Market Overview

Armstrong World Industries Reports First Quarter 2019 Results

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  • Net sales of $242.1 million, up 7% versus the prior year quarter

  • Operating income of $54.7 million, up 10% versus the prior year quarter

  • Architectural Specialties segment sales up 24% versus the prior year quarter

  • Adjusted EBITDA grew 17% and Adjusted EPS of $1.10, up 24% versus the prior year quarter

LANCASTER, Pa., April 29, 2019 (GLOBE NEWSWIRE) --  Armstrong World Industries, Inc. (NYSE:AWI), a leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions, today reported financial results for the first quarter.

First Quarter Results from Continuing Operations

(Dollar amounts in millions except per-share data)   For the Three Months Ended March 31,          
    2019     2018     Change  
Net sales   $ 242.1     $ 227.3       6.5 %
Operating income   $ 54.7     $ 49.6       10.3 %
Earnings from continuing operations   $ 36.4     $ 41.2       (11.7 )%
Diluted earnings per share   $ 0.73     $ 0.76       (3.9 )%

Consolidated net sales increased compared to the prior year quarter, driven by higher volumes in the Architectural Specialties segment, as well as higher Mineral Fiber average unit value ("AUV"), in which both positive like-for-like pricing and positive mix contributed.

Operating income increased over the prior year quarter, driven by positive Mineral Fiber AUV and volume growth in the Architectural Specialties segment, partially offset by higher SG&A expenses, including approximately $20 million relating to legal and professional fees incurred by the Company in connection with the conclusion of the Rockfon litigation matter, as well as costs, expenses and attorney's fees paid under the related settlement agreement. 

"Our first quarter results reflect a solid start to the year highlighted by strong Mineral Fiber AUV, Architectural Specialties growth and manufacturing productivity, all of which offset softer Mineral Fiber segment volume due to timing related issues," said Vic Grizzle, President and CEO of AWI. "I'm especially pleased with another quarter of greater than 20% growth in our Architectural Specialties business and our acquisition of Architectural Component's Group, Inc., one of the leading wood product companies in our industry."

Additional (non-GAAP*) Financial Metrics from Continuing Operations

(Dollar amounts in millions except per-share data)   For the Three Months Ended March 31,          
    2019     2018     Change  
Adjusted EBITDA   $ 92     $ 79       16.9 %
Adjusted net income   $ 54     $ 48       14.3 %
Adjusted diluted earnings per share   $ 1.10     $ 0.88       24.3 %
Adjusted free cash flow   $ 18     $ 4       394.6 %

*    The Company uses the above non-GAAP adjusted measures in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. Adjusted EBITDA, adjusted net income, and adjusted EPS exclude the impact of certain discrete expenses and income.  Examples include plant closures, restructuring actions, separation costs, environmental site expenses and related insurance recoveries, and other large unusual items outside of the normal course of our business operations. The Company excludes U.S. pension plan impact in the non-GAAP results as it represents the actuarial net periodic benefit cost recorded, while for all periods presented, the Company was not required and did not make cash contributions to the U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. Adjusted free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures, legacy environmental matters and litigation. Adjusted figures are reported using the actual exchange rate for 2019, and are reconciled to the most comparable GAAP measures in tables at the end of this release.   

(Dollar amounts in millions)   For the Three Months Ended March 31,          
    2019   2018     Change  
Adjusted EBITDA                      
Mineral Fiber   $ 82   $ 70       17.1 %
Architectural Specialties     10     9       14.5 %
Consolidated Adjusted EBITDA   $ 92   $ 79       16.9 %

Consolidated adjusted EBITDA improved 17% in the first quarter when compared to the same prior year period, driven by favorable AUV fall-through to profit in the Mineral Fiber segment and volume growth in the Architectural Specialties segment.

First Quarter Segment Highlights
In connection with the announced sale of the EMEA and Pacific Rim businesses, the EMEA and Pacific Rim segments have been excluded from results of continuing operations.  As a result, the Company's operating segments are as follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate.

Mineral Fiber

(Dollar amounts in millions)   For the Three Months Ended March 31,          
    2019   2018     Change  
Net sales (as reported)   $ 196.7   $ 190.7       3.1 %
Operating income (as reported)   $ 47.6   $ 43.7       8.9 %
Adjusted EBITDA   $ 82   $ 70       17.1 %

Net sales in Mineral Fiber grew from AUV expansion of 10% versus the prior year quarter.

Operating income increased, driven mainly by the margin impact of higher sales and higher equity earnings from WAVE, partially offset by higher SG&A expenses and input costs.

Architectural Specialties

(Dollar amounts in millions)   For the Three Months Ended March 31,          
    2019   2018     Change  
Net sales (as reported)   $ 45.4   $ 36.6       24.0 %
Operating income (as reported)   $ 9.2   $ 8.3       10.8 %
Adjusted EBITDA   $ 10   $ 9       14.5 %

Net sales in Architectural Specialties grew primarily from higher sales volume through increased market penetration and new construction activity, as well as the recent acquisitions of Architectural Components Group, Plasterform and Steel Ceilings. 

Operating income for the first quarter of 2019 increased due to the positive impact of higher sales volume, partially offset by an increase in expenses from recent acquisitions and additional investments in selling and design capacities.

Unallocated Corporate

Unallocated corporate expense of $2.1 million decreased from $2.4 million of expense in the prior year quarter, primarily due to lower service costs associated with our U.S. pension plan.

Market Outlook and 2019 Guidance
"We're off to a good start to the year with adjusted EBITDA up 17% and adjusted EBITDA margins up 330 basis points driven by strong AUV and leveraging our scale," said Brian MacNeal, CFO of AWI.  "We continue to expect economic conditions in 2019 to be similar to 2018.  Our 2019 guidance is unchanged and we anticipate sales growth of 7%-10% and adjusted EBITDA growth of greater than 10%."

Earnings Webcast

Management will host a live Internet broadcast beginning at 11:00 a.m. Eastern time today, to discuss first quarter results. This event will be broadcast live on the Company's website. To access the call and accompanying slide presentation, go to www.armstrongceilings.com and click Investors. The replay of this event will also be available on the Company's website for up to one year after the date of the call.

Uncertainties Affecting Forward-Looking Statements

Disclosures in this release, including without limitation, those relating to future financial results, market conditions and guidance, and in our other public documents and comments, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements provide our future expectations or forecasts and can be identified by our use of words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "outlook," "target," "predict," "may," "will," "would," "could," "should," "seek," and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward-looking statements. A more detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied is included in the "Risk Factors" and "Management's Discussion and Analysis" section of our report on Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission ("SEC"). Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.

About Armstrong and Additional Information

More details on the Company's performance can be found in its quarterly report on Form 10-Q for the quarter ended March 31, 2019 that the Company expects to file with the SEC today.

Armstrong World Industries, Inc. (AWI) is a global leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions. For more information, visit www.armstrongceilings.com.

Additional forward looking non-GAAP metrics are available on the Company's website at www.armstrongceilings.com under the Investors tab. The website is not part of this release and references to our website address in this release are intended to be inactive textual references only.

As Reported Financial Highlights

FINANCIAL HIGHLIGHTS
Armstrong World Industries, Inc. and Subsidiaries
(Amounts in millions, except for per-share amounts, quarterly data is unaudited)

        For the Three Months Ended March 31,  
        2019     2018  
Net sales     $ 242.1     $ 227.3
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