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EXHIBIT 99
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FOR IMMEDIATE RELEASE Contacts: Stan Steinreich
--------------------- -------- V.P. Corporate Relations
July 25, 2000 (717) 396-2169
Tom Waters
Director of Investor Relations
(717) 396-2216
ARMSTRONG'S SECOND-QUARTER RECORD SALES AND PRICE GAINS LED TO EARNINGS OF $1.21
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PER SHARE, EXCEEDING FINANCIAL COMMUNITY EXPECTATIONS
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FLOOR AND CEILING MAKER ALSO TAKES $236 MILLION CHARGE AGAINST FUTURE ASBESTOS
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LIABILITY
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LANCASTER, PA -- Armstrong Holdings, Inc. (NYSE:ACK) today announced
second-quarter 2000 earnings, which were led by record sales and price gains
that resulted in earnings per share from continuing operations of $1.21
excluding an asbestos charge and one-time items. This was solidly in line with
management guidance of $1.19 to $1.29 per share, but down from $1.43 in the same
period in 1999, excluding the gain from divested businesses. These gains came
despite external factors such as the strength of the U.S. dollar against other
currencies, high raw material costs and softness in the European construction
industry.
Sales from continuing operations in the second quarter reached a record
$834.9 million, a 0.9-percent increase over $827.3 million recorded in the same
period last year. However, excluding the negative impact of foreign exchange
rates and the impact of 1999 divestitures, sales would have actually increased
by 6.6 percent.
In the floor coverings organization, North American operations reported a
5.2 percent overall increase, led by 19-percent growth from newly introduced
ToughGuard products, a 20-percent jump in sales of its laminate products to the
home centers and an 8-percent hike in commercial tile sales. Results also
reflected price increases in residential sheet products initiated in early June.
In wood products, overall sales grew by 11.8 percent, led by dramatic gains
in the home center channel and the successful implementation of price increases.
The building products organization reported strong sales in most of its
product lines and geographies with an overall sales increase of 5.5 percent. The
key achievements were: a 10.3-percent hike in U.S. commercial sales as a result
of the continued success of new product introductions for Ultima and Optima
Vector; price increases; and gains reported in Canada, Latin America and Asia.
It also completed the acquisition of GEMA Holdings, AG in the quarter, which
provides Armstrong with the opportunity to offer its customers a wide variety of
metal ceiling solutions.
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Q-2 2000 EARNINGS
TAKE 2-2-2-2
News of the acquisition was well received by the international architect
and specifier community, as it added to Armstrong's leadership position in the
industry by offering a more complete line of ceiling solutions.
While sales and price increases helped all lines of business, external
factors continued to negatively impact bottom-line performance.
Excluding the asbestos charge, net earnings for the second quarter from
continuing operations were $52.2 million or $1.29 per share. This includes $5.2
million or $0.08 per share in proceeds related to the demutualization of
Metropolitan Life Insurance Co. This compares to $57.5 million or $1.43 per
share last year at the same time, which excludes a $7.5 million after tax gain
from selling 65-percent of Armstrong Industrial Specialties, Inc.
Second-quarter operating income from continuing operations was $107.4
million, representing an 11-percent decline from the $120.8 million recorded for
the same period last year. The chief reasons for the decline continue to be
higher raw material costs, such as a 50-percent increase in the cost of
homopolymer over the same period last year, which contributed to a 20.3-percent
decline in floor products operating income. Homopolymer is a key ingredient in
all Armstrong vinyl products. Likewise, hardwood costs continued to be above
prices last year at this time, which impacted the wood products organization.
Building products, which like the other businesses was impacted negatively by a
strong U.S. dollar, also saw natural gas prices increase more than 80 percent in
its manufacturing operations.
"From an operating perspective, we continue to be pleased with new product
sales trends, our ability to obtain needed price increases, and very good cost
control versus last year," said Chairman and CEO George A. Lorch. "But we do not
expect the external factors that are affecting our performance to significantly
change in the near term. We need to remain vigilant in executing our sales and
pricing plans, as well as continuing to reduce our costs, in order to improve
performance."
