Armstrong's Income Down

Lancaster, PA, Oct. 31--Armstrong Holdings, Inc. today reported third quarter net sales of $851.4 million that were 0.6% higher than net sales of $846.5 million in the same period last year. Excluding the favorable effects of foreign exchange rates of $28.2 million, consolidated net sales decreased by 2.7%, primarily due to lower sales volume. Operating income of $17.8 million was recorded for the third quarter compared to operating income of $52.4 million in the third quarter of 2002. For the nine-month period ending September 30, net sales were $2,453.2 million, an increase of 1.4% from the $2,420.2 million reported for the first nine months of 2002. Excluding the favorable effects of foreign exchange rates of $105.6 million, consolidated net sales decreased 2.9%. An operating loss in the first nine months of 2003 of $4.3 million compared to operating income of $148.5 million for the first nine months of 2002. Several items explain the majority of the $34.6 million decline in operating income in the third quarter and the $152.8 million decline for the first nine months. Results for the third quarter reflect lower selling, general and administrative (SG&A) costs that were partially offset by higher raw material costs and the effects of lower sales volumes, while the year-to-date performance reflects lower sales and higher raw material costs partially offset by lower SG&A expenses. Resilient Flooring net sales were $315.6 million in the third quarter and $315.1 million in the third quarter of 2002. 2003 sales compared to 2002 were favorably impacted by $9.4 million from the effects of foreign exchange rates in translation. Operating income of $20.8 million in the quarter declined by $0.7 million from the operating income in the third quarter of 2002 of $21.5 million. 2003 included $5.4 million of costs related to ceasing production of its residential stencil product line. In addition, lower SG&A expenses were partially offset by the effects of overall lower sales volume. Wood Flooring net sales of $183.7 million in the third quarter increased 1.9% from $180.3 million in the prior year. This increase was driven primarily by improved pricing and increased volume in certain products. An operating loss of $9.9 million was recorded in the third quarter compared to operating income of $10.0 million in the third quarter of 2002. $15.6 million of the $19.9 million decline in operating income was primarily due to charges from the closure of a manufacturing plant in Port Gibson, MS. Also contributing to the decline in operating income were increases in lumber and manufacturing costs and a $2.0 million impairment of an office building determined to be held for sale, partially offset by lower selling expenses. Textiles and Sports Flooring net sales of $73.3 million increased in the third quarter compared to $68.6 million in the third quarter of 2002. Excluding the favorable effects of foreign exchange rates of $9.6 million, net sales decreased 6.3% due to weak European markets. Operating income of $0.2 million in the third quarter increased by $1.3 million from the operating loss of $1.1 million in the third quarter of 2002. 2003 included a $3.7 million restructuring charge for European manufacturing-related severances. 2003 results reflect lower selling and advertising costs and improved manufacturing costs that were partially offset by the lower sales volume. Building Products net sales of $227.9 million in the third quarter increased from $225.8 million in the prior year. Excluding the favorable effects of foreign exchange rates of $9.2 million, sales decreased by 3.0%, primarily due to lower sales volume in commercial markets, partially offset by improved pricing in the U.S. commercial market. Operating income decreased to $32.4 million from operating income of $34.6 million in the third quarter of 2002. This decrease resulted from lower sales volume and increased natural gas costs, partially offset by improved production expenses and improved U.S. commercial market pricing. Operating income for the third quarter benefited by approximately $1.2 million due to the effect of foreign exchange rates. Cabinets net sales in the third quarter of $50.9 million decreased from $56.7 million in 2002 due primarily to reductions in volume. An operating loss of $3.2 million in 2003 compared to an operating loss of $0.3 million in the prior year. The operating loss was predominantly due to the negative effects of lower volume. Additionally, Cabinets recorded a $0.8 million impairment related to an office building determined to be held for sale. Armstrong anticipates charges of approximately $8 million during the fourth quarter from its announced Wood Flooring plant closure in Warren,AR.