Annual Reports

 
Quarterly Reports

  • 10-Q (Oct 30, 2017)
  • 10-Q (Jul 31, 2017)
  • 10-Q (May 1, 2017)
  • 10-Q (Oct 31, 2016)
  • 10-Q (Jul 29, 2016)
  • 10-Q (May 9, 2016)

 
8-K

 
Other

Armstrong World Industries 10-Q 2017

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
awi-10q_20170930.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission File Number 1-2116 

 

ARMSTRONG WORLD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter) 

 

 

Pennsylvania

 

23-0366390

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

2500 Columbia Avenue, Lancaster, Pennsylvania

 

17603

(Address of principal executive offices)

 

(Zip Code)

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

 

Indicate by check mark whether the registrant; (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of shares of Armstrong World Industries, Inc.’s common stock outstanding as of October 24, 2017 – 52,795,753.

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

2


 

When we refer to “AWI,” the “Company,” “we,” “our” or “us,” we are referring to Armstrong World Industries, Inc. and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, our expectations concerning our residential and commercial markets and their effect on our operating results; our expectations regarding the payment of dividends; and our ability to increase revenues, earnings and EBITDA (as such terms are defined by documents incorporated by reference herein). Words such as “anticipate,” “expect,” “intend,” “plan,” “target,” “project,” “predict,” “believe,” “may,” “will,” “would,” “could,” “should,” “seek,” “estimate” and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors that could have a material adverse effect on our financial condition, liquidity, results of operations or future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

 

global and domestic economic conditions;

 

construction activity;

 

the tax consequences of the separation of the flooring business from our ceilings (building products) business;

 

competition;

 

key customers;

 

availability and costs of raw materials and energy;

 

international operations;

 

Worthington Armstrong Venture (“WAVE”), our joint venture with Worthington Industries, Inc.;

 

environmental matters;

 

covenants in our debt agreements;

 

our indebtedness;

 

our liquidity;

 

strategic transactions;

 

negative tax consequences;

 

defined benefit plan obligations;

 

claims and litigation;

 

labor;

 

intellectual property rights;

 

costs savings and productivity initiatives; and

 

other risks detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K and in the documents incorporated by reference.

Such forward-looking statements speak only as of the date they are made. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any forward-looking statement is based.

3


 

PART I  - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

Armstrong World Industries, Inc., and Subsidiaries 

Condensed Consolidated Statements of Earnings and Comprehensive Income 

(amounts in millions, except per share data) 

Unaudited

 

 

 

Three Months Ended September 30, 2017

 

 

Three Months Ended September 30, 2016

 

 

Nine Months Ended September 30, 2017

 

 

Nine Months Ended September 30, 2016

 

Net sales

 

$

351.9

 

 

$

334.9

 

 

$

998.1

 

 

$

936.6

 

Cost of goods sold

 

 

241.0

 

 

 

225.2

 

 

 

676.8

 

 

 

651.1

 

Gross profit

 

 

110.9

 

 

 

109.7

 

 

 

321.3

 

 

 

285.5

 

Selling, general and administrative expenses

 

 

55.8

 

 

 

55.7

 

 

 

162.8

 

 

 

165.2

 

Separation costs

 

 

-

 

 

 

2.0

 

 

 

-

 

 

 

33.0

 

Equity earnings from joint venture

 

 

(13.9

)

 

 

(19.0

)

 

 

(51.9

)

 

 

(57.0

)

Operating income

 

 

69.0

 

 

 

71.0

 

 

 

210.4

 

 

 

144.3

 

Interest expense

 

 

9.1

 

 

 

9.0

 

 

 

27.5

 

 

 

43.4

 

Other non-operating expense

 

 

1.7

 

 

 

-

 

 

 

3.6

 

 

 

-

 

Other non-operating (income)

 

 

(3.0

)

 

 

(1.6

)

 

 

(7.4

)

 

 

(8.9

)

Earnings from continuing operations before income taxes

 

 

61.2

 

 

 

63.6

 

 

 

186.7

 

 

 

109.8

 

Income tax expense

 

 

17.7

 

 

 

7.7

 

 

 

70.9

 

 

 

44.4

 

Earnings from continuing operations

 

 

43.5

 

 

 

55.9

 

 

 

115.8

 

 

 

65.4

 

Net (loss) from discontinued operations, net of tax expense

   of $ -, $-, $- and $ 0.1

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4.5

)

Gain from disposal of discontinued business, net of tax

   (benefit) of ($5.9), ($14.7), ($5.4) and ($16.6)

 

 

5.9

 

 

 

14.7

 

 

 

5.3

 

 

 

16.7

 

Net gain from discontinued operations

 

