UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 1, 2011 (August 1, 2011)

ARMSTRONG WORLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Pennsylvania
1-2116
23-0366390
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(IRS Employer
Identification No.)

P.O. Box 3001, Lancaster, Pennsylvania
17604
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code:
(717) 397-0611

N/A
(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

□   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
□   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
□   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
□   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
Section 2 - Financial Information
 
Item 2.02 Results of Operations and Financial Condition.
 
On August 1, 2011, Armstrong World Industries, Inc. (the “Company”) issued a press release regarding its second quarter 2011 financial results. The full text of the press release is attached hereto as Exhibit 99.1.  The information being furnished pursuant to Item 2.02 of this Form 8-K and in Exhibit 99.1 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise be subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such a filing.
 
Section 5 – Corporate Governance and Management

Item 5.05 Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

(a)           On July 29, 2011, the Audit Committee of the Company’s Board of Directors approved certain stylistic and non-substantive edits to the Company’s Code of Business Conduct (the “Code”).  The edits were designed to reorganize content for easier reader navigation, simplify language, add comprehension aids, include additional content regarding conflicts of interest, substance abuse, data privacy and social media, and present a more engaging visual design.  The Code is intended to comply with the applicable rules and regulations of the New York Stock Exchange and the Securities Exchange Commission.

The preceding description is qualified in its entirety by reference to the full text of the Code, as amended and effective as of July 29, 2011, which is attached hereto as Exhibit 14.
 
Section 7 – Regulation FD

Item 7.01 Regulation FD Disclosure.

As previously announced, the Company will report its second quarter 2011 financial results via a webcast and conference call for investors on Monday, August 1, 2011 at 1:00 p.m. Eastern Standard Time.

In connection with a presentation to be made in the webcast and conference call,  the Company will reference two slide presentations, copies of which are attached hereto as Exhibit 99.2 and Exhibit 99.3 and incorporated by reference.  The information being furnished pursuant to Item 7.01 of this Form 8-K and in Exhibits 99.2 and 99.3 shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise be subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such a filing, is being furnished to the SEC and shall not be deemed to be “filed” for any purpose.

Section 8 – Other Events

Item 8.01 Other Events.

In its 8-K filed on April 27, 2011, announcing the hiring of Mark A. Hershey to the position of Senior Vice President,  General Counsel and Secretary, the Company indicated that it intended to enter into an Indemnification Agreement and Change of Control Agreement with Mr. Hershey that was expected to contain provisions similar to those provided to other directors and officers of the Company.  The Company has entered into such agreements with Mr. Hershey.

The terms of Mr. Hershey’s Indemnification Agreement are similar to those generally offered to directors and officers of the Company and provides for indemnification against liabilities relating to Mr. Hershey’s service as an officer of the Company and advancement of expenses under certain circumstances to the fullest extent permitted by law.

The Company’s standard form of Indemnification Agreement generally provided to directors and officers of the Company was previously filed by the Company as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 4, 2010.

The terms of Mr. Hershey’s Change in Control Agreement are similar to those provided to other senior Company officers, including severance benefits amounting to two times the sum of Mr. Hershey’s base salary and annual target bonus.  In the event of a Change in Control, the Change in Control Agreement will extend for two years from the date of the Change in Control event. If a Change in Control termination occurs prior to the completion of a bonus plan year, Mr. Hershey would receive a prorated bonus based on actual results achieved in the bonus plan year during which the termination occurs. Mr. Hershey’s health, disability and life insurance benefits would continue for two years following a Change in Control termination, or until eligible for benefits from a new employer.

The Company’s standard form of Change in Control Agreement provided to Company executives was previously filed by the Company as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 6, 2010.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

     
No. 14.1
  
Armstrong World Industries, Inc. Code of Business Conduct
No. 99.1
 
Press Release of Armstrong World Industries, Inc. dated August 1, 2011
No. 99.2
 
Second Quarter Earnings Call Presentation dated August 1, 2011
No. 99.3
 
Armstrong World Industries, Inc. Investor Presentation dated August 1, 2011

  2
 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
ARMSTRONG WORLD INDUSTRIES, INC.
 
 
By:
/s/ Mark A. Hershey
   
Mark A. Hershey
   
    Senior Vice President, General Counsel and Secretary
 

 
Date:
August 1, 2011



























 
  3
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Armstrong World Industries Reports Second Quarter 2011 Results
 
 
Highlights for the Second Quarter of 2011
 
 
·  
Adjusted EBITDA of $109 million, up 24% over the 2010 period
 
·  
Operating Income of $72.7 million, up 37.4% over the 2010 period
 
·  
Cost reduction program exceeding targeted savings
 
·  
Macro economic climate remains challenging
 
 
LANCASTER, Pa., August 1, 2011 /PRNewswire via COMTEX/ --Armstrong World Industries, Inc. (NYSE: AWI), a global leader in the design and manufacture of floors, ceilings, and cabinets, today reported second quarter 2011 results.
 
 
Second Quarter Results
 
 
(Amounts in millions except
per share data)
Three Months Ended June 30,
 
   
2011
2010
Change
 
Net sales
$ 748.6
$ 724.8
 3.3%
 
Operating income
      72.7
     52.9
37.4%
 
Net income
     37.9
     26.8
41.4%
 
Diluted earnings per share
   $     0.64
  $      0.46
39.1%
 
 
Consolidated net sales increased approximately $24 million or 3% compared to the prior year period.  Excluding a $24 million favorable foreign exchange impact for the quarter, sales were relatively flat compared to the prior year period.  On a consolidated level, price and mix were able to offset broad volume declines in all businesses and geographies, except in the Wood business and in Asia where volume grew.  Volume declines in the European flooring markets reflect the exit from the residential flooring business in fourth quarter of 2010, and the simplification of our country and product offerings in Europe.  Excluding the impact of these actions, volumes in European flooring showed slight improvement.
 
Operating income and net income both increased due to the cost reduction actions initiated in 2010, which resulted in lower manufacturing costs and core SG&A expenses when compared to the same period last year.  Input cost inflation increased $15 million versus second quarter 2010, primarily driven a broad array of input items including PVC, plasticizers and Titanium Dioxide.
 

 
 
 

“I am pleased to announce that, on an adjusted basis, EBITDA was up 24% from Q2 2010 levels, on relatively flat sales,” said Matt Espe, President and CEO.  “Volumes were down in most of our business reflecting the cautionary economic environment in which we continue to operate.  We were, however, able to achieve increased profitability through the continued execution of our cost savings plans, pricing ability, mix gains from new products and leverage of LEAN investments.”
 
