Armstrong Q3 Sales Down Overall, but Resilient Flooring Sees Growth

Lancaster, PA, October 30, 2015—Armstrong World Industries announced third quarter 2015 sales of $658.5 million, or $0.54 diluted earnings per share, compared to $678.9 million, or $0.84 diluted earnings per share in 2014.

In the resilient flooring business, sales were $192.1 million, 1% above 2014’s third quarter sales of $190.2. In the second quarter of 2015, resilient sales were $199.9 million.

Volume in the company's resilient flooring business was positive in North America during the third quarter, though price and mix were drags on the North America business. Volume growth represented a broad increase across both the residential and commercial segments.

Sales for the third quarter 2015 in Armstrong’s wood flooring business were $130.5 million, compared to $137.0 million during the same quarter last year, a 4.7% decline. However, it represents an increase from the second quarter's $126.7 million.

Volume in the wood flooring business was impacted by product availability issues in the engineered segment, while volume in the solid wood segment was up.

“The resilient business is more or less moving along quietly at the moment,” says analyst Stifel. “Volumes are generally improving across the various geographies. The company is planning on beginning orders in the new LVT line sometime in November, which ought to be a decent contributor in 2016 as that is the fastest growing flooring category in the industry. Outperformance in VCT was a drag to mix combined with higher spending on point-of-purchase materials negatively impacted margins. Reduced resin costs have been a nice tailwind to margins in this business YTD. Near term, the LVT start-up will drag earnings modestly.”

The analyst continues, “The story for the wood flooring business over the past 24 months has been an opposite tale of whatever lumber prices are doing. Margins sank from the high single digits to negative low single digits from 2012 to 2014 as Armstrong battled the tradeoff between volume decisions, inflation, and difficulty recovering lumber price inflation. As lumber prices have fallen meaningfully through 2015, the third quarter benefitted from meaningfully lower input costs without much concession on the pricing side and margin was back in the high-single digits. Clearly the company is not chasing volumes which is helping margin. The engineered business is facing tight capacity, which subsequently has put pressure on volume growth. The company is working on freeing up additional capacity and reports there should be an improvement there as we head into 2016, but the fourth quarter would still face some difficulties. LIFO accounting has somewhat inflated margins in this segment near term.”