 

5.9

 

 

 

14.7

 

 

 

5.3

 

 

 

12.2

 

Net earnings

 

$

49.4

 

 

$

70.6

 

 

$

121.1

 

 

$

77.6

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

7.0

 

 

 

(2.0

)

 

 

20.9

 

 

 

(13.8

)

Derivative (loss) gain

 

 

(0.3

)

 

 

1.7

 

 

 

(2.0

)

 

 

1.2

 

Pension and postretirement adjustments

 

 

14.3

 

 

 

6.9

 

 

 

18.8

 

 

 

23.9

 

Total other comprehensive income

 

 

21.0

 

 

 

6.6

 

 

 

37.7

 

 

 

11.3

 

Total comprehensive income

 

$

70.4

 

 

$

77.2

 

 

$

158.8

 

 

$

88.9

 

Earnings per share of common stock, continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.82

 

 

$

1.00

 

 

$

2.16

 

 

$

1.17

 

Diluted

 

$

0.81

 

 

$

0.99

 

 

$

2.14

 

 

$

1.16

 

Earnings per share of common stock, discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.11

 

 

$

0.26

 

 

$

0.10

 

 

$

0.22

 

Diluted

 

$

0.11

 

 

$

0.26

 

 

$

0.10

 

 

$

0.22

 

Net earnings per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.93

 

 

$

1.27

 

 

$

2.26

 

 

$

1.39

 

Diluted

 

$

0.92

 

 

$

1.26

 

 

$

2.24

 

 

$

1.38

 

Average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

53.0

 

 

 

55.5

 

 

 

53.5

 

 

 

55.6

 

Diluted

 

 

53.5

 

 

 

56.0

 

 

 

53.9

 

 

 

56.0

 

 

See accompanying notes to Condensed Consolidated Financial Statements beginning on page 8.

 

 

4


 

Armstrong World Industries, Inc., and Subsidiaries

Condensed Consolidated Balance Sheets 

(amounts in millions, except share and per share data) 

 

 

 

Unaudited

September 30, 2017

 

 

December 31, 2016

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

116.5

 

 

$

141.9

 

Accounts and notes receivable, net

 

 

142.5

 

 

 

108.3

 

Inventories, net

 

 

117.8

 

 

 

109.0

 

Income tax receivable

 

 

7.4

 

 

 

26.2

 

Other current assets

 

 

23.6

 

 

 

20.8

 

Total current assets

 

 

407.8

 

 

 

406.2

 

Property, plant, and equipment, less accumulated depreciation and amortization of

   $497.5 and $445.5, respectively

 

 

699.0

 

 

 

669.6

 

Prepaid pension costs

 

 

91.2

 

 

 

56.6

 

Investment in joint venture

 

 

105.4

 

 

 

106.2

 

Goodwill and intangible assets, net

 

 

450.3

 

 

 

434.5

 

Deferred income taxes

 

 

11.6

 

 

 

15.4

 

Income taxes receivable

 

 

-

 

 

 

5.7

 

Other non-current assets

 

 

64.4

 

 

 

63.8

 

Total assets

 

$

1,829.7

 

 

$

1,758.0

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current installments of long-term debt

 

$

32.5

 

 

$

25.0

 

Accounts payable and accrued expenses

 

 

169.8

 

 

 

197.1

 

Income tax payable

 

 

3.6

 

 

 

2.0

 

Total current liabilities

 

 

205.9

 

 

 

224.1

 

Long-term debt, less current installments

 

 

825.3

 

 

 

848.6

 

Postretirement benefit liabilities

 

 

80.2

 

 

 

84.8

 

Pension benefit liabilities

 

 

90.4

 

 

 

86.3

 

Other long-term liabilities

 

 

27.6

 

 

 

29.1

 

Income taxes payable

 

 

31.8

 

 

 

62.2

 

Deferred income taxes

 

 

202.3

 

 

 

156.5

 

Total non-current liabilities

 

 

1,257.6

 

 

 

1,267.5

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value per share, 200 million shares authorized, 60,719,298

   shares issued and 52,792,644 shares outstanding as of September 30, 2017 and

   60,597,140 shares issued and 54,428,233 shares outstanding as of December 31, 2016

 

 

0.6

 

 

 

0.6

 

Additional paid-in capital

 

 

512.6

 

 

 

504.9

 

Retained earnings

 

 

599.7

 

 

 

469.9

 

Treasury stock, at cost, 7,926,654 shares as of September 30, 2017 and 6,168,907

   shares as of December 31, 2016

 

 

(380.6

)

 

 

(305.2

)

Accumulated other comprehensive (loss)

 

 

(366.1

)

 

 

(403.8

)

Total shareholders' equity

 

 

366.2

 

 

 

266.4

 

Total liabilities and shareholders' equity

 

$

1,829.7

 

 

$

1,758.0

 

 

See accompanying notes to Condensed Consolidated Financial Statements beginning on page 8. 

