Armstrong World Industries Reports First-Quarter 2023 Results

LANCASTER, PA —Armstrong World Industries, Inc. (NYSE: AWI) this week reported first-quarter 2023 financial results, including year-over-year net sales growth of 10% driven by a 12% increase in Mineral Fiber segment sales and a 3% increase in Architectural Specialties segment sales.

“The results we delivered in the first quarter of 2023, highlighted by robust Mineral Fiber segment volume growth of 9% and Mineral Fiber adjusted EBITDA margin expansion, are an important first step on the path to delivering sales and earnings growth for the full year. We remain laser-focused on our strategic initiatives to drive sustainable growth while managing our costs in the current uncertain macroeconomic environment,” said Vic Grizzle, President and CEO of Armstrong World Industries. “Our strong market position, our commitment to operational excellence and innovation, and our best-in-class service model continue to enable us to create value in all parts of the economic cycle.”

First-Quarter Results

* The Company uses non-GAAP adjusted measures in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods and are useful alternative measures of performance. Reconciliations of the most comparable generally accepted accounting principles in the United States (“GAAP”) measure are found in the tables at the end of this press release. Excluding per share data, non-GAAP figures are rounded to the nearest million and corresponding percentages are rounded to the nearest decimal.

First-quarter 2023 consolidated net sales increased 9.8% from prior-year results, driven primarily by higher volumes of $21 million and favorable Average Unit Value (“AUV”) of $6 million. Mineral Fiber net sales increased $25 million and Architectural Specialties net sales increased $2 million over the prior-year period.

First-quarter 2023 operating income increased 11.1% versus the prior-year period driven primarily by the benefit of higher volumes, favorable AUV performance and an increase in Worthington Armstrong Joint Venture (‘WAVE”) equity earnings. These benefits were partially offset by increases in manufacturing costs and selling expenses, as well as severance expenses related to cost savings initiatives in the current-year quarter.

First-Quarter Segment Results
Mineral Fiber

First-quarter 2023 Mineral Fiber net sales increased 12.4% from prior-year results due to $19 million of higher sales volumes and $6 million of favorable AUV. The increase in volumes was primarily driven by a recovery of sales volumes compared to a weaker prior-year period due to inventory level reductions at certain customers, and partially due to current-year inventory level increases at home center customers. The improvement in AUV was driven by favorable like-for-like price, partially offset by unfavorable geographic mix.

First-quarter operating income increased 10.8% from prior-year results driven primarily by a $12 million benefit from higher sales volumes, a $5 million benefit from favorable AUV and a $3 million increase in WAVE equity earnings. These benefits were partially offset by an $8 million increase in manufacturing costs, primarily driven by raw material and energy inflation and inventory valuation impacts, partially offset by improved manufacturing productivity. Also partially offsetting the favorability was $3 million in severance costs related to cost savings initiatives in the current-year quarter and a $3 million increase in selling expenses, partially in support of digital growth initiatives.

Architectural Specialties

First-quarter 2023 net sales in Architectural Specialties increased 3.0% from prior-year results, driven by growth across most product categories, partially offset by lower metal product sales. Net sales growth was also negatively impacted by the timing of custom project sales.

The 10.8% increase in first-quarter Architectural Specialties operating income was driven primarily by a $2 million margin benefit from increased sales and favorable project mix and a $1 million reduction in acquisition-related expenses, partially offset by a $2 million increase in selling expenses.

Cash Flow and Share Repurchase Program
Cash flows from operating activities for the first three months of 2023 increased $10 million versus the prior-year quarter, while cash flows from investing activities decreased $2 million versus the prior-year quarter. The net $8 million, or 46%, increase in operating and investing cash flows was primarily due to favorable working capital changes, most notably in inventory, and an increase in dividends from WAVE, partially offset by an increase in purchases of property, plant and equipment.

During the first quarter of 2023, the Company repurchased 0.4 million shares of common stock for a total cost of $27 million, excluding the cost of commissions and taxes. As of March 31, 2023, there was $322 million remaining under the Board of Directors’ current authorized share repurchase program.

**On July 29, 2016, the Company’s Board of Directors approved its share repurchase program pursuant to which the Company is authorized to repurchase up to $1,200 million of its outstanding common stock through December 31, 2023 (the “Program”). Repurchases under the Program may be made through open market, block and privately negotiated transactions, including Rule 10b5-1 plans, at such times and in such amounts as management deems appropriate, subject to market and business conditions, regulatory requirements and other factors. The Program does not obligate AWI to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice.

Maintaining 2023 Outlook
“While we are encouraged by our first-quarter results, including adjusted free cash flow growth versus prior year, we acknowledge the challenging macroeconomic environment and expect weaker market conditions ahead for the rest of the year,” said Chris Calzaretta, AWI CFO. “We are confident in the financial strength of our business and are maintaining our full-year 2023 outlook. We continue to be focused on executing our strategy, delivering manufacturing productivity, managing costs across the business and growing adjusted free cash flow. Our capital allocation strategy is unchanged, as we expect to continue to create long-term value for shareholders through reinvestment in our business, strategic partnerships and acquisitions, and returning excess cash to shareholders.”

More details on the Company’s performance can be found in its report on Form 10-Q for the quarter ended March 31, 2023, that the Company expects to file with the SEC today.

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