Armstrong World Industries Inc · NYSE:AWI
Armstrong World Industries — Q4 2014 Earnings Presentation
29 slides from Armstrong World Industries's earnings presentation, Feb 23, 2015
Slide 1: Earnings Call Presentation 4th Quarter 2014
Exhibit 99.3 Earnings Call Presentation 4 th Quarter 2014 February 23, 2015
Slide 2: Safe Harbor Statement
Safe Harbor Statement Our disclosures in this presentation, including without limitation, those relating to future financial results guidance and the separation of our flooring business from our building products business, and in our other public documents and comments contain forward-looking statem
Slide 3: Basis of Presentation Explanation
Basis of Presentation Explanation • When reporting our financial results within this presentation, we make several adjustments. Management uses the non-GAAP measures below in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. A
Slide 4: Agenda
Agenda • Flooring business separation announcement • Review of fourth quarter and full year 2014 results • 2015 Outlook 4
Slide 5: Creating Two Independent Industry Leaders
Creating Two Independent Industry Leaders [Armstrong World Industries] [Armstrong Flooring ] Vic Grizzle Chief Executive Officer Don Maier Chief Executive Officer • Global commercial suspended ceiling solutions provider • Dedicated hard surface flooring products designer and manufacturer • #1 market
Slide 6: Separation Details
Separation Details • Expected tax-free spin-off of AFP to current AWI shareholders Structure and Timing • Expected completion in the first quarter of 2016, subject to customary conditions Transition • Separation Management Office (SMO) to lead transition planning Management • Expect to enter into in
Slide 7: Enhanced Opportunities To Create Value
Enhanced Opportunities To Create Value Strategic Operational Financial • Increases flexibility to • Little overlap, no significant • Optimized capital pursue domestic and synergies from operating as structures to match international growth combined entity different risk and cash opportunities flow p
Slide 8: Outlook
Outlook • North America commercial up low single digits, Residential new and R&R both up Economic • UK and Middle East improve, offset by soft Euro-zone and challenging Russia Conditions • China up except for high-end office, India strong, Australia mixed • Overall emerging markets challenged [Armst
Slide 9: Financial Review
Financial Review Financial Review 9
Slide 10: European Flooring Exit – 2014 Guidance Impact
European Flooring Exit – 2014 Guidance Impact • European Flooring Business • Announced decision to exit European flooring business in Q4 2014 • Treated as discontinued operation starting in Q4 2014 and removed from historical presentation within continuing operations • Results had previously been in
Slide 11: Key Metrics – Fourth Quarter 2014
Key Metrics – Fourth Quarter 2014 2014 2013 Variance Net Sales (1) $595 $610 (2.5%) Operating Income (2) 47 44 7.3% % of Sales 8.0% 7.2% 80 bps EBITDA 78 72 8.3% % of Sales 13.2% 11.8% 140 bps Earnings Per Share (3) $0.38 $0.35 6.9% Free Cash Flow 49 (7) 768% Net Debt 857 954 (97) ROIC (4) 7.7% 9.8%
Slide 12: Fourth Quarter 2014 vs. PY – Adjusted EBITDA to Reported Net Income
Fourth Quarter 2014 vs. PY– Adjusted EBITDA to Reported Net Income 2014 2013 V EBITDA– Adjusted $78 $72 $6 Depreciation and Amortization (31) (28) (3) Operating Income – Adjusted $47 $44 $3 Non-cash impact of U.S. pension - (1) 1 Foreign Exchange Movements (1) - (1) Impairment 10 - 10 Cost Reduction
Slide 13: Fourth Quarter Sales and EBITDA by Segment – 2014 vs. Prior Year
Fourth Quarter Sales and EBITDA by Segment – 2014 vs. Prior Year 13
Slide 14: Building Products Fourth Quarter Results
Building Products Fourth Quarter Results Key Highlights • Sales increased slightly over a strong base period (sales were up over 9% in the fourth quarter of 2013). Price and mix both improved and were only partially offset by lower volumes, primarily in the Americas. • Soft year-on-year retail activ
Slide 15: Resilient Fourth Quarter Results
Resilient Fourth Quarter Results Key Highlights • Sales increased slightly as strength in the Pacific Rim offset lower volumes in the Americas. Mix improvements in the Americas offset the lower volumes. • With commercialization of the two plants in China completed, volumes in China were up over 30%.
