Armstrong Reports 2Q Results

Lancaster, PA, July 30, 2007--Armstrong World Industries second quarter net earnings were up 28% compared to the same period a year ago.

Armstrong, which emerged from Chapter 11 bankruptcy in October, posted quarterly earnings of $51.6 million, compared to $40.2 million in the second quarter in 2006. Per share earnings were $0.91 during the quarter; per-share result from the year-age period were not available before the company emerged from bankruptcy. Analysts had forecast earnings per share of $0.57.

Sales during the quarter were $920.6 million in the quarter, up 4% from the $884.1 million last year. The second-quarter sales increase includes a $16 million benefit from foreign exchange rates.

Earnings for the first six months of 2007 were $77.6 million, up 13.8% from last year's first half income of $68.2 million.

Sales for the six-month period were $1.78 billion, compared with $1.71 billion during the first six months of 2006.

Segment Highlights

Resilient Flooring net sales were $322.9 million in the second quarter of 2007 and $315.4 million in the same period of 2006. Excluding the favorable impact of foreign exchange rates, net sales were flat. Volume growth in Europe and improved product mix in North America offset lower volume of residential vinyl products. Reported operating income was $20.9 million in the quarter, up from $17.7 million in the second quarter of 2006. Adjusted operating income grew to $18.7 million from $10.6 million on the same basis in the prior year period as reduced manufacturing expense and lower SG&A leveraged flat sales.

Wood Flooring net sales of $211.7 million in the second quarter fell 5% from $222.6 million in 2006 as lower residential sales more than offset the benefit from previously announced acquisitions.

Reported operating income was $21.7 million in the quarter compared to income of $18.2 million reported in the second quarter of 2006. Adjusted operating income of $18.3 million declined from income of $22.2 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 $322.1 million in the second quarter of 2007 increased from $287.4 million in the prior year. Excluding the effects of favorable foreign exchange rates of $9 million, sales increased by 9% due to volume growth in Europe and higher margins and improved product mix across all geographies. Operating income increased to $58.8 million from $53.2 million in the second quarter of 2006. Adjusted operating income of $63.4 million grew from $53.4 million on the same basis in the prior year period. The growth was driven by improved price realization, better product mix and improved manufacturing productivity. These benefits were partially offset by inflation in raw materials and by higher SG&A supporting sales growth.

Year-to-Date Results

For the six months ended June 30, net sales were $1.78 billion compared to $1.7 billion in 2006. Excluding a $32 million favorable impact from exchange rates, net sales increased by 3%. Improvement in both price and product mix offset modest volume declines.

Reported operating income for the first six months was $159.7 million compared to operating income of $129.3 million for the same period in 2006.

The company said it expects 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 uncertain renovation market. .