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 30, 2015

 

 

ARMSTRONG WORLD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Pennsylvania   1-2116   23-0366390

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

2500 Columbia Avenue P.O. Box 3001

Lancaster, Pennsylvania

  17603
(Address of principal executive offices)   (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))

 

 

 


Section 2 - Financial Information

 

Item 2.02 Results of Operations and Financial Condition.

On July 30, 2015, Armstrong World Industries, Inc. (the “Company”) issued a press release announcing its second quarter 2015 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 30, 2015, the Company issued a press release announcing that it will report its second quarter 2015 consolidated financial results via a webcast and conference call on Thursday, July 30, 2015 at 11:00 a.m. Eastern Time which can be accessed through the “For Investors” section of the Company’s website, www.armstrong.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 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    Press Release of Armstrong World Industries, Inc. dated July 30, 2015
No. 99.2    Earnings Call Presentation Second Quarter 2015 dated July 30, 2015

 

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SIGNATURES

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.
By:  

/s/ Mark A. Hershey

  Mark A. Hershey
  Senior Vice President, General Counsel and Chief Compliance Officer

Date: July 30, 2015

 

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Exhibit 99.1

 

 

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Armstrong World Industries

Reports Second Quarter 2015 Results

Key Highlights

 

    Second quarter operating income from continuing operations of $63.1 million, down 1% over the 2014 period impacted by separation costs and higher non-cash U.S. Pension expense

 

    Second quarter adjusted EBITDA from continuing operations of $112 million, up 8% over the 2014 period

 

    Upon completion of the separation, Brian MacNeal to become CFO of Armstrong World Industries and Jay Thompson to become CFO of Armstrong Flooring

 

    Upon completion of the separation, Dave Schulz to become COO of Armstrong Flooring

LANCASTER, Pa., July 30, 2015 —Armstrong World Industries, Inc. (NYSE: AWI), a global leader in the design and manufacture of floors and ceilings systems, today reported second quarter 2015 results.

Second Quarter Results from continuing operations

 

(Amounts in millions except per share data)    Three Months Ended June 30,         
     2015      2014      Change  

Net sales

   $ 632.7       $ 659.1         (4.0 %) 

Operating income

     63.1         63.6         (0.8 %) 

Net income

     29.9         26.6         12.4

Diluted earnings per share

   $ 0.53       $ 0.48         10.4

Excluding the unfavorable impact from foreign exchange of $24 million, consolidated net sales decreased 0.4% compared to the prior year period, driven by lower volumes primarily in the Wood business and Building Products in EMEA, which more than offset the impact from favorable price and mix.

Operating income declined compared to the prior year period driven by higher non-cash U.S. pension expense, costs associated with the previously announced separation project and the margin impact of lower volumes; which were only partially offset by lower input costs, favorable price and mix and improvements in productivity. Higher SG&A expense, primarily to support go-to-market initiatives in the Americas Resilient business, also negatively impacted operating income. Net income improved driven by the favorable impact from transactional foreign exchange.

 

 

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“The majority of the sales decline in the second quarter was caused by foreign exchange movements,” said Matt Espe, CEO. “Despite the muted top line performance in the first half of the year impacted by foreign exchange headwinds and market related softness, we’re maintaining our adjusted EBITDA and adjusted EPS guidance for the full year 2015, which remain unchanged at the midpoint.”

Additional (non-GAAP*) Financial Metrics from continuing operations

 

(Amounts in millions except per share data)    Three Months Ended June 30,         
     2015      2014      Change  

Adjusted operating income

   $ 82       $ 73         13

Adjusted net income

   $ 45       $ 37         24

Adjusted diluted earnings per share

   $ 0.81       $ 0.66         23

Free cash flow

   $ 77       $ 9         Favorable   

 

(Amounts in millions)    Three Months Ended June 30,         
     2015      2014      Change  

Adjusted EBITDA

        

Building Products

   $ 81       $ 83         (2 %) 

Resilient Flooring

     32         29         8

Wood Flooring

     11         8         42

Unallocated Corporate

     (12      (16      23
  

 

 

    

 

 

    

 

 

 

Consolidated Adjusted EBITDA

   $ 112       $ 104         8

 

* The Company uses the above non-GAAP adjusted measures, as well as other non-GAAP measures mentioned below, in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. Adjusted operating income, adjusted EBITDA, adjusted net income, and adjusted EPS exclude the impact of foreign exchange, restructuring charges and related costs, impairments, the non-cash impact of the U.S. pension plan, separation costs and certain other nonrecurring gains and losses. Free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, less restricted cash, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures. The company believes 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/divestitures. Adjusted figures are reported in comparable dollars using the budgeted exchange rate for 2015, and are reconciled to the most comparable GAAP measures in tables at the end of this release.