Slide 16: Wood Fourth Quarter Results
Wood Fourth Quarter Results Key Highlights • Sales declined 15% despite improvements in price and mix as pricing actions by competitors resulted in lower volumes. • The comparison was impacted by a strong base period (sales were up over 20% in the fourth quarter of 2013). • Reflects impact of price
Slide 17: EBITDA Bridge – Fourth Quarter 2014 vs. Prior Year
EBITDA Bridge – Fourth Quarter 2014 vs. Prior Year ($20) 17
Slide 18: Free Cash Flow – Fourth Quarter 2014 vs. Prior Year
Free Cash Flow – Fourth Quarter 2014 vs. Prior Year 18 * Includes $24 million associated with the closing of intercompany loan hedges
Slide 19: Key Metrics – Full Year 2014
Key Metrics – Full Year 2014 2014 2013 Variance Net Sales (1) $2,515 $2,508 0.3% Operating Income (2) 266 269 (1.3%) % of Sales 10.6% 10.7% (10 bps) EBITDA 384 372 3.2% % of Sales 15.3% 14.8% 50 bps Earnings Per Share (3) $2.32 $2.11 10.1% Free Cash Flow 64 68 (6.3%) (1) As reported Net Sales: $2,51
Slide 20: Full Year Sales and EBITDA by Segment – 2014 vs. Prior Year
Full Year Sales and EBITDA by Segment – 2014 vs. Prior Year 20
Slide 21: EBITDA Bridge – Full Year 2014 vs. Prior Year
EBITDA Bridge – Full Year 2014 vs. Prior Year ($41) $14 $4 ($13) 21
Slide 22: Free Cash Flow – Full Year 2014 vs. Prior Year
Free Cash Flow – Full Year 2014 vs. Prior Year ($56) ($9) 22 * Includes $29 million associated with the closing of intercompany loan hedges
Slide 23: Key Metrics – Guidance 2015
Key Metrics – Guidance 2015 2015 Estimate Range (1) 2014 (2) Variance Net Sales(3) 2,525 to 2,625 2,515 0% to 4% Operating Income (4) 230 to 270 271 (15%) to (1%) EBITDA 350 to 390 389 (10%) to 0% Earnings Per Share (5) $2.05 to $2.45 $2.38 (14%) to 3% (1) Guidance is presented using 2015 budgeted f
Slide 24: 2015 Financial Outlook
2015 Financial Outlook ABP Segment Sales(1) $1,300-$1,350 million; EBITDA $335-$360 million AFP Segment Sales(1) $1,225-$1,275 million; EBITDA $80-$100 million Corporate Segment EBITDA ($65) – ($70) Cash Taxes/ETR $45 - $55 million; Adjusted long-term ETR of ~39% (2) Capital Spending $125 - $150 mil
Slide 25: Appendix
@rmstrong Appendix Inspiring Great Spaces”
Slide 26: Full Year 2014 vs. Prior Year – Adjusted EBITDA to Reported Net Income
Full Year 2014 vs. Prior Year – Adjusted EBITDA to Reported Net Income 2014 2013 V EBITDA– Adjusted $384 $372 $12 Depreciation and Amortization (118) (103) (15) Operating Income – Adjusted $266 $269 ($3) Non-cash impact of U.S. pension 1 (2) 3 Foreign Exchange Movements (1) (2) 1 Impairments 13 - 13
Slide 27: Consolidated Results
Consolidated Results Fourth Quarter 2014 Comparability (1) 2014 2013 Comparability (1) 2013 FX(2) Adj FX(2) Adj Reported Adjustments Adjusted Reported Adjustments Adjusted Net Sales 587 - 8 595 615 - (5) 610 Operating 36 12 (1) 47 43 1 - 44 Income EPS $0.19 $0.20 ($0.01) $0.38 $0.42 ($0.07) - $0.35
Slide 28: Segment Operating Income (Loss)
Segment Operating Income (Loss) Fourth Quarter 2014 Comparability (1) 2014 2013 Comparability (1) 2013 Reported Adjustments Adjusted Reported Adjustments Adjusted Building Products 55 - 55 52 1 53 Resilient Flooring 16 (1) 15 10 1 11 Wood Flooring (19) 12 (7) 0 - 0 Unallocated Corporate (16) - (16)
Slide 29: Cash Flow
Cash Flow Fourth Quarter Full Year ($ millions) 2014 2013 2014 2013 Net cash from operations $98 $52 $209 $214 Net cash (used for) investing (52) (59) (149) (146) Add back (subtract) adjustments to reconcile to free cash flow Net cash effect from deconsolidation of 4 - 4 - European Flooring business
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