 
Additional (non-GAAP) Financial Metrics *
 
 
(Amounts in millions except per share data)
Three Months Ended June 30,
 
   
2011
2010
Change
 
Adjusted operating income
$ 82
$ 60
37%
 
Adjusted net income
   41
   33
24%
 
Adjusted diluted earnings per share
      $    0.70
      $    0.55
27%
 
Free cash flow
$ 50
$ 89
($39)
 
 
 
 
(Amounts in millions except per share data)
Three Months Ended June 30,
 
   
2011
2010
Change
 
Adjusted EBITDA
     
 
    Building Products
$  74
$ 68
    9%
 
    Resilient Flooring
    25
   20
   25%
 
    Wood Flooring
    16
    4
Favorable
 
    Cabinets
     1
  -
Favorable
 
    Unallocated Corporate
     (7)
    (4)
 (75)%
 
Consolidated Adjusted EBITDA
$109
$ 88
 24%
 
*The Company uses the above non-GAAP adjusted measures, as well as other non-GAAP measures mentioned below, in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. Adjusted operating income and adjusted EBITDA exclude the impact of foreign exchange, restructuring charges and related costs, impairments, and certain other nonrecurring gains and losses. Adjusted figures are reconciled to the most comparable GAAP measures in tables at the end of this release.
 
Improvements in adjusted operating income and EBITDA were driven by reductions in manufacturing costs, coupled with the impact of better pricing and reductions in SG&A expenses, which were partially offset by increased input costs.  The reduction in free cash flow was primarily due to a smaller decrease in working capital than in the second quarter of 2010, higher capital expenditures, and higher interest expense.
 
 
 
Second Quarter Segment Highlights
 
Building Products
 
   
Three Months Ended June 30,
 
   
2011
2010
Change
 
Total segment net sales
$ 305.0
$ 284.4
7.2%
 
Operating income
$   57.1
$   53.0
7.7%
 
 
The increase in net sales was driven by favorable foreign exchange of approximately $12 million and better price and mix, which were partially offset by lower volumes in the Americas and Western Europe.   Operating income increased as price offset inflation and improvements in mix and reduced manufacturing costs were offset slightly by lower volumes.
 
Resilient Flooring
 
   
Three Months Ended June 30,
 
   
2011
2010
Change
 
Total segment net sales
$ 274.7
$ 276.0
(0.5)%
 
Operating income
  $ 11.3
  $ 10.0
13.0%
 
 
Net sales decreased slightly as favorable foreign exchange of approximately $11 million and improved product mix and price were more than offset by volume declines in the Americas and Europe.  Net sales declines in the European markets for both periods reflects the volume reductions related to the restructuring of our European flooring business which included the exit of the residential flooring business and simplifying our country and product offerings. Excluding the impact of these actions, volumes in the European markets showed slight improvement.
 
The increase in operating income was due to reduced manufacturing costs, improved price and reductions in SG&A expenses, which were partially offset by volume declines and raw material inflation.  Operating income for the 2011 period included $5.9 million of severance and restructuring related costs in Europe.  European operating income was impacted by a $2.1 million fixed asset impairment charge in the 2010 period.
 
 
 
 
 
Wood Flooring
 
 
Three Months Ended June 30,
Change
2011
2010
Total segment net sales
$ 133.6
$ 127.2
5.0%
Operating income
$  13.4
$     1.1
Favorable
 
Net sales increased in the second quarter as price, volume and mix were all positive contributors.  Operating income increased as a result of reduced manufacturing and SG&A costs and improved sales.
 
Cabinets
 
Three Months Ended June 30,
 
2011
2010
Change
Total segment net sales
$ 35.3
$ 37.2
(5.1)%
Operating income (loss)
$   0.8
 $  (0.4)
Favorable
 
 
Net sales decreased primarily due to less favorable product mix.  Operating income improved primarily due to reduced SG&A expenses, which were partially offset by unfavorable product mix.
 
Corporate
 
Unallocated corporate expense of $9.9 million decreased from $10.8 million in the prior year. The second quarter 2011 expense included a $6.2 million lower pension credit compared to 2010.  The second quarter 2010 expense included a $3.0 million impairment charge related to the termination of flight operations.
 
Year to Date Results
 
For the six months ended June 30, 2011, reported net sales were $1,433.8 million compared to $1,383.7 million in 2010. Excluding a $29 million favorable impact from exchange rates, net sales increased by 1.5% percent as volume declines were more than offset by price and mix.
 
 
Reported operating income for the first six months was $124.8 million compared to operating income of $66.3 million for the same period in 2010. Adjusted EBITDA of $202 million increased 40% compared to Adjusted EBITDA of $144 million in the prior year period. Significant reductions in manufacturing costs and SG&A expenses, coupled with price and mix gains more than offset the negative margin impact of inflation in input costs.
 
 
 
 
Free cash flow for the first six months of 2011 was $6 million compared to $59 million for 2010 primarily due changes in working capital, higher interest expense and increased capital expenditures in 2011.
 
Market Outlook and 2011 Guidance
 
Management’s macro economic outlook for 2011 is down slightly from the beginning of the year and the end of the first quarter.  Entering the year U.S. and Western European markets were expected to be relatively flat. Management projected new home starts in the U.S. to be around 600,000 and anticipated repair and remodel activity in North America to be flat to slightly down and commercial repair remodel activity slightly up.  “We now expect our residential and commercial end markets opportunity to be slightly lower as the domestic economic recovery appears to be delayed,” said Tom Mangas, Senior Vice President and CFO.  “We continue to expect emerging markets’ GDP to continue to grow in the high single digit range.”
 
 
Management is raising the low end of sales guidance driven by foreign exchange trends, and raising the lower end of EBITDA guidance by $10 million to $385 million.  Savings opportunities in excess of the previously announced $150 million initiative have been identified.  “We now expect to save approximately $165 million and have accelerated some savings initially expected in 2012 into 2011.  2011 savings are now expected to be approximately $90 million, up from $65 million incorporated in our previous guidance,” said Mangas.
 
 
(Amounts in millions)
2011 Estimate Range
 
Net sales
$ 2,900   to   $ 3,000
 
Adjusted EBITDA
$385   to  $415
 
For the third quarter of 2011, sales are expected to be between $780 and $830 million and Adjusted EBITDA to be in the range of $115 to $130 million.  Additional forward looking non-GAAP metrics are available on our web site at http://www.armstrong.com/ under the Investor Relations tab.
 
Earnings Webcast
 
Management will conduct a discussion for shareholders during a live Internet broadcast beginning at 1:00 p.m. Eastern time today. This event will be broadcast live on the Company's Web site, www.armstrong.com. From the homepage, click "For Investors" to access the call and the accompanying slide presentation. The replay of this event will also be available on the Company's Web site.
 
