Armstrong World Industries, Inc.
), reported first-quarter 2013 adjusted earnings of 22 cents per
share, declining 55% from the prior year quarter's earnings of 49
cents per share. The decline was attributable to increased
foreign losses and the disbursement of previously capitalized
financing costs resulting in higher tax rate. The results also
missed the Zacks Consensus Estimate of 39 cents.
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On a reported basis, earnings decreased nearly six-fold to 5
cents per share from the prior-year quarter's earnings of 32
cents. Earnings include charges relating to a pre-tax adjustment,
ordinary tax, unbenefited foreign losses and reversal of tax
Net sales dipped 2% year over year to $622.3 million in the
reported quarter and fell short of the Zacks Consensus Estimate
of $634 million. Results were affected by the sale of the Patriot
wood flooring distribution business in the third-quarter 2012.
The year- over-year decline was also driven by lower commercial
volumes, partly offset by gains in new residential construction
which led to volume growth in the Wood Flooring business and
positive impact of price and mix.
Cost of sales went down 3.7% to $478 million in the reported
quarter. Gross profit improved 3.2% to $144.5 million from the
year-ago quarter. Gross margin expanded 120 basis points (bps)
year over year to 23.2% in the quarter.
Selling, general and administrative expenses declined 2% to
$112.7 million in the quarter. Adjusted operating income
decreased 8% to $54 million in the quarter from $59 million in
the prior-year quarter. Operating margin contracted 60 bps year
over year to 8.6%.
Net sales at the Building Products segment dropped 3.4% to $292.8
million, due to lower volumes in the Americas and Europe, partly
offset by a strong mix performance and higher pricing. Adjusted
operating profit for the segment increased 3.4% to $60 million
from $58 million in the year-ago quarter.
The Resilient Flooring segment reported sales of $215 million,
down 5.5% from the year-ago quarter. The decline was driven by
softness in commercial sectors resulting in lower volumes in
North America, Europe and Australia. The segment's adjusted
operating profit was $12 million, flat compared with the year-ago
Net sales in the reported quarter went up 8.6% year over year to
$114.7 million, driven by a strong volume growth owing to
promotional activity and share gains in the home center channel
as well as strong demand from independent distributors. Adjusted
operating profit, however, declined 50% to $1 million in the
reported quarter from $2 million in the prior-year quarter.
Cash and cash equivalents were $278 million as of Mar 31, 2013
compared with $683 million as of Mar 31, 2012. Cash flow used in
operating activities was $14 million in the reported quarter
compared with $33 million in the prior-year quarter.
Armstrong maintains its full year 2013 sales guidance in the
range of $2.7 to $2.8 billion. It also retains the forecast for
adjusted EBITDA in the band of $390 to $420 million. The company,
however, lowered its full year adjusted EPS from the previous
range of $2.30 to $2.60 to the new range of $2.15 to $2.45.
For the second quarter of 2013, Armstrong expects sales to be in
the range of $680 and $730 million and adjusted EBITDA in the
range of $85 to $105 million.
Pa.-based Armstrong is a leading global producer of flooring
products and ceiling systems for use in the construction and
renovation of residential, commercial and institutional
buildings. Armstrong also designs, manufactures and sells kitchen
and bathroom cabinets in the U.S.
Armstrong currently retains a short-term Zacks Rank #4 (Sell).
Other companies in the building and construction industry with
favorable Zacks Ranks are
James Hardie Industries plc
); each carrying a Zacks Rank #2 (Buy).