LANCASTER, Pa. -- Armstrong World Industries, Inc. (NYSE: AWI), a global leader in the design and manufacture of floors, ceilings, and cabinets, today reported third quarter 2011 results.  

Highlights for the Third Quarter of 2011

• Adjusted EBITDA of $124 million, up 11% over the 2010 period
• Operating Income of $92.8 million more than doubled from the 2010 period
• Cost savings program accelerated
• Management lowers 2011 guidance ranges

Consolidated net sales increased approximately $34 million or 5% compared to the prior year period.  Excluding approximately $29 million of favorable foreign exchange impact for the quarter, sales were relatively flat compared to the prior year period.  On a consolidated level, volume declines were offset by price and mix.  Volumes decreased in Worldwide Resilient and European Building Products, while volumes grew in Wood Flooring, Cabinets and Building Products Americas.  

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 $14 million versus third quarter 2010, driven by a broad array of input items including PVC, plasticizers and Titanium Dioxide.

"On an adjusted basis, total company EBITDA was up 11% from Q3 2010 levels, on relatively flat sales, illustrating that the businesses continue to execute well in a tough operating environment," said Matt Espe, President and CEO.  "The economic climate continues to be a challenge and, as a result, we saw lower volumes across most of our businesses.  We achieved increased profitability through the execution of our cost savings plans, pricing ability, mix gains from new products and leverage of LEAN investments.  We continue to focus on running the businesses and managing factors within our control and, in the third quarter, we were encouraged to see our Wood Flooring business, in particular, have another strong earnings quarter following their impressive Q2 results."  

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 higher capital expenditures and interest expense.

The increase in net sales was driven by favorable foreign exchange of approximately $15 million and better price and mix, which were partially offset by lower volumes in Europe and the Pacific Rim where volumes declined in Australia, offsetting growth in China and India.  Operating income increased as the benefits of price, mix, earnings from WAVE and SG&A savings offset inflationary headwinds and lower volumes in Europe.

Net sales decreased slightly as favorable foreign exchange of approximately $13 million and improved product mix and price were more than offset by volume declines in all geographies.  Net sales declines in the European markets reflect the volume reductions related to the restructuring of our European flooring business which included the exit of the residential flooring business and simplification of our country and product offerings.  Excluding the impact of these actions, volumes in the European markets were still down slightly.  

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 $4.6 million of severance and impairment and restructuring related costs in Europe.  Third quarter 2010 results were impacted by approximately $15.1 million of costs related to the restructuring of the European business, income of approximately $7.0 million related to laminate duty refunds, and charges of $5.5 million of costs related to the closure of our Montreal, Canada, facility.  

Net sales increased in the third quarter as higher volumes were partially offset by unfavorable price and mix.  Operating income increased as a result of reduced manufacturing and SG&A costs, favorable input costs when compared to the prior year, and volume gains.  Additionally, the 2010 period included $10.5 million of fixed asset write downs and severance charges related to the closure of two manufacturing facilities.    

Net sales increased as stronger volumes were partially offset by less favorable product mix.  Operating income improved primarily due to reduced SG&A expenses and stronger volumes, which were partially offset by unfavorable product mix.

Corporate

Unallocated corporate expense of $9.3 million decreased from $9.8 million in the prior year. The third quarter 2011 expense included a $6.2 million lower pension credit compared to 2010.  The third quarter 2010 expense included $2.3 million of CEO transition costs. After consideration of these items, corporate expenses declined due to lower headcount and professional services spending.

Excluding a $57 million favorable impact from exchange rates, net sales increased by 1.2% percent as volume declines were more than offset by price and mix gains.

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 and lower volumes.

The reduction in free cash flow was primarily due to changes in working capital, increased capital expenditures, and higher interest expense in the 2011 period.

Market Outlook and 2011 Guidance

The company is updating its previous 2011 net sales and EBITDA guidance from its previously communicated range.  Embedded in this update is a forecast for organic growth of slightly less than 4% for the full year, down from its previous expectation of 6%.  This update is largely driven by reduced volumes in its domestic residential businesses and modest softness in European commercial markets.  "We continue to see prolonged weakness in our residential focused businesses, reflecting the reduced new housing and remodeling market opportunity.  To compensate for weaker markets, we continue to drive plans to deliver cost savings, which is evidenced by our ability to accelerate $10 million of our cost savings program into 2011," said Tom Mangas, Senior Vice President and CFO.  

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.  To access the call and accompanying slide presentation, go to www.armstrong.com. and click "For Investors".  The replay of this event will also be available on the Company's Web site for up to one year after the date of the call.

Uncertainties Affecting Forward-Looking Statements

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 of 1995.  Those statements provide our future expectations or forecasts and can be identified by our use of words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "outlook," and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance.  Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future.  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.  Forward- looking statements speak only as of the date they are made.  We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.

About Armstrong and Additional Information

More details on the Company's performance can be found in its 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 September 30, 2011 Armstrong operated 31 plants in seven countries and has approximately 9,300 employees worldwide.  For more information, visit http://www.armstrong.com/.