First Quarter 2019 Highlights
- Net Sales of $141.7 Million
- Net Loss of $16.7 Million and Adjusted Net Loss of $13.1
Million
- Adjusted EBITDA Break-even
- Announces New $50 Million Share Repurchase Authorization
- Updates Outlook for Full Year 2019
Armstrong Flooring, Inc. (NYSE: AFI) (“Armstrong Flooring” or
the “Company”), North America’s largest producer of resilient
flooring products, today reported financial results for the first
quarter ended March 31, 2019.
In addition, the Company announced in a separate release today
that Larry McWilliams has been elected Chief Executive Officer on
an interim basis.
Mr. McWilliams commented, “We acknowledge the headwinds
affecting our first quarter results, but I am truly excited about
the future of our business. We can capitalize on the opportunities
before us by staying close and connected to our customer needs,
focusing on execution and committing to innovation in all facets of
our business. Our brand, products and most importantly the team we
have assembled are well positioned to drive profitable growth in
the business.”
First Quarter 2019 Results Compared with First Quarter of
2018 Results
Consolidated
Results
(Dollars in millions except per share data) Three Months
Ended March 31,
2019
2018
Change
Net sales $141.7 $164.3
(13.8%)
Operating (loss) ($15.6) ($8.9) NM Net (loss) ($16.7) ($10.4) NM
Diluted (loss) per share ($0.63) ($0.40) NM Adjusted EBITDA
$0.0 $10.6 NM Adjusted EBITDA margin 0.0% 6.5%
(650 bps)
Adjusted net (loss) ($13.1) $(3.5) NM Adjusted diluted (loss) per
share ($0.49) $(0.13) NM
In the first quarter of 2019, net sales decreased 13.8% to
$141.7 million from $164.3 million in the first quarter of 2018,
including an adverse currency impact of 120 basis points. The
decrease in net sales was primarily due to lower volumes and
unfavorable mix, partly offset by overall higher selling prices in
response to inflationary pressure. Lower volumes in the first
quarter of 2019 reflected overall soft end-market demand along with
challenging weather condition in many regions of the U.S.,
particularly in our residential categories. In addition inventory
levels decreased in the distributor channel, in part due to the
timing of customer purchases in response to uncertainty in U.S.
tariff policy since the second half of 2018.
Net loss in the first quarter of 2019 was $16.7 million, or
diluted loss per share of $0.63, as compared to a net loss of $10.4
million, or diluted loss per share of $0.40, in the prior year
quarter. Adjusted net loss was $13.1 million, or adjusted diluted
loss per share of $0.49, as compared to an adjusted net loss of
$3.5 million, or adjusted diluted loss per share of $0.13, in the
prior year quarter.
First quarter 2019 adjusted EBITDA was break even, as compared
to $10.6 million in the prior year quarter. The prior year quarter
benefited from $4.3 million of customer reimbursements, which did
not recur in the first quarter of 2019. The remainder of the
decrease in adjusted EBITDA was driven by input cost inflation
pressure and lower net sales, partially offset by improved
productivity.
Cash Flow and Balance Sheet
During the first quarter of 2019, the Company used $63.2 million
of cash from operations, primarily due to an increase in net
working capital following a lower than normal balance at December
31, 2018, in addition to normal seasonal working capital cash
outflows during the first quarter. During the first quarter of
2019, the Company paid down $25 million of its revolving credit
facility. At March 31, 2019, the Company had cash, cash
equivalents and restricted cash of $75.7 million and long-term debt
of $74.0 million. As of March 31, 2019, the Company had $71.1
million of availability under its revolving credit facility.
Share Repurchase Authorization
The Company also announced today that its Board of Directors has
increased its share repurchase program for an additional $50
million beyond the $41 million already repurchased under the prior
share repurchase program, effective immediately. Repurchases under
the new program may be made through open market, block, and
privately negotiated transactions, including Rule 10b5-1 plans, at
times and in such amounts as management deems appropriate, subject
to market and business conditions, regulatory requirements and
other factors. The authorization to repurchase additional shares
under the increased repurchase program is aligned with the
Company’s goal to return a portion of the net sale proceeds from
its wood flooring business, which closed on December 31, 2018.
Doug Bingham, Chief Financial Officer, stated, “The Board’s
decision to authorize a new $50 million share repurchase program
reflects the strength of our balance sheet. We remain committed to
driving value for our shareholders across multiple fronts, and an
efficient use of cash and capital structure is an effective tool in
achieving our goal.”
Full Year 2019 Outlook
For the full year 2019, the Company now expects adjusted EBITDA
to be in the range of $50 million to $58 million, with growth
heavily weighted to the second half as the overall market improves
and elevated inventory levels in the channel are worked down. The
Company also expects capital expenditures to be approximately $30
million for the full year 2019. The Company continues to expect to
build cash from operations over the remaining quarters of 2019.
