Armstrong World Industries Reports Second Quarter 2021 Results

Armstrong World Industries

LANCASTER, PA — Armstrong World Industries, Inc. (NYSE: AWI) has reported strong year-over-year sales and earnings growth for the second quarter 2021 as market conditions continued to rebound from the impact of COVID-19.

“Our strong second quarter results demonstrate a continued recovery in many of our key markets from COVID-19 challenges, as well as operational excellence and best-in-class service and distribution models that continue to distinguish Armstrong within the industry,” said Vic Grizzle, President and CEO of AWI. “While the recovery remains uneven and choppy, our actions and investments in support of our digital initiatives, Healthy Spaces products and Architectural Specialties portfolio have enhanced our growth potential. The momentum in our business fuels our confidence to increase our full-year 2021 guidance.”

Second Quarter Results from Continuing Operations

(Dollar amounts in millions except per-share data) For the Three Months Ended
June 30,
2021 2020 Change
Net sales $ 280.0 $ 203.2 37.8 %
Operating income $ 78.3 $ 62.4 25.5 %
Earnings from continuing operations $ 55.1 $ 49.5 11.3 %
Diluted earnings per share $ 1.14 $ 1.03 10.7 %
Additional Non-GAAP* Measures
Adjusted EBITDA $ 100 $ 69 44 %
Adjusted net income $ 56 $ 35 62 %
Adjusted diluted earnings per share $ 1.16 $ 0.72 61 %
Adjusted free cash flow $ 64 $ 63 1 %
* 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 GAAP measure are found in the tables at the end of this press release. Non-GAAP figures are rounded to the nearest million and corresponding percentages are rounded to the nearest percent based on unrounded figures.

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Consolidated net sales for the 2021 second quarter increased 37.8% from prior-year results, driven primarily by higher Mineral Fiber sales volumes, incremental sales from the acquisition of Turf, Moz and Arktura in 2020 (“2020 Acquisitions”) and favorable Average Unit Value (“AUV”). Volumes for both segments were driven higher by an increase in demand amid improving economic conditions and lesser COVID-19 impact when compared with the prior-year quarter.

Operating income increased 25.5% from second-quarter 2020 results, primarily driven by higher sales volumes in both the Mineral Fiber and Architectural Specialties segments, favorable AUV in the Mineral Fiber segment and an increase in WAVE equity earnings. The company also reported a $10 million reduction in the fair value contingent consideration related to Turf and Moz. These benefits were partially offset by higher SG&A costs attributable to the 2020 Acquisitions, a resumption in discretionary spending and variable compensation, both of which had been curtailed at the height of the COVID-19 pandemic in the prior year, and investments for future growth.

Second Quarter Segment Highlights

Mineral Fiber

Second-quarter 2021 Mineral Fiber net sales increased 32% due to higher sales volumes and a 10% increase in AUV. An increase in like-for-like pricing and improved sales mix driven by regional improvements in major metropolitan areas compared to the second quarter of 2020 contributed equally to the AUV increase.

Operating income increased sharply as expected in the second quarter primarily due to the positive impact of higher sales volume, favorable AUV and increased WAVE equity earnings, partially offset by higher SG&A expenses attributable to an increase in discretionary spending including variable compensation and investments in growth initiatives.

Architectural Specialties

(Dollar amounts in millions) For the Three Months Ended June 30,
2021 2020 Change
Net sales $ 71.9 $ 45.3 58.7 %
Operating income $ 7.4 $ 4.3 72.1 %
Adjusted EBITDA* $ 10 $ 6 48 %
Second-quarter 2021 net sales in Architectural Specialties increased 59% from prior-year results, driven by the 2020 Acquisitions and higher organic sales volumes due to the lessening impact from COVID-19 on economic activity compared to the prior year period.

Operating income increased in the second quarter due to the positive impact of higher sales volumes and a $10 million reduction in the fair value of contingent consideration related to Turf and Moz, which was partially offset by a $6 million increase in amortization expense and a $4 million increase in acquisition-related charges, both related to the 2020 Acquisitions.

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Unallocated Corporate

Unallocated corporate operating loss was $1 million in the second quarter of 2021 compared to income of $13 million in the second quarter of 2020, driven by a $14 million gain reported in the prior-year period from the sale of the idled, legacy mineral fiber plant in China.

Market Outlook and 2021 Guidance

“We are increasingly confident about improving market conditions and expect to exit the year on a sales rate per day basis comparable to 2019,” said Brian MacNeal, AWI CFO. “As we monitor the impacts and evolution of the pandemic, we will remain vigilant in our management of inflationary pressures and continue to adjust our pricing accordingly. As a result of our team’s solid execution through the first half of the year, a robust project pipeline and additional clarity around the current marketplace, we are elevating our 2021 guidance. We now expect to grow net sales 16% to 18% and adjusted EBITDA 12% to 15% versus the prior year, as we continue to invest to capitalize on improving market conditions.”

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