 
 
 
 
 
Uncertainties Affecting Forward-Looking Statements
 
Our disclosures in this presentation and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act.  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," etc. in discussions of future operating or financial performance or the outcome of contingencies such as liabilities or legal proceedings.   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.  A more detailed discussion of the risks and uncertainties that may affect our ability to achieve the projected performance is included in the “Risk Factors” and “Management’s Discussion and Analysis” sections of our recent reports on Forms 10-K and 10-Q filed with the SEC.  As a result, our actual results may differ materially from our expected results and from those expressed in our forward looking statements.  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 Form 10-Q that will be filed with the SEC today.
 
Armstrong World Industries, Inc. is a global leader in the design and manufacture of floors, ceilings and cabinets. In 2010, Armstrong's consolidated net sales totaled approximately $2.8 billion. Based in Lancaster, Pa., at June 30, 2011 Armstrong operated 31 plants in seven countries and has approximately 9,300 employees worldwide. For more information, visit http://www.armstrong.com/ .
 

 
 
 
As Reported Financial Highlights
 
 
FINANCIAL HIGHLIGHTS
Armstrong World Industries, Inc., and Subsidiaries
(amounts in millions, except for per-share amounts)
(Unaudited)
 
   
Three Months Ended June 30,
   
Three Months Ended June 30,
   
Six Months Ended June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Net sales
  $ 748.6     $ 724.8     $ 1,433.8     $ 1,383.7  
Cost of goods sold
    563.9       554.4       1,088.4       1,067.5  
Selling, general and administrative expenses
    122.2       131.8       242.3       275.3  
Restructuring charges
    2.4       -       7.3       -  
Equity (earnings) from joint venture
    (12.6 )     (14.3 )     (29.0 )     (25.4 )
    Operating income
    72.7       52.9       124.8       66.3  
                                 
Interest expense
    11.5       4.0       26.3       7.9  
Other non-operating expense
     0.8       0.3       1.1       0.3  
Other non-operating (income)
    (0.8 )     (0.8 )     (1.4 )     (1.5 )
Earnings before income taxes
    61.2       49.4       98.8       59.6  
Income tax expense
    23.3       22.6       47.4       52.2  
    Net income
  $ 37.9     $ 26.8     $ 51.4     $ 7.4  
                                 
Net earnings per share of common stock:
                               
    Basic
  $ 0.64     $ 0.47     $ 0.88     $ 0.13  
    Diluted
  $ 0.64     $ 0.46     $ 0.87     $ 0.13  
                                 
Average number of common shares outstanding:
                               
    Basic
    58.3       57.6       58.2       57.6  
    Diluted
    58.9       58.1       58.8       58.1  
 
 
 
 
 
 
SEGMENT RESULTS
Armstrong World Industries, Inc., and Subsidiaries
(amounts in millions)
(Unaudited)
 
   
Three Months Ended June 30,
   
Three Months Ended June 30,
   
Six Months Ended June 30,
   
Six Months Ended June 30,
 
Net sales
 
2011
   
2010
   
2011
   
2010
 
Building Products
  $ 305.0     $ 284.4     $ 611.9     $ 552.3  
Resilient Flooring
    274.7       276.0       509.4         508.6  
Wood Flooring
    133.6       127.2       244.6         251.5  
Cabinets
    35.3       37.2       67.9         71.3  
    Total net sales
  $ 748.6     $ 724.8     $ 1,433.8     $ 1,383.7  
 
 
Operating income (loss)
                       
Building Products
  $ 57.1     $ 53.0     $ 118.6     $ 95.7  
Resilient Flooring
    11.3       10.0        10.0        4.8  
Wood Flooring
    13.4       1.1       16.9       (0.5 )
Cabinets
      0.8       (0.4 )     -       (4.3 )
Unallocated Corporate (expense)
    (9.9 )     (10.8 )     (20.7 )     (29.4 )
    Total Operating income
  $ 72.7     $ 52.9     $ 124.8     $ 66.3  
 
 
Selected Balance Sheet Information
(amounts in millions)
 
(Unaudited) June 30,
2011
December 31, 2010
Assets
         
Current assets
  $ 1,147.6
   
 $1,020.7
 
Property, plant and equipment, net
        855.6
   
       854.9
 
Other noncurrent assets
     1,067.9
 
   
    1,046.8
 
 
        Total assets
  $ 3,071.1
 
  $
2,922.4
 
           
Liabilities and shareholders’ equity
         
 Current liabilities
 $     395.9
   
   $  382.9
 
 Noncurrent liabilities
     1,503.0
   
    1,448.7
 
 Equity
     1,172.2
 
   
    1,090.8
 
 
        Total liabilities and shareholders’ equity
   $ 3,071.1
 
  $
2,922.4
 
           
 
 
 
 
 
 
 
Selected Cash Flow Information
(amounts in millions)
(Unaudited)
 
   
Six Months Ended June 30,
 
   
2011
   
2010
 
Net income
  $ 51.4     $ 7.4  
Other adjustment to reconcile net income to net cash provided by operating activities
    57.8        64.9  
Changes in operating assets and liabilities, net
    (77.1 )      (16.1 )
Net cash provided by operating activities
    32.1       56.2  
Net cash (used for) provided by investing activities
    (22.7 )      2.7  
Net cash (used for) financing activities
    (29.7 )       (18.2 )
                 
Effect of exchange rate changes on cash and cash equivalents
    9.1         (10.3 )
Net (decrease) increase in cash and cash equivalents
    (11.2 )     30.4  
Cash and cash equivalents, beginning of period
    315.8       569.5  
Cash and cash equivalents, end of period
  $ 304.6     $ 599.9  
 
 
Supplemental Reconciliations of GAAP to non-GAAP Results
 
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), Armstrong provides additional measures of performance adjusted to exclude the impact of foreign exchange, restructuring charges and related costs, impairments, and certain other gains and losses.  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 our 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
 
Three Months Ended
June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Adjusted EBITDA
  $ 108.6     $ 88.3     $ 201.5     $ 143.7  
D&A/Fx*
    (26.4 )     (28.5 )     (52.9 )     (56.7 )
Operating Income, Adjusted
  $ 82.2     $ 59.8     $ 148.6     $ 87.0  
Cost reduction initiatives expenses
    7.9       2.2       18.0       1.5  
CEO transition costs
    -       -       -       11.2  
Restructuring
    2.4       -       7.3       -  
Fixed asset impairment
    -       5.1       -       8.2  
Foreign exchange impact
    (0.8 )     (0.4 )     (1.5 )     (0.2 )
     Operating Income, Reported
  $ 72.7     $ 52.9     $ 124.8     $ 66.3  
                                 
* Excludes accelerated depreciation associated with cost reduction initiatives reflected below.  Actual D&A as reported is; $29.9 million for the three months ended June 30, 2011, $28.1 million for the three months ended June 30, 2010, $61.8 million for the six months ended June 30, 2011, and $56.4 million for the six months ended June 30, 2010.
 
