Third Quarter 2020 Highlights
- Net Sales of $156.6 Million - Net Loss of $11.7 Million and
Adjusted Net Loss of $11.4 Million - Adjusted EBITDA of $2.8
Million - Made Additional Investments to Support Strategic
Long-term Growth and Profit Initiatives - Hired Amy Trojanowski as
Chief Financial Officer, Effective October 19, 2020
Armstrong Flooring, Inc. (NYSE: AFI) (“Armstrong Flooring” or
the “Company”), a leader in the design and manufacture of
innovative flooring solutions, today reported financial results for
the third quarter ended September 30, 2020.
Michel Vermette, President and Chief Executive Officer,
commented, “Third quarter results were largely in line with our
expectations as we further invested in the multi-pronged
transformation and modernization of our business. We were pleased
to produce sequential top line improvement compared to the second
quarter 2020 primarily due to stronger trends in residential end
markets outpacing a slower recovery in commercial activity.
Feedback from our customers about our service enhancements
continues to be positive and leaves us confident that we are on the
right path to improve our market positioning and set the stage for
growth in the years ahead. Through our customer-centric operating
model, we will continue to approach opportunities with a returns
oriented mindset while keeping our focus on three core areas that
comprise expanding our reach within our addressable flooring
market, simplifying our processes, and strengthening our
competitive positioning for long-term success.”
Third Quarter 2020 Results Compared with Third Quarter 2019
Results
Consolidated Results
(Dollars in millions except per share
data)
Three Months Ended September 30,
2020
2019
Change
Net sales
$156.6
$165.6
(5.4%)
Operating (loss)
($10.1)
($28.2)
N/M
Net (loss)
($11.7)
($31.4)
N/M
Diluted (loss) per share
($0.53)
($1.44)
N/M
Adjusted EBITDA1
$2.8
$8.8
(68.2%)
Adjusted EBITDA margin
1.8%
5.3%
(350 bps)
Adjusted net (loss) 1
($11.4)
($11.1)
N/M
Adjusted diluted (loss) per share1
($0.52)
($0.51)
N/M
(1)
Excludes business transformation costs,
amongst other items; See tables at end of the earnings release for
non-GAAP reconciliations
In the third quarter of 2020, net sales decreased 5.4% to $156.6
million from $165.6 million in the third quarter of 2019. The
decrease in net sales was primarily attributable to lower volumes
due to COVID-19 pandemic related business disruptions, including
the postponement of certain commercial projects and slower activity
at many independent customer retail locations, partly offset by
increased activity in home centers and other residential
channels.
The net loss in the third quarter of 2020 was $11.7 million, or
diluted loss per share of $0.53, as compared to net loss of $31.4
million, or diluted loss per share of $1.44, in the prior year
quarter. Adjusted net loss was $11.4 million, or adjusted diluted
loss per share of $0.52, as compared to adjusted net loss of $11.1
million, or adjusted diluted loss per share of $0.51, in the prior
year quarter.
Third quarter 2020 adjusted EBITDA was $2.8 million, as compared
to adjusted EBITDA of $8.8 million in the prior year quarter. The
decrease in adjusted EBITDA was primarily attributable to lower net
sales and to transition service agreement income in the prior year
quarter which did not recur, as well as investments to support
long-term strategic growth initiatives. These factors were partly
offset by improved productivity and reduced input costs.
Liquidity and Capital Resources Update
At September 30, 2020, the Company had total liquidity of
approximately $110.0 million including $22.2 million of cash plus
availability under its credit facilities. Prior to the onset of the
pandemic, the Company began assessing the monetization of non-core
assets. As part of this process, the Company’s South Gate,
California facility and land portfolio have been classified on the
balance sheet as assets held-for-sale. Under the terms of the
Company’s credit agreements, beginning in the fourth quarter of
2020 $30.0 million of availability under the credit facilities will
be withheld until such time the Company closes on a sale of its
South Gate property. The Company believes it has ample financial
resources to effectively execute its near- and long-term
objectives.
Multi-Year Transformation Update
During early 2020, the Company initiated a multi-year
transformation of its operations to become a leaner, faster growing
and more profitable business. The transformation encompasses three
critical objectives of expanding customer reach, simplifying
product offerings and operations, and the strengthening of core
capabilities.
To date, the Company has expanded its direct sales teams to
service key independent retailers, commercial national accounts,
and large flooring contractors. In terms of simplification,
progress has been made on executing product portfolio
simplification, inventory optimization, and reducing SKU mix of
underperforming products. The Company is also consolidating its
U.S. manufacturing facilities and improving efficiency. The Company
has announced the relocation of its headquarters, effective summer
2021, with estimated cost savings of approximately 60% of current
corporate lease expense. Steps to strengthen customer experiences
include the introduction of a Quick Ship program to accelerate
customer project timelines and investments in product innovation
with a focus on U.S. based manufacturing, amongst many other
initiatives. The Company will continue to invest in its business
with a customer-centric and returns-focused approach to execute on
its multi-year transformation.
