EX-99.2 4 exh99_2.htm SECOND QUARTER EARNINGS CALL PRESENTATION DATED AUGUST 1, 2011 exh99_2.htm
 
Earnings Call Presentation
2nd Quarter 2011
August 1, 2011
 
 
 
1
Safe Harbor Statement
 Our disclosures in this presentation and in our other public documents and comments
 contain forward-looking statements within the meaning of the Private Securities Litigation
 Reform Act. 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," etc. in discussions of future operating or financial performance
 or the outcome of contingencies such as liabilities or legal proceedings. 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. A more detailed discussion of the risks and uncertainties that may affect our ability
 to achieve the projected performance is included in the “Risk Factors” and “Management’s
 Discussion and Analysis” sections of our recent reports on Forms 10-K and 10-Q filed with
 the SEC. As a result, our actual results may differ materially from our expected results and
 from those expressed in our forward looking statements. We undertake no obligation to
 update any forward-looking statements beyond what is required under applicable
 securities law.
 In addition, we will be referring to non-GAAP financial measures within the meaning of
 SEC Regulation G. A reconciliation of the differences between these measures with the
 most directly comparable financial measures calculated in accordance with GAAP is
 available on the Investor Relations page of our website at www.armstrong.com.
 
 
 
2
Basis of Presentation Explanation
 
Comparable
Dollars
Other
Adjustments
Net Sales
Yes
No
Gross Profit
Yes
Yes
SG&A Expense
Yes
Yes
Equity Earnings
Yes
Yes
Operating Income
Yes
Yes
Net Income
Yes
Yes
Cash Flow
No
No
Return on Capital
Yes
Yes
EBITDA
Yes
Yes
 • We report in comparable dollars to
 remove the effects of currency
 translation on the P&L. The budgeted
 exchange rate for the current year is
 used for all currency translations in the
 current year and prior years.
 • We remove the impact of major, discrete
 expenses and income. Examples
 include plant closures, restructuring
 actions, and other large unusual items.
 • Taxes for normalized Net Income and
 EPS for all periods presented are
 calculated using a constant 42%, which
 is based on the full year historical tax
 rate.
When reporting our financial results within this presentation, we make several adjustments. Management uses
the adjusted non-GAAP measures below in managing the business and believes the adjustments provide
meaningful comparisons of operating performance between periods. As reported results will be footnoted
throughout the presentation.
What Items Are Adjusted
All figures throughout the presentation are in $ millions unless otherwise noted. Figures may
not add due to rounding.
 
 
 
3
Key Metrics - Second Quarter 2011
Financial Overview
(1) As reported Net Sales: $749 million in 2011 and $725 million in 2010.
(2) As reported Operating Income: $73 million in 2011 and $53 million in 2010
(3) As reported EPS: $0.64 in 2011 and $0.46 in 2010.
 
2011
Actual
2010
Actual
Variance
Net Sales (1)
$733
$733
0%
Operating Income (2)
82
60
36.7%
 % of Sales
11.2%
8.2%
300 bps
EBITDA
109
88
23.9%
 % of Sales
14.9%
12.0%
290 bps
Earnings Per Share (3)
$0.70
$0.57
22.8%
Free Cash Flow
50
89
(39)
Net (Cash) Debt
542
(141)
683
 
 
 
4
Q2 2011 - Adjusted EBITDA to Reported Net Income
Financial Overview
 
2011
2010
V
EBITDA- Adjusted
$109
$88
$21
 Depreciation and Amortization
(27)
(28)
1
Operating Income - Adjusted
$82
$60
$22
 Foreign Exchange Movements
1
-
1
 Cost Reduction Initiatives
(5)
(2)
(3)
 Accelerated Depreciation (not included above)
(3)
-
(3)
 Restructuring
(2)
-
(2)
 Impairments
-
(5)
5
Operating Income - As Reported
$73
$53
$20
 Interest (Expense) Income
(12)
(4)
(8)
EBT
$61
$49
$12
 Tax (Expense) Benefit
(23)
(22)
(1)
Net Income
$38
$27
$11
 
 
 
5
Q2 Sales and EBITDA by Segment - 2011 vs. 2010
Financial Overview
 
 
 
6
EBITDA Bridge - Q2 2011 versus Prior Year
Financial Overview
($11)
($1)
 
 
 
7
Free Cash Flow - Second Quarter 2011 versus Prior Year
Financial Overview
 
 
 
 
 
 
8
Key Metrics - 1st Half 2011
Financial Overview
(1) As reported Net Sales: $1,434 million in 2011 and $1,384 million in 2010.
(2) As reported Operating Income: $125 million in 2011 and $66 million in 2010
(3) As reported EPS: $0.87 in 2011 and $0.13 in 2010.
 
2011
Actual
2010
Actual
Variance
Net Sales (1)
$1,414
$1,393
1.5%
Operating Income (2)
149
87
71.3%
 % of Sales
10.5%
6.3%
430 bps
EBITDA
202
144
40.3%
 % of Sales
14.3%
10.3%
400 bps
Earnings Per Share (3)
$1.21
$0.80
51.3%
Free Cash Flow
6
59
(53)
Net (Cash) Debt
542
(141)
683
 
 
 
9
1H Sales and EBITDA by Segment - 2011 vs. 2010
Financial Overview
 
 
 
10
EBITDA Bridge - 1H 2011 versus Prior Year
Financial Overview
($13)
 
 
 
 
11
Key Metrics  - Guidance 2011
Financial Overview
 
2011
Estimate Range
 
2010
 
Variance
Net Sales(1)
2,900
to
3,000
 
2,766
 
5%
to
8%
Operating Income(2)
280
to
310
 
189
 
48%
to
64%
EBITDA
385
to
415
 
303
 
27%
to
37%
Earnings Per Share(3)
$2.29
to
$2.58
 
$1.73
 
32%
to
49%
Free Cash Flow
80
to
120
 
180
 
(56%)
to
(33%)
(1) Sales figures include foreign exchange impact.
(2) As reported Operating Income: $255- 285 million in 2011 and $81 million 2010.
(3) As reported earnings per share: $2.01 - $2.32 in 2011 and $0.19 in 2010.
 
