Second Quarter 2018 Highlights Compared to Prior Year
- Net Sales Increased 2.9% to $306.0 Million
- Net Income Improved 92.1% to $10.5 Million; EPS Doubled to
$0.40
- Adjusted EBITDA Increased 16.0% to $29.6 Million; Adjusted EPS
Grew 74.7% to $0.47
- Reaffirms Outlook for Full Year 2018
Armstrong Flooring, Inc. (NYSE:AFI) (“Armstrong Flooring” or the
“Company”), North America’s largest producer of resilient and wood
flooring products, today reported financial results for the second
quarter ended June 30, 2018.
Don Maier, Chief Executive Officer, commented, “I am very proud
of the Armstrong Flooring team as we delivered both top and bottom
line growth in the second quarter, building on our strong start in
Q1. Net sales increased 2.9% driven by significant volume growth in
Luxury Vinyl Tile (“LVT”) and higher selling prices across most
product categories. Adjusted EBITDA growth reflected the
combination of higher sales, productivity and cost saving actions
that more than offset significant inflationary pressures. Into the
second half of 2018, we have a range of initiatives in motion to
further advance our strategic priorities and deliver on our
reaffirmed full-year 2018 outlook.”
Second Quarter of 2018 Results Compared with Second Quarter
of 2017 Results
Consolidated Results
(Dollars in millions except per share data)
Three Months Ended June 30,
2018
2017
Change
Net sales $ 306.0 $ 297.3 2.9 % Operating income $ 14.0 $ 11.2 25.0
% Net income $ 10.5 $ 5.4 92.1 % Diluted earnings per share $ 0.40
$ 0.20 100.0 % Adjusted EBITDA $ 29.6 $ 25.5 16.0 % Adjusted
EBITDA margin 9.7 % 8.6 % 110 bps Adjusted net income $ 12.2 $ 7.5
62.5 % Adjusted diluted earnings per share $ 0.47 $ 0.27 74.7 %
In the second quarter of 2018, net sales increased 2.9% to
$306.0 million as compared to $297.3 million in the second quarter
of 2017, primarily due to higher Resilient segment net sales.
Second quarter 2018 net income was $10.5 million, or diluted
earnings per share of $0.40, as compared to net income of $5.4
million, or diluted earnings per share of $0.20, in the prior year
quarter. Adjusted net income was $12.2 million, or adjusted diluted
earnings per share of $0.47, as compared to an adjusted net income
of $7.5 million, or adjusted diluted earnings per share of $0.27,
in the prior year quarter.
Second quarter 2018 adjusted EBITDA was $29.6 million, as
compared to $25.5 million in the prior year quarter. The increase
in adjusted EBITDA was primarily due to higher net sales, stronger
productivity and lower manufacturing costs, which more than offset
the impact of significantly higher input costs.
Resilient Flooring Segment
Three Months Ended June 30, (Dollars in
millions)
2018
2017
Change
Net sales $ 199.9 $ 187.8 6.4 % Operating income $ 9.4 $ 13.5 (30.6
%) Adjusted EBITDA $ 21.5 $ 24.0 (10.3 %) Adjusted EBITDA
margin 10.8 % 12.8 % (200) bps
Net sales were $199.9 million as compared to $187.8 million in
the prior year period. The increase in net sales was primarily due
to double-digit volume growth in LVT, along with higher selling
prices and improved mix across most categories.
Operating income was $9.4 million as compared to operating
income of $13.5 million in the prior year quarter. Adjusted EBITDA
was $21.5 million as compared to $24.0 million in the prior year
quarter, primarily attributable to the impact of higher input
costs, which more than offset the benefit of improved productivity
and higher net sales.
Wood Flooring Segment
Three Months Ended June 30, (Dollars in
millions)
2018
2017
Change
Net sales $ 106.1 $109.5 (3.1 %) Operating income (loss) $ 4.6
($2.3 ) NM Adjusted EBITDA $ 8.1 $1.5 425.1 %
Adjusted EBITDA margin 7.6 % 1.4 % 620 bps
Net sales were $106.1 million as compared to $109.5 million in
the prior year quarter, with the decline driven by lower volumes in
engineered wood. Higher selling prices in both solid and engineered
wood provided a partial offset to lower volumes.
Operating income was $4.6 million, compared to an operating loss
of $2.3 million in the prior year quarter. Adjusted EBITDA was $8.1
million as compared to $1.5 million in the prior year quarter,
driven by improved manufacturing costs and productivity, along with
lower SG&A spending, which more than offset higher input
costs.
Full Year 2018 Outlook
For the full year 2018, the Company continues to expect adjusted
EBITDA to be in the range of $70 million to $80 million. The
adjusted EBITDA outlook assumes sales growth in the low
single-digits. The Company continues to expect capital expenditures
to be in the range of $40 million to $45 million for the full year
2018 while delivering another year of free cash flow in line with
recent years.
Conference Call and Webcast
The Company will host a live webcast and conference call to
review second quarter results on Tuesday, August 7, 2018 at 11:00
a.m. ET. The live webcast and accompanying slide presentation will
be available in the Investors section of the Company’s website at
www.armstrongflooring.com. To participate in the call, please dial
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 13681530.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the
design and manufacture of innovative flooring solutions that
inspire spaces where people live, work, learn, heal and play SM.
