Third Quarter 2018 Highlights Compared to Prior Year -
Net Sales Increased 0.4% to $309.7 Million; Resilient Segment Net
Sales Up 7.0%- Net Income Improved to $7.9 Million; EPS Expanded to
$0.30 from ($0.70)- Adjusted EBITDA Increased 17.1% to $29.9
Million; Adjusted EPS Grew 129.4% to $0.46 from $0.20- Narrows
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 third
quarter ended September 30, 2018.
Don Maier, Chief Executive Officer, commented, “Third quarter
net sales improved led by 7% growth in our Resilient segment, which
more than offset lower Wood segment sales. We generated significant
volume growth in Luxury Vinyl Tile (“LVT”) as well as higher
selling prices across many product categories, reflecting our 2018
pricing actions in response to inflationary pressure. On this
momentum, Adjusted EBITDA improved by 17% and margin by 140 basis
points year-over-year, augmented by productivity gains and cost
saving actions. These results are a reflection of continued
execution of our strategic priorities. We are seeing more
consistent progress in our top and bottom line performance. We plan
to continue investing in growth categories, pricing in line with
inflation and targeting cost efficiencies to further improve our
margin and returns in 2018 and beyond.”
Third Quarter of 2018 Results Compared with Third Quarter of
2017 Results
Consolidated Results
(Dollars in millions except per share data) Three
Months Ended September 30,
2018
2017
Change
Net sales $309.7 $308.5 0.4% Operating income (loss) $11.1 ($29.2)
NM Net income (loss) $7.9 ($18.7) NM Diluted earnings (loss) per
share $0.30 ($0.70) NM Adjusted EBITDA $29.9 $25.6 17.1%
Adjusted EBITDA margin 9.7% 8.3% 140 bps Adjusted net income $12.0
$5.4 124.1% Adjusted diluted earnings per share $0.46 $0.20 129.4%
In the third quarter of 2018, net sales increased 0.4% to $309.7
million as compared to $308.5 million in the third quarter of 2017
due to higher Resilient segment net sales.
Third quarter 2018 net income was $7.9 million, or diluted
earnings per share of $0.30, as compared to net loss of $18.7
million, or diluted loss per share of $0.70, in the prior year
quarter. Prior year loss included pre-tax expenses of $23.7 million
related to plant closures and $12.5 million due to intangible asset
impairment. Adjusted net income was $12.0 million, or adjusted
diluted earnings per share of $0.46, as compared to an adjusted net
income of $5.4 million, or adjusted diluted earnings per share of
$0.20, in the prior year quarter.
Third quarter 2018 adjusted EBITDA was $29.9 million, as
compared to $25.6 million in the prior year quarter. The increase
in adjusted EBITDA was primarily driven by pricing gains in
response to inflationary pressure, improved productivity, including
the benefit of plant closures, and lower SG&A spending.
Resilient Flooring Segment
Three Months Ended September 30,
(Dollars in millions)
2018
2017
Change
Net sales $208.1 $194.4 7.0% Operating income $10.7 $9.3 13.8%
Adjusted EBITDA $24.6 $21.3 15.6% Adjusted EBITDA margin
11.8% 11.0% 80 bps
Net sales were $208.1 million as compared to $194.4 million in
the prior year period. The increase in net sales was primarily due
to double-digit volume growth in LVT and increases in inventory at
distributors, along with improved mix and overall higher selling
prices in response to inflationary pressure.
Operating income was $10.7 million as compared to operating
income of $9.3 million in the prior year quarter. Adjusted EBITDA
was $24.6 million as compared to $21.3 million in the prior year
quarter, largely reflecting the benefit of higher net sales,
improved productivity and lower SG&A spending, which more than
offset higher input and freight costs.
Wood Flooring Segment
Three Months Ended September 30,
(Dollars in millions)
2018
2017
Change
Net sales $101.6 $114.1 (11.0%) Operating income (loss) $0.4
($38.5) NM Adjusted EBITDA $5.3 $4.2 25.5% Adjusted EBITDA
margin 5.2% 3.7% 150 bps
Net sales were $101.6 million as compared to $114.1 million in
the prior year quarter, with the decline due to lower volumes.
Lower volumes were partially offset by higher selling prices in
response to inflationary pressure and improved mix in both solid
and engineered wood.