5


 

Armstrong World Industries, Inc., and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity 

(amounts in millions, except share data) 

Unaudited 

 

 

 

Nine Months Ended September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Total

 

Balance at beginning of period

 

 

54,428,233

 

 

$

0.6

 

 

$

504.9

 

 

$

469.9

 

 

 

6,168,907

 

 

$

(305.2

)

 

$

(403.8

)

 

$

266.4

 

Cumulative effect impact of ASU 2016-09

    adoption

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.7

 

Stock issuance

 

 

122,158

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based employee compensation

 

 

 

 

 

 

 

 

 

 

6.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.8

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

121.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

121.1

 

Separation of Armstrong Flooring, Inc.

 

 

 

 

 

 

 

 

 

 

0.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.9

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37.7

 

 

 

37.7

 

Acquisition of treasury stock

 

 

(1,757,747

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,757,747

 

 

 

(75.4

)

 

 

 

 

 

 

(75.4

)

Balance at end of period

 

 

52,792,644

 

 

$

0.6

 

 

$

512.6

 

 

$

599.7

 

 

 

7,926,654

 

 

$

(380.6

)

 

$

(366.1

)

 

$

366.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Total

 

Balance at beginning of period

 

 

55,359,064

 

 

$

0.6

 

 

$

1,151.8

 

 

$

365.2

 

 

 

5,057,382

 

 

$

(261.4

)

 

$

(487.4

)

 

$

768.8

 

Stock issuance

 

 

147,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based employee compensation

 

 

 

 

 

 

 

 

 

 

13.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13.1

 

Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

77.6

 

Separation of Armstrong Flooring, Inc.

 

 

 

 

 

 

 

 

 

 

(660.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

56.8

 

 

 

(603.9

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.3

 

 

 

11.3

 

Acquisition of treasury stock

 

 

(187,331

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

187,331

 

 

 

(7.8

)

 

 

 

 

 

 

(7.8

)

Balance at end of period

 

 

55,319,221

 

 

$

0.6

 

 

$

504.2

 

 

$

442.8

 

 

 

5,244,713

 

 

$

(269.2

)

 

$

(419.3

)

 

$

259.1

 

 

See accompanying notes to Condensed Consolidated Financial Statements beginning on page 8. 

 

 

6


 

Armstrong World Industries, Inc., and Subsidiaries 

Condensed Consolidated Statements of Cash Flows 

(amounts in millions) 

Unaudited

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net earnings

 

$

121.1

 

 

$

77.6

 

Adjustments to reconcile net earnings to net cash provided by (used for) operating activities:

 

Depreciation and amortization

 

 

62.9

 

 

 

70.1

 

Write off of debt financing costs

 

 

-

 

 

 

1.1

 

Deferred income taxes

 

 

53.0

 

 

 

28.0

 

Share-based compensation

 

 

8.1

 

 

 

9.6

 

Excess tax benefit from share-based awards

 

 

-

 

 

 

(5.8

)

Equity earnings from joint venture

 

 

(51.9

)

 

 

(57.0

)

Separation costs

 

 

-

 

 

 

33.0

 

Loss on interest rate swap

 

 

-

 

 

 

10.7

 

U.S. pension expense

 

 

2.0

 

 

 

11.8

 

Other non-cash adjustments, net

 

 

(0.5

)

 

 

(4.2

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

(27.4

)

 

 

(41.3

)

Inventories

 

 

(1.5

)

 

 

(4.4

)

Other current assets

 

 

(3.6

)

 

 

11.5

 

Other non-current assets

 

 

(3.3

)

 

 

(7.0

)

Accounts payable and accrued expenses

 

 

(35.9

)

 

 

(88.2

)

Income taxes payable

 

 

(7.8

)

 

 

(24.1

)

Other long-term liabilities

 

 

(8.8

)

 

 

(19.4

)

Other, net

 

 

(1.5

)

 

 

(4.6

)

Net cash provided by (used for) operating activities

 

 

104.9

 

 

 

(2.6

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(63.2

)

 

 

(75.7

)

Return of investment from joint venture

 

 

52.8

 

 

 

68.5

 

Cash paid for acquisition

 

 

(31.4

)

 

 

-

 

Other investing activities

 

 

0.5

 

 

 

0.3

 

Net cash (used for) investing activities

 

 

(41.3

)

 

 

(6.9

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility and other short-term debt