Second Quarter 2019 Highlights
- Net Sales of $177.7 Million
- Net Income of $14.7 Million and Adjusted Net Income of $9.4
Million
- Adjusted EBITDA of $20.0 Million
- Repurchased 4.5 Million Shares for Approximately $50
Million
- Updates Full Year 2019 Outlook
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 second
quarter ended June 30, 2019.
Larry McWilliams, Chairman and Interim Chief Executive Officer,
commented, “Adjusted EBITDA margin improved in the quarter despite
challenging end market demand across our industry, including the
winding down of elevated channel inventory levels. We remain
committed to investing in our products, people and operations to
improve our position with customers. The strength of our balance
sheet provides us with the flexibility to continue executing
against that objective while capitalizing on value enhancing
opportunities.”
Second Quarter 2019 Results Compared with Second Quarter of
2018 Results
(Dollars in millions except per share
data)
Three Months Ended June 30,
2019
2018
Change
Net sales
$177.7
$201.2
(11.7%)
Operating income
$3.7
$3.7
0.0%
Net income
$14.7
$10.5
40.0%
Diluted income per share
$0.56
$0.40
$0.16
Adjusted EBITDA
$20.0
$20.7
(3.4%)
Adjusted EBITDA margin
11.3%
10.3%
100 bps
Adjusted net income
$9.4
$7.8
20.5%
Adjusted diluted income per share
$0.36
$0.30
$0.06
In the second quarter of 2019, net sales decreased 11.7% to
$177.7 million from $201.2 million in the second quarter of 2018,
including an adverse currency impact of 110 basis points. The
decrease in net sales was primarily due to lower volumes and mix,
marginally offset by modest price realization in response to tariff
related inflationary pressures. Lower volumes in the second quarter
of 2019 reflected relative changes in distributor inventory and
overall soft end-market demand, particularly in our residential
categories. Inventory levels in the distributor channel decreased
sequentially compared to the first quarter 2019 but remained
moderately elevated at the end of the quarter.
Net income in the second quarter of 2019 was $14.7 million, or
diluted income per share of $0.56, as compared to a net income of
$10.5 million, or diluted income per share of $0.40, in the prior
year quarter. Adjusted net income was $9.4 million, or adjusted
diluted income per share of $0.36, as compared to an adjusted net
income of $7.8 million, or adjusted diluted income per share of
$0.30, in the prior year quarter.
Second quarter 2019 adjusted EBITDA was $20.0 million, as
compared to $20.7 million in the prior year quarter. The decrease
in adjusted EBITDA was primarily attributable to lower net sales,
partially offset by lower selling, general and administrative
expenses and improved productivity.
During the second quarter 2019, the company repurchased
approximately 4.5 million shares for $50.0 million, excluding fees.
At June 30, 2019, the Company had cash, cash equivalents and
restricted cash of $45.5 million and long-term debt of $73.0
million. As of June 30, 2019, the Company had $71.1 million of
availability under its revolving credit facility.
Full Year 2019 Outlook
For the full year 2019, the Company has moderated its
expectation for adjusted EBITDA, which it now anticipates to be in
the range of $46 million to $54 million, primarily attributable to
a continuation of soft end-market conditions. The Company continues
to expect capital expenditures to be approximately $30 million for
the full year 2019. The Company expects 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 second quarter results on Tuesday, August 6, 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 13692428.
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 June
30,
2019
2018
Net sales
$
177.7
$
201.2
Cost of goods sold
141.5
157.5
Gross profit
36.2
43.7
Selling, general, and administrative
expense
32.5
40.0
Operating income
3.7
3.7
Interest expense
0.9
1.0
Other expense
0.2
0.7
Income from continuing operations before
income taxes
2.6
2.0
Income tax benefit
(2.7
)
(0.9)
Gain from continuing operations
5.3
2.9
Income from discontinued operations
--
7.6
Gain on disposal of discontinued
operations
9.4
--
Net income from discontinued
operations
9.4
7.6
Net income
$
14.7
$
10.5
Weighted average number of common shares
outstanding - Basic
26.1
25.9
Basic income per share of common stock
$
0.56
$
0.40
Weighted average number of common shares
outstanding - Diluted
26.1
26.0
Diluted income per share of common
stock
$
0.56
$
0.40
Consolidated Balance
Sheet
(Dollars in millions)
Assets
June 30, 2019
December 31, 2018
Current Assets:
Cash, cash equivalents, and restricted
cash
$
45.5
$
173.8
Accounts and notes receivable, net
65.9
39.0
Inventories, net
136.0
139.5
Other current assets
15.9
18.6
Total current assets
263.3
370.9
Property, plant, and equipment, net
291.4
296.1
Other non-current assets
44.8
41.2
Total assets
$
599.5
$
708.2
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable and accrued expenses
$
110.6
$
141.4
Short-term debt and current portion of
long-term debt
4.0
28.7
Other current liabilities
0.1
0.5
Total current liabilities
114.7
170.6
Long-term debt
69.0
70.6
Noncurrent lease liabilities
3.9
--
Postretirement benefit liabilities
53.7
55.7
Pension benefit liabilities
9.1
11.3
Other long-term liabilities
9.6
9.0
Total liabilities
260.0
317.2
Total stockholders’ equity
339.5
391.0
Total liabilities and stockholders’
equity
$
599.5
$
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 per share
data)
Three Months Ended June
30,
2019
2018
Net income
$14.7
$10.5
Net (income) from discontinued
operations
(9.4)
(7.6)
Interest expense
0.9
1.0
Other expense
0.2
0.7
Taxes
(2.7)
(0.9)
Operating income
3.7
3.7
Depreciation and amortization
11.0
11.3
Expenses related to strategic projects and
cost reduction initiatives
4.7
0.1
U.S. pension expense
0.6
0.9
Pro forma adjustment for corporate
expense
--
4.8
Adjusted EBITDA
$20.0
$20.7
Three Months Ended June
30,
2019
2018
$
million
Per
diluted share
$
million
Per
diluted share
Net income
$14.7
$0.56
$10.5
$0.40
Expenses related to strategic projects and
cost reduction initiatives
4.7
0.1
Pro forma adjustment for corporate
expense
--
4.8
U.S. pension expense
0.6
0.9
Other expense
0.2
0.7
Tax impact of adjustments at statutory
rate
(1.4)
(1.6)
Net (income) from discontinued
operations
(9.4)
(7.6)
Adjusted Net Income
$9.4
$0.36
$7.8
$0.30
Rows and columns may not foot due to rounding.
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version on businesswire.com: https://www.businesswire.com/news/home/20190806005174/en/
Investors: Doug Bingham SVP, Chief Financial Officer
717-672-9300 IR@armstrongflooring.com
Media: Steve Trapnell Communications Manager 717-672-7218
media@armstrongflooring.com
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