Armstrong World Industries Reports Second-Quarter 2022 Results

Armstrong World Industries

LANCASTER, PA — Armstrong World Industries, Inc. (NYSE: AWI) recently reported second-quarter 2022 financial results. The company drove net sales growth of 15% primarily due to price over higher-than-expected inflation and strong growth in the Architectural Specialties segment.

“I am pleased with the dedicated effort of our teams to deliver another quarter of double-digit sales growth as we continue to navigate a dynamic macro backdrop. Our top line growth resulted from pricing performance and improved sales volumes for Mineral Fiber, paired with strong execution in our Architectural Specialties segment,” said Vic Grizzle, President and CEO of Armstrong World Industries. “While market-driven challenges remain, namely higher inflation and the lengthening of the commercial project completion cycle, we are optimistic about the second half of 2022. Our teams are squarely focused on executing our growth initiatives and delivering double-digit top- and bottom-line growth for the full year.”

Second-Quarter Results from Continuing Operations

(Dollar amounts in millions except per-share data) For the Three Months Ended June 30,
2022 2021 Change
Net sales $ 321.0 $ 280.0 14.6%
Operating income $ 71.6 $ 78.3 (8.6)%
Earnings from continuing operations $ 52.2 $ 55.1 (5.3)%
Diluted earnings per share $ 1.11 $ 1.14 (2.6)%
Additional Non-GAAP* Measures
Adjusted EBITDA $ 102 $ 100 2.0%
Adjusted net income from continuing operations $ 60 $ 56 7.8%
Adjusted diluted earnings per share $ 1.29 $ 1.16 11.2%
* 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 with the exception of per share data.

Second-quarter 2022 consolidated net sales increased 14.6% from prior-year results, driven primarily by favorable Mineral Fiber Average Unit Value (“AUV”) of $24 million and increased Architectural Specialties net sales of $15 million.

READ:  Infamous-Ryders Biker Gang Leader, Lancaster County Man Sentenced for Drug Trafficking

The decrease in operating income in the second quarter reflects $8 million of acquisition-related charges in the current period, including a $6 million loss related to the change in the fair value of contingent consideration related to the Company’s 2020 acquisition of TURF Design, Inc. due to improved projected financial performance over the earn-out period. Operating income for the comparable prior-year period included a benefit of $6 million from acquisition-related gains, net of expenses. Excluding these impacts, operating income increased 9% versus the prior year due to favorable AUV performance, a reduction in intangible asset amortization and positive impacts from the increase in sales volumes. These benefits were partially offset by an increase in manufacturing costs, primarily due to higher raw material and energy costs, an increase in selling expenses, a decrease in equity earnings from Worthington Armstrong Joint Venture (“WAVE”), the Company’s joint venture with Worthington Industries, Inc., and an increase in incentive compensation expenses.

Second-Quarter Segment Highlights

Mineral Fiber

(Dollar amounts in millions) For the Three Months Ended June 30,
2022 2021 Change
Net sales $ 234.5 $ 208.1 12.7%
Operating income $ 71.4 $ 72.1 (1.0)%
Adjusted EBITDA* $ 89 $ 90 (1.5)%
Second-quarter 2022 Mineral Fiber net sales increased 12.7% due to $24 million of favorable AUV and $2 million from higher sales volumes. Strong AUV performance resulted primarily from favorable like-for-like pricing. While sales volumes began the quarter pressured by a reduction of inventory levels for certain distributor customers, volume growth accelerated throughout the quarter.

Second-quarter Mineral Fiber operating income decreased 1.0% from prior-year results. A favorable AUV margin impact of $21 million was more than offset by a $14 million increase in manufacturing costs driven by elevated raw material and energy costs, a $4 million increase in selling expenses, a $2 million decrease in equity earnings driven primarily by higher steel cost inflation, and a $2 million increase in incentive compensation expenses.

READ:  The Triumph Group, Inc. Reports First Quarter Fiscal 2023 Results

Architectural Specialties

(Dollar amounts in millions) For the Three Months Ended June 30,
2022 2021 Change
Net sales $ 86.5 $ 71.9 20.3%
Operating income $ 1.1 $ 7.4 (85.1)%
Adjusted EBITDA* $ 13 $ 10 34.8%
Second-quarter 2022 net sales in Architectural Specialties increased 20.3% from prior-year results, driven by improved performance from recent acquisitions compared to the prior year, positive impacts from price increases and an increase in custom project sales.

The year-over-year decrease in Architectural Specialties operating income reflects $8 million of acquisition-related charges in the current period, including gains and losses related to changes in the fair value of acquisition-related contingent consideration, compared to a benefit of $6 million recorded in the prior-year period. Architectural Specialties operating income was positively impacted by a $5 million increase in sales volumes and a $5 million reduction in intangible asset amortization, partially offset by a $1 million increase in selling expenses related to additional investments in selling capabilities and incentive compensation.

Unallocated Corporate
The Company reported an Unallocated Corporate operating loss of $1 million in both the second quarter of 2022 and the prior year period.

Cash Flow
Operating activities for the first six months of 2022 provided $63 million of cash, compared to $82 million in the first six months of 2021. The decrease was primarily driven by negative working capital changes in receivables and inventory, primarily due to timing, partially offset by higher cash earnings.

2022 Outlook

“Despite second quarter sales performance in-line with our expectations, inflation accelerated faster and stronger than anticipated and created temporary pressures on margins. We expect our margin performance to improve in the second half of the year following our announced Mineral Fiber price increase effective July 1st,” said Brian MacNeal, AWI CFO. “With the continued, though uneven, commercial construction recovery, the encouraging performance of our growth initiatives and manufacturing productivity driven by operational excellence efforts, we remain confident in our revenue growth outlook and are modestly reducing our adjusted EBITDA outlook on year-to-date inflation impacts.”

READ:  Female Police Officers Wanted: Lancaster County Chiefs of Police Association Announces Upcoming Test
For the Year Ended December 31, 2022
(Dollar amounts in millions except per-share data) 2021 Actual Current Guidance VPY Growth %
Net sales $ 1,107 $ 1,225 to $ 1,245 11% to 13%
Adjusted EBITDA* $ 372 $ 410 to $ 420 10% to 13%
Adjusted diluted earnings per share* $ 4.36 $ 5.10 to $ 5.20 17% to 19%
Adjusted free cash flow* $ 190 $ 215 to $ 235 13% to 24%
More details on the Company’s performance can be found in its report on Form 10-Q for the quarter ended June 30, 2022 that the Company filed with the SEC.

You May Also Be Interested In…

Thanks for visiting! Looking for some Chester County pride? We got you covered! Shop our MyChesCo store and show your love for Chester County, Pennsylvania. We got shirts, hats, and more – all with a unique ChesCo flair. Plus, proceeds from each purchase helps support our mission of bringing reliable information and resources to the people of Chester County.