 
BUILDING PRODUCTS
 
Three Months Ended
June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Adjusted EBITDA
  $ 73.8     $ 68.2     $ 155.0     $ 123.0  
D&A/Fx
    (13.0 )     (13.2 )     (26.1 )     (26.1 )
Operating Income, Adjusted
  $ 60.8     $ 55.0     $ 128.9     $ 96.9  
Cost reduction initiatives expenses
    4.4       2.2       9.6       1.5  
Restructuring
    (0.2 )     -       1.5       -  
Foreign exchange impact
    (0.5 )     (0.2 )     (0.8 )     (0.3 )
     Operating Income, Reported
  $ 57.1     $ 53.0     $ 118.6     $ 95.7  
 
 
 
 
RESILIENT FLOORING
 
Three Months Ended
June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Adjusted EBITDA
  $ 24.8     $ 19.9     $ 39.0     $ 22.5  
D&A/Fx
    (7.5 )     (8.2 )     (14.8 )     (16.1 )
Operating Income, Adjusted
  $ 17.3     $ 11.7     $ 24.2     $ 6.4  
Cost reduction initiatives expenses
    3.7       -       9.5       -  
Restructuring
    2.2       -       5.4       -  
Fixed Asset Impairment
    -       2.1       -       2.1  
Foreign exchange impact
    0.1       (0.4 )     (0.7 )     (0.5 )
     Operating Income, Reported
  $ 11.3     $ 10.0     $ 10.0     $ 4.8  
 
 

 
 
 

 
WOOD FLOORING
 
Three Months Ended
June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Adjusted EBITDA
  $ 15.4     $ 4.5     $ 21.2     $ 6.4  
D&A/Fx
    (2.6 )     (3.1 )     (5.3 )     (6.2 )
Operating Income, Adjusted
  $ 12.8     $ 1.4     $ 15.9     $ 0.2  
Cost reduction initiatives (income)
    (0.2 )     -       (0.5 )     -  
Restructuring
    -       -       (0.2 )     -  
Foreign exchange impact
    (0.4 )     0.3       (0.3 )     0.7  
     Operating Income (Loss),   Reported
  $ 13.4     $ 1.1     $ 16.9     $ (0.5 )
 
 
 
 
CABINETS
 
Three Months Ended
June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Adjusted EBITDA
  $ 1.4     $ -     $ 1.1     $ (3.4 )
D&A/Fx
    (0.6 )     (0.4 )     (1.1 )     (0.9 )
Operating Income (Loss), Adjusted*
  $ 0.8     $ (0.4 )   $ -     $ (4.3 )
*No adjustments necessary to reconcile adjusted operating income to reported operating income (loss).
 
 
 
UNALLOCATED CORPORATE
 
Three Months Ended
June 30,
   
Six Months Ended June 30,
 
   
2011
   
2010
   
2011
   
2010
 
Adjusted EBITDA
  $ (6.8 )   $ (4.3 )   $ (14.8 )   $ (4.8 )
D&A/Fx
    (2.7 )     (3.6 )     (5.6 )     (7.4 )
Operating (Loss), Adjusted
  $ (9.5 )   $ (7.9 )   $ (20.4 )   $ (12.2 )
Cost reduction initiatives (income)
    -       -       (0.5 )     -  
CEO transition costs
    -       -       -       11.2  
Restructuring
    0.4       -       0.6       -  
Fixed asset impairments
    -       3.0       -       6.1  
Foreign exchange impact
    (0.1 )     (0.1 )     0.2       -  
     Operating (Loss), Reported
  $ (9.9 )   $ (10.8 )   $ (20.7 )   $ (29.4 )
 
 

 
 
 
 
 
Three Months Ended
Six Months Ended
CONSOLIDATED
June 30, 2011
June 30, 2010
June 30, 2011
June 30, 2010
 
Total
Per Share
Total
Per Share
Total
Per Share
Total
Per Share
Adjusted EBITDA
 $ 108.6
 
 $ 88.3
 
 $ 201.5
 
 $ 143.7
 
                 
D&A as reported
      (29.9)
 
    (28.1)
 
     (61.8)
 
       (56.4)
 
Accelerated Deprecation/Fx
        3.5
 
 
      (0.4)
 
 
        8.9
 
 
         (0.3)
 
 
Operating Income, Adjusted
   $ 82.2
 
  $ 59.8
 
 $ 148.6
 
     $ 87.0
 
Other non-operating (expense)
      (11.5)
 
 
       (3.7)
 
 
     (26.0)
 
 
          (6.8)
 
 
Earnings Before Taxes, Adjusted
      70.7
 
      56.1
 
   122.6
 
        80.2
 
                 
Adjusted tax (expense) @ 42%
      (29.7)
 
 
      (23.6)
 
 
     (51.5)
 
 
       (33.7)
 
 
Net Earnings, Adjusted
   $ 41.0
$ 0.70
    $ 32.5
$ 0.57
  $ 71.1
$ 1.21
     $ 46.5
$ 0.80
                 
Pre-tax adjustment items
        (9.5)
 
         (6.9)
 
     (23.8)
 
        (20.7)
 
Reversal of adjusted tax @ 42%
      29.7
 
       23.6
 
     51.5
 
        33.7
 
Ordinary tax
      (23.8)
  
       (19.7)
 
     (43.4)
 
        (23.5)
 
Unbenefitted foreign losses
        (3.1)
 
          (2.9)
 
       (7.9)
 
          (7.0)
 
Tax adjustment items
        3.6
 
         0.2
 
       3.9
 
  -
 
Federal Medicare Subsidy Adjustment
-
 
 
-
 
 
  -
 
 
        (21.6)
 
 
Net Earnings, Reported
   $ 37.9
 
$ 0.64
 
   $ 26.8
 
$ 0.46
 
$ 51.4
 
$ 0.87
 
        $ 7.4
 
$ 0.13
 
 
 
 
CASH FLOW
 
Three Months Ended
June 30,
   
Six Months Ended June 30,
 
Free Cash Flow
 
2011
   
2010
   
2011
   
2010
 
Net Cash From Operations
  $ 68     $ 84     $ 32     $ 56  
Plus/(minus): Net Cash Used for Investing
    (18 )     5       (26 )     3  
Free Cash Flow
  $ 50     $ 89     $ 6     $ 59  
 