Adjusted operating income and adjusted EBITDA improved by 13% and 8%, respectively, in the second quarter of 2015 when compared to the prior year period. The improvement in adjusted EBITDA was driven by lower manufacturing and input costs and favorable price and mix, which were only partially offset by higher SG&A spending and the margin impact of lower volumes. Adjusted earnings per share is calculated using a 39% adjusted tax rate in both periods. The increase in free cash flow was driven by improvements in working capital, lower capital expenditures and higher cash earnings.

 

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Second Quarter Segment Highlights

Building Products

 

     Three Months Ended June 30,         
     2015      2014      Change  

Total segment net sales

   $ 306.1       $ 323.5         (5.4 %) 

Operating income

   $ 64.2       $ 64.9         (1.1 %) 

Excluding the unfavorable impact of foreign exchange of approximately $20 million, net sales increased slightly as favorable price and mix offset the impact of lower volumes, primarily in EMEA. Operating income declined in the second quarter of 2015, as the margin impact of lower volumes and higher SG&A expenses were only partially offset by favorable price and mix and lower manufacturing and input costs.

Resilient Flooring

 

     Three Months Ended June 30,         
     2015      2014      Change  

Total segment net sales

   $ 199.9       $ 196.2         1.9

Operating income

   $ 23.2       $ 20.7         12.1

Net sales increased driven by strong volume growth in the Americas commercial business, which was only partially offset by unfavorable price and mix. Volume improvement in the Americas commercial business was partially aided by favorable market share shifts as a result of competitive product availability issues and our service proposition relative to competition. Operating income improved as productivity, lower input costs and the margin impact of higher volumes more than offset increased SG&A expenses to support go-to-market initiatives in the Americas and the unfavorable impact from price and mix.

 

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Wood Flooring

 

     Three Months Ended June 30,         
     2015      2014      Change  

Total segment net sales

   $ 126.7       $ 139.4         (9.1 %) 

Operating income (loss)

   $ 2.5       ($ 2.6      Favorable   

Net sales decreased driven by volume declines caused by market share shifts as a result of prior year price and mix optimization actions, inventory adjustments at home centers, and engineered wood product availability challenges. Operating income improved driven by lower manufacturing and input costs which more than offset the margin impact of lower volumes, unfavorable price and mix and a slight increase in SG&A expense. The comparison was also impacted by $4 million of expense recorded in the second quarter of 2015 resulting from new duty rates assigned to separate rate importers of multilayered hardwood flooring from China by the U.S. Department of Commerce in connection with its second annual administrative review of its 2010 anti-dumping and countervailing duty orders. The comparison was also impacted by $4 million of idle equipment impairment charges and $3 million of severance and other charges associated with the closure of our engineered wood flooring plant in Kunshan China that were recorded in the second quarter of 2014.

Corporate

Unallocated corporate expense of $26.8 million increased from $19.4 million in the prior year due to increased U.S. pension costs of $7 million and separation costs of $5 million, which more than offset expense reductions across corporate functions.

Year to Date Results from continuing operations

 

(Amounts in millions)    Six Months Ended June 30,         
     2015      2014      Change  

Net sales (as reported)

   $ 1,184.1       $ 1,249.1         (5.2 %) 

Operating income (as reported)

     98.9         117.4         (15.8 %) 

Adjusted EBITDA

     186         187         0

Free cash flow

     35         (45      Favorable   

Excluding the unfavorable impact from foreign exchange of $43 million, consolidated net sales decreased compared to the prior year period as volume declines were only partially offset by favorable price and mix.

 

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Operating income declined by 16% driven primarily by higher non-cash U.S. pension costs and costs associated with the previously announced separation project. Adjusted EBITDA was essentially unchanged when compared to the prior year period as lower manufacturing and input costs and favorable price and mix offset the margin impact of lower volumes, higher SG&A expenses and lower earnings from WAVE. The increase in free cash flow was driven by improvements in working capital and lower capital expenditures, which were only partially offset by lower cash earnings and dividends from the WAVE joint venture.