Lorch added that we continued to execute against the plans to reduce debt
as well as to reduce our costs.
"The completed sale of our insulation products company and our recently
announced agreement to sell our installation products group, puts us closer to
achieving our divestiture goals for this year. The proceeds of the divestitures
will be used to pay down debt," he added.
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Q-2 2000 EARNINGS
TAKE 3-3-3-3
Armstrong also indicated that it anticipates recording a $236 million
pre-tax charge to increase its estimated liability related to pending and future
asbestos personal injury claims. The amount of the charge will be finalized upon
receiving and evaluating the most current information on claims, settle-ments
and other events prior to the release of the company's financial statements. In
the fourth quarter of 1999, the company recorded a net pre-tax charge of $335.4
million for asbestos personal injury claims.
The key reasons for the charge are a higher than expected number of claims
filed over the past few months and higher costs to settle claims outside the
Strategic Settlement Program (SSP) of the Center for Claims Resolution (CCR). At
the same time, Armstrong said it continues to see the positive impact that the
SSP is having. At the end of 1999 we reached agreements with approximately 41
percent of claimants. By the end of the second quarter of 2000, this number rose
to approximately 53 percent.
For the six-month period ending June 30, 2000, Armstrong sales, from
continuing operations, were $1.608 billion, an increase of 0.5 percent from the
$1.600 billion reported last year. Net earnings, from continuing operations
excluding the asbestos charge, were $78.2 million, or $1.94 a diluted share, a
20.8-percent decline over 1999's first-half earnings of $98.7 million or $2.46
per diluted share, excluding a gain from the sale of Armstrong Industrial
Specialties, Inc.
Operating income from continuing operations excluding the asbestos charge
of $176.6 million, was 17.7 percent below the $214.5 million reported in 1999.
This news release contains forward-looking statements related to future
sales growth and earnings. Actual results could differ materially as a result of
known and unknown risks and uncertainties and other factors, including the
outcome of asbestos-related and other litigation, future sales growth resulting
from our investment in research and development, our success in the introduction
of new products, interest, foreign exchange and effective tax rates, impacts to
international operations caused by changes to intellectual property protections
or trade regulations, potential business combinations among our competitors or
suppliers, variations in raw material and energy costs, the strength of domestic
and foreign end-use markets, product and price competition caused by factors
such as worldwide excess industry capacity, the political climate in emerging
markets, and the successful integration of our 1998 acquisitions. Additional
information on matters which could affect the company's financial results is
included in its 1999 annual report and form 10-K.
Armstrong Holdings, Inc. is a global leader in the design, innovation and
manufacture of interior finishing solutions, most notably floors and ceilings.
Based in Lancaster, PA, Armstrong has approximately 18,000 employees worldwide.
In 1999, Armstrong's net sales totaled more than $3.4 billion. Additional
information about the company can be found on the Internet at www.armstrong.com.
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Notes to editors and analysts: The details which follow elaborate on Armstrong's
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second-quarter results.
. Second Quarter 2000
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Sales. Sales of $834.9 million from continuing operations were 0.9% higher
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than in the second quarter of 1999. Included in the second quarter of 1999 were
sales from Armstrong Industrial Specialties, Inc. and the Textile products
businesses, which were sold in the second and third quarters of last year,
respectively. Excluding the impact of the 1999 divestitures and the impact of
foreign exchange rate translation, sales increased 6.6%. Wood products sales
increased 11.8%. Floor coverings sales decreased 1.1% as strong sales growth in
the Americas was offset by lower sales in Europe. Building products sales
increased 5.5% led by a strong sales performance in the North American market.
Cost of goods sold. For the second quarter, the cost of goods sold
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increased from 65.5% of sales in 1999 to 69.0% of sales in 2000 driven
by higher raw material expense primarily in floor coverings and wood
products and higher energy costs in building products.