Conference Call and Webcast
The Company will hold a live webcast and conference call to
review first quarter results hosted by Mr. McWilliams and Mr.
Bingham on Tuesday, May 7, 2019 at 10:00 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 13689555.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the
design and manufacture of innovative flooring solutions.
Headquartered in Lancaster, Pennsylvania, Armstrong Flooring is
North America’s largest producer of resilient flooring products.
The Company safely and responsibly operates 8 manufacturing
facilities globally, working 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
Consolidated Statements of
Operations
(Dollars in millions except per share
data)
(Unaudited)
Three months ended March 31, 2019
2018 Net sales $ 141.7 $ 164.3 Cost of
goods sold 119.6 135.0 Gross profit 22.1 29.3 Selling, general, and
administrative expense 37.7 38.2 Operating (loss) (15.6 ) (8.9 )
Interest expense 1.0 1.0 Other expense 0.3 0.6 (Loss) from
continuing operations before income taxes (16.9 ) (10.5 ) Income
tax (benefit) (0.3 ) (0.1 ) (Loss) from continuing operations (16.6
) (10.4 ) Earnings (loss) from discontinued operations -- -- Loss
on disposal of discontinued operations (0.1 ) --
Net (loss) from discontinued operations (0.1 )
-- Net (loss) $ (16.7 ) $ (10.4 ) Weighted average number of
common shares outstanding - Basic 26.7 25.9
Basic (loss) per share of common stock $ (0.63 ) $ (0.40 )
Weighted average number of common shares outstanding - Diluted
26.7 25.9 Diluted (loss) per share of
common stock $ (0.63 ) $ (0.40 )
Consolidated Balance Sheet
(Dollars in millions)
Assets March 31,
2019
December 31,
2018
Current Assets: Cash, cash equivalents, and restricted cash $ 75.7
$ 173.8 Accounts and notes receivable, net 61.0 39.0 Inventories,
net 144.7 139.5 Other current assets 16.7 18.6 Total current
assets 298.1 370.9 Property, plant, and equipment, net 294.3 296.1
Other non-current assets 47.0 41.2
Total assets $
639.4 $ 708.2
Liabilities and Stockholders’ Equity
Current liabilities: Accounts payable and accrued expenses $ 108.9
$ 141.4 Short-term debt and current portion of long-term debt 3.7
28.7 Other current liabilities 0.2 0.5 Total
current liabilities 112.8 170.6 Long-term debt 70.3 70.6
Postretirement benefit liabilities 54.7 55.7 Pension benefit
liabilities 10.3 11.3 Other long-term liabilities 13.7
9.0
Total liabilities 261.8 317.2
Total
stockholders’ equity 377.6 391.0
Total
liabilities and stockholders’ equity $ 639.4 $ 708.2
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. 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. In addition, the Company has applied pro
forma adjustments to its non-GAAP results for periods prior to
completion of the sale of the wood flooring business. These
adjustments represent the elimination of certain shared costs that
were formerly allocated to the divested wood flooring segment and
are intended to reflect, on a pro forma basis, the retroactive
elimination of these costs in accordance with the Company’s ongoing
cost optimization program which, when combined with certain
payments under the Transition Services Agreement entered into with
the purchaser, are expected to offset the impact of substantially
all of these costs. 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 pershare
data)
Three Months Ended March 31,
2019 2018 Net (loss) ($16.7)
($10.4) Net loss from discontinued operations 0.1 --
Interest expense 1.0 1.0 Other expense 0.3 0.6 Taxes
(0.3) (0.1) Operating (loss)
(15.6) (8.9) Depreciation and amortization 11.3 10.8
Expenses related to strategic
projects and cost reduction
initiatives
3.7 3.0 U.S. pension expense 0.6 0.9 Pro forma adjustment for
corporate expense
-- 4.7 Adjusted
EBITDA $0.0 $10.6
Three Months Ended March 31,
2019 2018 $ million
Per diluted share $
million Per diluted
share Net (loss) ($16.7) ($0.62)
($10.4) ($0.40)
Expenses related to strategic projects and
costreduction initiatives
3.7 3.0 Pro forma adjustment for corporate expense -- 4.7 U.S.
pension expense 0.6 0.9 Other expense 0.3 0.6 Tax impact of
adjustments at statutory rate (1.2) (2.3) Net loss (earnings) from
discontinued operations
0.1 --
Adjusted Net Loss ($13.1)
($0.49) ($3.5)
($0.13)
Rows and columns may not foot due to rounding.
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version on businesswire.com: https://www.businesswire.com/news/home/20190503005073/en/
Investors:Douglas BinghamSVP, Chief Financial
Officer717-672-9300IR@armstrongflooring.comMedia:Alison van
HarskampDirector, Corporate
Communications717-672-7545aficorporatecommunications@armstrongflooring.com
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