Market Outlook and 2015 Guidance (1)

“Primarily due to foreign exchange headwinds and restrained market activity in Europe and U.S. repair and remodel, we now expect full year sales to be in the $2.4 to $2.5 billion range,” said Dave Schulz, CFO.

The Company is reiterating and narrowing its expected ranges for full year 2015 adjusted EBITDA and adjusted earnings per share, and now expects adjusted EBITDA to be in the $355 to $385 million range and adjusted EPS to be in the range of $2.05 to $2.35 per diluted share.

 

(1)  Sales guidance includes the impact of foreign exchange. Guidance metrics, other than sales, are presented using 2015 budgeted foreign exchange rates. Adjusted EPS guidance for 2015 is calculated based on an adjusted effective tax rate of 39%.

Earnings Webcast

Management will host a live Internet broadcast beginning at 11:00 a.m. Eastern time today, to discuss second quarter 2015 results, market outlook and 2015 guidance. During the earnings webcast, the appointments of MacNeal, Thompson and Schulz will be discussed. This event will be broadcast live on the Company’s Web site. To access the call and accompanying slide presentation, go to www.armstrong.com and click “For Investors.” The replay of this event will also be available on the Company’s Web site 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 guidance and our plan to separate our Flooring business from our Ceilings (Building Products) business 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

 

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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” 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.

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, 2015 that the Company expects to file with the SEC today.

Armstrong World Industries, Inc. is a global leader in the design and manufacture of floors and ceilings. In 2014, Armstrong’s consolidated net sales from continuing operations totaled approximately $2.5 billion. As of June 30, 2015, Armstrong operated 32 plants in nine countries and had approximately 7,600 employees worldwide.

Additional forward looking non-GAAP metrics are available on the Company’s web site at http://www.armstrong.com/ under the Investor Relations 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.

 

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As Reported Financial Highlights

FINANCIAL HIGHLIGHTS

Armstrong World Industries, Inc. and Subsidiaries

(amounts in millions, except for per-share amounts, quarterly and year to date data is unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014     2015     2014  

Net Sales

   $ 632.7      $ 659.1      $ 1,184.1      $ 1,249.1   

Costs of goods sold

     474.8        512.1        896.7        960.0   

Selling general and administrative expenses

     106.1        100.2        209.1        203.3   

Separation costs

     5.1        —          9.4        —     

Goodwill impairment

     —          0.8        —          0.8   

Equity (earnings) from joint venture

     (16.4     (17.6     (30.0     (32.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     63.1        63.6        98.9        117.4   

Interest expense

     11.4        11.8        22.6        23.4   

Other non-operating expense

     0.2        1.2        1.5        6.6   

Other non-operating (income)

     (3.6     (0.6     (4.2     (1.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from continuing operations before income taxes

     55.1        51.2        79.0        88.6   

Income tax expense

     25.2        24.6        45.3        43.9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings from continuing operations

   $ 29.9      $ 26.6      $ 33.7      $ 44.7   

Net (loss) from discontinued operations, net of tax (benefit) of $-, $-, $- and $-

     —          (5.6     —          (6.8

(Loss) earnings from disposal of discontinued business, net of tax (benefit) of ($-), ($1.2), ($43.4) and ($1.2)

     (0.3     (2.1     42.5        (2.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) earnings from discontinued operations

     (0.3     (7.7     42.5        (8.9

Net earnings

   $ 29.6      $ 18.9      $ 76.2      $ 35.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax:

        

Foreign currency translation adjustments

     7.4        4.5        (7.9     4.1   

Derivative (loss)

     (0.6     (5.6     (1.1     (6.2

Pension and postretirement adjustments

     9.2        5.7        21.1        12.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income

     16.0        4.6        12.1        10.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 45.6      $ 23.5      $ 88.3      $ 46.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share of common stock, continuing operations

        

Basic

   $ 0.53      $ 0.48      $ 0.60      $ 0.81   

Diluted

   $ 0.53      $ 0.48      $ 0.60      $ 0.80   

(Loss) earnings per share of common stock, discontinued operations

        

Basic

   ($ 0.01   ($ 0.14   $ 0.76      ($ 0.16

Diluted

   ($ 0.01   ($ 0.14   $ 0.76      ($ 0.16

Net earnings per share of common stock:

        

