Armstrong Flooring, Inc. (NYSE:AFI) (“Armstrong Flooring” or the
“Company”) a leader in the design and manufacture of innovative
flooring solutions, today reported financial results for the first
quarter ended March 31, 2021.
Michel Vermette, President and Chief Executive
Officer, commented, “The positive momentum in our business
continued into the first quarter and I am pleased with the ongoing
transformation of Armstrong Flooring. We delivered 7.4% top-line
growth compared to the first quarter 2020 and 5.1% growth compared
to the first quarter of 2019 led by sales in China and Australia.
Stable year-over-year North American net sales in the first quarter
resulted from an encouraging recovery in demand that was partly
offset by severe weather and macro supply chain disruptions.
Looking ahead, our customer orders heading into the second quarter
point to further sequential momentum, particularly in residential
new and remodel end markets.”
Multi-Year Transformation
Update
Mr. Vermette continued, “Our business
transformation remains on track. During the first quarter, we
completed several initiatives under the three pillars of our
transformation plan: expanding customer reach, simplifying product
offerings and operations, and strengthening our core
capabilities.
As it relates to expanding customer reach, the expansion of our
go-to-market strategy continued with the introduction of Armstrong®
Flooring Pro™ for the homebuilder and multi-family channels. In
addition, we introduced Armstrong® Flooring Signature™, a segmented
product portfolio for our distributor partners, and we accomplished
several key wins in our Asia healthcare channel.
Pertaining to simplifying product offerings and
operations, we executed on the long-standing efforts to monetize
our non-core assets and completed the sale of our South Gate
facility announced earlier in the quarter.
In terms of strengthening our core capabilities,
through several internal initiatives we continued to improve
organizational alignment between our supply chain, customer service
and procurement organizations. In addition, we officially opened
our Technical Center in Lancaster to house our research and
development teams in a unique space designed for collaboration and
innovation. Notably, this is the first of three buildings we will
open in 2021 as part of the headquarters relocation we announced in
2020.
While there is more work to be done, all these
key steps among others completed in 2020 and ongoing initiatives,
have firmly planted the foundation of our transformation plan.”
First Quarter 2021 Results
(Dollars in millions except per share data) |
Three Months Ended March 31, |
|
|
2021 |
|
|
|
2020 |
|
|
Change |
Net sales |
$148.9 |
|
|
$138.7 |
|
|
7.4% |
Operating income (loss) |
|
27.8 |
|
|
|
(13.3) |
|
|
N/M |
Net income (loss) |
|
27.2 |
|
|
|
(13.2) |
|
|
N/M |
Diluted earnings (loss) per share |
|
1.23 |
|
|
|
(.60) |
|
|
N/M |
|
|
|
|
|
|
Adjusted EBITDA1 |
$(7.6) |
|
|
$(1.6) |
|
|
N/M |
Adjusted EBITDA margin |
|
(5.1%) |
|
|
|
(1.2%) |
|
|
N/M |
Adjusted net (loss) 1 |
$(8.3) |
|
|
$(12.7) |
|
|
N/M |
Adjusted diluted (loss) per share1 |
$(0.38) |
|
|
$(0.58) |
|
|
N/M |
In the first quarter of 2021, net sales
increased 7.4% to $148.9 million from $138.7 million in the first
quarter of 2020. The increase in net sales reflects growth in China
and Australia, partly offset by slightly lower net sales in North
America. North America results reflect growth in residential
through remodel and new construction, while commercial sales were
flat and sales to residential National Accounts were down due to a
prior year major program launch that did not repeat in 2021. In
North America, overall higher selling prices resulting from the
Company’s previously announced price increases were partially
offset by the impact of lower volume and product mix in the
quarter.
Net income in the first quarter of 2021 was
$27.2 million, or diluted income per share of $1.23, as compared to
net loss of $13.2 million, or diluted loss per share of $0.60, in
the prior year quarter. Net income in the first quarter of 2021
reflected a $46 million gain on the sale of the Company’s South
Gate facility. Adjusted net loss was $8.3 million, or adjusted
diluted loss per share of $0.38, as compared to adjusted net loss
of $12.7 million, or adjusted diluted loss per share of $0.60, in
the prior year quarter.
First quarter 2021 adjusted EBITDA was a loss of
$7.6 million, as compared to an adjusted EBITDA loss of $1.6
million in the prior year quarter. The decrease in adjusted EBITDA
was primarily due to lower production volumes, principally due to
the impacts of winter storm Uri which disrupted three of the
Company’s key manufacturing plants in the U.S. for several weeks,
along with disruptions in the supply of key raw materials. In
addition, we continued to see higher raw material and shipping
costs which created headwinds compared to the prior year
quarter.
