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Adjusted operating income and adjusted EBITDA improved by 23% and 19%, respectively, in the second quarter of 2016 when compared to the prior year period. The improvement in adjusted EBITDA was driven by lower SG&A costs in international regions, higher earnings from the WAVE joint venture, the margin impact of higher volume and AUV improvement. Adjusted earnings per share is calculated using a 39% adjusted tax rate in both periods.

Second Quarter Segment Highlights

Effective April 1, 2016, the former Building Products operating segment was disaggregated into the following three distinct geographical segments: Americas (including Canada); Europe, Middle East and Africa (including Russia) ("EMEA") and Pacific Rim. The Unallocated Corporate segment historically included assets, liabilities, income and expenses that had not been allocated to the geographical segments, including AFI separation costs.

Adjusted EBITDA improved in all three geographic segments, excluding the impact of stand-alone corporate costs allocated to the Americas segment.

Excluding the unfavorable impact of foreign exchange of approximately $1 million, net sales in the Americas for the second quarter increased 6.3%, driven by broad based mid-single digit volume growth in the Americas and continued improvement in AUV. On an as reported basis, operating income decreased, driven by higher SG&A expenses and manufacturing costs, due to increased costs as result of the AFI separation. These costs more than offset the margin impact of higher volumes, strong earnings from the WAVE joint venture and improvements in AUV.

Excluding the unfavorable impact of foreign exchange of approximately $2 million, net sales in EMEA for the second quarter decreased 1.9%, driven by lower volumes as lower sales in the Middle East were mostly offset by higher sales in Russia. On an as reported basis, operating loss decreased, driven by lower SG&A costs and lower manufacturing and input costs that offset the margin impact from lower volumes. The improvement in SG&A costs over the prior year period reflects the benefit of prior cost reduction actions and strong cost control to mitigate softer end markets.

Excluding the unfavorable impact of foreign exchange of approximately $1 million, net sales in the Pacific Rim for the second quarter increased 1.2%, as improvements in AUV offset lower volumes. On an as reported basis, the increase in operating loss was due entirely to severance charges associated with cost reduction actions, which offset improvements in AUV and lower SG&A expenses.

Unallocated Corporate

As a result of the AFI separation on April 1, 2016, the majority of the AWI corporate support functions, representing costs of approximately $16 million for the three months ended June 30, 2016, were incorporated into the Americas segment. As a result, unallocated corporate support expenses decreased significantly during the three months ended June 30, 2016 when compared to the same period in 2015.

On an as reported basis, unallocated corporate expense of $5.2 million decreased from $23.0 million in the prior year. The decrease was due to the inclusion of most of the corporate costs within the Americas segment. The expenses flowing through this segment in 2016 are costs and expenses related to the AFI separation.

Year to Date Results from continuing operations

Excluding the unfavorable impact from foreign exchange of approximately $11 million, year to date consolidated net sales increased 2.6% compared to the prior year period driven by higher volumes in the Americas and improvements in AUV.

On an as reported basis, operating income declined by 2.7% driven by AFI separation expenses. Separation expenses in the first six months of 2016 were $31 million, compared to $9 million in the prior year period. Operating income was also impacted by strong earnings from the WAVE joint venture, lower SG&A expenses reflecting cost control measures plus the net impact of the separation, and the margin impact from higher volumes; which more than offset higher manufacturing and input costs, and the margin impact of unfavorable AUV.

Share Repurchase Program

AWI also separately announced today that its Board of Directors authorized a stock repurchase program under which it may repurchase up to $150 million of its outstanding common stock. The repurchase authorization extends through July of 2018. "As a key component of our capital allocation strategy, this authorization demonstrates our conviction in our strategic growth initiatives and the potential of our business," said Vic Grizzle, CEO.

Market Outlook and 2016 Guidance ⁽¹⁾

"For the full year 2016, we are maintaining our adjusted EBITDA guidance, with constant currency sales now expected to be in the $1.23 to $1.28 billion range," said Brian MacNeal, CFO. "We expect sales to improve sequentially in the second half of the year in our international markets after a slow start to the year, but with the uncertainty created by the U.K. referendum to leave the European Union, we expect the rate of improvement to be less than what we had previously anticipated."

The Company is maintaining its expected range for full year 2016 adjusted EBITDA of $310 to $330 million and its free cash flow range of $80 to $100 million. The Company now expects adjusted earnings per share, to be in the range of $2.05 to $2.25 per diluted share.

⁽¹⁾ Sales guidance includes the impact of foreign exchange. Guidance metrics, other than sales, are presented using 2016 budgeted foreign exchange rates. Adjusted EPS guidance for 2016 is calculated based on an adjusted effective tax rate of 39%.

Earnings Webcast

Management will host a live Internet broadcast beginning at 11:00 a.m. Eastern time today, to discuss second quarter 2016 results. This event will be broadcast live on the Company`s Web site. To access the call and accompanying slide presentation, go to www.armstrongceilings.com and click "Investors." The replay of this event will also be available on the Company`s Web site for up to one year after the date of the call.

Uncertainties Affecting Forward-Looking Statements

Disclosures in this release, including without limitation, those relating to future financial results, market conditions and guidance, 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 the "Risk Factors" and "Management`s Discussion and Analysis" sections of our reports on Forms 10-K and 10-Q filed with the U.S. Securities and Exchange Commission ("SEC"). 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.

About Armstrong and Additional Information

More details on the Company`s performance can be found in its quarterly report on Form 10-Q for the quarter ended June 30, 2016 that the Company expects to file with the SEC today.

Armstrong World Industries, Inc. (AWI) is a global leader in the design and manufacture of innovative commercial and residential ceiling, wall and suspension system solutions. With 3,800 employees and fiscal 2015 revenues from ceiling operations in excess of $1.2 billion, AWI operates from a global manufacturing network of 24 facilities, including 9 plants dedicated to its WAVE joint venture. On April 1, 2016, AWI completed the separation of its legacy flooring business that now operates as Armstrong Flooring Inc., an independent, publicly-traded company. For more information, visit www.armstrongceilings.com.

Additional forward looking non-GAAP metrics are available on the Company`s web site at http://www.armstrongceilings.com/ under the Investor Relations tab. The website is not part of this release and references to our website address in this release are intended to be inactive textual references only.

Supplemental Reconciliations of GAAP to non-GAAP Results (unaudited)
(Amounts in millions, except per share data)

To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company provides additional measures of performance adjusted to exclude the impact of foreign exchange, restructuring charges and related costs, impairments, the non-cash impact of the U.S. pension plan, separation costs and certain other gains and losses. Adjusted figures are reported in comparable dollars using the budgeted exchange rate for 2016. The Company uses these adjusted performance measures in managing the business, including communications with its Board of Directors and employees, and believes that they provide users of this financial information with meaningful comparisons of operating performance between current results and results in prior periods. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance, as well as prospects for its future performance. A reconciliation of these adjustments to the most directly comparable GAAP measures is included in this release and on the Company`s website. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.

CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS

*Excludes accelerated depreciation associated with cost reduction initiatives reflected below. Actual D&A as reported is; $20.0 million for the three months ended June 30, 2016, $19.3 million for the three months ended June 30, 2015, $38.8 million for the six months ended June 30, 2016, and $38.3 million for the six months ended June 30, 2015.

*Adjusted results exclude $10.7 million of interest expense recorded in the first quarter of 2016 related to the settlement of interest rate swaps incurred in connection with the company`s refinancing of its credit facility.

Source: Armstrong World Industries

AWI Reports Second Quarter 2016 Results FINAL

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Armstrong World Industries, Inc. via GlobeNewswire
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