Armstrong World Industries Reports Second Quarter 2013 Results

Second Quarter Results from continuing operations

(Amounts in millions except

per share data)

Three Months Ended June 30,

2013

2012

Change

Net sales

$706.6

$675.4

4.6%

Operating income

67.6

77.6

(12.9)%

Net income

30.6

42.2

(27.5)%

Diluted earnings per share

$0.51

$0.71

(28.2)%

Additional (non-GAAP*) Financial Metrics from continuing operations

(Amounts in millions except

per share data)

Three Months Ended June 30,

2013

2012

Change

Adjusted operating income

$71

$86

(17)%

Adjusted net income

37

43

(14)%

Adjusted diluted earnings per share

$0.62

$0.73

(15)%

Free cash flow

$32

$36

(11)%

(Amounts in millions except

per share data)

Three Months Ended June 30,

2013

2012

Change

Adjusted EBITDA

    Building Products

$81

$74

9%

    Resilient Flooring

27

29

(7)%

    Wood Flooring

5

16

(68)%

    Unallocated Corporate

(15)

(9)

Consolidated Adjusted EBITDA

$98

$110

(11)%

*The Company uses the above non-GAAP adjusted measures, as well as other non-GAAP measures mentioned below, in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. Adjusted operating income,  adjusted EBITDA, adjusted net income, and adjusted EPS exclude the impact of foreign exchange, restructuring charges and related costs, impairments, and certain other nonrecurring gains and losses.  Free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, less restricted cash, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures.  The company believes free cash flow is useful because it provides insight into the amount of cash that the Company has available for discretionary uses, after expenditures for capital commitments and adjustments for acquisitions/divestitures.  Adjusted figures are reported in comparable dollars using the budgeted exchange rate for 2013, and are reconciled to the most comparable GAAP measures in tables at the end of this release.   

Second Quarter Segment Highlights

Building Products

Three Months Ended June 30,

2013

2012

Change

Total segment net sales

$316.3

$297.1

6.5%

Operating income

$64.7

$53.5

20.9%

Resilient Flooring

Three Months Ended June 30,

2013

2012

Change

Total segment net sales

$252.1

$253.5

(0.6)%

Operating income

$17.7

$21.9

(19.2)%

Wood Flooring

Three Months Ended June 30,

2013

2012

Change

Total segment net sales

$138.2

$124.8

10.7%

Operating income

$ 2.5

$13.8

(81.9)%

(Amounts in millions except

per share data)

Six Months Ended June 30,

2013

2012

Change

Net sales (as reported)

$ 1,328.9

$ 1,311.4

1.3%

Operating income (as reported)

114.6

120.3

(4.7)%

Adjusted EBITDA

177

194

(9)%

Free cash flow

(19)

(14)

(37)%

As Reported Financial Highlights

FINANCIAL HIGHLIGHTS

Armstrong World Industries, Inc. and Subsidiaries

(amounts in millions, except for per-share amounts)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Net Sales

$706.6

$675.4

$1,328.9

$1,311.4

Costs of goods sold

542.3

504.8

1,020.1

1,000.8

Selling general and administrative expenses

111.2

107.9

223.9

218.6

Restructuring charges, net

(0.1)

-

(0.1)

0.2

Equity (earnings) from joint venture

(14.4)

(14.9)

(29.6)

(28.5)

Operating income

67.6

77.6

114.6

120.3

Interest expense

11.8

14.4

45.0

25.6

Other non-operating expense

0.7

0.3

0.7

0.3

Other non-operating (income)

(1.4)

(0.7)

(2.7)

(1.5)

Earnings from continuing operations

before income taxes

56.5

63.6

71.6

95.9

Income tax expense

25.9

21.4

37.8

34.7

Earnings from continuing operations

$30.6

$42.2

$33.8

$61.2

Net loss from discontinued operations, net of

tax benefit of $-, ($0.3), $-, and ($0.6)