 
 
 


 
Earnings Call Presentation
2nd Quarter 2011
August 1, 2011
 
 
 
1
Safe Harbor Statement
  Our disclosures in this presentation and in our other public documents and comments
  contain forward-looking statements within the meaning of the Private Securities Litigation
  Reform Act.   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," etc. in discussions of future operating or financial performance
  or the outcome of contingencies such as liabilities or legal proceedings.   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.   A more detailed discussion of the risks and uncertainties that may affect our ability
  to achieve the projected performance is included in the “Risk Factors” and “Management’s
  Discussion and Analysis” sections of our recent reports on Forms 10-K and 10-Q filed with
  the SEC.   As a result, our actual results may differ materially from our expected results and
  from those expressed in our forward looking statements.   We undertake no obligation to
  update any forward-looking statements beyond what is required under applicable
  securities law.
  In addition, we will be referring to non-GAAP financial measures within the meaning of
  SEC Regulation G. A reconciliation of the differences between these measures with the
  most directly comparable financial measures calculated in accordance with GAAP is
  available on the Investor Relations page of our website at www.armstrong.com .
 
 
 
2
Basis of Presentation Explanation
 
Comparable
Dollars
Other
Adjustments
Net Sales
Yes
No
Gross Profit
Yes
Yes
SG&A Expense
Yes
Yes
Equity Earnings
Yes
Yes
Operating Income
Yes
Yes
Net Income
Yes
Yes
Cash Flow
No
No
Return on Capital
Yes
Yes
EBITDA
Yes
Yes
  •   We report in comparable dollars to
  remove the effects of currency
  translation on the P&L.   The budgeted
  exchange rate for the current year is
  used for all currency translations in the
  current year and prior years.
  •   We remove the impact of major, discrete
  expenses and income.   Examples
  include plant closures, restructuring
  actions, and other large unusual items.
  •   Taxes for normalized Net Income and
  EPS for all periods presented are
  calculated using a constant 42%, which
  is based on the full year historical tax
  rate.
When reporting our financial results within this presentation, we make several adjustments. Management uses
the adjusted non-GAAP measures below in managing the business and believes the adjustments provide
meaningful comparisons of operating performance between periods.   As reported results will be footnoted
throughout the presentation.
What Items Are Adjusted
All figures throughout the presentation are in $ millions unless otherwise noted.   Figures may
not add due to rounding.
 
 
 
3
Key Metrics - Second Quarter 2011
Financial Overview
(1)   As reported Net Sales:   $749 million in 2011 and $725 million in 2010.
(2)   As reported Operating Income:   $73 million in 2011 and $53 million in 2010
(3)   As reported EPS:   $0.64 in 2011 and $0.46 in 2010.
 
2011
Actual
2010
Actual
Variance
Net Sales (1)
$733
$733
0%
Operating Income (2)
82
60
36.7%
  % of Sales
11.2%
8.2%
300 bps
EBITDA
109
88
23.9%
  % of Sales
14.9%
12.0%
290 bps
Earnings Per Share (3)
$0.70
$0.57
22.8%
Free Cash Flow
50
89
(39)
Net (Cash) Debt
542
(141)
683
 
 
 
4
Q2 2011 - Adjusted EBITDA to Reported Net Income
Financial Overview
 
2011
2010
V
EBITDA- Adjusted
$109
$88
$21
  Depreciation and Amortization
(27)
(28)
1
Operating Income - Adjusted
$82
$60
$22
  Foreign Exchange Movements
1
-
1
  Cost Reduction Initiatives
(5)
(2)
(3)
  Accelerated Depreciation (not included above)
(3)
-
(3)
  Restructuring
(2)
-
(2)
  Impairments
-
(5)
5
Operating Income - As Reported
$73
$53
$20
  Interest (Expense) Income
(12)
(4)
(8)
EBT
$61
$49
$12
  Tax (Expense) Benefit
(23)
(22)
(1)
Net Income
$38
$27
$11
 
 
 
5
Q2 Sales and EBITDA by Segment - 2011 vs. 2010
Financial Overview
 
 
 
6
EBITDA Bridge - Q2 2011 versus Prior Year
Financial Overview
($11)
($1)
 
 
 
7
Free Cash Flow - Second Quarter 2011 versus Prior Year
Financial Overview
 
 
 
 
 
 
8
Key Metrics - 1 st Half 2011
Financial Overview
(1)   As reported Net Sales:   $1,434 million in 2011 and $1,384 million in 2010.
(2)   As reported Operating Income:   $125 million in 2011 and $66 million in 2010
(3)   As reported EPS:   $0.87 in 2011 and $0.13 in 2010.
 
2011
Actual
2010
Actual
Variance
Net Sales (1)
$1,414
$1,393
1.5%
Operating Income (2)
149
87
71.3%
  % of Sales
10.5%
6.3%
430 bps
EBITDA
202
144
40.3%
  % of Sales
14.3%
10.3%
400 bps
Earnings Per Share (3)
$1.21
$0.80
51.3%
Free Cash Flow
6
59
(53)
Net (Cash) Debt
542
(141)
683
 
 
 
9
1H Sales and EBITDA by Segment - 2011 vs. 2010
Financial Overview
 
 
 
10
EBITDA Bridge - 1H 2011 versus Prior Year
Financial Overview
($13)
 
 
 
 
11
Key Metrics     - Guidance 2011
Financial Overview
 
2011
Estimate Range
 
2010
 
Variance
Net Sales (1)
2,900
to
3,000
 
2,766
 
5%
to
8%
Operating Income (2)
280
to
310
 
189
 
48%
to
64%
EBITDA
385
to
415
 
303
 
27%
to
37%
Earnings Per Share (3)
$2.29
to
$2.58
 
$1.73
 
32%
to
49%
Free Cash Flow
80
to
120
 
180
 
(56%)
to
(33%)
(1)   Sales figures include foreign exchange impact.
(2)   As reported Operating Income:   $255- 285 million in 2011 and $81 million 2010.
(3)   As reported earnings per share:   $2.01 - $2.32 in 2011 and $0.19 in 2010.
 
