Fourth Quarter 2020 Highlights
- Net Sales of $143.9 Million, Up Year-Over-Year Led by
Residential Demand - Net Loss of $32.4 Million and Adjusted Net
Loss of $30.1 Million - Adjusted EBITDA loss of $14.5 Million -
Investments of $9.8 Million to Support Strategic Long-term Growth
and Profit Initiatives
Full Year 2020 Highlights
- Net Sales of $584.8 Million - Net Loss of $63.6 Million and
Adjusted Net Loss of $59.2 Million - Adjusted EBITDA loss of $6.3
Million - Investments of $16.5 Million to Support Strategic
Long-term Growth and Profit Initiatives
Armstrong Flooring, Inc. (NYSE: AFI) (“Armstrong Flooring” or
the “Company”), a leader in the design and manufacture of
innovative flooring solutions, today reported financial results for
the fourth quarter and full year ended December 31, 2020.
Michel Vermette, President and Chief Executive Officer,
commented, “I’m proud of the resilience our employees showed
throughout the year while executing our business transformation.
Our progress was evident in our fourth quarter results, which were
largely in line with our expectations as we further invested in the
multi-pronged transformation and modernization of our
business.”
“Looking forward to 2021, macro trends further support Armstrong
Flooring’s internal efforts. Residential housing construction
remains positive for Armstrong Flooring, with this end market
continuing to grow in importance, representing 40% of 2020 sales
compared to 35% historically. Economic indicators for single-family
residential construction and renovation are all pointing towards
robust levels of activity to continue in 2021. We believe these
residential tailwinds will support Armstrong Flooring’s strong
brand, the timing of our direct sales efforts to select independent
retailers, growing presence in big box retailers, and meaningfully
enhanced sales efforts with our valued flooring distribution
network. Commercial activity continues to gain momentum with
sequential improvement in demand trending in the right direction
since mid-year 2020. These factors combined with the significant
steps that we are taking to structurally transform our business
give us the confidence in our transformation plans.”
Consolidated Results
Three Months Ended
Twelve Months Ended
December 31,
December 31,
(Dollars in millions, except per share
data)
2020
2019
Change
2020
2019
Change
Net sales
$
143.9
$
141.3
1.8
%
$
584.8
$
626.3
(6.6
%)
Operating (loss)
$
(32.7
)
$
(21.0
)
NM
$
(61.7
)
$
(61.1
)
NM
Net (loss)
$
(32.4
)
$
(25.1
)
NM
$
(63.6
)
$
(58.5
)
NM
Diluted (loss) per share
$
(1.48
)
$
(1.14
)
NM
$
(2.90
)
$
(2.42
)
NM
Adjusted EBITDA1
$
(14.5
)
$
(4.3
)
NM
$
(6.3
)
$
24.4
NM
Adjusted EBITDA margin
(10.1
%)
(3.1
%)
NM
(1.1
%)
3.9
%
NM
Adjusted net (loss) 1
NM
$
(30.1
)
$
(23.1
)
$
(59.2
)
$
(37.9
)
NM
Adjusted diluted (loss) per
share1
$
(1.37
)
$
(1.05
)
NM
$
(2.70
)
$
(1.57
)
NM
(1)
Excludes business transformation
costs, amongst other items; See tables at end of the earnings
release for non-GAAP reconciliations
Fourth Quarter 2020 Results
In the fourth quarter of 2020, net sales increased 1.8% to
$143.9 million from $141.3 million in the fourth quarter of 2019.
The increase in net sales was due to higher volumes and a favorable
mix of residential products which offset commercial project delays.
Residential end market sales grew, mostly driven by volumes gains.
Pricing actions from the second half of 2020 will have a positive
impact into the first half of 2021. The Company continues to see
strength in its residential sales, particularly in remodel.
Commercial end market sales slipped as projects continued to be
slowed by COVID-19.
The net loss in the fourth quarter of 2020 was $32.4 million, or
diluted loss per share of $1.48, as compared to net loss of $25.1
million, or diluted loss per share of $1.14, in the prior year
quarter. Adjusted net loss was $30.1 million, or adjusted diluted
loss per share of $1.37, as compared to adjusted net loss of $23.1
million, or adjusted diluted loss per share of $1.05, in the prior
year quarter.
