UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 27, 2018
ARMSTRONG WORLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania |
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1-2116 |
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23-0366390 |
(State or other jurisdiction of incorporation or organization) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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2500 Columbia Avenue P.O. Box 3001 Lancaster, Pennsylvania |
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17603 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (717) 397-0611
NA
(Former name or former address if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ◻
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
On July 31, 2018, Armstrong World Industries, Inc. (the “Company”) issued a press release announcing its second quarter 2018 consolidated financial results. The full text of the press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing.
Section 7 – Regulation FD
Item 7.01 Regulation FD Disclosure.
On July 27, 2018, the Company’s Board of Directors approved an additional $300.0 million authorization to repurchase shares under the Company’s existing share repurchase program, increasing the total authorized amount under the program to $700.0 million. Pursuant to the program, the Company may purchase shares of its common stock at times and in such amounts as management deems appropriate, subject to market and business conditions, regulatory requirements and other factors. Repurchases under the program may be made through open market, block and privately-negotiated transactions, including Rule 10b5-1 plans. The expanded program extends through October 2020, unless otherwise determined by the Board of Directors, does not obligate the Company to purchase any particular amounts of common stock and may be suspended or discontinued at any time without notice.
On July 31, 2018, the Company issued a press release announcing that it will report its second quarter 2018 consolidated financial results via a webcast and conference call on Tuesday, July 31, 2018 at 11:00 a.m. Eastern Time which can be accessed through the “Investors” section of the Company’s website, www.armstrongceilings.com. During this report, the Company will reference a slide presentation, a copy of which is attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Act, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
No. 99.1 |
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Press Release of Armstrong World Industries, Inc. dated July 31, 2018 |
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No. 99.2 |
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Earnings Call Presentation Second Quarter 2018 dated July 31, 2018
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2
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ARMSTRONG WORLD INDUSTRIES, INC. |
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By: |
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/s/ Mark A. Hershey |
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Mark A. Hershey |
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Senior Vice President, General Counsel, Secretary and Chief Compliance Officer |
Date: July 31, 2018
3
Exhibit 99.1
Armstrong World Industries Reports
Second Quarter 2018 Results
Key Highlights
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• |
As reported net sales of $248.6 million, up 10% versus the prior year quarter |
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• |
As reported operating income of $66.0 million, down 5% versus the prior year quarter, driven by accelerated depreciation charges associated with closure of the St. Helens facility |
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• |
Architectural Specialties segment sales grew 18% with an adjusted EBITDA margin of 22% |
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• |
Adjusted EBITDA up 12% versus the prior year quarter, with adjusted EBITDA margins expanding 70 basis points |
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• |
Share repurchase program authorization increased by $300 million |
LANCASTER, Pa., July 31, 2018 -- Armstrong World Industries, Inc. (NYSE:AWI), a leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions, today reported financial results for the second quarter.
Second Quarter Results from Continuing Operations
(Dollar amounts in millions except per-share data) |
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For the Three Months Ended June 30, |
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|||||
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2018 |
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2017 |
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Change |
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|||
Net sales |
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$ |
248.6 |
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$ |
225.6 |
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|
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10.2 |
% |
Operating income |
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$ |
66.0 |
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$ |
69.2 |
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|
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(4.6 |
)% |
Earnings from continuing operations |
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$ |
47.6 |
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$ |
43.7 |
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|
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8.9 |
% |
Diluted earnings per share |
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$ |
0.90 |
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$ |
0.81 |
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11.1 |
% |
Consolidated net sales increased compared to the prior year quarter, driven by higher volumes in both the Mineral Fiber and Architectural Specialties segments, as well as higher Mineral Fiber average unit values (“AUV”), in which both positive like for like pricing and positive mix contributed.
Operating income decreased over the prior year quarter, driven by $4.3 million of St. Helens accelerated depreciation and higher manufacturing and input costs, partially offset by positive Mineral Fiber AUV and volume growth in both the Mineral Fiber and Architectural Specialties segments. Excluding the St. Helens accelerated depreciation, operating income would have increased over the prior year quarter by $2 million.
Additional (non-GAAP*) Financial Metrics from Continuing Operations
(Dollar amounts in millions except per-share data) |
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For the Three Months Ended June 30, |
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2018 |
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2017 |
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Change |
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Adjusted EBITDA |
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$ |
95 |
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$ |
85 |
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12.2 |
% |
Adjusted net income |
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$ |
52 |
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$ |
47 |
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11.5 |
% |
Adjusted diluted earnings per share |
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$ |
1.01 |
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$ |
0.87 |
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15.8 |
% |
Adjusted free cash flow |
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$ |
67 |
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$ |
28 |
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139.3 |
% |
* |
The Company uses the above non-GAAP adjusted measures in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. Adjusted EBITDA, adjusted net income, and adjusted EPS exclude the impact of foreign exchange, restructuring and related costs, impairments, U.S. pension plan credit/expense, environmental insurance recoveries and expenses, and certain other gains and losses. The Company excludes U.S. pension plan impact in the non-GAAP results as it represents the actuarial net periodic benefit cost recorded, while for all periods presented, the Company was not required and did not make cash contributions to the U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. Adjusted free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures. Adjusted figures are reported using the budgeted exchange rate for 2018, and are reconciled to the most comparable GAAP measures in tables at the end of this release. |
(Dollar amounts in millions) |
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For the Three Months Ended June 30, |
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2018 |
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2017 |
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Change |
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Adjusted EBITDA |
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Mineral Fiber |
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$ |
86 |
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$ |
76 |
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13.0 |
% |
Architectural Specialties |
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9 |
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9 |
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5.2 |
% |
Unallocated Corporate |
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- |
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- |
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- |
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Consolidated Adjusted EBITDA |
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$ |
95 |
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$ |
85 |
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12.2 |
% |
Consolidated adjusted EBITDA improved 12% in the second quarter when compared to the prior year quarter, driven by volume growth in both the Mineral Fiber and Architectural Specialties segments, solid AUV fall-through to profit, and higher equity earnings from WAVE, which were partially offset by higher SG&A expenses and higher manufacturing and input costs. Adjusted earnings per share reflects a 25% adjusted tax rate in both 2018 and 2017. Adjusted free cash flow improvement was driven primarily by higher cash earnings and lower capital expenditures.