 
 
12
$165 Million Savings Program
$165M savings from manufacturing and SG&A, net of inflation.
Manufacturing savings driven by plant closures and LEAN.
Cumulative Savings     $35M       $125M       $165M
Financial Overview
 
 
 
 
 
 
13
2011 Financial Outlook
Financial Overview
¾   Raw Material & Energy Inflation*   $50 - $60 million increase
¾   Manufacturing Productivity*   Gross Margin +175 to +225 bps vs. 2010
¾   U.S. Pension Credit   ~$25 million, down ~$25 million vs. 2010
    60% manufacturing, 40% SG&A
¾   Earnings from WAVE   $5 - $10 million vs. 2010
¾   Cash Taxes/ETR*   ~$25 million. Adjusted ETR of 42%
¾   Q3   Sales $780 - $830 million
    EBITDA $115 - $130 million
¾   Capital Spending   ~$180-$200 million
¾   Exclusions from   EBITDA*   ~$18 - $22 million associated with already
    announced actions
* Changed from April Outlook
 
 
 
14
Appendix
 
 
 
15
1H 2011 - Adjusted EBITDA to Reported Net Income
Financial Overview Appendix
 
2011
2010
V
EBITDA- Adjusted
$202
$144
$58
  Depreciation and Amortization
(53)
(57)
4
Operating Income - Adjusted
$149
$87
$62
  Foreign Exchange Movements
(1)
-
(1)
  Cost Reduction Initiatives
(25)
(13)
(12)
  Accelerated Depreciation (not included above)
9
-
9
  Restructuring
(7)
-
(7)
  Impairments
-
(8)
8
Operating Income - As Reported
$125
$66
$59
  Interest (Expense) Income
(26)
(6)
(20)
EBT
$99
$60
$39
  Healthcare Reform- Medicare Subsidy Elimination
-
(22)
22
  Tax (Expense) Benefit
(48)
(31)
(17)
Net Income
$51
$7
$44
 
 
 
16
Adjusted Operating Income to Free Cash Flow
Financial Overview Appendix
 
2011
Estimate Range
Adjusted Operating Income
280
to
310
  D&A
105
Adjusted EBITDA
385
to
415
  Changes in Working Capital
5
to
25
  Capex
(180)
to
(200)
  Pension Credit
(25)
  Interest Expense
(50)
  Cash Taxes
(25)
  Other, including cash payments for
  restructuring and one-time items
(30)
Free Cash Flow
80
to
120
 
 
 
17
Consolidated Results
Financial Overview Appendix
Second Quarter
 
2011
Reported
Comparability (1
) Adjustments
FX (2) Adj
2011
Adjusted
2010
Reported
Comparability (1
) Adjustments
FX (2) Adj
2010
Adjusted
Net Sales
749
-
(16)
733
725
-
                                                   8
733
Operating Income
73
10
(1)
82
53
7
-
60
EPS
$0.64
$0.07
($0.01)
$0.70
$0.46
$0.11
$ -
$0.57
 
Full Year 2011
 
2011
Reported
Comparability (1
) Adjustments
FX (2) Adj
2011
Adjusted
2010
Reported
Comparability (1
) Adjustments
FX (2) Adj
2010
Adjusted
Net Sales
1,434
-
(20)
1,414
1,384
-
9
1,393
Operating Income
125
25
(1)
149
66
21
-
87
EPS
$0.87
$0.35
($0.01)
$1.21
$0.13
$0.67
$-
$0.80
(1)   See earnings press release and 10-Q for additional detail on comparability adjustments
(2)   Eliminates impact of foreign exchange movements
 
 
 
18
Segment Operating Income (Loss)
Financial Overview Appendix
(1)   Eliminates impact of foreign exchange movements and non-recurring items; see earnings press release and 10-Q for additional detail.
Second Quarter
 
2011
Reported
Comparability (1)
Adjustments
2011
Adjusted
2010
Reported
Comparability (1)
Adjustments
2010
Adjusted
Building Products
57
4
61
53
2
55
Resilient Flooring
11
6
17
10
2
12
Wood Flooring
14
(1)
13
1
-
1
Cabinets
1
-
1
-
-
-
Unallocated Corporate
(Expense) Income
(10)
-
(10)
(11)
3
(8)
 
Full Year 2011
 
2011
Reported
Comparability (1)
Adjustments
2011
Adjusted
2010
Reported
Comparability (1)
Adjustments
2010
Adjusted
Building Products
119
10
129
95
2
97
Resilient Flooring
10
14
24
5
1
6
Wood Flooring
17
(1)
16
(1)
1
-
Cabinets
-
-
-
(4)
-
(4)
Unallocated Corporate
(Expense) Income
(21)
1
(20)
(29)
17
(12)
 
 
 
19
Cash Flow
Financial Overview Appendix
 
Second Quarter
Full Year
($-millions)
2011
2010
2011
2010
Net Cash From Operations
68
84
32
56
Plus / (Minus) Net Cash from Investing
(18)
5
(26)
3
Equals Free Cash Flow
50
89
6
59
 
 
 
1
Armstrong World
Industries
Investor Presentation

August 1, 2011
 
 
 
 
 
 
 
 
1
Safe Harbor Statement
  Our disclosures in this presentation and in our other public documents and comments
  contain forward-looking statements within the meaning of the Private Securities Litigation
  Reform Act.   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," etc. in discussions of future operating or financial performance
  or the outcome of contingencies such as liabilities or legal proceedings.   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.   A more detailed discussion of the risks and uncertainties that may affect our ability
  to achieve the projected performance is included in the “Risk Factors” and “Management’s
  Discussion and Analysis” sections of our recent reports on Forms 10-K and 10-Q filed with
  the SEC.   As a result, our actual results may differ materially from our expected results and
  from those expressed in our forward looking statements.   We undertake no obligation to
  update any forward-looking statements beyond what is required under applicable
  securities law.
  In addition, we will be referring to non-GAAP financial measures within the meaning of
  SEC Regulation G. A reconciliation of the differences between these measures with the
  most directly comparable financial measures calculated in accordance with GAAP is
  available on the Investor Relations page of our website at www.armstrong.com .
 
 
 
2
Basis of Presentation Explanation
 
Comparable
Dollars
Other
Adjustments
Net Sales
Yes
No
Gross Profit
Yes
Yes
SG&A Expense
Yes
Yes
Equity Earnings
Yes
Yes
Operating Income
Yes
Yes
Net Income
Yes
Yes
Cash Flow
No
No
Return on Capital
Yes
Yes
EBITDA
Yes
Yes
  •   We report in comparable dollars to
  remove the effects of currency
  translation on the P&L.   The budgeted
  exchange rate for the current year is
  used for all currency translations in the
  current year and prior years.
  •   We remove the impact of major, discrete
  expenses and income.   Examples
  include plant closures, restructuring
  actions, and other large unusual items.
  •   Taxes for normalized Net Income and
  EPS for all periods presented are
  calculated using a constant 42%, which
  is based on the full year historical tax
  rate.
When reporting our financial results within this presentation, we make several adjustments. Management uses
the adjusted non-GAAP measures below in managing the business and believes the adjustments provide
meaningful comparisons of operating performance between periods.   As reported results will be footnoted
throughout the presentation.
What Items Are Adjusted
All figures throughout the presentation are in $ millions unless otherwise noted.   Figures may
not add due to rounding.
 