Webcast and Conference Call
The Company will hold a live webcast and conference call to
review financial results and conduct a question-and-answer session
on Wednesday, October 21, 2020 at 10:00 a.m. ET. The live webcast
will be available in the Investors section of the Company’s website
at www.armstrongflooring.com. For those unable to access the
webcast, the conference call will be accessible by dialing
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 13711604.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the
design and manufacture of innovative flooring solutions that
inspire beauty wherever your life happens. Headquartered in
Lancaster, Pennsylvania, Armstrong Flooring is a leading
manufacturer of resilient products across North America. The
company safely and responsibly operates eight 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
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,
2020
2019
Net sales
$
156.6
$
165.6
Cost of goods sold
129.0
153.8
Gross profit
27.6
11.8
Selling, general, and administrative
expense
37.7
40.0
Operating (loss)
(10.1)
(28.2)
Interest expense
2.8
0.8
Other (income) expense
(1.5
)
0.7
(Loss) from continuing operations before
income taxes
(11.4
)
(29.7)
Income tax expense
0.3
--
Net (loss) income from continuing
operations
(11.7
)
(29.7)
Net (loss) from discontinued
operations
-
(1.7)
Net (loss)
$
(11.7
)
$
(31.4)
Weighted average number of common shares
outstanding - Basic
22.0
21.9
Basic (loss) per share of common stock
$
(0.53
)
$
(1.44)
Weighted average number of common shares
outstanding - Diluted
22.0
21.9
Diluted (loss) per share of common
stock
$
(0.53
)
$
(1.44)
Consolidated Balance
Sheet
(Dollars in millions)
Assets
September 30, 2020
December 31, 2019
Current Assets:
Cash
$
22.2
$
27.1
Accounts and notes receivable, net
43.8
36.1
Inventories, net
129.9
111.6
Prepaid expenses and other current
assets
13.8
10.7
Assets held-for-sale
19.3
--
Total current assets
229.0
185.5
Property, plant, and equipment, net
246.0
277.2
Other non-current assets
33.6
39.5
Total assets
$
508.6
$
502.2
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable and accrued expenses
$
112.9
$
104.4
Short-term debt and current installments
of long-term debt
8.4
0.2
Total current liabilities
121.3
104.6
Long-term debt
62.1
42.5
Postretirement benefit liabilities
56.2
59.7
Pension benefit liabilities
11.1
16.0
Other long-term liabilities
13.0
11.1
Total liabilities
263.7
233.9
Total stockholders’ equity
244.9
268.3
Total liabilities and stockholders’
equity
$
508.6
$
502.2
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 used 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.
(Dollars in millions except per share
data)
Three Months Ended September
30,
2020
2019
Net (loss) income
($11.7)
($31.4)
Net income from discontinued
operations
--
1.7
Interest expense
2.8
0.8
Other (income) expense
(1.5)
0.7
Income taxes
0.3
--
Depreciation and amortization
11.1
12.9
Expenses related to cost reduction
initiatives, special projects, and plant closures
1.2
23.3
U.S. pension expense
0.6
0.8
Adjusted EBITDA(2)
$2.8
$8.8
(2)
Adjusted EBITDA is a non-GAAP financial
measure and consists of net (loss) income adjusted to add back
interest expense, other (income) expense, income taxes,
depreciation and amortization; U.S. pension expense and excludes
business transformation costs, amongst other items. The Company‘s
management believes Adjusted EBITDA is meaningful to investors
because management reviews Adjusted EBITDA in assessing and
evaluating performance. However, this measure should be considered
in addition to, rather than as a substitute for net (loss) income
provided in accordance with GAAP. The Company's method of
calculating Adjusted EBITDA may differ from methods used by other
companies and, as a result, Adjusted EBITDA may not be comparable
to other similarly titled measures disclosed by other
companies.
Three Months Ended September
30,
2020
2019
$
million
Per
diluted share
$
million
Per
diluted share
Net (loss) income
($11.7)
($0.53)
($31.4)
($1.44)
Expenses related to cost reduction
initiatives, special projects, and plant closures, including
accelerated depreciation
1.2
23.3
U.S. pension expense
0.6
0.8
Other (income) expense
(1.5)
0.7
Tax impact of adjustments at statutory
rate
(0.1)
(6.2)
Net income from discontinued
operations
--
1.7
Adjusted net (loss) income(3)
($11.4)
($0.52)
($11.1)
($0.51)
(3)
Adjusted net (loss) income is a non-GAAP
financial measure and consists of net (loss) income adjusted to add
back U.S. pension expense; add back business transformation costs;
remove other (income); and adjust such items for the related tax
impacts. The Company’s management believes Adjusted net (loss)
income is meaningful to investors because management reviews
Adjusted net (loss) income in assessing and evaluating performance.
However, this measure should be considered in addition to, rather
than a substitute for net (loss) income provided in accordance with
GAAP. The Company’s method of calculating Adjusted net (loss)
income may differ from methods used by other companies and, as a
result, Adjusted net (loss) income may not be comparable to other
similarly titled measures disclosed by other companies.
Rows and columns may not foot due to rounding.
Category: Earnings
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201021005190/en/
Investors: Amy Trojanowski SVP, Chief Financial Officer
ir@armstrongflooring.com Media: Alison van Harskamp Director,
Corporate Communications
aficorporatecommunications@armstrongflooring.com
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