“We had a solid second quarter with Mineral Fiber volumes bouncing back from weather-related issues in March, and continued strength from Architectural Specialties. In particular I’m pleased with our WAVE business, which achieved price over steel inflation and delivered quarterly equity earnings growth of over 20%.” said Vic Grizzle, President and CEO of Armstrong. “We also completed a strategic acquisition in the quarter with the purchase of Plasterform, which will improve our solutions portfolio.”
Second Quarter Segment Highlights
In connection with the announced sale of the EMEA and Pacific Rim businesses, the EMEA and Pacific Rim segments have been excluded from results of continuing operations. As a result, the Company’s operating segments are as follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate.
2
(Dollar amounts in millions) |
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For the Three Months Ended June 30, |
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2018 |
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2017 |
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Change |
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Net sales (as reported) |
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$ |
206.7 |
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$ |
190.1 |
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8.7 |
% |
Operating income (as reported) |
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$ |
59.5 |
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$ |
64.1 |
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(7.2 |
)% |
Adjusted EBITDA |
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$ |
86 |
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$ |
76 |
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13.0 |
% |
Net sales grew primarily by higher volume and AUV expansion versus the prior year quarter.
Operating income decreased $4.6 million, driven mainly by $4.3 million of accelerated depreciation related to the previously announced closure of our St. Helens plant, higher SG&A expenses, and higher manufacturing and input costs, partially offset by the margin impact of higher sales and higher equity earnings from WAVE.
Architectural Specialties
(Dollar amounts in millions) |
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For the Three Months Ended June 30, |
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|||||
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2018 |
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2017 |
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Change |
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Net sales (as reported) |
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$ |
41.9 |
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$ |
35.5 |
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18.0 |
% |
Operating income (as reported) |
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$ |
8.6 |
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$ |
8.1 |
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6.2 |
% |
Adjusted EBITDA |
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$ |
9 |
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$ |
9 |
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5.2 |
% |
Net sales grew primarily by higher sales volume from increased market penetration and new construction activity.
Operating income increased due to the positive impact of higher sales volume partially offset by slightly higher SG&A expenses.
Unallocated Corporate
Unallocated corporate expense of $2.1 million decreased from $3.0 million of expense in the prior year quarter, primarily due to lower costs associated with the U.S. pension plan.
Year to Date Results from Continuing Operations
(Dollar amounts in millions) |
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For the Six Months Ended June 30, |
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|||||
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2018 |
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2017 |
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Change |
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Net sales (as reported) |
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$ |
475.9 |
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$ |
445.4 |
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6.8 |
% |
Operating income (as reported) |
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$ |
115.6 |
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$ |
126.5 |
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(8.6 |
)% |
Adjusted EBITDA |
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$ |
174 |
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$ |
160 |
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|
|
8.7 |
% |
Net sales increased driven mainly by volume growth in both the Mineral Fiber and Architectural Specialties segments, and higher AUVs in the Mineral Fiber segment, in which both positive mix and positive like for like pricing contributed.
Operating income declined over the prior year period, driven mainly by $12.0 million of accelerated depreciation related to the previously announced closure of our St. Helens plant.
3
The AWI Board of Directors authorized an expansion of the Company’s existing stock repurchase program under which it may repurchase up to an additional $300.0 million of its outstanding common stock. This additional repurchase authorization extends through October of 2020.
Repurchases under the 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 share repurchase program does not obligate the Company to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice. The Company had approximately 51.7 million shares of common stock outstanding as of June 30, 2018.
Market Outlook and 2018 Guidance
“We are reaffirming our full year guidance of 5%-7% revenue growth, greater than 10% adjusted EBITDA growth, and free cash flow growth of 20%-30% versus the prior year,” said Brian MacNeal, CFO. “With $105 million of share repurchases in the first half of 2018, we have reduced our outstanding share count for our second quarter EPS calculations to 52 million from 53 million previously. Since inception of our repurchase program in 2016, we have bought back 4.7 million shares at an average share price of $48.34.”
Earnings Webcast
Management will host a live Internet broadcast beginning at 11:00 a.m. Eastern time today, to discuss second quarter results. This event will be broadcast live on the Company's website. To access the call and accompanying slide presentation, go to www.armstrongceilings.com and click Investors. The replay of this event will also be available on the Company's website for up to one year after the date of the call.
