Armstrong’s 3Q Income Up

Lancaster, PA, November 5--Armstrong Holdings, Inc. yesterday reported third quarter 2004 net sales of $893.5 million, a 4.9% increase over third quarter net sales of $851.4 million in 2003. Excluding the favorable effects of foreign exchange rates of $18.3 million, consolidated net sales increased by 2.7%. Sales growth was recorded for the Company's Building Products, Wood Products and Cabinets segments primarily due to improved demand and higher prices. Operating income of $48.8 million was recorded for the third quarter of 2004 compared to operating income of $17.8 million in the third quarter of 2003. A non-cash charge of $8.0 million was recorded in the third quarter of 2003 related to an asbestos claim settlement. During 2003, Armstrong implemented several manufacturing and organizational changes to improve its cost structure and enhance its competitive position. The costs for these initiatives incurred in the third quarter of 2003 totaled approximately $33.6 million, of which approximately $24.0 million was for accelerated depreciation. The remaining amount was primarily for severances and related inventory obsolescence. During the third quarter of 2004, net charges for cost reduction initiatives were $1.4 million. The improvement in operating income is primarily due to reduced expenses relating to cost-reduction initiatives, lower operating expenses as a result of implementing the cost-reduction initiatives and improved pricing. Higher raw material costs, particularly lumber and PVC, a lower mix of products, as well as higher selling, general and administrative expenses, offset these improvements. Resilient Flooring net sales were $308.1 million in the third quarter of 2004 and $315.6 million in the third quarter of 2003. 2004 sales compared to 2003 were favorably impacted by $5.4 million from the translation effect of the changes in foreign exchange rates. The decline in sales was primarily due to unit volume declines of laminate and vinyl products sold to major national retailers. Operating income of $10.0 million was recorded for the quarter, a decline of $10.8 million from the third quarter of last year. The decline was due primarily to lower sales and higher raw material costs, wages and salaries, partially offset by expenses incurred in 2003 for the cost-reduction initiatives and reduced expenses in 2004 resulting from implementing those initiatives. Wood Flooring net sales of $209.4 million in the third quarter of 2004 increased 14% from $183.7 million in the prior year. This increase was primarily driven by higher sales volume and improved selling prices. Operating income of $7.1 million in the third quarter of 2004 compared to an operating loss of $9.9 million in the third quarter of 2003. The increase in operating income was primarily attributable to expenses incurred in 2003 for cost-reduction initiatives, reduced expenses in 2004 resulting from implementing those initiatives, sales volume gains and higher prices. Partially offsetting these gains were higher lumber costs. Textiles and Sports Flooring net sales of $70.0 million decreased in the third quarter of 2004 compared to $73.3 million in the third quarter of 2003. Excluding the favorable effects of foreign exchange rates of $5.5 million, net sales decreased 11.2%. Operating income of $2.8 million was reported for the third quarter of 2004 compared to operating income of $0.2 million in the third quarter of 2003. The increase in operating income was primarily due to a $1.8 million gain on the sale of a previously closed plant, expenses incurred in 2003 for cost-reduction initiatives and reduced manufacturing expenses resulting from implementing those initiatives, partially offset by the impact of lower sales. Building Products net sales of $250.2 million in the third quarter of 2004 increased from $227.9 million in the prior year. Excluding the favorable effects of foreign exchange rates of $7.5 million, sales increased by 6.3%