Basic

   $ 0.53      $ 0.34      $ 1.36      $ 0.65   

Diluted

   $ 0.53      $ 0.34      $ 1.36      $ 0.64   

Average number of common shares outstanding

        

Basic

     55.5        54.8        55.4        54.8   

Diluted

     55.8        55.3        55.8        55.2   

 

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SEGMENT RESULTS

Armstrong World Industries, Inc. and Subsidiaries

(amounts in millions)

(Unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2015     2014     2015     2014  

Net Sales

        

Building Products

   $ 306.1      $ 323.5      $ 598.1      $ 631.7   

Resilient Flooring

     199.9        196.2        356.7        359.9   

Wood Flooring

     126.7        139.4        229.3        257.5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

   $ 632.7      $ 659.1      $ 1,184.1      $ 1,249.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (loss)

        

Building Products

   $ 64.2      $ 64.9      $ 124.0      $ 122.7   

Resilient Flooring

     23.2        20.7        29.1        31.1   

Wood Flooring

     2.5        (2.6     1.3        2.5   

Unallocated Corporate (expense)

     (26.8     (19.4     (55.5     (38.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Operating Income

   $ 63.1      $ 63.6      $ 98.9      $ 117.4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Selected Balance Sheet Information

(amounts in millions)

 

     June 30, 2015      December 31, 2014  

Assets

     

Current assets

   $ 860.0       $ 811.5   

Property, plant and equipment, net

     1,068.3         1,062.4   

Other noncurrent assets

     729.6         732.3   
  

 

 

    

 

 

 

Total assets

   $ 2,657.9       $ 2,606.2   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Current liabilities

   $ 410.9       $ 388.1   

Noncurrent liabilities

     1,499.7         1,569.0   

Equity

     747.3         649.1   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 2,657.9       $ 2,606.2   
  

 

 

    

 

 

 

 

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Selected Cash Flow Information

(amounts in millions)

 

     Six Months Ended June 30,  
     2015     2014  

Net income

   $ 76.2      $ 35.8   

Other adjustments to reconcile net income to net cash provided by operating activities

     12.8        68.5   

Changes in operating assets and liabilities, net

     (30.1     (81.9
  

 

 

   

 

 

 

Net cash provided by operating activities

     58.9        22.4   

Net cash (used for) investing activities

     (24.3     (67.8

Net cash (used for) provided by financing activities

     (15.0     61.3   

Effect of exchange rate changes on cash and cash equivalents

     (3.3     1.5   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     16.3        17.4   

Cash and cash equivalents, beginning of period

     185.3        135.2   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 201.6      $ 152.6   

Cash and cash equivalents at end of period of discontinued operations

     —        ($ 7.1
  

 

 

   

 

 

 

Cash and cash equivalents at end of period of continuing operations

   $ 201.6      $ 159.7   
  

 

 

   

 

 

 

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, the non-cash impact of the U.S. pension plan, separation costs and certain other gains and losses. Adjusted figures are reported in comparable dollars using the budgeted exchange rate for 2015. 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.

 

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CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2014      2015      2014  

Adjusted EBITDA

   $ 112       $ 104       $ 186       $ 187   

D&A/Fx*

     (30      (31      (58      (59
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income, Adjusted

   $ 82       $ 73       $ 128       $ 128   

Non-cash impact of U.S. Pension

     6         —           13         —     

Separation costs

     5         —           9         —     

Cost reduction initiatives expenses (income)

     —           7         (1      7   

Multilayered Wood flooring duties

     4         —           4         —     

Impairment

     —           1         —           1   

Foreign exchange impact

     4         1         4         3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income, Reported

   $ 63       $ 64       $ 99       $ 117   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Excludes accelerated depreciation associated with cost reduction initiatives reflected below. Actual D&A as reported is; $28.9 million for the three months ended June 30, 2015, $32.7 million for the three months ended June 30, 2014, $57.4 million for the six months ended June 30, 2015, and $62.7 million for the six months ended June 30, 2014.