Uncertainties Affecting Forward-Looking Statements
Disclosures in this release, including without limitation, those relating to future financial results, market conditions and guidance, 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 the “Risk Factors” and “Management’s Discussion and Analysis” section of our report on Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”). 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.
4
About Armstrong and Additional Information
More details on the Company’s performance can be found in its quarterly report on Form 10-Q for the quarter ended June 30, 2018 that the Company expects to file with the SEC today.
Armstrong World Industries, Inc. (AWI) is a global leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions. For more information, visit www.armstrongceilings.com.
Additional forward looking non-GAAP metrics are available on the Company’s website at www.armstrongceilings.com under the Investors tab. The website is not part of this release and references to our website address in this release are intended to be inactive textual references only.
5
As Reported Financial Highlights
FINANCIAL HIGHLIGHTS
Armstrong World Industries, Inc. and Subsidiaries
(Amounts in millions, except for per-share amounts, quarterly data is unaudited)
|
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For the Three Months Ended June 30, |
|
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For the Six Months Ended June 30, |
|
||||||||||
|
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2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Net sales |
|
$ |
248.6 |
|
|
$ |
225.6 |
|
|
$ |
475.9 |
|
|
$ |
445.4 |
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Cost of goods sold |
|
|
165.9 |
|
|
|
140.4 |
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|
|
322.4 |
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|
|
281.9 |
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Gross profit |
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82.7 |
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85.2 |
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|
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153.5 |
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|
|
163.5 |
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Selling, general and administrative expenses |
|
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40.9 |
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|
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35.7 |
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|
|
78.4 |
|
|
|
75.0 |
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Equity earnings from joint venture |
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(24.2 |
) |
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(19.7 |
) |
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(40.5 |
) |
|
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(38.0 |
) |
Operating income |
|
|
66.0 |
|
|
|
69.2 |
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|
|
115.6 |
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|
|
126.5 |
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Interest expense |
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9.8 |
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|
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8.9 |
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|
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19.0 |
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|
|
17.8 |
|
Other non-operating (income), net |
|
|
(9.1 |
) |
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(8.3 |
) |
|
|
(18.1 |
) |
|
|
(17.2 |
) |
Earnings from continuing operations before income taxes |
|
|
65.3 |
|
|
|
68.6 |
|
|
|
114.7 |
|
|
|
125.9 |
|
Income tax expense |
|
|
17.7 |
|
|
|
24.9 |
|
|
|
25.9 |
|
|
|
46.7 |
|
Earnings from continuing operations |
|
|
47.6 |
|
|
|
43.7 |
|
|
|
88.8 |
|
|
|
79.2 |
|
Net earnings (loss) from discontinued operations, net of tax expense of $0.2, $3.7, $1.7 and $6.5 |
|
|
5.5 |
|
|
|
(2.2 |
) |
|
|
9.4 |
|
|
|
(6.9 |
) |
(Loss) from disposal of discontinued business, net of tax expense (benefit) of $0.1, $0.2, ($0.3) and $0.5 |
|
|
(5.8 |
) |
|
|
(0.2 |
) |
|
|
(23.1 |
) |
|
|
(0.6 |
) |
Net (loss) from discontinued operations |
|
|
(0.3 |
) |
|
|
(2.4 |
) |
|
|
(13.7 |
) |
|
|
(7.5 |
) |
Net earnings |
|
$ |
47.3 |
|
|
$ |
41.3 |
|
|
$ |
75.1 |
|
|
$ |
71.7 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
(20.8 |
) |
|
|
2.8 |
|
|
|
(14.9 |
) |
|
|
13.9 |
|
Derivative gain (loss), net |
|
|
2.0 |
|
|
|
(1.8 |
) |
|
|
5.8 |
|
|
|
(1.7 |
) |
Pension and postretirement adjustments |
|
|
3.1 |
|
|
|
2.0 |
|
|
|
4.9 |
|
|
|
4.5 |
|
Total other comprehensive (loss) income |
|
|
(15.7 |
) |
|
|
3.0 |
|
|
|
(4.2 |
) |
|
|
16.7 |
|
Total comprehensive income |
|
$ |
31.6 |
|
|
$ |
44.3 |
|
|
$ |
70.9 |
|
|
$ |
88.4 |
|
Earnings per share of common stock, continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.91 |
|
|
$ |
0.82 |
|
|
$ |
1.69 |
|
|
$ |
1.47 |
|
Diluted |
|
$ |
0.90 |
|
|
$ |
0.81 |
|
|
$ |
1.66 |
|
|
$ |
1.46 |
|
(Loss) per share of common stock, discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.01 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.14 |
) |
Diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.14 |
) |
Net earnings per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.90 |
|
|
$ |
0.77 |
|
|
$ |
1.43 |
|
|
$ |
1.33 |
|
Diluted |
|
$ |
0.89 |
|
|
$ |
0.77 |
|
|
$ |
1.40 |
|
|
$ |
1.32 |
|
Average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
51.9 |
|
|
|
53.3 |
|
|
|
52.5 |
|
|
|
53.7 |
|
Diluted |
|
|
52.6 |
|
|
|
53.7 |
|
|
|
53.2 |
|
|
|
54.1 |