 
 
3
Company Overview
 
 
 
4
Armstrong at a Glance
Leading global manufacturer of floors and ceilings
for use in renovation and new construction.
Significant U.S. cabinets’ business.
¾   $2.8 billion in sales in 2010
  § Market leader in businesses representing 80% of sales
¾   Serving global customers from seven countries
¾   31 manufacturing locations
¾   Approximately 9,300 employees
¾   Approximately $2.6 billion market capitalization
  §   Strong balance sheet - $540 million of net debt
  §   Significant NOL carry forward
¾   58 million diluted shares outstanding
  §   300K average daily trading volume
  §   64% owned by Armstrong Asbestos Trust and Armor TPG
¾   ‘AWI’ on the NYSE
  §   Since October 2006 emergence from asbestos-related bankruptcy
Company Overview
 
 
 
5
§ Emerge from
bankruptcy
§ Initiate strategic
review and sale
process
§ Idle: Nashville
History
  2006     2007     2008     2009     2010
Company Overview
$3.50B
$407M
11.6%
§ Cancel Strategic
sale process
§ Sell Desseaux textile &
sports flooring business
• Sales
• EBITDA
$3.54B
$439M
12.4%
$3.21B
$384M
12.0%
$2.85B
$296M
10.4%
$2.83B
$303M
10.7%
§ $250M special
dividend
§ TPG invests in
Armstrong
§ Idle: Montreal
  Mobile
§ Close: Auburn
  Nashville
§ New CEO and CFO
§ Leverage recap.
and $800M special
dividend
§ Investing in
emerging markets
§ Announce $150M
cost out initiative
§ Close: St. Gallen
  Oneida
  Center
  Montreal
  Teeside
Housing starts
 
 
 
6
§ Approve second
flooring plant in China
§ New leader of
Ceilings business
§ Approve new ceilings
plant in China
§ Cost out initiative
raised to $165 million
§ Idle: Statesville
§ Close: Beaver Falls
  Holmsund
Present / Future
    2011     2012     2013     2014
Company Overview
§ Competitive cost structure in place
  § $165 million cost reduction initiative, ongoing LEAN efforts
§ Fix underperforming businesses
  § European flooring products profitable in 2012
§ Dramatic growth in priority emerging markets
  § Three new Chinese manufacturing facilities on-line
  § Significant increase is sales and marketing resources across emerging markets
§ Profitable growth in core markets
  § Focus on product innovation, design and environmental leadership
§ Build a winning team and a global organization
  § Implement Organization Vitality and create a globally aligned organization
• Sales
• EBITDA
$2.85-2.95B
$385-$415M
~13.8%
ROIC > Cost of Capital
 
 
 
7
Key Investment Highlights
¾   New senior leadership team to execute strategy
¾   $165M cost savings program to achieve competitive cost structure
¾   Investments in emerging markets to continue to win and maintain
  market leader strategy
¾   ROIC targets to return at least the cost of capital by 2013 with ~1M
  housing starts
¾   Efficient balance sheet and sufficient liquidity to manage operations,
  execute capital spending and restructuring plans
Company Overview
 
 
 
8

2010 Business Segment and End-Use Profile
Majority of business is renovation - dampens cycles.
Company Overview
N.A. >75% renovation
¾   9% of Sales from Emerging Markets
 
 
 
9
Business Segment Profile
Building Products delivers the bulk of worldwide income and has
remained profitable through the economic cycle.
2010 EBITDA
- Excludes unallocated corporate expense
Company Overview
 
 
 
10
Industry Structure/Competitive Position
 
U.S. Resilient
European
Resilient
Hardwood
Building
Products
Cabinets
Market Leadership
 
 
 
 
 
Competitor Concentration
 
 
 
 
 
Industry Capacity Utilization
 
 
 
 
 
Low-Cost Manufacturer
 
 
 
 
 
Armstrong continuously focused on competitive dynamics.
Key
 
Favorable
 
Neutral
 
Unfavorable
Company Overview
 
 
 
11
Business Segment Overview
 
 
 
12
Worldwide Business Overview - Building Products
Worldwide market leader in suspended ceilings.
Business Segment Overview - Building Products
North America
 
Mkt
Size
(B ft 2 )
AWI
Rank
Commercial
1.4
1
Residential
0.4
1
Europe, Africa, Middle-
East
 
Mkt
Size
(B ft 2 )
AWI
Rank
Western
1.2
1
Eastern
0.5
1
Africa / Mid-
East
0.3
1
Asia, Australia
 
Mkt
Size
(B ft 2 )
AWI
Rank
China
0.2
1
Australia
<0.1
1
India
<0.1
1
SE Asia
<0.1
1
 
 
 
13
ABP Key Strategies
1
Broadest Product Portfolio
¾   Complete product offering
¾   New product pipeline (Metal, Wood)
¾   Win versus soft fiber in Europe
2
Emerging Market Growth
¾   Plant #2 in China
¾   Distribution in Russia, Middle East
¾   Grid plant in India
Business Segment Overview - Building Products
4
Best-in-Class Service/Quality
¾   Best on-time delivery performance
¾ Lowest claims rate
¾ Best product availability
3
Innovation Leadership
¾   “Sustainability” leadership
¾   Custom solutions (Metal, Wood)
¾   Recycling program
 
 
 
14
Building Products (ABP) Sales by Geography
($-Millions)
Contribution of WAVE JV Profit to Operating Margin
4%
Worldwide EBITDA Margin
22%
Adding new engines to accelerate global growth.
Business Segment Overview - Building Products
¾   Global market leader
  §   Broadest Product Line  
  §   Innovation
  §   Go-to-Market
  §   Best cost, quality, service
n   >90% sales commercial
n   Grid - 50/50 joint venture
Ceilings & Grid
¾   15% of Sales from Emerging Markets
 
 
 
15
Worldwide Business Overview - Floor Products *
Business Segment Overview - Worldwide Floor Products
Global presence with market leadership in most regions.
Asia, Australia
 
Mkt
Size
(B ft 2 )
AWI
Rank
China
0.4
3
Australia
0.1
2
India
<0.1
1
SE Asia
0.1
1
Europe, Africa,
Middle-East
 
Mkt
Size
(B ft 2 )
AWI
Rank
Central
0.3
1
Eastern /
Africa /
Mid-East
0.3
5
Western
Europe
0.9
4
North America
 
Mkt
Size
(B ft 2 )
AWI
Rank
Commercial
1.0
1
Residential
2.0
1
Wood
0.6
1
* Market figures exclude segments in which we do not participate.
 