 
 
12
$165 Million Savings Program
$165M savings from manufacturing and SG&A, net of inflation.
Manufacturing savings driven by plant closures and LEAN.
Cumulative Savings  $35M   $125M   $165M
Financial Overview
 
 
 
 
 
 
13
2011 Financial Outlook
Financial Overview
¾ Raw Material & Energy Inflation*  $50 - $60 million increase
¾ Manufacturing Productivity* Gross Margin +175 to +225 bps vs. 2010
¾ U.S. Pension Credit ~$25 million, down ~$25 million vs. 2010
  60% manufacturing, 40% SG&A
¾ Earnings from WAVE $5 - $10 million vs. 2010
¾ Cash Taxes/ETR* ~$25 million. Adjusted ETR of 42%
¾ Q3 Sales $780 - $830 million
  EBITDA $115 - $130 million
¾ Capital Spending ~$180-$200 million
¾ Exclusions from EBITDA* ~$18 - $22 million associated with already
  announced actions
* Changed from April Outlook
 
 
 
14
Appendix
 
 
 
15
1H 2011 - Adjusted EBITDA to Reported Net Income
Financial Overview Appendix
 
2011
2010
V
EBITDA- Adjusted
$202
$144
$58
 Depreciation and Amortization
(53)
(57)
4
Operating Income - Adjusted
$149
$87
$62
 Foreign Exchange Movements
(1)
-
(1)
 Cost Reduction Initiatives
(25)
(13)
(12)
 Accelerated Depreciation (not included above)
9
-
9
 Restructuring
(7)
-
(7)
 Impairments
-
(8)
8
Operating Income - As Reported
$125
$66
$59
 Interest (Expense) Income
(26)
(6)
(20)
EBT
$99
$60
$39
 Healthcare Reform- Medicare Subsidy Elimination
-
(22)
22
 Tax (Expense) Benefit
(48)
(31)
(17)
Net Income
$51
$7
$44
 
 
 
16
Adjusted Operating Income to Free Cash Flow
Financial Overview Appendix
 
2011
Estimate Range
Adjusted Operating Income
280
to
310
 D&A
105
Adjusted EBITDA
385
to
415
 Changes in Working Capital
5
to
25
 Capex
(180)
to
(200)
 Pension Credit
(25)
 Interest Expense
(50)
 Cash Taxes
(25)
 Other, including cash payments for
 restructuring and one-time items
(30)
Free Cash Flow
80
to
120
 
 
 
17
Consolidated Results
Financial Overview Appendix
Second Quarter
 
2011
Reported
Comparability(1
) Adjustments
FX(2) Adj
2011
Adjusted
2010
Reported
Comparability(1
) Adjustments
FX(2) Adj
2010
Adjusted
Net Sales
749
-
(16)
733
725
-
                                                   8
733
Operating Income
73
10
(1)
82
53
7
-
60
EPS
$0.64
$0.07
($0.01)
$0.70
$0.46
$0.11
$ -
$0.57
 
Full Year 2011
 
2011
Reported
Comparability(1
) Adjustments
FX(2) Adj
2011
Adjusted
2010
Reported
Comparability(1
) Adjustments
FX(2) Adj
2010
Adjusted
Net Sales
1,434
-
(20)
1,414
1,384
-
9
1,393
Operating Income
125
25
(1)
149
66
21
-
87
EPS
$0.87
$0.35
($0.01)
$1.21
$0.13
$0.67
$-
$0.80
(1) See earnings press release and 10-Q for additional detail on comparability adjustments
(2) Eliminates impact of foreign exchange movements
 
 
 
18
Segment Operating Income (Loss)
Financial Overview Appendix
(1) Eliminates impact of foreign exchange movements and non-recurring items; see earnings press release and 10-Q for additional detail.
Second Quarter
 
2011
Reported
Comparability(1)
Adjustments
2011
Adjusted
2010
Reported
Comparability(1)
Adjustments
2010
Adjusted
Building Products
57
4
61
53
2
55
Resilient Flooring
11
6
17
10
2
12
Wood Flooring
14
(1)
13
1
-
1
Cabinets
1
-
1
-
-
-
Unallocated Corporate
(Expense) Income
(10)
-
(10)
(11)
3
(8)
 
Full Year 2011
 
2011
Reported
Comparability(1)
Adjustments
2011
Adjusted
2010
Reported
Comparability(1)
Adjustments
2010
Adjusted
Building Products
119
10
129
95
2
97
Resilient Flooring
10
14
24
5
1
6
Wood Flooring
17
(1)
16
(1)
1
-
Cabinets
-
-
-
(4)
-
(4)
Unallocated Corporate
(Expense) Income
(21)
1
(20)
(29)
17
(12)
 
 
 
19
Cash Flow
Financial Overview Appendix
 
Second Quarter
Full Year
($-millions)
2011
2010
2011
2010
Net Cash From Operations
68
84
32
56
Plus / (Minus) Net Cash from Investing
(18)
5
(26)
3
Equals Free Cash Flow
50
89
6
59