|
6
SEGMENT RESULTS
Armstrong World Industries, Inc. and Subsidiaries
(Amounts in millions)
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
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June 30, |
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||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Net sales to external customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral Fiber |
|
$ |
206.7 |
|
|
$ |
190.1 |
|
|
$ |
397.4 |
|
|
$ |
379.9 |
|
Architectural Specialties |
|
|
41.9 |
|
|
|
35.5 |
|
|
|
78.5 |
|
|
|
65.5 |
|
Total net sales to external customers |
|
$ |
248.6 |
|
|
$ |
225.6 |
|
|
$ |
475.9 |
|
|
$ |
445.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Segment operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral Fiber |
|
$ |
59.5 |
|
|
$ |
64.1 |
|
|
$ |
103.2 |
|
|
$ |
119.6 |
|
Architectural Specialties |
|
|
8.6 |
|
|
|
8.1 |
|
|
|
16.9 |
|
|
|
12.9 |
|
Unallocated Corporate |
|
|
(2.1 |
) |
|
|
(3.0 |
) |
|
|
(4.5 |
) |
|
|
(6.0 |
) |
Total consolidated operating income |
|
$ |
66.0 |
|
|
$ |
69.2 |
|
|
$ |
115.6 |
|
|
$ |
126.5 |
|
Selected Balance Sheet Information
(Amounts in millions)
|
|
Unaudited June 30, 2018 |
|
|
December 31, 2017 |
|
||
Assets |
|
|
|
|
|
|
|
|
Current assets |
|
$ |
583.0 |
|
|
$ |
648.9 |
|
Property, plant and equipment, net |
|
|
484.8 |
|
|
|
499.9 |
|
Other noncurrent assets |
|
|
756.9 |
|
|
|
724.7 |
|
Total assets |
|
$ |
1,824.7 |
|
|
$ |
1,873.5 |
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
259.9 |
|
|
$ |
269.9 |
|
Noncurrent liabilities |
|
|
1,160.7 |
|
|
|
1,184.3 |
|
Equity |
|
|
404.1 |
|
|
|
419.3 |
|
Total liabilities and shareholders’ equity |
|
$ |
1,824.7 |
|
|
$ |
1,873.5 |
|
7
Selected Cash Flow Information
(Amounts in millions)
(Unaudited)
|
|
Three Months Ended June 31, |
|
|||||
|
|
2018 |
|
|
2017 |
|
||
Net earnings |
|
$ |
75.1 |
|
|
$ |
71.7 |
|
Other adjustments to reconcile net earnings to net cash provided by operating activities |
|
|
19.5 |
|
|
|
29.4 |
|
Changes in operating assets and liabilities, net |
|
|
(5.6 |
) |
|
|
(58.7 |
) |
Net cash provided by operating activities |
|
|
89.0 |
|
|
|
42.4 |
|
Net cash provided by (used for) investing activities |
|
|
(1.3 |
) |
|
|
(40.7 |
) |
Net cash (used for) financing activities |
|
|
(105.8 |
) |
|
|
(64.6 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(2.5 |
) |
|
|
0.7 |
|
Net (decrease) in cash and cash equivalents |
|
|
(20.6 |
) |
|
|
(62.2 |
) |
Cash and cash equivalents at beginning of year |
|
|
159.6 |
|
|
|
141.9 |
|
Cash and cash equivalents at end of period |
|
$ |
139.0 |
|
|
$ |
79.7 |
|
Supplemental Reconciliations of GAAP to non-GAAP Results (unaudited)
(Amounts in millions, except per share data)
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 foreign exchange, restructuring charges and related costs, impairments, U.S. pension plan income/expense, separation costs and certain other gains and losses. The Company excludes U.S. pension income/expense in the non-GAAP results as it represents the actuarial net periodic benefit credit/cost recorded as a component of operating income and for all periods presented, the Company was not required and did not make cash contributions to the U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation, nor does the Company expect to make cash contributions to the plan in 2018. Adjusted free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures. The Company believes adjusted free cash flow is useful because it provides insight into the amount of cash that the Company has available for discretionary uses, after expenditures for capital commitments and adjustments for acquisitions and divestitures. Adjusted figures are reported in comparable dollars using the budgeted exchange rate for 2018. The Company uses these adjusted performance measures in managing the business, including communications with its Board of Directors and employees, and believes that they provide users of this financial information with meaningful comparisons of operating performance between current results and results in prior periods. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance, as well as prospects for its future performance. A reconciliation of these adjustments 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.
8
In the following charts, numbers may not sum due to rounding.
Consolidated Results From Continuing Operations – Adjusted EBITDA
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Earnings from continuing operations, Reported |
|
$ |
48 |
|
|
$ |
44 |
|
|
$ |
89 |
|
|
$ |
79 |
|
(Less) Add: Tax expense |
|
|
18 |
|
|
|
25 |
|
|
|
26 |
|
|
|
47 |
|
Earnings before tax, Reported |
|
$ |
65 |
|
|
$ |
69 |
|
|
$ |
115 |
|
|
$ |
126 |
|
Add: Interest/other income and expense, net |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Operating Income, Reported |
|
$ |
66 |
|
|
$ |
69 |
|
|
$ |
116 |
|
|
$ |
127 |
|
Add: U.S. Pension Expense(1) |
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
4 |
|
Add: Cost Reduction Initiatives |
|
|
4 |
|
|
|
- |
|
|
|
5 |
|
|
|
- |
|
Add: Net Proforma International Allocations, Other |
|
|
1 |
|
|
|
1 |
|
|
|
4 |
|
|
|
2 |
|
Add (Less): Net Environmental Expense (Recoveries) |
|
|
1 |
|
|
|
(2 |
) |
|
|
2 |
|
|
|
(2 |
) |
Add: Foreign Exchange Movements |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
Add: D&A |
|
|
21 |
|
|
|
14 |
|
|
|
44 |
|
|
|
28 |
|
Adjusted EBITDA |
|
$ |
95 |
|
|
$ |
85 |
|
|
$ |
174 |
|
|
$ |
160 |
|
(1) U.S. pension expense represents the actuarial net periodic benefit cost expected to be recorded as a component of operating income. For all periods presented, we were not required and did not make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation.