Liquidity and Capital Resources
Update
At March 31, 2021, the Company had total
liquidity of approximately $104 million including $16.7 million of
cash plus availability under its credit facilities. During the
quarter, following the sale of the South Gate facility, the Company
made a required prepayment of $20 million under the Term Loan
facility, and repaid amounts borrowed under the revolving credit
facility. The Company’s Net Debt on March 31, 2021, was $36.3
million. The Company believes it has ample financial resources to
effectively execute its near- and long-term objectives.
Webcast and Conference Call
The Company will hold a live webcast and
conference call to review financial results and conduct a
question-and-answer session on Thursday, April 22 at 10:00 a.m. ET.
The live webcast will be available in the Investors section of the
Company’s website at www.armstrongflooring.com. For those unable to
access the webcast, the conference call will be accessible by
dialing 877-407-0789 (domestic) or 201-689-8562 (international). A
replay of the conference call will be available for 90 days, by
dialing 844-512-2921 (domestic) or 412-317-6671 (international) and
entering the passcode 13718687.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global
leader in the design and manufacture of innovative flooring
solutions that inspire beauty wherever your life happens.
Headquartered in Lancaster, Pennsylvania, Armstrong Flooring is a
leading manufacturer of resilient products across North America.
The company safely and responsibly operates seven manufacturing
facilities globally, working to provide the highest levels of
service, quality, and innovation to ensure it remains as strong and
vital as its 150-year heritage. Learn more
www.armstrongflooring.com.
Forward Looking Statements
Disclosures in this release and in our other
public documents and comments contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements provide our future expectations or
forecasts and can be identified by our use of words such as
“anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”
“believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,”
“could,” “should,” “seek,” and other words or phrases of similar
meaning in connection with any discussion of future operating or
financial performance. Forward-looking statements, by their nature,
address matters that are uncertain and involve risks because they
relate to events and depend on circumstances that may or may not
occur in the future. As a result, our actual results may differ
materially from our expected results and from those expressed in
our forward-looking statements. A more detailed discussion of the
risks and uncertainties that could cause our actual results to
differ materially from those projected, anticipated, or implied is
included in our reports filed with the U.S. Securities and Exchange
Commission. Forward-looking statements speak only as of the date
they are made. We undertake no obligation to update any
forward-looking statements beyond what is required under applicable
securities law.
Contact Information
Investors: Amy TrojanowskiSVP, Chief Financial
Officerir@armstrongflooring.com
Media: Alison van HarskampDirector, Corporate
CommunicationsMedia@armstrongflooring.com
Armstrong Flooring, Inc. and
SubsidiariesCondensed Consolidated Statements of
Operations (unaudited)
|
|
Three Months EndedMarch 31 |
(In millions) |
|
2021 |
|
2020 |
Net sales |
|
$ |
148.9 |
|
|
|
$ |
138.7 |
|
|
Cost of goods sold |
|
129.0 |
|
|
|
115.4 |
|
|
Gross
profit |
|
19.9 |
|
|
|
23.3 |
|
|
Selling, general and
administrative expenses |
|
38.1 |