Fourth quarter 2020 adjusted EBITDA was a loss of $14.5 million,
as compared to an adjusted EBITDA loss of $4.3 million in the prior
year quarter. The decrease in adjusted EBITDA was primarily due to
higher raw materials, higher freight/shipping costs, and tariff
headwinds. Operating results were also impacted by transition
service agreement income in the prior year quarter which did not
recur in the fourth quarter of 2020. Improved productivity in our
manufacturing facilities was offset by investments to support
long-term strategic growth initiatives, including our transition
from our South Gate, CA facility.
Full Year 2020 Results
For the full year 2020, net sales declined 6.6% to $584.8
million from $626.3 million in the prior year, primarily due to the
effects of COVID-19 on our business, particularly in the second and
third quarter of 2020.
Full year 2020 net loss was $63.6 million, or diluted loss per
share of $2.90, as compared to net loss of $58.5 million, or
diluted loss per share of $2.42, in the prior year. Diluted loss
per share from continuing operations was $2.90 in 2020, compared to
$2.85 in the prior year. Adjusted net loss was $59.2 million, or
adjusted diluted loss per share of $2.70, as compared to an
adjusted net loss of $37.9 million, or adjusted diluted loss per
share of $1.57, in the prior year.
Full year 2020 adjusted EBITDA was a loss of $6.3 million, as
compared to adjusted EBITDA of $24.4 million in the prior year. The
decrease in adjusted EBITDA was primarily attributable to lower net
sales and increased investments to support the Company’s long-term
growth and profit initiatives. Full year 2019 adjusted EBITDA
included a $19 million benefit related to transition service
agreement income, which did not recur in 2020.
Liquidity and Capital Resources Update
At December 31, 2020, the Company had total liquidity of
approximately $52.7 million, including $13.7 million of cash plus
availability under its credit facilities. Under the terms of the
Company’s credit agreements, beginning in the fourth quarter of
2020, $30.0 million of availability under the credit facilities was
withheld until such time the Company sells its South Gate property
in California. The Company believes it has ample financial
resources to effectively execute its near and long-term
objectives.
Multi-Year Transformation Update
During 2020, the Company took meaningful steps in executing the
multi-year transformation plan introduced in March 2020.
Expanding customer reach
- Expanded direct sales teams to service key independent
retailers, commercial national accounts, and large flooring
contractors
- Added teams to address key addressable markets, such as
hospitality
Simplifying product offerings and operations
- Reduced SKU count by approximately 30% in 2020
- Consolidated U.S. manufacturing facilities and improved
efficiencies
- Announced the relocation of corporate headquarters, effective
summer 2021, with estimated cost savings of approximately 60% of
current corporate lease expense
Strengthening core capabilities
- Launched new branding, rolled out innovative in-store displays
and accelerated new product introductions
- Introduced Quick Ship program to service accelerated customer
project timelines
- Invested in product innovation with a focus on U.S. based
manufacturing
- Augmented our logistics capabilities to align with customer
expectations, including the addition of a VP of Logistics and other
investments in process and personnel
Outlook
For the full year 2021, the Company expects revenue to grow
compared to 2020 supported by anticipated positive residential
trends, new product introductions, late 2020 pricing actions, and
sales channel enhancement efforts. The Company expects adjusted
EBITDA improvement to be supported by top line growth, business
transformation initiatives and manufacturing productivity.
Webcast and Conference Call
The Company will hold a live webcast and conference call to
review financial results and conduct a question-and-answer session
on Wednesday, February 17, 2021 at 10:00 a.m. ET. The live webcast
will be available in the Investors section of the Company’s website
at www.armstrongflooring.com. For those unable to access the
webcast, the conference call will be accessible by dialing
877-407-0789 (domestic) or 201-689-8562 (international). A replay
of the conference call will be available for 90 days, by dialing
844-512-2921 (domestic) or 412-317-6671 (international) and
entering the passcode 13715779.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a leading global
manufacturer of flooring products and one of the industry’s most
trusted and celebrated brands. The company continually builds on
its resilient, 150-year legacy by delivering on its mission to
create a stronger future for customers through adaptive and
inventive solutions. Headquartered in Lancaster, Pennsylvania,
Armstrong Flooring safely and responsibly operates eight
manufacturing facilities globally. Learn more at
www.armstrongflooring.com.
Forward Looking Statements
Disclosures in this release 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 our reports filed with the U.S. Securities and Exchange
Commission. 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.
