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Tuesday, March 1, 2011

Armstrong World Industries Reports Fourth Quarter and Year-End 2010 Results

LANCASTER, Pa., Feb. 28, 2011 /PRNewswire via COMTEX/ -- Armstrong World Industries, Inc. (NYSE: AWI) today reported fourth quarter 2010 net sales of $642.9 million, down 2 percent, from $653.0 million in the same period for 2009. Excluding a $5 million, or 1 percent, unfavorable impact of foreign exchange rates, sales decreased 1 percent. Reported operating loss of $30.2 million for the fourth quarter compared to operating loss of $1.6 million in the fourth quarter of 2009. Reported net loss was $21.0 million, or $0.36 per diluted share, for the fourth quarter. This compared to a net loss of $3.8 million, or $0.07 per diluted share, in the fourth quarter of 2009.

The Company uses adjusted income from operations, 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 excludes the impact of foreign exchange, restructuring charges and related costs, impairments, and certain other gains and losses.
Adjusted operating income for the fourth quarter of 2010 of $18.7 million decreased 28 percent compared to $25.8 million on the same basis in the fourth quarter of 2009. As detailed in the attached reconciliation to GAAP, these adjustments increased operating income by $48.9 million in the fourth quarter of 2010 and $27.4 million in the fourth quarter of 2009. Adjusted net income was $6.3 million, or $0.11 per diluted share, compared to $12.9 million, or $0.22 per diluted share, on the same basis in 2009.

Fourth quarter volume declines of 2.5% and input inflation of $23 million more than offset the gains from manufacturing and SG&A. Volume losses were especially significant in our Wood Flooring segment where sales were down 11% despite modest mix and price improvements. Inflation had a particularly negative impact on our Wood Flooring segment which experienced approximately $20 million of increased cost due to lumber pricing versus the same period in 2009.

4th Quarter Segment Highlights
Resilient Flooring net sales were $229.3 million in the fourth quarter of 2010 compared to $237.6 million in the same period of 2009. Excluding the unfavorable impact of foreign exchange of $3 million, net sales declined about 2 percent. Lower sales volumes drove the decline. Reported operating loss was $1.8 million compared to a loss of $6.9 million in the fourth quarter of 2009. European Resilient Flooring contributed losses of $7.8 million and $5.2 million, respectively to those totals. Adjusted operating income for the segment of $1.2 million improved from a loss of $4.3 million calculated on the same basis in the prior year, despite lower sales. Adjusted operating income improved due to lower manufacturing and SG&A costs more than offsetting the margin impact of lower volume.

Wood Flooring net sales of $107.8 million in the fourth quarter of 2010 declined 11 percent from $120.7 million in the prior year's quarter as residential new home construction and repair remodel activity in North America was down year-over-year. Reported operating loss of $32.0 million in the fourth quarter reflected a larger loss than the loss of $10.2 million reported in fourth quarter of 2009. Adjusted operating loss of $4.1 million was worse than income of $9.7 million calculated on the same basis in the prior year. Raw material inflation and lower volumes exceeded the cost reductions in manufacturing and SG&A.

Building Products net sales of $273.4 million in the fourth quarter of 2010 increased from $260.0 million in the prior year's quarter. Excluding the unfavorable effects of foreign exchange of $2 million, sales increased by 6 percent. Volumes improved, primarily in Europe and Asia, and price and mix were up in North America. Reported operating income decreased to $16.1 million from $23.6 million in the fourth quarter of 2009. Adjusted operating income of $31.7 million increased from $23.6 million calculated on the same basis in 2009; 2010 was impacted by $7 million in charges related to the shutdown of the Beaver Falls facility. The adjusted operating income improvements were primarily driven by the sales gains.
Cabinets fourth quarter net sales of $32.4 million were 7 percent below sales of $34.7 million in 2009 due to less volume. Reported operating loss for the fourth quarter of $0.9 million was better than the prior year's $8.3 million loss. 2010 results were helped by lower manufacturing and SG&A expense. 2009 as reported results were impacted by the $4.9 million adjustment related to expenses associated with the closure of the Auburn, Nebraska manufacturing plant.

Unallocated corporate expense of $11.6 million in the fourth quarter of 2010 compared to income of $0.2 million in the fourth quarter of 2009. This change was driven by increased consulting expense in 2010 to help drive manufacturing and SG&A productivity.
Free cash flow of $43 million in the fourth quarter of 2010 compared to $53 million in 2009. Lower cash earnings, smaller improvements in working capital and restructuring charges negatively impacted results for the 2010 period versus the 2009 period.

Full Year Results
For the year ended December 31, 2010, net sales of $2.8 billion were flat with 2009. Excluding a $7 million favorable impact from exchange rates, net sales decreased by 1 percent. Lower volumes, primarily in North America more than offset mix and price gains.
Reported operating income for the year was $81.1 million compared to $90.6 million for 2009. Reported net earnings were $11.0 million, or $0.19 per diluted share, compared to $77.7 million, or $1.36 per diluted share in 2009.

Adjusted operating income of $188.2 million increased 20 percent compared to adjusted operating income of $156.6 million in 2009. Reduced manufacturing costs, particularly fixed costs, and lower SG&A expense offset inflation and lower sales volume. Adjusted net earnings of $100.8 million, or $1.73 per diluted share, compared to $81.9 million, or $1.44 per diluted share, on the same basis in 2009.
Free cash flow for the year was $180 million compared to $211 million in 2009 as smaller working capital improvements and lower cash earnings led to lower free cash flow in 2010.

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