BUILDING PRODUCTS

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2014      2015      2014  

Adjusted EBITDA

   $ 81       $ 83       $ 158       $ 157   

D&A/Fx

     (17      (17      (34      (32
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income, Adjusted

   $ 64       $ 66       $ 124       $ 125   

Foreign exchange impact

     —           1         —           2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income, Reported

   $ 64       $ 65       $ 124       $ 123   
  

 

 

    

 

 

    

 

 

    

 

 

 

RESILIENT FLOORING

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2014      2015      2014  

Adjusted EBITDA

   $ 32       $ 29       $ 43       $ 47   

D&A/Fx

     (7      (6      (13      (14
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income, Adjusted

   $ 25       $ 23       $ 30       $ 33   

Cost reduction initiatives expenses (income)

     —           2         (1      2   

Foreign exchange impact

     2         —           2         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income, Reported

   $ 23       $ 21       $ 29       $ 31   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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WOOD FLOORING

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2014      2015      2014  

Adjusted EBITDA (1)

   $ 11       $ 8       $ 13       $ 16   

D&A/Fx

     (3      (5      (6      (8
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income, Adjusted (1)

   $ 8       $ 3       $ 7       $ 8   

Cost reduction initiatives expenses

     —           5         —           5   

Multilayered Wood flooring duties

     4         —           4         —     

Impairment

     —           1         —           1   

Foreign exchange impact

     1         —           2         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income (Loss), Reported(1)

   $ 3       ($ 3    $ 1       $ 2   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes a $4 million charge recorded in the second quarter of 2015 resulting from new duty rates assigned by the U.S. Department of Commerce on multilayered wood importers and a $1 million gain recorded in the second quarter of 2014 related to a refund of previously paid duties on imports of engineered wood flooring.

UNALLOCATED CORPORATE

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2014      2015      2014  

Adjusted EBITDA

   ($ 12    ($ 16    ($ 28    ($ 33

D&A/Fx

     (3      (3      (5      (5
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating (Loss), Adjusted

   ($ 15    ($ 19    ($ 33    ($ 38

Non-cash impact of U.S. Pension

     6         —           13         —     

Separation costs

     5         —           9         —     

Foreign exchange impact

     1         —           —           1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating (Loss), Reported

   ($ 27    ($ 19    ($ 55    ($ 39
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2014      2015      2014  

CASH FLOW(1)

           

Net cash from operations

   $ 93       $ 55       $ 59       $ 22   

Less: net cash (used for) investing

     (16      (46      (24      (68
  

 

 

    

 

 

    

 

 

    

 

 

 

Add back (subtract) adjustments to reconcile to free cash flow

           

Other

     —           —           —           1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Free Cash Flow

   $ 77       $ 9       $ 35       ($ 45

 

(1)  Cash flow includes cash flows attributable to European Flooring business

 

LOGO


LOGO

 

CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2015      2014      2015      2014  
     Total     Per
Share
     Total     Per
Share
     Total     Per
Share
     Total     Per
Share
 

Adjusted EBITDA

   $ 112         $ 104         $ 186         $ 187     

D&A as reported

     (29        (33        (57        (63  

Fx/Accelerated Deprecation

     (1        2           (1        4     
  

 

 

      

 

 

      

 

 

      

 

 

   

Operating Income, Adjusted

   $ 82         $ 73         $ 128         $ 128     

Other non-operating (expense)

     (8        (13        (20        (29  
  

 

 

      

 

 

      

 

 

      

 

 

   

Earnings Before Taxes, Adjusted

     74           60           108           99     

Adjusted tax (expense) @ 39% for 2015 and 2014

     (29        (23        (42        (38  
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net Earnings, Adjusted

   $ 45      $ 0.81       $ 37      $ 0.66       $ 66      $ 1.18       $ 61      $ 1.10   

Pre-tax adjustment items

     (13        (9        (16        (11  

Non-cash impact of U.S. Pension

     (6        —             (13        —       

Reversal of adjusted tax expense @ 39% for 2015 and 2014

     29           23           42           38     

Ordinary tax

     (17        (15        (24        (27  

Unbenefitted foreign losses

     (7        (9        (16        (16  

Tax adjustment items

     (1        —             (5        —       
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net Earnings, Reported

   $ 30      $ 0.53       $ 27      $ 0.48       $ 34      $ 0.60       $ 45      $ 0.80   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Source: Armstrong World Industries

 

LOGO



Earnings Call
Presentation
2
nd
Quarter 2015
July 30, 2015
Exhibit 99.2


2
Our disclosures in this presentation, including without limitation, those relating to future financial results
guidance and the possible separation of our flooring business from our building products business, 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 or the separation
of our businesses.  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 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.armstrong.com.
The guidance in this presentation is only effective as of the date given, July 30, 2015, and will not be updated or
affirmed unless and until we publicly announce updated or affirmed guidance. 
Safe Harbor Statement
2