Armstrong Flooring, Inc. and
Subsidiaries
Consolidated Statements of Operations
(unaudited)
Three Months Ended
December 31,
Year Ended December
31,
(In millions)
2020
2019
2020
2019
Net sales
$
143.9
$
141.3
$
584.8
$
626.3
Cost of goods sold
136.0
126.1
501.3
541.0
Gross profit
7.9
15.2
83.5
85.3
Selling, general and administrative
expenses
40.6
36.2
145.2
146.4
Operating (loss)
(32.7
)
(21.0
)
(61.7
)
(61.1
)
Interest expense
2.9
1.7
7.5
4.4
Other (income) expense, net
(2.4
)
0.6
(4.8
)
1.8
(Loss) from continuing operations
before income taxes
(33.2
)
(23.3
)
(64.4
)
(67.3
)
Income tax (benefit) expense
(0.8
)
4.6
(0.8
)
1.6
(Loss) from continuing
operations
(32.4
)
(27.9
)
(63.6
)
(68.9
)
Gain (loss) on disposal of discontinued
operations, net of tax
—
2.8
—
10.4
Net (loss)
$
(32.4
)
$
(25.1
)
$
(63.6
)
$
(58.5
)
Basic (loss) per share of common
stock:
Basic (loss) per share of common stock
from continuing operations
$
(1.48
)
$
(1.27
)
$
(2.90
)
$
(2.85
)
Basic earnings (loss) per share of common
stock from discontinued operations
—
0.13
—
0.43
Basic (loss) per share of common
stock
$
(1.48
)
$
(1.14
)
$
(2.90
)
$
(2.42
)
Diluted (loss) per share of common
stock:
Diluted (loss) per share of common stock
from continuing operations
$
(1.48
)
$
(1.27
)
$
(2.90
)
$
(2.85
)
Diluted earnings (loss) per share of
common stock from discontinued operations
—
0.13
—
0.43
Diluted (loss) per share of common
stock
$
(1.48
)
$
(1.14
)
$
(2.90
)
$
(2.42
)
Armstrong Flooring, Inc. and Subsidiaries Consolidated
Balance Sheets (unaudited)
(In millions)
December 31,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents
$
13.7
$
27.1
Accounts and notes receivable, net
43.0
36.1
Inventories, net
122.9
111.6
Prepaid expenses and other current
assets
12.9
10.7
Assets held-for-sale
17.8
—
Total current assets
210.3
185.5
Property, plant and equipment, net
246.9
277.2
Operating lease assets
8.5
6.0
Intangible assets, net
19.0
25.4
Deferred income taxes
4.4
5.3
Other noncurrent assets
4.4
2.8
Total assets
$
493.5
$
502.2
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt
$
5.5
$
—
Current installments of long-term debt
2.9
0.2
Accounts payable and accrued expenses
113.7
104.4
Total current liabilities
122.1
104.6
Long-term debt, net of unamortized debt
issuance costs
71.4
42.5
Noncurrent operating lease liabilities
5.8
2.7
Postretirement benefit liabilities
55.6
59.7
Pension benefit liabilities
4.6
16.0
Other long-term liabilities
9.0
6.0
Deferred income taxes
2.4
2.4
Total liabilities
270.9
233.9
Commitments and contingencies
Stockholders' equity:
Common stock
—
—
Preferred stock
—
—
Treasury stock
(87.1
)
(88.9
)
Additional paid-in capital
677.4
676.7
Accumulated deficit
(308.4
)
(244.8
)
Accumulated other comprehensive (loss)
(59.3
)
(74.7
)
Total stockholders' equity
222.6
268.3
Total liabilities and stockholders'
equity
$
493.5
$
502.2
Armstrong Flooring, Inc. and
Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended
December 31,
Year Ended December
31,
(In millions)
2020
2019
2020
2019
Cash flows from operating
activities:
Net (loss)
$
(32.4
)
$
(25.1
)
$
(63.6
)
$
(58.5
)
Adjustments to reconcile net (loss) to