Mineral Fiber
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Operating Income, Reported |
|
$ |
60 |
|
|
$ |
64 |
|
|
$ |
103 |
|
|
$ |
120 |
|
Add: Cost Reduction Initiatives |
|
|
4 |
|
|
|
- |
|
|
|
5 |
|
|
|
- |
|
Add: Net Proforma International Allocations, Other |
|
|
1 |
|
|
|
1 |
|
|
|
3 |
|
|
|
1 |
|
Add (Less): Net Environmental Expense (Recoveries) |
|
|
1 |
|
|
|
(2 |
) |
|
|
2 |
|
|
|
(2 |
) |
Add: D&A |
|
|
21 |
|
|
|
14 |
|
|
|
43 |
|
|
|
27 |
|
Adjusted EBITDA |
|
$ |
86 |
|
|
$ |
76 |
|
|
$ |
156 |
|
|
$ |
146 |
|
9
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Operating Income, Reported |
|
$ |
9 |
|
|
$ |
8 |
|
|
$ |
17 |
|
|
$ |
13 |
|
Add: D&A |
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
Adjusted EBITDA |
|
$ |
9 |
|
|
$ |
9 |
|
|
$ |
18 |
|
|
$ |
14 |
|
Unallocated Corporate
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Operating (Loss), Reported |
|
$ |
(2 |
) |
|
$ |
(3 |
) |
|
$ |
(5 |
) |
|
$ |
(6 |
) |
Add: U.S. Pension Expense(1) |
|
|
1 |
|
|
|
2 |
|
|
|
3 |
|
|
|
4 |
|
Add: Net Proforma International Allocations, Other |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Add: D&A |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Adjusted EBITDA |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Adjustment to 2017 Results
|
CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS |
|
|||||||||||||||||
|
Three Months Ended March 31, 2017 |
|
|
Three Months Ended June 30, 2017 |
|
|
Three Months Ended September 30, 2017 |
|
|
Three Months Ended December 31, 2017 |
|
|
Year Ended December 31, 2017 |
|
|||||
Adjusted EBITDA Previously Reported |
$ |
75 |
|
|
$ |
84 |
|
|
$ |
93 |
|
|
$ |
65 |
|
|
$ |
317 |
|
Impact of ASU 2017-07 |
|
- |
|
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
2 |
|
Adjusted EBITDA |
$ |
75 |
|
|
$ |
85 |
|
|
$ |
94 |
|
|
$ |
65 |
|
|
$ |
319 |
|
(1) This new accounting standard, which was effective January 1, 2018, requires all components of our supplemental pension and post-retirement benefit plans, excluding service costs, to be recorded below operating income/EBITDA. These changes also apply to the Mineral Fiber segment.
10
Adjusted Free Cash Flow
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||
Net cash provided by operations |
|
$ |
63 |
|
|
$ |
32 |
|
|
$ |
89 |
|
|
$ |
42 |
|
(Less): net cash (used for) investing |
|
|
(7 |
) |
|
|
(3 |
) |
|
|
(1 |
) |
|
|
(41 |
) |
Add: Acquisitions |
|
|
12 |
|
|
|
- |
|
|
|
12 |
|
|
|
31 |
|
Add: Other |
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
1 |
|
Adjusted Free Cash Flow |
|
$ |
67 |
|
|
$ |
28 |
|
|
$ |
99 |
|
|
$ |
33 |
|
Consolidated Results From Continuing Operations – Adjusted Diluted Earnings Per Share
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
||||||||||||||||||||
|
|
Total |
|
|
Per Diluted Share(2) |
|
|
Total |
|
|
Per Diluted Share(2) |
|
|
Total |
|
|
Per Diluted Share(2) |
|
|
Total |
|
|
Per Diluted Share(2) |
|
||||||||
Earnings from continuing operations, As Reported |
|
$ |
48 |
|
|
$ |
0.90 |
|
|
$ |
44 |
|
|
$ |
0.81 |
|
|
$ |
89 |
|
|
$ |
1.66 |
|
|
$ |
79 |
|
|
$ |
1.46 |
|
Add: Income tax expense, as reported |
|
|
18 |
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
47 |
|
|
|
|
|
Earnings from continuing operations before income taxes, As Reported |
|
$ |
65 |
|
|
|
|
|
|
$ |
69 |
|
|
|
|
|
|
$ |
115 |
|
|
|
|
|
|
$ |
126 |
|
|
|
|
|
(Less): U.S. Pension (Credit)(1) |
|
|
(7 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
|
|
|
|
(12 |
) |
|
|
|
|
Add: Cost Reduction Initiatives |
|
|
9 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Add: Net Proforma International Allocations |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
Add: Net Environmental Expenses |
|
|
1 |
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
Add: Foreign Exchange Movements |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
Adjusted earnings from continuing operations before income taxes |
|
$ |
69 |
|
|
|
|
|
|
$ |
62 |
|
|
|
|
|
|
$ |
125 |
|
|
|
|
|
|
$ |
115 |
|
|
|
|
|
Add: Adjusted tax (expense) @ 25% for 2018 and 2017 |
|
|
(17 |
) |
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
(31 |
) |
|
|
|
|
|
|
(29 |
) |
|
|
|
|
Adjusted net income |
|
$ |
52 |
|
|
$ |
1.01 |
|
|
$ |
47 |
|
|
$ |
0.87 |
|
|
$ |
94 |
|
|
$ |
1.81 |
|
|
$ |
86 |
|
|
$ |
1.60 |
|
(1) U.S. pension (credit) expense represents the actuarial net periodic pension (credit) cost recorded as a component of operating income. For all periods presented, we were not required and did not make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation.