3
All figures throughout the presentation are in $ millions 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 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. 
Basis of Presentation Explanation
We report in comparable dollars to remove the
effects of currency translation on the P&L.  The
budgeted exchange rate for 2015 is used for all
currency translations in 2015 and prior years.
Guidance is presented using the 2015 budgeted
exchange rate for the year.  
We remove the impact of discrete expenses and
income.  Examples include plant closures,
restructuring actions, separation costs and other
large unusual items.  We also remove the non-
cash
impact
of
our
U.S.
Pension
Plan. 
Taxes for normalized Net Income and EPS are
calculated using a constant 39% for 2015
guidance, and 2015 and 2014 results, which are
based on the expected full year historical tax
rate.
What Items Are Adjusted
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


4
Key Metrics –
Second Quarter 2015
(1)
As
reported
Net
Sales:
$633
million
in
2015
and
$659
million
in
2014
(2)
As reported Operating Income: $63 million in 2015 and $64 million in 2014
(3)
As reported EPS: $0.53 in 2015 and $0.48 in 2014
(4)
Unadjusted
2015
2014
Variance
Net Sales
(1)
$649
$652
(0.4%)
Operating Income
(2)
82
73
13.1%
% of Sales
12.7%
11.2%
150 bps
EBITDA
112
104
7.7%
% of Sales
17.2%
15.9%
130 bps
Earnings Per Share
(3)
$0.81
$0.66
22.5%
Free Cash Flow
77
9
Favorable
Net Debt
823
963
(140)
ROIC
(4)
6.6%
8.4%
(180 bps)


5
Second Quarter 2015 vs. PY–
Adjusted EBITDA to Reported Net Income
2015
2014
V
EBITDA–
Adjusted
$112
$104
$8
Depreciation and Amortization
(30)
(31)
1
Operating
Income
Adjusted
$82
$73
$9
Non-cash Impact of U.S. Pension
6
-
6
Separation Expenses
5
-
5
Multilayered Wood Flooring Duty
4
-
4
Cost Reduction Initiatives
-
7
(7)
Impairment
-
1
(1)
Foreign Exchange Movements
4
1
3
Operating
Income
As
Reported
$63
$64
($1)
Interest/Other (Expense)
(8)
(13)
5
EBT
$55
$51
$4
Tax (Expense)
(25)
(24)
(1)
Net Income
$30
$27
$3


6
Second Quarter Sales and EBITDA by Segment –
2015 vs. Prior Year
3
3
(2)
4
4%
(8%)
1%
(10%)
(5%)
0%
5%
10%
(10)
(5)
-
5
10
Resilient Flooring
Wood Flooring
Building Products
Corporate
EBITDA Change (Left
-hand scale)
% Change in Sales (Right-hand scale)


7
On a comparable foreign exchange basis sales
increased slightly as favorable price and mix
performance offset volume declines predominantly in
EMEA markets  
Reflects impact of prior price increases and continued
strong mix performance 
Driven by lower volumes in EMEA and the Americas
Reflects the benefit of lower freight costs and
productivity in the Americas
Driven by inflation and higher marketing collateral
expense
Building Products Second Quarter Results
Volume declines and higher SG&A expenses pressure margins despite favorable
price and mix performance
$205
$198
$77
$83
$36
$35
Q2 2015
Q2 2014
Net Sales
Americas
EMEA
Pacific Rim
$318
$316
Key Highlights
Q2 2014 Adjusted EBITDA
$      83M
Price & Mix
6
Volume
(5)
Manufacturing & Input Costs
1
SG&A
(3)
WAVE
(1)
Q2 2015 Adjusted EBITDA
$      81M


8
Sales increased driven by strong volume growth in the
Americas commercial business that was partially aided
by favorable market share shifts as a result of
competitive product availability issues and our service
proposition relative to competition
On a comparable foreign exchange basis sales in the
Pacific Rim increased slightly driven by growth in India
Driven by unfavorable price and mix performance in
residential flooring in the Americas
Volume growth driven by U.S. commercial
Reflects the benefit of favorable input costs
Higher SG&A expense to support go-to-market
initiatives
Resilient Second Quarter Results
Strong commercial volumes in the Americas and favorable input costs drive margin
performance
$177
$172
$26
$24
Q2 2015
Q2 2014
Net Sales
Americas
Pacific Rim
$203
$196
Key Highlights
Q2 2014 Adjusted EBITDA
$      29M
Price & Mix
(3)
Volume
5
Manufacturing & Input Costs
8
SG&A
(7)
Q2 2015 Adjusted EBITDA
$      32M