net cash (used for) provided by operating activities:
Depreciation and amortization
15.8
15.5
47.8
50.7
(Gain) loss on disposal of discontinued
operations
—
(2.8
)
—
(10.4
)
Inventory write down
—
—
—
13.6
Deferred income taxes
(0.7
)
4.6
(1.6
)
1.1
Stock-based compensation
0.7
(1.2
)
2.7
1.2
Gains from postretirement plan changes
(1.8
)
—
(2.9
)
—
U.S. pension expense
1.0
1.4
3.8
5.6
Write off of debt financing costs
—
0.8
—
0.8
Other non-cash adjustments, net
(0.3
)
0.4
0.3
0.2
Changes in operating assets and
liabilities:
Receivables
5.0
7.4
(2.7
)
2.9
Inventories
8.3
0.4
(9.7
)
14.1
Accounts payable and accrued expenses
(6.2
)
(4.0
)
5.0
(26.0
)
Income taxes payable and receivable
0.3
(0.3
)
0.9
(0.5
)
Other assets and liabilities
(1.6
)
(1.3
)
(8.2
)
(0.8
)
Net cash (used for) provided by
operating activities
(11.9
)
(4.2
)
(28.2
)
(6.0
)
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(7.6
)
(6.0
)
(22.8
)
(28.9
)
Proceeds from the sale of assets
1.6
1.4
1.7
1.4
Net (payments) proceeds related to sale of
discontinued operations
—
—
—
(1.9
)
Net cash (used for) provided by
investing activities
(6.0
)
(4.6
)
(21.1
)
(29.4
)
Cash flows from financing
activities:
Proceeds from revolving credit facility
and other debt
15.1
47.2
58.2
47.2
Payments on revolving credit facility and
other debt
(5.9
)
(5.0
)
(85.1
)
(30.0
)
Issuance of long-term debt
—
—
70.0
—
Payments of long-term debt
(0.1
)
(72.3
)
(0.3
)
(75.3
)
Financing costs
(0.3
)
(0.7
)
(7.7
)
(0.8
)
Purchases of treasury stock
—
(0.1
)
—
(51.4
)
Proceeds from exercised stock options
—
—
—
0.1
Value of shares withheld related to
employee tax withholding
(0.1
)
(0.1
)
(0.1
)
(0.9
)
Net cash provided by (used for) financing
activities
8.7
(31.0
)
35.0
(111.1
)
Effect of exchange rate changes on cash
and cash equivalents
0.7
0.3
0.9
(0.2
)
Net (decrease) increase in cash and
cash equivalents
(8.5
)
(39.5
)
(13.4
)
(146.7
)
Cash and cash equivalents at beginning of
period
22.2
66.6
27.1
173.8
Cash and cash equivalents at end of
period
$
13.7
$
27.1
$
13.7
$
27.1
Armstrong Flooring, Inc. and
Subsidiaries
Reconciliation of Free Cash Flow to Net
Cash Used for Operating Activities (unaudited)
Three Months Ended
December 31,
Year Ended December
31,
(In millions)
2020
2019
2020
2019
Net cash used for operating activities
$
(11.9
)
$
(4.2
)
$
(28.2
)
$
(6.0
)
Less: Capital expenditures
(7.6
)
(6.0
)
(22.8
)
(28.9
)
Add: Proceeds from asset sales
1.6
1.4
1.7
1.4
Free cash flow
$
(17.9
)
$
(8.8
)
$
(49.3
)
$
(33.5
)
Free cash flow is a non-GAAP financial measure and consists of
cash flows from operating activities less capital expenditures net
of proceeds from asset sales. The Company’s management believes
Free cash flow is meaningful to investors because management
reviews Free cash flow in assessing and evaluating performance.
However, this measure should be considered in addition to, rather
than a substitute for cash flows used for operating activities
provided in accordance with GAAP. The Company’s method of
calculating Free cash flow may differ from methods used by other
companies and, as a result, Free cash flow may not be comparable to
other similarly titled measures disclosed by other companies.