(2) Based on ~52 million diluted shares outstanding for the three and six months ended Jun 30, 2018 and ~54 million diluted shares outstanding for the three and six months ended Mar 31, 2017.
11
Earnings Call Presentation 2nd Quarter 2018 July 31, 2018 Exhibit 99.2
Our disclosures in this presentation, including without limitation, those relating to future financial results market conditions and guidance, 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,” “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 may affect our ability to achieve the projected performance is included in the “Risk Factors” and “Management’s Discussion and Analysis” sections of our reports on Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”). 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. 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 are included within this presentation and available on the Investor Relations page of our website at www.armstrongceilings.com. The guidance in this presentation is only effective as of the date given, July 31, 2018 and will not be updated or affirmed unless and until we publicly announce updated or affirmed guidance. Safe Harbor Statement
All dollar figures throughout the presentation are in $ millions (except earnings per share) unless otherwise noted. Figures may not add due to rounding. When reporting our financial results within this presentation, we make several adjustments. Management uses the non-GAAP measures 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. Basis of Presentation Explanation Results throughout this presentation are presented on a continuing operations basis with the exception of cash flow. With the pending sale of our EMEA and Pacific Rim businesses, we no longer adjust our sales for movements in foreign exchange rates as we expect these to have minimal impact on revenue. We remove the impact of certain discrete expenses and income. Examples include plant closures, restructuring actions, environmental site expenses and related insurance recoveries, and other large unusual items. We also adjust for our U.S. pension plan (credit) expense(1). Taxes for adjusted net income and adjusted diluted EPS are calculated using a constant 25% rate. Segment SG&A cost structures reflect updated cost allocation methodology. U.S. pension (credit) expense represents the actuarial net periodic benefit cost expected to be recorded as a component of operating income. For all periods presented, we were not required and did not make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation, nor do we expect to make cash contributions to the plan in 2018.
Consolidated Company Key Metrics - Second Quarter 2018 (1) As reported EPS: $0.90 in 2018 and $0.81 in 2017 2018 2017 Variance Net Sales $248.6 $225.6 0.10195035460992918 Adj. EBITDA $95.1 64 $84.741 0.12224307006053725 % of Sales 0.38254223652453739 0.37562499999999999 70 Adj. Earnings Per Share (1) $1.0054069615384611 $0.86815994444444433 0.15808955247508494 Adj. Free Cash Flow $67 $28 1.3928571428571428 Net Debt $706 $684.7 $21.299999999999955
Adjusted EBITDA Bridge – Second Quarter 2018 vs. PY $8 $2 ($4) ($3) $1 $5 Adjusted EBITDA up 12% $2 (1) (1) Other includes discontinued operation costs recognized in the Americas and international cost allocation adjustments.
Adjusted Free Cash Flow Bridge – Second Quarter 2018 vs. PY $0 “Other” driven mainly by $12M increase in income taxes payable $0 $18 $4 $4 $13
Mineral fiber sales grew 9% boosted by positive volume, price and mix EBITDA up 13% for the quarter as higher volume and AUV gains and contributions from WAVE were partially offset by higher SG&A and inflation Mineral Fiber Second Quarter Results Strong volume and AUV gains partially offset by higher SG&A expenses and input costs Key Highlights 2017 Q2 Adjusted EBITDA $76 AUV 2 Mix fall through negatively impacted by sales to Latin America and US home centers Volume 5 Volume increase driven by new construction activity, Latin America and home centers Manufacturing & Input Costs -2 Productivity gains offset by inflation and one-time transition expenses SG&A -2 Legal expenses higher year on year WAVE 5 Net sales up over 15% and achieved price over steel inflation Other 2 International cost allocation adjustments 2018 Q2 Adjusted EBITDA $86
Sales up 18% driven by organic sales growth and increased market penetration Profitability up 5% as volume gains fall through Architectural Specialties Second Quarter Results Continued strong sales gains in the quarter Key Highlights 2017 Q2 Adjusted EBITDA $9 Sales 2 Strong organic growth Period Expense (1) Higher volume impacts period expense SG&A (1) Adding technical and sales support resources 2018 Q2 Adjusted EBITDA $9 EBITDA up 5%
Consolidated Company Key Metrics – 1st Half 2018 As reported EPS: $1.66 in 2018 and $1.46 in 2017 2018 2017 Variance Net Sales $475.9 $445.4 6.8477772788504643E-2 Adj. EBITDA $173.93029200000001 64 $159.965 8.7302172350201657E-2 % of Sales 0.36547655389787775 0.35914907947911989 60 Adj. Earnings Per Share (2) $1.64 $1.6 2.4999999999999911E-2 Adj. Free Cash Flow $99.299999999999983 $33 2.0090909090909084
Adjusted EBITDA Bridge – 1st Half 2018 vs. PY $6 $7 ($8) $0 $3 $3 Adjusted EBITDA up 9% $4 (1) (1) Other includes discontinued operation costs recognized in the Americas and international cost allocation adjustments.