Other items. A $236.0 million non-cash pre-tax charge for an increase
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in the estimate of probable liability for asbestos-related claims
resulted in an after-tax net earnings impact of $153.4 million or
$3.81 per share. The increase in the estimated liability reflects
higher than anticipated claims and higher average settlement costs for
claims, primarily for recent settlements outside of the CCR's
Strategic Settlement Program ("SSP"). The estimated liability also
reflects the impact of the SSP which to date has settled 53% of our
current claims versus 41% as of the end of 1999. During the second
quarter of 2000, the CCR received and verified approximately 16,800
claims naming Armstrong as a defendant. This compares to 17,500 claims
received and verified in the second quarter of 1999. The total
probable and estimable liability as of June 30, 2000 ranges from
$822.5 million to $1,427.0 million. As of December 31, 1999 the
probable and estimable liability range was $681.5 million to $1,337.9
million. The increase is due to the additional charge taken in the
second quarter of 2000 partially offset by payments made on claims
between those dates. At June 30, 2000, the number of committed and
pending claims totaled 176,000 compared to 172,200 at March 31, 2000.
Armstrong paid $31 million for asbestos related claims, net of
insurance recoveries, in the second quarter of 2000 compared to $22.8
million in the second quarter of 1999. The related insurance asset was
$268.3 million at June 30, 2000 and $296.0 million at December 31,
1999 with the decrease due to cash receipts.
Other income includes a pre-tax gain of $5.2 million or $0.08 per
share from the demutualization of an insurance company with whom
Armstrong has company-owned life insurance policies. In 1999, a $7.5
million after-tax gain was recorded for the sale of 65% of Armstrong
Industrial Specialties, Inc. Interest expense of $27.9 million in the
second quarter of 2000 increased from $26.4 million in 1999 driven
primarily by higher interest rates partially offset by lower
outstanding debt. Equity earnings from affiliates of $4.5 million
improved $0.5 million reflecting primarily improvement in our WAVE
grid joint venture.
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Industry segment results:
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Floor Coverings. Sales in the quarter of $397.9 million were
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1.1% lower than last year. Sales in the Americas increased
5.2% over prior year as sales of both residential and
commercial products increased. European sales of $132.9
million were 9.7% below 1999 levels as a result of
unfavorable foreign exchange rate translation, lower prices
and a less favorable mix driven by continued market
weakness. Excluding foreign exchange rate translation, sales
in Europe were 0.9% above last year. Pacific area sales
decreased 1.1% versus 1999.
Operating income of $47.0 million was 11.8% of sales
compared to $59.0 million in the second quarter of 1999, or
14.7% of sales. The operating margin reduction was driven
primarily by higher manufacturing costs, principally higher
raw material and energy costs, and weaker volume and price
in Europe driven by competitive pressure and continued weak
construction activity.
Building Products. Building products sales of $192.2 million
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were 5.5% above 1999. Americas sales increased 5.5% driven
primarily by higher sales in the U.S. commercial channel and
Latin America. In Europe, sales increased 2.4% primarily due
to incremental sales from Gema, our metal ceilings
subsidiary acquired during the second quarter of 2000,
increased sales to emerging markets and a more favorable mix
of products. Pacific area sales increased 4.7% versus 1999.
Operating income increased $0.2 million to $31.2 million as improved volume
and increased price in the Americas was largely offset by higher manufacturing
expense including raw materials and energy. Overall operating margins decreased
from 17.0% to 16.2%.
Wood Products. Triangle Pacific contributed $244.8 million
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in sales in the second quarter, an 11.8% increase over prior
year. Cabinet sales grew 9.3% due to higher volume. Wood
flooring sales increased 12.6% versus 1999 driven primarily
by volume growth and improved pricing. Operating margins
declined from 13.7% to 11.9% primarily driven by higher
lumber costs which were about even with the first quarter of
2000 but 20% above last year.
All Other. Sales and operating income in this segment were
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down $24.0 million and $3.3 million, respectively due to the
absence of the Armstrong Industrial Specialties and Textile
Products businesses which were sold in the second and third
quarters of 1999, respectively.
Effective Tax Rate. Excluding the impact of the asbestos charge
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in 2000 and the gain from the sale of 65% of Armstrong Industrial
Specialties, Inc. in 1999, the effective tax rate was 39% in the
second quarter of 2000 and 1999.
