Third Quarter 2019 Highlights
- Net Sales of $165.6 Million
- Net Loss of $31.4 Million and Adjusted Net Loss of $11.1
Million
- Adjusted EBITDA of $8.8 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 third
quarter ended September 30, 2019.
Michel Vermette, President and Chief Executive Officer,
commented, “Since joining the Company in September I have spent
time assessing the business, and it is clear that the current
performance does not reflect the Company’s potential. I have begun
working with the teams to initiate a comprehensive review of all
aspects of the business to allow us to address operational
challenges, optimize our product portfolio, expand our customer
reach, streamline processes and implement numerous best practices
to better capitalize on market opportunities. As we begin the
effort needed to overhaul and modernize the business, I am
confident that the long-term upside for our Company will be
significant.”
Third Quarter 2019 Results Compared with Third Quarter of
2018 Results
(Dollars in millions except per share
data)
Three Months Ended September
30,
2019
2018
Change
Net sales
$165.6
$208.9
(20.7%)
Operating income (loss)
($28.2)
$4.4
NM
Net income (loss)
($31.4)
$7.9
NM
Diluted income (loss) per share
($1.44)
$0.30
NM
Adjusted EBITDA
$8.8
$24.4
(63.9%)
Adjusted EBITDA margin
5.3%
11.7%
(640 bps)
Adjusted net income (loss)
($11.1)
$10.5
NM
Adjusted diluted income (loss) per
share
($0.51)
$0.40
NM
In the third quarter of 2019, net sales decreased 20.7% to
$165.6 million from $208.9 million in the third quarter of 2018,
including an adverse currency impact of 90 basis points. The
decrease in net sales was primarily due to unfavorable volumes and
mix. Lower volumes in the third quarter of 2019 primarily reflected
an unfavorable comparison in 2018 due to significant customer
purchases in the distribution channel in anticipation of U.S.
tariffs along with what the Company believes to be weaker
performance by several distributors in 2019. Volume was below
expectations due to further inventory reductions combined with
share loss in some categories within the distribution channel, and
mix was driven by lower relative LVT sales as a result of
distributor stocking activity in the prior year quarter.
The net loss in the third quarter of 2019 was $31.4 million, or
diluted loss per share of $1.44, as compared to a net income of
$7.9 million, or diluted income per share of $0.30, in the prior
year quarter. The third quarter 2019 included pre-tax charges of
$23.3 million primarily related to inventory write-down,
merchandizing write-off, executive transition and business
optimization costs. Adjusted net loss was $11.1 million, or
adjusted diluted loss per share of $0.51, as compared to an
adjusted net income of $10.5 million, or adjusted diluted income
per share of $0.40, in the prior year quarter.
Third quarter 2019 adjusted EBITDA was $8.8 million, as compared
to $24.4 million in the prior year quarter. The decrease in
adjusted EBITDA was primarily attributable to lower net sales and
increased input cost inflation pressure, partially offset by
improved productivity and lower SG&A spending.
At September 30, 2019, the Company had cash and cash equivalents
$66.6 million and long-term debt of $72.1 million.
Full Year 2019 Outlook
For the full year 2019, the Company has revised its expectation
for adjusted EBITDA, which it now anticipates to be in the range of
$20 million to $25 million. This adjustment is primarily
attributable to recent sales trends and cost pressures. The Company
continues to expect capital expenditures to be approximately $30
million for the full year 2019. The Company expects to experience a
typical seasonal cash draw in the fourth quarter of 2019.
“While the team is disappointed in the persistent topline
challenges and acknowledges that it will take some time to improve
results, we are committed to taking decisive actions to achieve the
Company’s potential,” commented Mr. Vermette.
Conference Call and Webcast
The Company will hold a live webcast and conference call to
review third quarter results on Tuesday, November 5, 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 13695294.
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
September 30,
2019
2018
Net sales
$
165.6
$
208.9
Cost of goods sold
153.8
163.7
Gross profit
11.8
45.2
Selling, general, and administrative
expense
40.0
40.8
Operating income (loss)
(28.2
)
4.4
Interest expense
0.8
0.9
Other expense
0.7
0.9
Income (loss) from continuing operations
before income taxes
(29.7
)
2.6
Income tax benefit
--
(0.7
)
Gain (loss) from continuing operations
(29.7
)
3.3
Income from discontinued operations
--
4.6
Loss on disposal of discontinued
operations
(1.7
)
--
Net income (loss) from discontinued
operations
(1.7
)
4.6
Net income (loss)
$
(31.4
)
$
7.9
Weighted average number of common shares
outstanding - Basic
21.9
26.0
Basic income (loss) per share of common
stock
$
(1.44
)
$
0.31
Weighted average number of common shares
outstanding - Diluted
21.9
26.2
Diluted income (loss) per share of common
stock
$
(1.44
)
$
0.30
Consolidated Balance
Sheet
(Dollars in millions)
Assets
September 30,
2019
December 31,
2018
Current Assets:
Cash and cash equivalents
$
66.6
$
173.8
Accounts and notes receivable, net
43.2
39.0
Inventories, net
111.5
139.5
Other current assets
10.8
18.6
Total current assets
232.1
370.9
Property, plant, and equipment, net
281.2
296.1
Other non-current assets
42.0
41.2
Total assets
$
555.3
$
708.2
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable and accrued expenses
$
104.7
$
141.4
Short-term debt and current portion of
long-term debt
4.0
28.7
Other current liabilities
--
0.5
Total current liabilities
108.7
170.6
Long-term debt
68.1
70.6
Noncurrent lease liabilities
3.3
--
Postretirement benefit liabilities
51.9
55.7
Pension benefit liabilities
8.1
11.3
Other long-term liabilities
8.7
9.0
Total liabilities
248.8
317.2
Total stockholders’ equity
306.5
391.0
Total liabilities and stockholders’
equity
$
555.3
$
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
Company’s 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 Company’s 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 September
30,
2019
2018
Net income (loss)
($31.4)
$7.9
Net (income) loss from discontinued
operations
1.7
(4.6)
Interest expense
0.8
0.9
Other expense
0.7
0.9
Taxes
--
(0.7)
Operating income (loss)
(28.2)
4.4
Depreciation and amortization
12.9
11.4
Expenses related to inventory
write-downs
13.6
--
Expenses related to merchandizing
write-offs
6.0
--
Expenses related to executive
transition
1.9
--
Expenses related to cost reduction
initiatives, plant closures and special projects
1.8
2.9
U.S. pension expense
0.8
1.0
Pro forma adjustment for corporate
expense
--
4.7
Adjusted EBITDA
$8.8
$24.4
Three Months Ended September
30,
2019
2018
$
million
Per
diluted share
$
million
Per
diluted share
Net income (loss)
($31.4)
($1.44)
$7.9
$0.30
Expenses related to inventory
write-downs
13.6
--
Expenses related to merchandizing
write-offs
6.0
--
Expenses related to executive
transition
1.9
--
Expenses related to cost reduction
initiatives, plant closures, and special projects
1.8
2.9
Pro forma adjustment for corporate
expense
--
4.7
U.S. pension expense
0.8
1.0
Other expense
0.7
0.9
Tax impact of adjustments at statutory
rate
(6.2)
(2.4)
Net (income) loss from discontinued
operations
1.7
(4.6)
Adjusted net income (loss)
($11.1)
($0.51)
$10.5
$0.40
Rows and columns may not foot due to rounding.
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version on businesswire.com: https://www.businesswire.com/news/home/20191105005290/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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