Armstrong 2

Textiles and Sports Flooring net sales of $271.9 million increased in 2003 compared to $247.2 million in 2002. Excluding the translation effect of the changes in foreign exchange rates of $49.8 million, net sales decreased 8.4% due to weak European markets. An operating loss of $9.8 million in 2003 increased by $5.1 million from the operating loss of $4.7 million recorded for 2002. 2003 results include expense of $7.5 million associated with cost reduction initiatives. Partially offsetting the effects of the cost reduction expenses and lower sales volumes were reduced manufacturing expenses and SG&A expenditures. Building Products net sales of $862.2 million in 2003 increased from $826.6 million in the prior year. Excluding the translation effect of the changes in foreign exchange rates of $48.9 million, sales decreased by 1.5%, primarily due to lower sales volume in commercial markets, partially offset by improved pricing in the U.S. commercial and residential markets. Operating income decreased to $95.2 million from operating income of $96.5 million in 2002. This decrease resulted from lower sales volume, increased energy costs, wage and salary inflation, price concessions in Europe and expense for cost reduction initiatives. Improved U.S. pricing and manufacturing cost improvements partially offset this decrease. Operating income for 2003 also benefited by approximately $4.1 million due to the translation effect of the changes in foreign exchange rates. Cabinets net sales in 2003 of $204.8 million decreased from $226.9 million in 2002 due primarily to reductions in volume. An operating loss of $11.1 million in 2003 compared to an operating loss of $3.9 million in the prior year. The operating loss was predominantly due to the negative effects of lower volume. Partially offsetting the decline were lower selling expenses.