-

(0.4)

-

(1.2)

Loss on sale of discontinued business, net of

tax benefit of ($0.4), $-, (0.5) and $-

(0.7)

-

(0.9)

-

Net loss from discontinued operations

(0.7)

(0.4)

(0.9)

(1.2)

Net earnings

$29.9

$41.8

$32.9

$60.0

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

(8.7)

(8.6)

(14.9)

(3.3)

Derivative gain (loss)

12.2

(2.0)

16.5

(4.3)

Pension and postretirement adjustments

6.0

2.5

14.9

4.9

Total other comprehensive (loss) income

9.5

(8.1)

16.5

(2.7)

Total comprehensive income

$39.4

$33.7

$49.4

$57.3

Earnings per share of common stock,

continuing operations

Basic

$0.51

$0.72

$0.57

$1.04

Diluted

$0.51

$0.71

$0.56

$1.03

Loss per share of common stock,

discontinued operations

Basic

($0.01)

($0.01)

($0.02)

($0.02)

Diluted

($0.01)

($0.01)

($0.02)

($0.02)

Net earnings per share of common stock:

Basic

$0.50

$0.71

$0.55

$1.02

Diluted

$0.50

$0.70

$0.54

$1.01

Average number of common shares

outstanding

Basic

59.3

58.8

59.2

58.7

Diluted

59.9

59.4

59.8

59.3

Dividends declared per common share

$-

$-

$-

$8.55

SEGMENT RESULTS

Armstrong World Industries, Inc. and Subsidiaries

(amounts in millions)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

Net Sales

2013

2012

2013

2012

Building Products

$316.3

$297.1

$609.1

$600.2

Resilient Flooring

252.1

253.5

466.9

480.8

Wood Flooring

138.2

124.8

252.9

230.4

Total net sales

$706.6

$675.4

$1,328.9

$1,311.4

Operating Income (loss)

Building Products

$64.7

$53.5

$124.0

$96.8

Resilient Flooring

17.7

21.9

24.1

32.6

Wood Flooring

2.5

13.8

3.0

16.3

Unallocated Corporate (expense)

(17.3)

(11.6)

(36.5)

(25.4)

Total Operating Income

$67.6

$77.6

$114.6

Selected Balance Sheet Information

(amounts in millions)

Assets

(Unaudited)

June 30, 2013

December 31, 2012

Current assets

$1,084.3

$1,019.9

Property, plant and equipment, net

1,036.0

1,005.0

Other noncurrent assets

841.5

829.4

Total assets

$2,961.8

$2,854.3

Liabilities and shareholders' equity

 Current liabilities

$399.8

$384.7

 Noncurrent liabilities

1,783.1

1,750.5

 Equity

778.9

719.1

Total liabilities and shareholders' equity

$2,961.8

$2,854.3

Selected Cash Flow Information

(amounts in millions)

(Unaudited)

Six Months Ended June 30,

2013

2012

Net income

$32.9

$60.0

Other adjustments to reconcile net income to net cash provided by operating activities

60.4

59.7

Changes in operating assets and liabilities, net

(50.1)

(89.7)

Net cash provided by operating activities

43.2

30.0

Net cash (used for) investing activities

(62.5)

(42.6)

Net cash (used for) financing activities

(6.3)

(249.1)

Effect of exchange rate changes on cash and cash equivalents

(6.1)

(1.6)

Net (decrease) in cash and cash equivalents

(31.7)

(263.3)

Cash and cash equivalents, beginning of period

336.4

480.6

Cash and cash equivalents, end of period

$304.7

$217.3

Supplemental Reconciliations of GAAP to non-GAAP Results (unaudited)

(Amounts in millions, except per share data)

To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company provides additional measures of performance adjusted to exclude the impact of foreign exchange, restructuring charges and related costs, impairments, and certain other gains and losses. Adjusted figures are reported in comparable dollars using the budgeted exchange rate for 2013. 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 the Company's 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.