Headquartered in Lancaster, Pa., Armstrong Flooring is the #1
manufacturer of resilient and wood flooring products across North
America. The Company safely and responsibly operates 15
manufacturing facilities in three countries and employs
approximately 3,500 individuals, all working together to provide
the highest levels of service, quality and innovation to ensure it
remains as strong and vital as its 150-year heritage. 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 Condensed Consolidated Statements of
Operations (Unaudited) (Dollars in millions except
per share data) Three months ended June 30,
2018 2017 Net sales $ 306.0 $ 297.3
Cost of goods sold 243.2 239.4 Gross profit 62.8 57.9 Selling,
general, and administrative expense 48.8 46.7 Operating income 14.0
11.2 Interest expense 1.0 0.7 Other expense 0.7 1.5 Earnings before
income taxes 12.3 9.0 Income tax expense 1.8 3.6 Net
income $ 10.5 $ 5.4 Weighted average number of common shares
outstanding - Basic 25.9 27.7 Basic earnings per
share of common stock $ 0.41 $ 0.20 Weighted average number of
common shares outstanding - Diluted 26.0 28.0 Diluted
earnings per share of common stock $ 0.40 $ 0.20
Condensed Consolidated Balance Sheet
(Dollars in millions)
June 30, 2018
December 31, 2017
Assets (unaudited) Current Assets: Cash $ 28.5 $ 39.0
Accounts and notes receivable, net 98.9 79.7 Inventories, net 246.1
236.0 Other current assets 25.8 35.6 Total current assets 399.3
390.3 Property, plant, and equipment, net 406.3 418.1 Other
non-current assets 68.2 71.1
Total assets $ 873.8
$ 879.5
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable and accrued expenses $ 163.8 $ 150.2
Other current liabilities 0.8 0.8 Total current liabilities 164.6
151.0 Long-term debt 69.7 86.0 Postretirement benefit liabilities
70.2 72.7 Pension benefit liabilities 3.5 5.7 Other long-term
liabilities 14.0 14.1
Total liabilities 322.0
329.5
Total stockholders’ equity 551.8 550.0
Total liabilities and stockholders’ equity $ 873.8 $ 879.5
Supplemental Reconciliations of GAAP to
non-GAAP Results (unaudited)
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 restructuring charges
and related costs, impairments, the non-cash impact of the U.S.
pension plan, and certain other gains and losses. Free cash flow is
defined as net cash from operating activities less purchases of
property, plant and equipment plus proceeds from the sale of
property, plant and equipment. The Company uses these adjusted
performance measures in managing the business, including in
communications with its Board of Directors and employees, and
believes that they can provide users of this financial information
with meaningful comparisons of operating performance between
current and prior periods. The Company believes that these non-GAAP
financial measures are appropriate to enhance understanding of its
past performance, as well as its prospects for future performance.
A reconciliation of these non-GAAP financial measures 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. The Company does not provide financial guidance for
forecasted net income since certain items that impact net income
are outside of our control and cannot be reasonably predicted.
Therefore, the Company is unable to provide a reconciliation of its
Adjusted EBITDA guidance to net income, the most comparable
financial measure calculated in accordance with GAAP.
(Dollars in millions except per share
data)
Three Months Ended June 30, 2018
2017
Total Resilient
Wood
Total
Resilient
Wood Net income $10.5
$5.4
Interest Expense 1.0
0.7
Other Expense 0.7
1.5
Taxes
1.8
3.6
Operating Income 14.0 9.4 4.6
11.2
13.5 (2.3) Depreciation and amortization 14.1 11.3
2.9
12.5
8.8 3.8 Expense related to plant closures, multi-layer wood
flooring duties, acquisitions, and cost reduction initiatives 0.5
0.1 0.4
0.3
0.5 (0.2) U.S. pension expense
0.9
0.8
0.1
1.4
1.2
0.2
Adjusted EBITDA
$ 29.6
$ 21.5
$ 8.1
$25.5
$ 24.0
$1.5
Three Months Ended June 30, 2018 2017
$
million
Per diluted
share
$
million
Per diluted
share
Net income $10.5 $0.40 $5.4
$0.20 Expenses related to plant closures, multi-layer wood
flooring duties, acquisitions, and cost reduction initiatives 0.5
0.3 U.S. pension expense 0.9 1.4 Other Expense 0.7 1.5 Tax impact
of adjustments at statutory rate
(0.5)
(1.2)
Adjusted Net Income $12.2
$0.47 $7.5
$0.27
Rows and columns may not foot due to rounding.
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version on businesswire.com: https://www.businesswire.com/news/home/20180807005087/en/
Armstrong Flooring, Inc.Investors:Douglas Bingham,
717-672-9300VP, Treasury and Investor
RelationsIR@armstrongflooring.comorMedia:Steve Trapnell,
717-672-7218Corporate Communications
Manageraficorporatecommunications@armstrongflooring.com
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