Adjusted Free Cash Flow Bridge – 1st Half 2018 vs. PY $6 Adjusted Free Cash Flow includes the receipt of cash (net of $26) from insurance settlements reached in the second half of 2017 $43 $19 $0 $1 $9
2018 Guidance $3.60 – $3.82 19% – 27% YoY Growth $3.02 Adjusted EBITDA Adjusted EPS(1) Adjusted Free Cash Flow(2) Revenue $894 $319(3) $935– $955 5% – 7% YoY Growth $345 – $360 >10% YoY Growth $175 – $190 20% – 30% YoY Growth $147 As reported expected earnings per share in 2018 of $3.94 - $4.13. 2017 EPS calculated using 54 million shares. Cash flow from operations includes international discontinued operations and dividends from the WAVE JV. Change due to pension accounting from $317. 0% - 2% Mineral Fiber volume >15% Architectural Specialties volume >3% Average Unit Value (AUV) increase 3% – 4% earnings contribution from AUV Architectural Specialties volume contribution Manufacturing productivity over inflation First phase of restructuring savings in 2018 $180 cash flow from operations $70 of total capital expenditures Cash tax rate 20% – 25% FCF per share 24% - 35% YoY growth 2017 Results 2018 Guidance $35 of interest expense 25% tax rate for both 2017 and 2018 52 million average diluted shares outstanding
Appendix
Adjusted EBITDA Reconciliation CONSOLIDATED For the Three MonthsEnded June 30, For the Six MonthsEnded June 30, qtr YTD 2018 2017 V 2018 2017 V Earnings from continuing operations, Reported 47.59999999999998 43.699999999999996 3.8999999999999844 88.799999999999983 79.2 9.5999999999999801 rounding Add: Tax expense 17.7 24.9 -7.1999999999999993 25.9 46.7 -20.800000000000004 Earnings before tax, Reported 65.299999999999983 68.599999999999994 -3.3000000000000114 114.69999999999999 125.9 -11.200000000000017 rounding Less: Interest/other expense 0.70000000000000107 0.59999999999999964 - 0.89999999999999858 0.60000000000000142 - Operating Income, Reported 66 69.199999999999989 -3.1999999999999886 115.6 126.5 -10.900000000000006 Add: U.S. pension expense 1.4346810000000001 2.085121 -0.65043999999999991 2.8690000000000002 4.17 -1.3009999999999997 Add: Cost Reduction Initiatives 4.4171620000000003 0 4.4171620000000003 5.0264439999999997 0 5.0264439999999997 Add: Net Proforma International Allocations, Other 1.0840000000000001 1.2 - 3.9333659999999999 2.4 1.533366 Add: Net Environmental Recoveries 1.08 -2.2164269999999999 3.296427 2.4350000000000001 -1.524 3.9590000000000001 Add: Foreign Exchange Movements - - - - 0.59399999999999997 0 Add: Depreciation and Amortization 21 14.141000000000005 6.8589999999999947 43.830292000000014 27.792000000000002 16.038292000000013 Adjusted EBITDA 95.1 84.741 10.358999999999995 173.69410200000002 159.93199999999999 14.356102000000007 rounding
Adjusted Diluted Earnings Per Share Reconciliation Based on ~52 million diluted shares outstanding for the three months ended March 31, 2018 and ~54 million diluted shares outstanding for the three months ended March 31, 2017. CONSOLIDATED For the Three MonthsEnded Jun 30, For the Six MonthsEnded Jun 30, 2018 Per DilutedShare(1) 2017 Per DilutedShare(1) V 2018 Per DilutedShare(1) 2017 Per DilutedShare(1) V Qtr YTD Earnings from continuing operations, As Reported 47.59999999999998 $0.9 43.699999999999996 $0.81 3.8999999999999844 88.799999999999983 $1.66 79.2 $1.46 9.5999999999999801 rounding Add: Income tax expense, as reported 17.7 24.9 -7.1999999999999993 25.9 46.7 -20.800000000000004 Earnings from continuing operations before income taxes, As Reported 65.299999999999983 68.599999999999994 -3.3000000000000114 114.69999999999999 125.9 -11.200000000000017 rounding rounding (Less): U.S. Pension (Credit) -7 -6 -1 -13 -12 -1 Add: Cost reduction initiatives 8.7171620000000001 0 8.7171620000000001 17.026443999999998 0 17.026443999999998 Add: Net Proforma International Allocations, Other 1.0840000000000001 1.2 0 3.9333659999999999 2.4 1.533366 Add: Net Environmental Expenses 1.08 -2.2164269999999999 3.296427 2.4350000000000001 -1.524 3.9590000000000001 Add: Foreign Exchange Movements - - - - 0.59399999999999997 - Adjusted earnings from continuing operations before income taxes 69.281161999999981 61.880636999999993 7.4005249999999876 125.29481 115.37 9.9248099999999937 Add: Adjusted tax (expense) @ 25% for 2018 and 2017 -17 -15 -2 -31 -29 -2 Adjusted net income 52.281161999999981 $1.0054069615384611 46.880636999999993 $0.86815994444444433 5.4005249999999876 94.294809999999998 $1.81 86.37 $1.6 -