|
|
|
36.6 |
|
|
(Gain) loss on sale of
property |
|
(46.0 |
) |
|
|
— |
|
|
Operating income
(loss) |
|
27.8 |
|
|
|
(13.3 |
) |
|
Interest expense |
|
3.5 |
|
|
|
0.6 |
|
|
Other expense (income),
net |
|
(2.1 |
) |
|
|
(0.4 |
) |
|
Income (loss) before
income taxes |
|
26.4 |
|
|
|
(13.5 |
) |
|
Income tax expense
(benefit) |
|
(0.8 |
) |
|
|
(0.3 |
) |
|
Net income
(loss) |
|
$ |
27.2 |
|
|
|
$ |
(13.2 |
) |
|
|
|
|
|
|
Earnings (loss) per
share of common stock: |
|
|
|
|
Basic earnings (loss) per share of common stock |
|
$ |
1.24 |
|
|
|
$ |
(0.60 |
) |
|
Diluted earnings (loss) per share of common stock |
|
$ |
1.23 |
|
|
|
$ |
(0.60 |
) |
|
Armstrong Flooring, Inc. and
SubsidiariesCondensed Consolidated Balance Sheets
(unaudited)
(In millions) |
|
March 31,2021 |
|
December 31,2020 |
Assets |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
16.7 |
|
|
|
$ |
13.7 |
|
|
Accounts and notes receivable, net |
|
57.7 |
|
|
|
43.0 |
|
|
Inventories, net |
|
125.1 |
|
|
|
122.9 |
|
|
Prepaid expenses and other current assets |
|
12.9 |
|
|
|
12.9 |
|
|
Assets held-for-sale |
|
— |
|
|
|
17.8 |
|
|
Total current assets |
|
212.4 |
|
|
|
210.3 |
|
|
Property, plant and equipment,
net |
|
242.2 |
|
|
|
246.9 |
|
|
Operating lease assets |
|
9.9 |
|
|
|
8.5 |
|
|
Intangible assets, net |
|
17.3 |
|
|
|
19.0 |
|
|
Deferred income taxes |
|
4.4 |
|
|
|
4.4 |
|
|
Other noncurrent assets |
|
6.7 |
|
|
|
4.4 |
|
|
Total assets |
|
$ |
492.9 |
|
|
|
$ |
493.5 |
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Short-term debt |
|
$ |
8.2 |
|
|
|
$ |
5.5 |
|
|
Current installments of long-term debt |
|
3.9 |
|
|
|
2.9 |
|
|
Trade account payables |
|
82.1 |
|
|
|
78.5 |
|
|
Accrued payroll and employee costs |
|
13.9 |
|
|
|
14.8 |
|
|
Current operating lease liabilities |
|
2.2 |
|
|
|
2.7 |
|
|
Other accrued expenses |
|
14.7 |
|
|
|
17.7 |
|
|
Total current liabilities |
|
125.0 |
|
|
|
122.1 |
|
|
Long-term debt, net of
unamortized debt issuance costs |
|
40.9 |
|
|
|
71.4 |
|
|
Noncurrent operating lease
liabilities |
|
7.7 |
|
|
|
5.8 |
|
|
Postretirement benefit
liabilities |
|
55.2 |
|
|
|
55.6 |
|
|
Pension benefit
liabilities |
|
4.6 |
|
|
|
4.6 |
|
|
Deferred income taxes |
|
1.6 |
|
|
|
2.4 |
|
|
Other long-term
liabilities |
|
8.2 |
|
|
|
9.0 |
|
|
Total liabilities |
|
243.2 |
|
|
|
270.9 |
|
|
Commitments and
contingencies |
|
|
|
|
Stockholders'
equity: |
|
|
|
|
Common stock |
|
— |
|
|
|
— |
|
|
Preferred stock |
|
— |
|
|
|
— |
|
|
Treasury stock |
|
(86.2 |
) |
|
|
(87.1 |
) |
|
Additional paid-in capital |
|
677.0 |
|
|
|
677.4 |
|
|
Accumulated deficit |
|
(281.2 |
) |
|
|
(308.4 |
) |
|
Accumulated other comprehensive (loss) |
|
(59.9 |
) |
|
|
(59.3 |
) |
|
Total stockholders' equity |
|
249.7 |
|
|
|
222.6 |
|
|
Total liabilities and stockholders' equity |
|
$ |
492.9 |
|
|
|
$ |
493.5 |
|
|
Armstrong Flooring, Inc. and
SubsidiariesCondensed Consolidated Statements of
Cash Flows (unaudited)
|
|
Three Months EndedMarch 31 |
(In
millions) |
|
2021 |
|
2020 |
Cash flows from
operating activities: |
|
|
|
|
Net income (loss) |
|
$ |
27.2 |
|
|
|
$ |
(13.2 |
) |
|
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities: |
Depreciation and amortization |
|
9.9 |
|
|
|
10.6 |
|
|
Deferred income taxes |
|
(0.5 |
) |
|
|
(0.5 |
) |
|
Stock-based compensation expense |
|
0.6 |
|
|
|
0.7 |
|
|
Gain on sale of property |
|
(46.0 |
) |
|
|
— |
|
|
Gain from long-term disability plan change |
|
— |
|
|
|
(1.1 |
) |
|
U.S. pension expense (income) |
|
(1.8 |
) |
|
|
0.9 |
|
|
Other non-cash adjustments, net |
|
0.1 |
|
|
|
1.4 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Receivables |
