Armstrong 2Q Income Up

Lancaster, PA, July 2, 2006--Armstrong Holdings in the second quarter reported operating income of $72.5 million up from the $36.6 million of the second quarter of 2005, primarily on the growth in sales. Increased manufacturing productivity offset inflationary cost increases. Net gains from sales of buildings were largely offset by non-cash charges related to an employee benefit plan and to accrual adjustments. Net sales for the quarter were up 3% to $945.5 million compared with $919.0 million in the second quarter of 2005, including a $4.1 million negative impact from foreign exchange rates. Operating income in the first half of 2006 was $120.7 million compared to $44.3 million for the first six months of 2005. For the six-month period net sales were $1,822.1 million compared to $1,759.7 million reported for the first six months of 2005. Excluding the $23.8 million impact from unfavorable foreign exchange rates, net sales increased by 5%. Increases were reported in all segments except Resilient Flooring. Resilient Flooring net sales were $305.3 million in the second quarter of 2006 and $317.6 million in the same period of 2005. Excluding the unfavorable impact of foreign exchange rates, net sales decreased 4%. The decline was primarily due to decreased residential vinyl volume and lower selling prices for laminate in the Americas, and to lower volumes in Europe. Operating income of $17.6 million in the quarter compared to a loss in the second quarter of 2005 of $3.9 million. The improvement is primarily attributable to $17 million in net gains from the sale of buildings. In addition, benefits from previously implemented cost reductions were partially offset by sales declines and by inflation in raw materials and freight. Wood Flooring net sales of $222.6 million in the current quarter grew 4% from $214.6 million in the prior year due to the benefit from previously announced acquisitions and to volume growth in both engineered and solid wood floors. These benefits were partially offset by price declines. Operating income of $18.2 million in the quarter compared to $19.9 million in the second quarter of 2005. The decline includes approximately $4 million in non-cash charges related to an adjustment to accruals and to fixed asset impairment. Improved operating income from increased sales volume and production efficiencies largely offset both the charges and the price declines. Textiles and Sports Flooring net sales in the second quarter of 2006 increased to $71.5 million from $68.8 million. Excluding the effects of unfavorable foreign exchange rates of $1.8 million, sales grew 7% on improved price and product mix, which offset volume declines in broadloom carpet. An operating loss of $9.6 million in 2006 compares to an operating loss in 2005 of $0.5 million. The increased operating loss was primarily driven by an $8.5 million non-cash charge related to the transfer of a defined benefit pension plan to a multiemployer industry plan. Building Products net sales of $287.4 million in the current quarter increased from $262.7 million in the prior year. Excluding the effects of unfavorable foreign exchange rates of $1.6 million, sales increased by 10%, primarily due to price increases made to offset inflationary pressures, and to increased volume in the strong U.S. Commercial markets. Operating income increased to $53.2 million from operating income of $37.6 million in the second quarter of 2005. The growth was driven by improved price realization, better product mix and increased equity earnings in WAVE, which were only partially offset by inflation in raw materials, energy and freight. Cabinets net sales in the second quarter of 2006 of $58.7 million increased from $55.3 million in 2005 on higher selling prices and improved product mix, which more than offset lower volume. Operating income for the second quarter of $2.1 million improved from the prior year's $3.3 million operating loss, primarily driven by the sales growth. In addition, the 2005 operating loss included higher SG&A expense and costs related to the shutdown of the Morristown, Tennessee manufacturing plant which were not repeated in 2006.