Armstrong Flooring Reports Second Quarter 2018 Results
LANCASTER, Pa.--(BUSINESS WIRE)--Aug 7, 2018--Armstrong Flooring, Inc. (NYSE:AFI) (“Armstrong Flooring” or the “Company”), North America’s largest producer of resilient and wood flooring products, today reported financial results for the second quarter ended June 30, 2018.
Don Maier, Chief Executive Officer, commented, “I am very proud of the Armstrong Flooring team as we delivered both top and bottom line growth in the second quarter, building on our strong start in Q1. Net sales increased 2.9% driven by significant volume growth in Luxury Vinyl Tile (“LVT”) and higher selling prices across most product categories. Adjusted EBITDA growth reflected the combination of higher sales, productivity and cost saving actions that more than offset significant inflationary pressures. Into the second half of 2018, we have a range of initiatives in motion to further advance our strategic priorities and deliver on our reaffirmed full-year 2018 outlook.”
Second Quarter of 2018 Results Compared with Second Quarter of 2017 Results
In the second quarter of 2018, net sales increased 2.9% to $306.0 million as compared to $297.3 million in the second quarter of 2017, primarily due to higher Resilient segment net sales.
Second quarter 2018 net income was $10.5 million, or diluted earnings per share of $0.40, as compared to net income of $5.4 million, or diluted earnings per share of $0.20, in the prior year quarter. Adjusted net income was $12.2 million, or adjusted diluted earnings per share of $0.47, as compared to an adjusted net income of $7.5 million, or adjusted diluted earnings per share of $0.27, in the prior year quarter.
Second quarter 2018 adjusted EBITDA was $29.6 million, as compared to $25.5 million in the prior year quarter. The increase in adjusted EBITDA was primarily due to higher net sales, stronger productivity and lower manufacturing costs, which more than offset the impact of significantly higher input costs.
Resilient Flooring Segment
Net sales were $199.9 million as compared to $187.8 million in the prior year period. The increase in net sales was primarily due to double-digit volume growth in LVT, along with higher selling prices and improved mix across most categories.
Operating income was $9.4 million as compared to operating income of $13.5 million in the prior year quarter. Adjusted EBITDA was $21.5 million as compared to $24.0 million in the prior year quarter, primarily attributable to the impact of higher input costs, which more than offset the benefit of improved productivity and higher net sales.
Wood Flooring Segment
Net sales were $106.1 million as compared to $109.5 million in the prior year quarter, with the decline driven by lower volumes in engineered wood. Higher selling prices in both solid and engineered wood provided a partial offset to lower volumes.
Operating income was $4.6 million, compared to an operating loss of $2.3 million in the prior year quarter. Adjusted EBITDA was $8.1 million as compared to $1.5 million in the prior year quarter, driven by improved manufacturing costs and productivity, along with lower SG&A spending, which more than offset higher input costs.
Full Year 2018 Outlook
For the full year 2018, the Company continues to expect adjusted EBITDA to be in the range of $70 million to $80 million. The adjusted EBITDA outlook assumes sales growth in the low single-digits. The Company continues to expect capital expenditures to be in the range of $40 million to $45 million for the full year 2018 while delivering another year of free cash flow in line with recent years.
Conference Call and Webcast
The Company will host a live webcast and conference call to review second quarter results on Tuesday, August 7, 2018 at 11:00 a.m. ET. The live webcast and accompanying slide presentation will be available in the Investors section of the Company’s website at www.armstrongflooring.com. To participate in the call, please dial 877-407-0789 (domestic) or 201-689-8562 (international). A replay of the conference call will be available for 90 days, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13681530.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the design and manufacture of innovative flooring solutions that inspire spaces where people live, work, learn, heal and playSM. Headquartered in Lancaster, Pa., Armstrong Flooring is the #1 manufacturer of resilient and wood flooring products across North America. The Company safely and responsibly operates 15 manufacturing facilities in three countries and employs approximately 3,500 individuals, all working together to provide the highest levels of service, quality and innovation to ensure it remains as strong and vital as its 150-year heritage. Learn more at www.armstrongflooring.com.
Forward Looking Statements
Disclosures in this release and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements provide our future expectations or forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward looking statements. A more detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied is included in our reports filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.
Supplemental Reconciliations of GAAP to non-GAAP Results (unaudited)
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company provides additional measures of performance adjusted to exclude the impact of restructuring charges and related costs, impairments, the non-cash impact of the U.S. pension plan, and certain other gains and losses. Free cash flow is defined as net cash from operating activities less purchases of property, plant and equipment plus proceeds from the sale of property, plant and equipment. The Company uses these adjusted performance measures in managing the business, including in communications with its Board of Directors and employees, and believes that they can provide users of this financial information with meaningful comparisons of operating performance between current and prior periods. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance, as well as its prospects for future performance. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is included in this release and on the Company’s website. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies. The Company does not provide financial guidance for forecasted net income since certain items that impact net income are outside of our control and cannot be reasonably predicted. Therefore, the Company is unable to provide a reconciliation of its Adjusted EBITDA guidance to net income, the most comparable financial measure calculated in accordance with GAAP.
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