CONSOLIDATED RESULTS FROM

CONTINUING OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Adjusted EBITDA

$98

$110

$177

$194

D&A/Fx*

(27)

(24)

(52)

(49)

Operating Income, Adjusted

$71

$86

$125

$145

Cost reduction initiatives expenses

3

8

9

19

Impairment

-

-

-

5

Foreign exchange impact

-

-

1

1

Operating Income, Reported

$68

$78

$115

$120

*Excludes accelerated depreciation associated with cost reduction initiatives reflected below.  Actual D&A as reported is; $26.4 million for the three months ended June 30, 2013, $26.1 million for the three months ended June 30, 2012, $51.8 million for the six months ended June 30, 2013, and $60.3 million for the six months ended June 30, 2012. 

BUILDING PRODUCTS

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Adjusted EBITDA

$81

$74

$154

$145

D&A/Fx

(14)

(12)

(27)

(25)

Operating Income, Adjusted

$67

$62

$127

$120

Cost reduction initiatives expenses

2

8

2

18

Impairment

-

-

-

5

Foreign exchange impact

-

-

1

-

Operating Income, Reported

$65

$54

$124

$97

RESILIENT FLOORING

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Adjusted EBITDA

$27

$29

$46

$49

D&A/Fx

(9)

(7)

(15)

(15)

Operating Income, Adjusted

$18

$22

$31

$34

Cost reduction initiatives expenses

1

-

7

1

Foreign exchange impact

-

-

-

1

Operating Income, Reported

$17

$22

$24

$32

WOOD FLOORING

Three Months  Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Adjusted EBITDA

$5

$16

$9

$21

D&A/Fx

(2)

(2)

(6)

(5)

Operating Income, Adjusted

$3

$14

$3

$16

Foreign exchange impact

-

-

-

-

Operating Income, Reported

$3

$14

$3

$16

UNALLOCATED CORPORATE

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Adjusted EBITDA

($15)

($9)

($32)

($21)

D&A/Fx

(2)

(3)

(4)

(4)

Operating (Loss), Adjusted

($17)

($12)

($36)

($25)

Foreign exchange impact

-

-

-

-

Operating (Loss), Reported

($17)

($12)

($36)

($25)

CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Total

Per Share

Total

Per Share

Total

Per Share

Total

Per Share

Adjusted EBITDA

$98

$110

$177

$194

D&A as reported

(26)

(26)

(52)

(60)

Accelerated

Deprecation/Fx

(1)

2

-

11

Operating Income,

Adjusted

$71

$86

$125

$145

Other non-operating

(expense)

(10)

(14)

(43)

(25)

Earnings Before

Taxes, Adjusted

61

72

82

120

Adjusted tax (expense)

@ 39% for 2013 and

40% for 2012

(24)

(29)

(32)

(48)

Net Earnings,

Adjusted

$37

$0.62

$43

$0.73

$50

$0.84

$72

$1.22

Pre-tax adjustment

items

(3)

(8)

(10)

(25)

Reversal of adjusted tax

expense @ 39%

for 2013 and  40% for 2012

24

29

32

48

Ordinary tax

(18)

(21)

(23)

(31)

Unbenefitted foreign

losses

(8)

(2)

(15)

(6)

Foreign tax credits

-

2

-

2

Tax adjustment items

(1)

(1)

-

1

Net Earnings,

Reported

$31

$0.51

$42

$0.71

$34

$0.56

$61

$1.03

CASH FLOW ⁽¹⁾

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Net Cash From Operations

$57

$63

$43

$30

Less: net cash (used for) investing

(25)

(27)

(62)

(42)

Add back (subtract) adjustments

to reconcile to free cash flow

Restricted Cash

-

-

-

(2)

Free Cash Flow

$32

$36

($19)

($14)

(1)    Cash flow includes cash flows attributable to Cabinets