|
(16.2 |
) |
|
|
(4.8 |
) |
|
Inventories |
|
(2.4 |
) |
|
|
(8.1 |
) |
|
Accounts payable and accrued expenses |
|
2.6 |
|
|
|
1.2 |
|
|
Other assets and liabilities |
|
(1.3 |
) |
|
|
(4.2 |
) |
|
Net cash provided by
(used for) operating activities |
|
(27.8 |
) |
|
|
(17.1 |
) |
|
Cash flows from
investing activities: |
|
|
|
|
Purchases of property, plant and equipment |
|
(7.0 |
) |
|
|
(7.5 |
) |
|
Proceeds from sale of assets |
|
65.3 |
|
|
|
— |
|
|
Net cash provided by
(used for) investing activities |
|
58.3 |
|
|
|
(7.5 |
) |
|
Cash flows from
financing activities: |
|
|
|
|
Proceeds from revolving credit facility |
|
26.6 |
|
|
|
30.0 |
|
|
Payments on revolving credit facility |
|
(33.8 |
) |
|
|
— |
|
|
Payments on long-term debt |
|
(20.1 |
) |
|
|
(0.1 |
) |
|
Value of shares withheld related to employee tax withholding |
|
(0.1 |
) |
|
|
— |
|
|
Net cash provided by
(used for) financing activities |
|
(27.4 |
) |
|
|
29.9 |
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(0.1 |
) |
|
|
(0.5 |
) |
|
Net increase
(decrease) in cash and cash equivalents |
|
3.0 |
|
|
|
4.8 |
|
|
Cash and cash equivalents at
beginning of year |
|
13.7 |
|
|
|
27.1 |
|
|
Cash and cash equivalents at
end of period |
|
$ |
16.7 |
|
|
|
$ |
31.9 |
|
|
Armstrong Flooring, Inc. and
SubsidiariesReconciliation of Free Cash Flow to
Net Cash Provided by (Used for) Operating Activities
(unaudited)
|
|
Three Months EndedMarch 31 |
(In millions) |
|
2021 |
|
2020 |
Net cash provided by (used for) operating
activities |
|
$ |
(27.8 |
) |
|
|
$ |
(17.1 |
) |
|
Less: Capital
expenditures |
|
(7.0 |
) |
|
|
(7.5 |
) |
|
Add: Proceeds from asset
sales |
|
65.3 |
|
|
|
— |
|
|
Free cash
flow |
|
$ |
30.5 |
|
|
|
$ |
(24.6 |
) |
|
Free cash flow is a non-GAAP financial measure
and consists of Net cash provided by (used for) operating
activities less capital expenditures net of proceeds from asset
sales. The Company’s management believes Free cash flow is
meaningful to investors because management reviews Free cash flow
in assessing and evaluating performance. However, this measure
should be considered in addition to, rather than a substitute for
Cash flows provided by (used for) operating activities provided in
accordance with GAAP. The Company’s method of calculating Free cash
flow may differ form methods used by other companies and, as a
result, Free cash flow may not be comparable to other similarly
titled measures disclosed by other companies.
Armstrong Flooring, Inc. and
SubsidiariesReconciliation of Net Debt to Total
Debt Outstanding (unaudited)
(In millions) |
|
March 31,2021 |
|
December 31,2020 |
Total debt outstanding: |
|
|
|
|
Short-term debt |
|
$ |
8.2 |
|
|
$ |
5.5 |
|
Current installments of long-term debt |
|
3.9 |
|
|
2.9 |
|
Long-term debt, net of unamortized debt issuance costs |
|
40.9 |
|
|
71.4 |
|
Total debt
outstanding |
|
53.0 |
|
|
79.8 |
|
Less: Cash and cash
equivalents |
|
16.7 |
|
|
13.7 |
|
Net debt |
|
$ |
36.3 |
|
|
$ |
66.1 |
|
Net debt is a non-GAAP financial measure and
consists of total debt outstanding reduced by cash and cash
equivalents. The Company‘s management believes Net debt is
meaningful to investors because management reviews Net debt in
assessing and evaluating performance. However, this measure should
be considered in addition to, rather than as a substitute for total
debt outstanding in accordance with GAAP. The Company's method of
calculating Net debt may differ from methods used by other
companies and, as a result, Net debt may not be comparable to other
similarly titled measures disclosed by other companies.