Discontinued Operations. The Insulation products business was sold on
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May 31, 2000. The after-tax gain from the divestiture was $106.4
million or $2.64 per share. During the second quarter (April and May
only), the Insulation products business generated net earnings of $2.3
million or $0.06 per share.
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FINANCIAL HIGHLIGHTS--estimated and unaudited
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Armstrong Holdings, Inc., and subsidiaries
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(amounts in U.S. Dollars millions except for per-share data)
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<TABLE>
<CAPTION>
Three months Six months
ended June 30 ended June 30
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Continuing Operations 2000 1999 2000 1999
--------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 834.9 $ 827.3 $1,608.2 $1,600.1
Cost of goods sold 576.5 541.6 1,113.5 1,060.7
Selling, general and administrative expense 149.3 162.9 315.0 320.7
Charge for asbestos liability 236.0 - 236.0 -
Goodwill amortization 6.2 6.0 12.3 12.1
Equity earnings from affiliates (4.5) (4.0) (9.2) (7.9)
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Operating income (loss) (128.6) 120.8 (59.4) 214.5
Interest expense 27.9 26.4 53.8 53.1
Other (income), net (6.0) (7.3) (5.4) (7.9)
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Earnings (loss) on continuing
operations before income taxes (150.5) 101.7 (107.8) 169.3
Income taxes (benefit) (49.3) 36.7 (32.6) 63.1
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Earnings (loss) on continuing
operations $(101.2) $ 65.0 $ (75.2) $ 106.2
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Discontinued Operations
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Earnings from discontinued operations,
net of income tax of
$1.1, $3.5, $3.2 and $6.7,
respectively $ 2.3 $ 7.8 $ 7.0 $ 14.9
Gain on sale of discontinued
operations, net of tax of $41.9 106.4 - 106.4 -
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Earnings from discontinued operations $ 108.7 $ 7.8 $ 113.4 $ 14.9
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Net earnings $ 7.5 $ 72.8 $ 38.2 $ 121.1
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Earnings (loss) per share from continuing operations:
Basic $ (2.52) $ 1.63 $ (1.88) $ 2.67
Diluted $ (2.52) $ 1.62 $ (1.88) $ 2.64
Earnings per share from discontinued operations:
Basic $ 2.70 $ 0.20 $ 2.83 $ 0.37
Diluted $ 2.70 $ 0.19 $ 2.81 $ 0.37
Net earnings per share of common stock:
Basic $ 0.19 $ 1.83 $ 0.95 $ 3.04
Diluted $ 0.19 $ 1.81 $ 0.95 $ 3.01
Average number of common shares outstanding:
Basic 40.2 39.8 40.1 39.8
Diluted 40.3 40.2 40.3 40.2
</TABLE>
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Note:
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Earnings per share components for the second quarter and first six months of
2000 do not add due to the anti-dilutive impact of the loss from continuing
operations.
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INDUSTRY SEGMENTS -- estimated and unaudited
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Armstrong Holdings, Inc., and subsidiaries
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(amounts in U.S. Dollars millions)
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<TABLE>
<CAPTION>
Three months Six months
ended June 30 ended June 30
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Continuing Operations 2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Net trade sales:
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Floor coverings $ 397.9 $402.3 $ 766.4 $ 778.5
Building products 192.2 182.1 380.7 371.8
Wood products 244.8 218.9 461.1 405.9
All Other - 24.0 - 43.9
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Total net sales $ 834.9 $827.3 $1,608.2 $1,600.1
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Operating income:
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Floor coverings $ 47.0 $ 59.0 $ 76.7 $ 105.7
Building products 31.2 31.0 56.9 60.7
Wood products 29.2 30.0 47.1 48.5
All Other (0.1) 3.2 0.1 5.1
Unallocated corporate income (expense) 0.1 (2.4) (4.2) (5.5)
Charge for asbestos liability (236.0) - (236.0) -
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Total operating income $(128.6) $120.8 $ (59.4) $ 214.5
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</TABLE>