Armstrong Flooring, Inc. and
Subsidiaries
Reconciliation of Adjusted Net (Loss)
to Net (Loss) (unaudited)
Three Months Ended
December 31,
Year Ended December
31,
(In millions)
2020
2019
2020
2019
Net (loss)
$
(32.4
)
$
(25.1
)
$
(63.6
)
$
(58.5
)
Add-back (deduct) business reset
items:
Site exit costs
5.9
4.6
6.2
4.6
Strategic initiative costs (including
executive transition)
—
0.4
0.7
8.3
Additional costs related to business
transformation initiatives
1.0
0.1
3.2
4.2
Product rationalization
—
—
—
19.6
Gain from postretirement plan change
(1.8
)
—
(1.8
)
—
Gain on sale of Vicksburg property
(0.2
)
—
(0.2
)
—
U.S. Pension expense
0.6
0.7
2.6
2.7
Other (income) expense,net
(2.4
)
0.6
(4.8
)
1.8
Net (income) loss from discontinued
operations
—
(2.8
)
—
(10.4
)
Tax impact of adjustments (at statutory
rate)
(0.8
)
(1.6
)
(1.5
)
(10.3
)
Adjusted net (loss)
$
(30.1
)
$
(23.1
)
$
(59.2
)
$
(37.9
)
(a)
Adjusted diluted (loss) per
share
$
(1.37
)
$
(1.05
)
$
(2.70
)
$
(1.57
)
(a) Does not total due to rounding.
Adjusted net (loss) is a non-GAAP financial measures and
consists of net (loss) adjusted to remove the impact of business
transformation costs, U.S. pension expense, other (income) expense;
discontinued operations and adjust such items for the related tax
impacts. Adjusted diluted (loss) per share is a non-GAAP financial
measure and consists of Adjusted net (loss) divided by weighted
average diluted shares outstanding for the corresponding period.
The Company’s management believes Adjusted net (loss) and Adjusted
diluted (loss) per share are meaningful to investors because
management reviews Adjusted net (loss) and Adjusted diluted (loss)
per share in assessing and evaluating performance. However, these
measures should be considered in addition to, rather than a
substitute for net (loss) and diluted (loss) per share provided in
accordance with GAAP. The Company’s method of calculating Adjusted
net (loss) and Adjusted diluted (loss) per share may differ from
methods used by other companies and, as a result, Adjusted net
(loss) and Adjusted diluted (loss) per share may not be comparable
to other similarly titled measures disclosed by other
companies.
Armstrong Flooring, Inc. and
Subsidiaries
Reconciliation of Adjusted EBITDA to
Net (Loss) (unaudited)
Three Months Ended
December 31,
Year Ended December
31,
(In millions)
2020
2019
2020
2019
Net (loss)
$
(32.4
)
$
(25.1
)
$
(63.6
)
$
(58.5
)
Add-back (deduct):
Net earnings for discontinued
operations
—
(2.8
)
—
(10.4
)
Income tax expense (benefit)
(0.8
)
4.6
(0.8
)
1.6
Other (income) expense, net
(2.4
)
0.6
(4.8
)
1.8
Interest expense
2.9
1.7
7.5
4.4
Operating (loss)
(32.7
)
(21.0
)
(61.7
)
(61.1
)
Add-back: Depreciation and amortization
expense
15.8
15.5
47.8
50.7
Add-back: U.S. Pension expense
0.6
0.7
2.6
2.7
Add-back (deduct) Business reset
items:
Product rationalization
—
—
—
19.6
Strategic initiative costs (including
executive transition)
—
0.4
0.7
8.3
Site exit costs (a)
1.0
—
1.3
—
Additional costs related to business
transformation initiatives
1.0
0.1
3.2
4.2
Gain on sale of Vicksburg property
(0.2
)
—
(0.2
)
—
Adjusted EBITDA
$
(14.5
)
$
(4.3
)
$
(6.3
)
$
24.4
(a) Site exit costs exclude $4.9 million and $4.6 million of
accelerated depreciation in both the three months and year ended
December 31, 2020 and 2019, respectively, that are added back as
part of the Depreciation and amortization expense.
Adjusted EBITDA is a non-GAAP financial measure and consists of
net (loss) adjusted to remove the impact of discontinued
operations, income taxes, other (income) expense, interest expense,
depreciation and amortization, U.S. pension expense and business
transformation costs. The Company‘s management believes Adjusted
EBITDA is meaningful to investors because management reviews
Adjusted EBITDA in assessing and evaluating performance. However,
this measure should be considered in addition to, rather than as a
substitute for net (loss) provided in accordance with GAAP. The
Company's method of calculating Adjusted EBITDA may differ from
methods used by other companies and, as a result, Adjusted EBITDA
may not be comparable to other similarly titled measures disclosed
by other companies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210217005513/en/
Investors: Amy Trojanowski SVP, Chief Financial Officer
ir@armstrongflooring.com
Media: Alison van Harskamp Director, Corporate Communications
media@armstrongflooring.com
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