Armstrong Flooring, Inc. and
SubsidiariesReconciliation of Adjusted Net Income
(Loss) to Net Income (Loss) (unaudited)
|
|
Three Months EndedMarch 31 |
|
(In millions) |
|
2021 |
|
2020 |
|
Net income (loss) |
|
$ |
27.2 |
|
|
|
$ |
(13.2 |
) |
|
|
Add-back (deduct)
business transformation items: |
|
|
|
|
|
Site exit costs |
|
0.5 |
|
|
|
— |
|
|
|
Additional costs related to business transformation
initiatives |
|
— |
|
|
|
0.4 |
|
|
|
Gain on sale of South Gate property |
|
(46.0 |
) |
|
|
|
— |
|
|
|
U.S. Pension expense |
|
0.2 |
|
|
|
0.6 |
|
|
|
Other (income)
expense,net |
|
(2.1 |
) |
|
|
(0.4 |
) |
|
|
Tax impact of adjustments (at
statutory rate) |
|
11.9 |
|
|
|
(0.2 |
) |
|
|
Adjusted net income
(loss) |
|
$ |
(8.3 |
) |
|
|
$ |
(12.7 |
) |
|
(a) |
Adjusted diluted
earnings (loss) per share |
|
$ |
(0.38 |
) |
|
|
$ |
(0.58 |
) |
|
|
(a) Does not total due to rounding.
Adjusted net income (loss) is a non-GAAP
financial measures and consists of Net income (loss) adjusted to
remove the impact of business transformation costs, U.S. pension
expense, other (income) expense, net; and adjust such items for the
related tax impacts. Adjusted diluted earnings (loss) per share is
a non-GAAP financial measure and consists of Adjusted net income
(loss) divided by weighted average diluted shares outstanding for
the corresponding period. The Company’s management believes
Adjusted net income (loss) and Adjusted diluted earnings (loss) per
share are meaningful to investors because management reviews
Adjusted net income (loss) and Adjusted diluted earnings (loss) per
share in assessing and evaluating performance. However, these
measures should be considered in addition to, rather than a
substitute for Net income (loss) and Diluted earnings (loss) per
share provided in accordance with GAAP. The Company’s method of
calculating Adjusted net income (loss) and Adjusted diluted
earnings (loss) per share may differ from methods used by other
companies and, as a result, Adjusted net income (loss) and Adjusted
diluted earnings (loss) per share may not be comparable to other
similarly titled measures disclosed by other companies.
Armstrong Flooring, Inc. and
SubsidiariesReconciliation of Adjusted EBITDA to
Net Income (Loss) (unaudited)
|
|
Three Months EndedMarch 31 |
|
(In millions) |
|
2021 |
|
2020 |
|
Net income (loss) |
|
$ |
27.2 |
|
|
|
$ |
(13.2 |
) |
|
|
Add-back
(deduct): |
|
|
|
|
|
Income tax expense (benefit) |
|
(0.8 |
) |
|
|
(0.3 |
) |
|
|
Other (income) expense, net |
|
(2.1 |
) |
|
|
(0.4 |
) |
|
|
Interest expense |
|
3.5 |
|
|
|
0.6 |
|
|
|
Operating
(loss) |
|
27.8 |
|
|
|
(13.3 |
) |
|
|
Add-back: Depreciation and
amortization expense |
|
9.9 |
|
|
|
10.6 |
|
|
|
Add-back: U.S. Pension
expense |
|
0.2 |
|
|
|
0.6 |
|
|
|
Add-back (deduct)
Business transformation items: |
|
|
|
|
|
Site exit costs |
|
0.5 |
|
|
|
— |
|
|
|
Additional costs related to business transformation
initiatives |
|
— |
|
|
|
0.4 |
|
|
|
Gain on sale of South Gate property |
|
(46.0 |
) |
|
|
— |
|
|
|
Adjusted
EBITDA |
|
$ |
(7.6 |
) |
|
|
$ |
(1.6 |
) |
|
(a) |
(a) Does not total due to rounding.
Adjusted EBITDA is a non-GAAP financial measure
and consists of Net income (loss) adjusted to remove the impact of
income taxes, other (income) expense, interest expense,
depreciation and amortization, U.S. pension expense and business
transformation costs. The Company‘s management believes Adjusted
EBITDA is meaningful to investors because management reviews
Adjusted EBITDA in assessing and evaluating performance. However,
this measure should be considered in addition to, rather than as a
substitute for Net income (loss) provided in accordance with GAAP.
The Company's method of calculating Adjusted EBITDA may differ from
methods used by other companies and, as a result, Adjusted EBITDA
may not be comparable to other similarly titled measures disclosed
by other companies.
Armstrong Flooring (NYSE:AFI)
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