Despite improvements in mix sales declined driven
primarily by lower volumes
Volume declines were caused by market share shifts
as a result of prior year price and mix optimization
actions, inventory adjustments at home centers, and
engineered wood product availability challenges
Driven by unfavorable price, despite mix improvement
Due to engineered wood product availability challenges
and share loss at opening price points
Reflects the benefit of favorable input costs
Wood Second Quarter Results
Favorable input costs and manufacturing productivity drive margin improvement
$128
$140
Q2 2015
Q2 2014
Net Sales
Americas
$128
$140
Key Highlights
Q2 2014 Adjusted EBITDA
$      8M
Price & Mix
(1)
Volume
(4)
Manufacturing & Input Costs
11
SG&A
(1)
D&A/Other
(2)
Q2 2015 Adjusted EBITDA
$      11M
9


10
$3
$17
$3
$104
$0
$20
$40
$60
$80
$100
$120
$140
2014
Price/Mix
Volume
Input Costs
Mfg Cost
SG&A
WAVE
Change in
D&A
2015
($1)
$112
($1)
($8)
EBITDA Bridge –
Second Quarter 2015 vs. Prior Year
($5)


11
$7
$33
$32
$0
$77
$9
$0
$20
$40
$60
$80
$100
2014
Cash
Earnings
Working
Capital
Capex
Interest
Expense
WAVE
Dividends
Other
2015
($3)
($1)
Free Cash Flow –
Second Quarter 2015 vs. Prior Year


12
Key Metrics –
1
st
Half 2015
(1)
As
reported
Net
Sales:
$1,184
million
in
2015
and
$1,249
million
in
2014
(2)
As reported Operating Income: $99 million in 2015 and $117 million in 2014
(3)
As reported EPS: $0.60 in 2015 and $0.80 in 2014
(4)
Unadjusted
2015
2014
Variance
Net Sales
(1)
$1,214
$1,236
(1.8%)
Operating Income
(2)
128
128
(0.1%)
% of Sales
10.5%
10.4%
10 bps
EBITDA
186
187
(0.3%)
% of Sales
15.4%
15.1%
30 bps
Earnings Per Share
(3)
$1.18
$1.10
7.9%
Free Cash Flow
35
(45)
Favorable


13
(4)
(3)
1
5
1%
(10%)
1%
(15%)
(10%)
(5%)
0%
5%
10%
(15)
(10)
(5)
-
5
10
Resilient Flooring
Wood Flooring
Building Products
Corporate
EBITDA Change (Left-hand scale)
% Change in Sales (Right-hand scale)
1H Sales and EBITDA by Segment – 2015 vs. Prior Year


14
$187
$100
$120
$140
$160
$180
$200
$220
2014
Price/Mix
Volume
Input Costs
Mfg Cost
SG&A
WAVE
Change in
D&A
2015
$15
$186
($3)
($11)
EBITDA Bridge –
1H 2015 vs. Prior Year
($21)
$14
$5
$0


15
($20)
$42
$47
$1
($4)
$14
$35
($45)
($80)
($60)
($40)
($20)
$0
$20
$40
$60
2014
Cash
Earnings
Working
Capital
Capex
Interest
Expense
WAVE
Dividends
Other
2015
Free
Cash
Flow
1H
2015
vs.
Prior
Year


16
2015 Estimate Range
(1)
2014
(2)
Variance
Net Sales
(3)
2,400
to
2,500
2,515
(5%)
to
(1%)
Operating Income
(4)
235
to
265
271
(13%)
to
(2%)
EBITDA
355
to
385
389
(9%)
to
(1%)
Earnings Per Share
(5)
$2.05
to
$2.35
$2.38
(14%)
to
(1%)
Key Metrics –
Guidance 2015
(1)
Guidance is presented using 2015 budgeted foreign exchange rates 
(2)
2014 results are presented using 2015 budgeted foreign exchange rates
(3)
2015 and 2014 net sales include the impact of foreign exchange
(4)
As reported Operating Income: $180 - $210 million in 2015 and $239 million 2014
(5)
As reported earnings per share: $1.10 - $1.35 in 2015 and $1.83 in 2014


