Armstrong 1Q Earnings Off 7%

Lancaster, PA, May 3, 2007--Armstrong World Industries reported first quarter earnings that were off 7 percent to $26 million, or $0.46 per share, from $28 million in the year-ago period. The company did not provide a per-share result from last year before the company emerged from bankruptcy.

Analysts were expecting earnings EPS of $0.41.

Sales rose 5 percent to $863.4 million from $822.2 million last year. Favorable exchange rates added $15 million to the total.

Adjusted operating income, boosted by commercial sales, rose to $61.7 million from $48.2 million in the same period last year.

The company logged a loss of $4.7 million from discontinued operations and $147.1 million in selling, general and administrative costs, a 13.4 percent increase.

Resilient Flooring net sales were $290.6 million in the first quarter of 2007 and $294.2 million in the same period of 2006. Excluding the favorable impact of foreign exchange rates, net sales decreased four percent. The decline was due to decreased volume for residential vinyl products and lower laminate prices in North America, partially offset by growth in Europe and Asia. Reported operating income was $10.8 million in the quarter compared to a reported loss in the first quarter of 2006 of $3.9 million. Adjusted operating income of $8.4 million improved compared to income of $5.3 million on the same basis in the prior year period. The improvement was realized as reduced manufacturing expense and lower SG&A expense offset the decline in sales.

Wood Flooring net sales of $199.2 million in the first quarter declined 3 percent from $205.2 million in the prior year as volume declines related to the residential housing market slowdown more than offset the benefit from previously announced acquisitions. Reported operating income of $8.4 million in the quarter was below income of $11.5 million reported in the first quarter of 2006. Adjusted operating income of $5.0 million declined from income of $11.5 million on the same basis in the prior year period. The reduction in operating income was due to the decline in sales volume, unfavorable product mix and higher lumber prices.

Building Products net sales of $313.9 million in the first quarter of 2007 increased from $267.9 million in the prior year. Excluding the effects of favorable foreign exchange rates of $8 million, sales increased by 14 percent due to price, volume growth in Europe and the Pacific Rim and improved product mix in North America. Reported operating income increased to $53.7 million from $40.0 million in the first quarter of 2006. Adjusted operating income of $57.5 million grew from income of $40.4 million on the same basis in the prior year period. The growth was driven by improved price realization, international volume growth, better product mix and improved manufacturing productivity. These benefits were only partially offset by inflation in raw materials and by increased investment in SG&A to support the sales growth.

Cabinets net sales in the first quarter of 2007 of $59.7 million increased 9 percent from $54.9 million in 2006 on increased volume. Reported operating income for the first quarter of $0.9 million improved from $0.2 million in the prior year, driven by the sales growth, partially offset by increased investment in SG&A to support the sales growth. There were no material adjustments to operating income in either period.

Unallocated corporate expense of $8.3 million in 2007 increased from $0.6 million in 2006. Adjusted expense of $10.8 million increased from $9.2 million on the same basis in the prior year, primarily due to a lower U.S. pension credit driven by unfavorable demographic changes.

Global macroeconomic indicators suggest a diverse outlook for our key markets for 2007. Based on these indicators, we expect flat to modest growth across North American and European commercial markets, and sustained growth in the Pacific Rim. The outlook for North American residential markets is uncertain due to the continuing weakness in U.S. housing starts and mixed indicators for renovation. On a consolidated basis, improved prices and increased manufacturing productivity are anticipated to offset cost inflation.