the changes in foreign exchange rates of $8.8 million, sales increased by 6.8%, primarily due to higher sales volume in commercial markets and improved pricing. Operating income increased to $148.5 million from operating income of $127.0 million in 2004. Volume growth and increased equity earnings in WAVE drove operating income improvement. Price realization essentially offset inflationary pressure from raw materials, energy and freight.

Cabinets 2005 net sales of $212.5 million were level with 2004 sales of $213.0 million. Operating loss of $9.7 million was recorded in 2005 compared to an operating income of $1.4 million in the prior year. Operating losses in 2005 were primarily caused by manufacturing inefficiencies resulting from plant consolidation and higher SG&A expenses.

More details on the Company's performance can be found in its Form 10-K, filed with the SEC today. References to performance excluding the effects of foreign exchange are non-GAAP measures. Management believes that this information improves the comparability of business performance by excluding the impacts of changes in foreign exchange rates when translating comparable foreign currency amounts.

Armstrong Holdings, Inc. is the parent company of Armstrong World Industries, Inc., 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 41 plants in 12 countries and has approximately 14,900 employees worldwide. More information about Armstrong is available on the Internet at http://www.armstrong.com.

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: Armstrong World Industries, Inc.'s ("AWI") Chapter 11 case and the magnitude of its asbestos liabilities; claims and legal proceedings, lower construction activity reducing our market opportunities, unavailability and/or increased costs for raw materials and energy; success in introducing new products, achieving manufacturing efficiencies and implementing price increases to offset increased costs; risks related to our international trade and business; labor relations issues; price competition stemming from factors such as worldwide excess industry capacity; 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.

FINANCIAL HIGHLIGHTS
Armstrong Holdings, Inc., and Subsidiaries
(amounts in millions, except for per-share amounts)

Three Months ended Year ended
December 31, December 31,
2005 2004 2005 2004

Net sales $861.7 $855.3 $3,558.4 $3,497.3
Cost of goods sold 719.6 764.2 2,821.1 2,811.0
Selling, general and administrative
expenses 157.1 172.4 652.7 635.0
Goodwill impairment - 48.4 - 108.4
Restructuring charges, net 6.2 13.3 23.2 18.3
Equity (earnings) from joint venture (11.1) (8.2) (39.3) (31.6)
Operating income (loss) (10.1) (134.8) 100.7 (43.8)

Interest expense (unrecorded
contractual interest of $19.3,
$21.8, $82.8 and $86.9,
respectively) 2.0 2.1 8.5 8.4
Other non-operating expense 0.1 0.2 1.5 3.1
Other non-operating (income) (2.1) (1.7) (12.0) (6.4)
Chapter 11 reorganization (income)
costs, net (5.7) 0.3 (1.2) 6.9
Earnings (loss) from continuing
operations before income taxes (4.4) (135.7) 103.9 (55.8)
Income tax expense (benefit) (45.3) (26.6) 2.2 24.6
Earnings (loss) from continuing
operations 40.9 (109.1) 101.7 (80.4)
Gain (loss) from discontinued
operations, net of tax of $0.0,
$0.0, $0.0 and $0.2 10.4 - 10.4 (0.4)
Net earnings (loss) $51.3 $(109.1) $112.1 $(80.8)

Earnings (loss) per share of common
stock, continuing operations:
Basic $1.01 $(2.69) $2.51 $(1.99)
Diluted $1.00 $(2.69) $2.50 $(1.99)

Gain (loss) per share of common
stock, discontinued operations:
Basic $0.26 $- $0.26 $(0.01)
Diluted $0.26 $- $0.26 $(0.01)

Net earnings (loss) per share of
common stock:
Basic $1.26 $(2.69) $2.77 $(2.00)
Diluted $1.26 $(2.69) $2.75 $(2.00)

Average number of common shares
outstanding:
Basic 40.6 40.5 40.5 40.5
Diluted 40.7 40.5 40.7 40.5



SEGMENT RESULTS
Armstrong Holdings, Inc., and Subsidiaries
(amounts in millions)

Three Months ended Year ended
December 31, December 31,
2005 2004 2005 2004
Net sales:
Resilient Flooring $271.4 $281.0 $1,185.4 $1,215.1
Wood Flooring 209.0 211.2 833.9 832.1
Textiles and Sports Flooring 67.6 68.0 279.0 265.4
Building Products 263.1 244.2 1,047.6 971.7
Cabinets 50.6 50.9 212.5 213.0
Total Net Sales $861.7 $855.3 $3,558.4 $3,497.3

Operating income (loss):
Resilient Flooring $(20.0) $(136.8) $(25.8) $(150.2)
Wood Flooring 6.5 12.9 60.9 51.4
Textiles and Sports Flooring (1.2) (6.3) (4.4) (7.1)
Building Products 32.5 20.7 148.5 127.0
Cabinets (0.2) (3.5) (9.7) 1.4
Unallocated Corporate (27.7) (21.8) (68.8) (66.3)
Total Operating Income (Loss) $(10.1) $(134.8) $100.7 $(43.8)



Selected Balance Sheet Information
(amounts in millions)

December 31,
2005 2004
Assets:
Current assets $1,561.3 $1,482.2
Property, plant and equipment, net 1,145.3 1,208.8
Other noncurrent assets 1,899.4 1,918.4
Total assets $4,606.0 $4,609.4

Liabilities and shareholders' equity:
Current liabilities $423.4 $488.1
Liabilities subject to compromise 4,864.7 4,866.2
Other noncurrent liabilities 623.2 666.8
Shareholders' equity (deficit) (1,305.3) (1,411.7)
Total liabilities and shareholders'
equity $4,606.0 $4,609.4



Selected Cash Flow Information
(amounts in millions)

Year ended
December 31,
2005 2004

Net earnings (loss) $112.1 $(80.8)
Goodwill impairment - 108.4
Other adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities 89.0 170.6
Changes in operating assets and
liabilities, net (54.4) (55.4)
Net cash provided by operating activities 146.7 142.8
Net cash used for investing activities (48.5) (111.7)
Net cash used for financing activities (3.9) (7.0)
Effect of exchange rate changes on cash
and cash equivalents (8.0) 7.5
Net increase in cash and cash equivalents 86.3 31.6
Cash and cash equivalents, beginning
of year 515.9 484.3
Cash and cash equivalents, end of year $602.2 $515.9



SOURCE Armstrong Holdings, Inc.