 
 
16
AFP Key Strategies
Business Segment Overview - Worldwide Floor Products
1
Best Product Portfolio
¾   Offer broadest assortment
¾   Drive mix
¾   Quality leadership
2
Complete Market Coverage
¾   Brand leadership
¾   Merchandising presence
¾   Sales coverage effectiveness
3
Low-Cost Manufacturing
¾   Lean deployment
¾   Capability investment, e.g., glass,
  wood automation
¾   Rationalize footprint
4
Innovation Leadership
¾   Environmental solutions
¾   Design, performance, and
  installation
5
Drive China Growth
¾     Focus on market
  development
¾   Plant investments to support
  growth
6
Restructure Europe
¾     Exited Residential
¾   Simplify Commercial participation
¾   Cost-out … plants and SG&A
 
 
 
17
Floor Products (AFP) Sales by Geography
($-Millions)
Worldwide Adjusted EBITDA Margin
excluding Europe
5%
7%
Continued profitability through bottom of residential downturn.
Business Segment Overview - Worldwide Floor Products
Resilient & Wood
Wood
Worldwide Resilient
¾   4% of Sales from Emerging Markets
 
 
 
18
European Floor Products
Commercial
87%
Residential
13%
2009
Sales (1)
$330M
EBITDA (2)
($ 15M)
Business Segment Overview - European Floor Products
(1) Includes intercompany sales, (2) Excludes restructuring expense
¾   Exited Residential segment
¾   Simplified Commercial business … country and product participation
¾   Closed Teesside and Holmsund plants
¾   SG&A restructuring … 38% decrease in headcount
EBITDA break even in 2011… Profitable in 2012.
2011
Sales
$280M
EBITDA (2)
$   0M
Commercial
100%
Transform the business
 
 
 
19
Cabinets
¾   Small player…<5% share
¾   Focus on small-/medium-size builder
¾   Go-to-Market
Current Situation
2010 Sales   =   $150M
¾   Niche player… both new and remodel
¾   Restructure costs to reflect market reality
¾   Non-core business
Strategy
 
% of Sales
Company-Owned
Service Centers
51%
Distribution
27%
Multi-Family
22%
Business Segment Overview - Cabinets
 
 
 
20
Financial Overview
 
 
 
21
Profitable and cash flow positive through downturn
¾   Focus on cost control / productivity
¾   Strong free cash flow
¾   ROIC greater than cost of capital in 2013, with new home starts at
  one million
¾   Continuing to fully invest in businesses
¾   Strong balance sheet: leverage, liquidity and maturity profile
¾   Overfunded US pension plan
¾   Positioned for considerable operational leverage on modest market
  recovery
Financial Summary
Financial Overview
 
 
 
22
Figures rounded to nearest $5 million
Financial Overview
Cost reduction and improved price / mix significantly offset
dramatic volume declines.
EBITDA Bridge (2006-2009)
 
 
 
23
(Millions)
Figures rounded to nearest $1 million
Financial Overview
Cost reduction offsets volume and input cost headwinds.
EBITDA Bridge (2009-2010)
 
 
 
24
EBITDA Bridge -1H 2011 versus Prior Year
Financial Overview
($13)
 
 
 
25
$165 Million Savings Program
$165M savings from manufacturing and SG&A, net of inflation.
Manufacturing savings driven by plant closures and LEAN.
Cumulative Savings     $35M       $125M       $165M
Financial Overview
 
 
 
 
 
 
26
Balance Sheet         6/30/2011
(2%)
(14%)
Financial Overview
$580
(Millions)
Maturity Profile
¾   No significant maturities until 2015
¾   Considerable covenant flexibility
Liquidity
¾   Sufficient liquidity to manage
  operations, and execute capital
  spend and restructuring plans
 
 
 
27
Financial Overview Appendix
 
 
 
28
Key Metrics     - Guidance 2011
Financial Overview Appendix
 
2011
Estimate Range
 
2010
 
Variance
Net Sales (1)
2,900
to
3,000
 
2,766
 
5%
to
8%
Operating Income (2)
280
to
310
 
189
 
48%
to
64%
EBITDA
385
to
415
 
303
 
27%
to
37%
Earnings Per Share (3)
$2.29
to
$2.58
 
$1.73
 
32%
to
49%
Free Cash Flow
80
to
120
 
180
 
(56%)
to
(33%)
(1)   Sales figures include foreign exchange impact.
(2)   As reported Operating Income:   $255- 285 million in 2011 and $81 million 2010.
(3)   As reported earnings per share:   $2.01 - $2.32 in 2011 and $0.19 in 2010.
Guidance provided as of August 1, 2011.
We undertake no obligation to update guidance, beyond what is required by securities law.
 
 
 
29
2011 Financial Outlook
Financial Overview Appendix
¾   Raw Material & Energy Inflation*   $50 - $60 million increase
¾   Manufacturing Productivity*   Gross Margin +175 to +225 bps vs. 2010
¾   U.S. Pension Credit   ~$25 million, down ~$25 million vs. 2010
    60% manufacturing, 40% SG&A
¾   Earnings from WAVE   $5 - $10 million vs. 2010
¾   Cash Taxes/ETR*   ~$25 million. Adjusted ETR of 42%
¾   Q3   Sales $780 - $830 million
    EBITDA $115 - $130 million
¾   Capital Spending   ~$180-$200 million
¾   Exclusions from   EBITDA*   ~$18 - $22 million associated with already
    announced actions
* Changed from April Outlook
 
 
 
30
Full Year 2010 - Adjusted Operating Income to
Reported Net Income
Financial Overview Appendix
 
2010
2009
V
Operating Income - Adjusted
$188
$157
$31
  Foreign Exchange Movements
2
-
2
  Laminate Duty Refund
7
-
7
  Cost Reduction Initiatives
(50)
(16)
(34)
  Asset Impairments
(31)
(18)
(13)
  Restructuring
(22)
-
(22)
  Executive Transition
(15)
-
(15)
  Gain on Settlement of Note Receivable
2
-
2
  Accelerated Vesting
-
(32)
32
Operating Income - As Reported
$81
$91
($10)
  Interest (Expense) Income
(14)
(16)
2
EBT
$67
$75
($8)
  Tax (Expense) Benefit
(56)
3
(59)
Net Income
$11
$78
($67)