Operating income was $0.4 million, compared to an operating loss
of $38.5 million in the prior year quarter, which included expenses
of $23.7 million related to plant closures and $12.5 million of
intangible asset impairment charges. Adjusted EBITDA was $5.3
million as compared to $4.2 million in the prior year quarter,
driven by improved manufacturing costs and productivity, along with
lower SG&A spending, which more than offset lower net sales and
higher input costs.
Full Year 2018 Outlook
For the full year 2018, the Company now expects adjusted EBITDA
to be in the range of $72 million to $78 million. The adjusted
EBITDA outlook assumes sales growth in the low single-digits. The
Company now expects capital expenditures to be approximately $40
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 third quarter results on Tuesday, November 6, 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 13683720.
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 playSM.
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 September
30,
2018 2017 Net sales $ 309.7 $ 308.5
Cost of goods sold 249.1 276.2 Gross profit 60.6 32.3 Selling,
general, and administrative expense 49.5 49.0 Intangible asset
impairment -- 12.5 Operating income (loss) 11.1 (29.2 ) Interest
expense 0.9 0.8 Other expense 0.9 1.0 Earnings (loss) before income
taxes 9.3 (31.0 ) Income tax expense (benefit) 1.4
(12.3 ) Net income (loss) $ 7.9 $ (18.7 ) Weighted
average number of common shares outstanding - Basic 26.0
26.8 Basic earnings (loss) per share of common
stock $ 0.31 $ (0.70 ) Weighted average number of common
shares outstanding - Diluted 26.2 26.8
Diluted earnings (loss) per share of common stock $ 0.30 $
(0.70 )
Condensed Consolidated Balance
Sheet
(Dollars in millions)
September 30,2018
December 31,2017
Assets (unaudited) Current Assets: Cash $ 39.4 $ 39.0
Accounts and notes receivable, net 115.9 79.7 Inventories, net
266.6 236.0 Other current assets 23.4 35.6 Total current
assets 445.3 390.3 Property, plant, and equipment, net 398.9 418.1
Other non-current assets 66.5 71.1
Total assets $ 910.7 $
879.5
Liabilities and
Stockholders’ Equity
Current liabilities: Accounts payable and accrued expenses $ 169.8
$ 150.2 Other current liabilities 1.2 0.8 Total current liabilities
171.0 151.0 Long-term debt 94.6 86.0 Postretirement benefit
liabilities 68.7 72.7 Pension benefit liabilities 2.6 5.7 Other
long-term liabilities 17.0 14.1
Total
liabilities 353.9 329.5
Total stockholders’ equity
556.8 550.0
Total liabilities and
stockholders’ equity $ 910.7 $ 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 September 30,
2018 2017
Total
Resilient
Wood
Total
Resilient
Wood
Net income (loss) $7.9 ($18.7) Interest
expense 0.9 0.8 Other expense 0.9 1.0 Taxes
1.4
(12.3) Operating income (loss) 11.1
10.7 0.4 (29.2) 9.3 (38.5)
Depreciation and amortization 14.3 11.4 2.9 35.8 10.7 25.1 Expenses
related to plant closures, multi-layer wood flooring duties,
strategic projects, and cost reduction initiatives 3.6 1.8 1.9 5.1
0.1 5.0 Intangible asset impairment -- -- -- 12.5 -- 12.5 U.S.
pension expense
0.9 0.8 0.1
1.4 1.1 0.3 Adjusted
EBITDA $ 29.9 $ 24.6
$ 5.3 $25.6 $
21.3 $4.2 Three Months
Ended September 30, 2018 2017
$ million
Per diluted share
$
million
Per diluted
share
Net income (loss) $7.9 $0.30 ($18.7)
($0.70) Expenses related to plant closures, multi-layer wood
flooring duties, strategic projects, and cost reduction initiatives
3.6 5.1 Intangible asset impairment -- 12.5 Accelerated
depreciation from plant closures -- 18.7 U.S. pension expense 0.9
1.4 Other Expense 0.9 1.0 Tax impact of adjustments at statutory
rate
(1.4) (14.7) Adjusted Net
Income $12.0 $0.46
$5.4 $0.20
Rows and columns may not foot due to rounding.
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Investors:Douglas BinghamVP, Treasury and Investor
Relations717-672-9300IR@armstrongflooring.comorMedia:Steve
TrapnellCorporate Communications
Manager717-672-7218aficorporatecommunications@armstrongflooring.com
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