Armstrong Reports 2Q Results

Lancaster, PA, August 2--Armstrong Holdings in the second quarter reported sales that were up 1.7% to $919.0 million versus $903.5 million in the same quarter of 2004. Excluding the effects of favorable foreign exchange rates of $14.8 million, consolidated net sales increased by 0.1%. Operating income in the quarter was $36.6 million compared to $2.0 million in the second quarter of 2004. Resilient Flooring net sales were $317.6 million in the second quarter and $321.9 million in the second quarter of 2004. Excluding the favorable impact of foreign exchange rates, net sales declined 2.9%. The decrease was primarily due to lower sales in the Americas, primarily residential vinyl products and laminate products. An operating loss of $3.9 million was recorded for the quarter compared to an operating loss in the second quarter of 2004 of $39.1 million. Wood Flooring net sales of $214.6 million in the second quarter of 2005 increased 0.2% from $214.1 million in the prior year. Units sold of pre- finished solid wood floors increased by approximately 2% in the second quarter primarily due to strong sales to home center retailers. Units sold of engineered hardwood floors increased 13% in the second quarter primarily due to continued strong overall demand. Net sales in the second quarter were negatively impacted by price declines which were made in response to declining lumber prices. Operating income was $19.9 million in the second quarter of 2005 compared to $21.1 million in the second quarter of 2004. The decline in operating income was primarily attributable to selling price decreases and non-lumber inflationary cost pressures greater than declines in lumber costs. Textiles and Sports Flooring net sales in the second quarter of 2005 increased to $68.8 million from $65.1 million in 2004. Excluding the effects of favorable foreign exchange rates, sales were down 0.3% due to lower net sales related to sports flooring products, partially offset by increased sales of carpet flooring products. An operating loss of $0.5 million was recorded in 2005 compared to an operating loss in 2004 of $1.7 million. The 2005 operating loss decreased from 2004 as the benefit of lower selling, general and administrative ("SG&A") expenses exceeded increased raw material costs. Building Products net sales of $262.7 million in the second quarter of 2005 increased from $247.3 million in the prior year. Excluding the effects of favorable foreign exchange rates, sales increased by 3.9%, primarily due to a 6% unit volume increase combined with higher prices, partially offset by lower product mix. Operating income decreased to $37.6 million from operating income of $38.4 million in the second quarter of 2004. The decline was due to inflationary cost pressures offsetting higher sales prices, increased charges for cost reduction initiatives, and a mix shift to lower margin sales in both the U.S. and Eastern Europe. Cabinets net sales in the second quarter of 2005 of $55.3 million increased from $55.1 million in 2004. Net sales were essentially flat as price increases were mostly offset by volume declines. An operating loss of $3.3 million was recorded in 2005 compared to operating income of $1.5 million in the prior year. The decline was due to the impact of higher SG&A expenses (primarily consulting costs, as well as employee compensation and selling- related expenses), costs incurred to shut down the Morristown, Tennessee manufacturing plant and manufacturing inefficiencies in other plants resulting from the transfer of production from Morristown. For the six months of 2005, net sales were $1,759.7 million, an increase of 0.6% from the $1,748.5 million reported for the first six months of 2004. Increases were reported in the Textiles and Sports Flooring and Building Products segments, while the Resilient Flooring, Wood Flooring, and Cabinets segments reported decreases.