Adjusted Free Cash Flow Reconciliation Adjusted free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures. The Company believes adjusted free cash flow is useful because it provides insight into the amount of cash that the Company has available for discretionary uses, after expenditures for capital commitments and adjustments for acquisitions and divestitures. Free cash flow includes discontinued international operations. Q2 2018 Q2 2017 1H 2018 1H 2017 As Reported Net cash provided by operating activities $63 $32 $89 $42 As Reported Net cash provided by (used for) investing activities $-7 $-3 $-1 $-41 Subtotal $56 $29 $88 $1 Add: Acquisitions $12 - $11.6 $31.4 Add: Other - $-1 - $1 Adjusted Free Cash Flow (1) $67 $28 $99 $33
Segment Reported Operating Income (Loss) to Adjusted EBITDA Q2 2018 vs. PY 1H 2018 vs. PY MINERAL FIBER ARCHITECTURAL SPECIALTIES UNALLOCATED CORPORATE rounding factor 2016 V 2018 2017 V 2018 2017 V 2018 2017 V Operating Income (Loss) – As Reported 59.5 64.099999999999994 -4.5999999999999943 8.6 8.1 0.5 -2.4 -3 0.60000000000000009 Add: U.S. pension expense 0 0 0 0 0 0 1.4346810000000001 2.085121 -0.65043999999999991 Add: Cost Reduction Initiatives 4.4171620000000003 0 4.4171620000000003 - 0 - 0 0 0 Add: Net Proforma International Allocations, Other 0.5 0.52500000000000002 - 0 0 0 0.84891499999999986 0.67500000000000004 - check cell n12, was not working properly Add: Net Environmental Expenses 1.08 -2.2164269999999999 3.296427 0 0 0 0 0 0 Add: Depreciation and Amortization 20.612610000000004 13.555 7.0576100000000039 - - - - - - EBITDA – Adjusted 86.049610000000001 76.155000000000001 9.8946100000000001 9.0109999999999992 8.5640000000000001 0 0 0 0 MINERAL FIBER ARCHITECTURAL SPECIALTIES UNALLOCATED CORPORATE rounding factor 2016 V 2018 2017 V 2018 2017 V 2018 2017 V Operating Income (Loss) – As Reported 103.2 119.6 -16.399999999999991 16.899999999999999 12.9 3.9999999999999982 -4.5 -6 1.5 Add: U.S. pension expense 0 0 0 0 0 0 2.8690000000000002 4.17 -1.3009999999999997 Add: Cost Reduction Initiatives 4.9851929999999998 0 4.9851929999999998 - 0 - 0 0 0 Add: Net Proforma International Allocations, Other 2.5 1.05 1.45 0 0 0 1.4333659999999999 1.35 - check cell n12, was not working properly Add: Net Environmental Expenses 2.4350000000000001 -1.524 3.9590000000000001 0 0 0 0 0 0 Add: Depreciation and Amortization 42.919806999999992 26.734999999999999 16.184806999999992 -1.8999999999999986 -1 -0.89999999999999858 - - - EBITDA – Adjusted 156.04 146.261 9.7789999999999964 17.889408 13.766999999999999 4.1224080000000001 0 0 0
Net Sales & EBITDA – Guidance Reconciliation Net Sales Adjusted EBITDA For the Year Ending December 31, 2018 Low to High Reported Net Sales $935 to $955 For the Year Ending December 31, 2018 Low to High Net income $205 to $215 Add: Interest expense 35 35 Add: Income tax expense 65 70 Operating income $305 to $320 Add: U.S. pension expense -20 -20 Add: D&A 60 60 Adjusted EBITDA $345 to $360
Adjusted EPS & Free Cash Flow – Guidance Reconciliation Adjusted Diluted Earnings Per Share Adjusted Free Cash Flow Adjusted EPS guidance for 2018 is calculated based on an adjusted effective tax rate of 25% and based on ~52 million of diluted shares outstanding. For the Year Ending December 31, 2018 Low to High Net cash provided by operating activities $175 to $190 Add: Return of investment from joint venture 70 70 Adjusted net cash provided by operating activities $245 to $260 Less: Capital Expenditures -70 -70 Adjusted Free Cash Flow $175 to $190 For the Year Ending December 31, 2018 Low Per DilutedShare(1) to High Per DilutedShare(1) Net Income $205 $3.94 to $215 $4.13 Add: Interest Expense 35 35 Add: Income Tax Expense 65 70 Operating Income $305 to $320 Less: U.S. Pension (Credit) -20 -20 Less: Interest expense -35 -35 Adjusted Earnings before Income Taxes $250 to $265 Less: Income Tax Expense -63 -66.25 Adjusted Net Income $187 $3.6 to $198.75 $3.82
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