17
2015 Financial Outlook
Sales
(1)
$1,220-$1,270 million; EBITDA $335-$355 million
Sales
(1)
$1,180-$1,230 million; EBITDA $85-$100 million
EBITDA ($65) –
($70)
$35 -
$45 million; Adjusted long-term ETR of ~39%
(2)
$145  -
$165 million
Non-cash:
$25 million US pension expense
Cash:
$20 -
$40 million transaction costs
ABP Segment*
AFP
Segment*
Cash Taxes/ETR
Capital Spending*
Exclusions from  EBITDA
(1)
Net sales include foreign exchange impact
(2)
As reported ETR of 53% for 2015
* Changed from April Outlook
Corporate Segment


18
Appendix


19
1H 2015 vs. PY–
Adjusted EBITDA to Reported Net Income
2015
2014
V
EBITDA–
Adjusted
$186
$187
($1)
Depreciation and Amortization
(58)
(59)
1
Operating
Income
Adjusted
$128
$128
$ -
Non-cash Impact of U.S. Pension
13
-
13
Separation Expenses
9
-
9
Multilayered Wood Flooring Duty
4
-
4
Cost Reduction Initiatives
(1)
7
(8)
Impairment
-
1
(1)
Foreign Exchange Movements
4
3
1
Operating
Income
As
Reported
$99
$117
($18)
Interest/Other (Expense)
(20)
(28)
8
EBT
$79
$89
($10)
Tax (Expense)
(45)
(44)
(1)
Net Income
$34
$45
($11)


20
Consolidated Results
Second Quarter
2015
Reported
Comparability
(1)
Adjustments
FX
(2)
Adj
2015
Adjusted
2014
Reported
Comparability
(1)
Adjustments
FX
(2)
Adj
2014
Adjusted
Net Sales
633
-
16
649
659
-
(7)
652
Operating
Income
63
15
4
82
64
8
1
73
EPS
$0.53
$0.23
$0.05
$0.81
$0.48
$0.17
$0.01
$0.66
YTD
2015
Reported
Comparability
(1)
Adjustments
FX
(2)
Adj
2015
Adjusted
2014
Reported
Comparability
(1)
Adjustments
FX
(2)
Adj
2014
Adjusted
Net Sales
1,184
-
30
1,214
1,249
-
(13)
1,236
Operating
Income
99
25
4
128
117
8
3
128
EPS
$0.60
$0.53
$0.05
$1.18
$0.80
$0.26
$0.04
$1.10
(1)
See earnings press release and 10-Q for additional detail on comparability adjustments
(2)
Eliminates impact of foreign exchange movements


21
Segment Operating Income (Loss)
Second Quarter
2015
Reported
Comparability
(1)
Adjustments
2015
Adjusted
2014
Reported
Comparability
(1)
Adjustments
2014
Adjusted
Building Products
64
-
64
65
1
66
Resilient Flooring
23
2
25
21
2
23
Wood Flooring
(2)
3
5
8
(3)
6
3
Unallocated Corporate
(Expense) Income
(27)
12
(15)
(19)
-
(19)
YTD
2015
Reported
Comparability
(1)
Adjustments
2015
Adjusted
2014
Reported
Comparability
(1)
Adjustments
2014
Adjusted
Building Products
124
-
124
123
2
125
Resilient Flooring
29
1
30
31
2
33
Wood Flooring
(2)
1
6
7
2
6
8
Unallocated Corporate
(Expense) Income
(55)
22
(33)
(39)
1
(38)
(1)
Eliminates impact of foreign exchange movements and non-recurring items; see earnings press release and 10-Q for additional detail.
(2)
Includes a $4 million charge recorded in the second quarter of 2015 resulting from new duty rates assigned by the U.S. Department of Commerce on multilayered wood
importers and a $1 million gain recorded in the second quarter of 2014 related to a refund of previously paid duties on imports of engineered wood flooring.


22
Cash Flow
Second Quarter
YTD
($ millions)
2015
2014
2015
2014
Net cash from operations
$93
$55
$59
$22
Net cash (used for) investing
(16)
(46)
(24)
(68)
Add back (subtract) adjustments to reconcile to
free cash flow
Other
-
-
-
1
Free Cash Flow
$77
$9
$35
($45)
Cash flow includes cash flows attributable to the European flooring business
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