Armstrong World Industries Inc · NYSE:AWI
Armstrong World Industries — Investor Presentation (February 2013)
51 slides from Armstrong World Industries's investor presentation, Feb 19, 2013
Slide 1: Armstrong World Industries Investor Presentation February 2013
Armstrong World Industries Investor Presentation February 2013
Slide 2: Safe Harbor Statement
Safe Harbor Statement Our disclosures in this presentation, including without limitation, those relating to future financial results guidance, and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Those s
Slide 3: Basis of Presentation
All figures throughout the presentation are in $ millions unless otherwise noted. Figures may not add due to rounding. 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
Slide 4: Investment Highlights
@imstrong: Investment Highlights
Slide 5: Investment Highlights
Investment Highlights Diversified $2.6 billion global building products company with leading positions in most key markets and products Leadership team executing strategy to drive strong EBITDA growth in all business, despite lower volumes, through disciplined focus on costs and pricing Pursue profi
Slide 6: Global Business Overview
@ymstrong: Global Business Overview Ni
Slide 7: Diversified Global Building Products Company
Diversified Global Building Products Company Leading global manufacturer of hardwood and resilient floors and suspended ceiling solutions for use in renovation and new construction $2.6 billion in sales from continuing operations in 2012 32 manufacturing plants in 8 countries Approximately 8,500 emp
Slide 8: 2012 Business Segment and End-Use Profile
2012 Business Segment and End-Use Profile 8 Diversified revenue profile across products and end-use applications (CHART) $925 $450 $1,225 $2,600 45% 20% 25% 10% 60% 35% 5% 65% 35% 30% 5% 45% 20% * Residential flooring products are sold in North America only North America
Slide 9: EBITDA Growth in All Businesses Despite Lower Volumes
77% 22% 12% EBITDA Growth in All Businesses Despite Lower Volumes 9 2009 2012 Strong EBITDA growth during challenging macro environment $400M $306M (11%) Worldwide Ceilings Worldwide Resilient Wood Corporate Worldwide Ceilings Worldwide Resilient Wood 2009 2012 2009 2012 2009 2012 Sales $1.1B $1.2B
Slide 10: Global Revenue Mix and Product Mix
Global Revenue Mix and Product Mix 10 Sales by End-use Segment (2) Office Retail Education Healthcare Segment % of Business Office 30% - 40% Retail 20% - 30% Education 15% - 25% Healthcare 5% - 15% Transportation / Other 5% - 15% (CHART) (CHART) Ceilings Commercially oriented business with diverse e
Slide 11: Where We Make Money
Where We Make Money 11 (CHART) $220M $310M Improved profitability; leveraged to rebound in North American Market Ceilings 41% 2009 2012 Worldwide ABP Sales $1.1B $1.2B 10.6% EBITDA as % of sales 20% 25% + 540 bps Contribution of WAVE JV to EBITDA margin 4% 5%
Slide 12: Armstrong/Worthington JV (WAVE)
Armstrong/Worthington JV (WAVE) 50% - 50% global joint venture with Worthington Industries - 20+ years old Manufactures ceiling suspension systems (grid) Leverage Worthington's strength buying and forming steel, and Armstrong's strength selling and marketing ceilings Invisible to the customer - they
Slide 13: Global Revenue, Profitability and Product Mix
(CHART) Global Revenue, Profitability and Product Mix (1) Residential flooring products are sold in North America only *Considered traditional vinyl products ~50% of flooring sales 13 (CHART) 2012 Sales by Geography and Product Form (CHART) Residential (1) 58% Commercial 42% Flooring Wood $450 2009
Slide 14: Global Revenue Mix cont.
Global Revenue Mix cont..... 14 Commercial ~$600M Residential ~$775M Total Business (CHART) Remodel 70% New 30% (CHART) Remodel 75% New 25% New vs. Remodel Channel / End-use Segment (1) Segment % of Business Healthcare 20% - 30% Retail 20% - 30% Education 15% - 25% Other 15% - 25% Office 5% - 15% Ch
Slide 15: Leadership
@ymstrong: Leadership
Slide 16: Management Successfully Executing
Management Successfully Executing Majority of senior leadership team joined Armstrong after January 2010 Earnings progress despite lower volumes Building competitive cost structure European turnaround Growth through organic investments, tactical acquisitions and product adjacencies Innovation initia
Slide 17: Key Milestones and Financial History
2006 2007 2008 2009 2010 2011 2012 2013 Est. Sales $3.25B $3.29B $3.13B $2.64B $2.63B $2.67B $2.61B $2.70 - $2.80B EBITDA $396M $430M $398M $306M $306M $374M $400M $390 - $420M EBITDA as % of Sales 12.2% 13.1% 12.7% 11.6% 11.6% 14.0% 15.3% ~14.7% Housing starts(1) 1,801 1,355 906 554 587 609 780 ~95
Slide 18: Strategy
Strategy 18 1. Optimize Product Portfolio Broad product offering and availability Drive mix New product pipeline Quality leader 2. Drive Emerging Market Growth Construction of four plants underway, three in China and one in Russia Tailor products for local consumption Increase in sales and marketing
Slide 19: Growth
Growth 19
Slide 20: Growth Opportunity Highlights
Growth Opportunity Highlights Developed markets growth initiatives Consolidate and leverage brand and market share Drive price to cover inflation Realize mix and share gains through innovation, sustainability and new product introductions Architectural Specialties Armstrong is uniquely positioned to
Slide 21: Growth From The Core
Growth From The Core 21 Results Business Model Strengths Strong Brand and Leading Market Share Across Businesses Track Record Of Price Increases > Inflation New Products And Improving Mix High operating leverage when volumes recover Lower cost structure leads to higher margins Recurring revenue from
Slide 22: Leadership in Product Innovation - We Make Ideas Become Reality
Leadership in Product Innovation - We Make Ideas Become Reality 22 Bridge to future growth in developed markets Alterna(tm) & Alterna Reserve - premium luxury vinyl tile flooring is the innovative alternative to stone and ceramic tile. Both Alterna collections are designed to capture the timeless lo
Slide 23: Leadership in Product Innovation - Sustainable Solutions
Leadership in Product Innovation - Sustainable Solutions 23 23 Awards: Awarded Bronze in the 2011 International Design Awards (IDA) Received the coveted Silver 2012 Nightingale Award. The awards program, sponsored by Contract magazine and The Center for Health Design, recognizes the best in excellen
Slide 24: Architectural Specialties (AS)
Architectural Specialties (AS) 24 Critical attributes are design and aesthetics; functionality is an important added benefit Lower volume, higher "touch", sometimes involving custom design and engineering Higher price per unit, used for "statement" spaces and high-end commercial buildings Incrementa
Slide 25: Architectural Specialties Global Footprint
Architectural Specialties Global Footprint Rankweil, Austria Armstrong factory Engineering office Montreal, Canada Lancaster, US Stafford, UK Paris, France Moscow, Russia St. Gallen, Switz. Dubai, UAE Shanghai, China Mumbai, India 25 Top global firms doing more foreign projects Of the top 200 global
Slide 26: Emerging Markets Investments to Drive Growth
Emerging Markets Investments to Drive Growth Manufacturing investments in priority markets to make products designed for local consumption Building four plants; three in China to be completed in 2013 and one in Russia to be completed late in 2014 Added over 100 sales and marketing resources - primar
Slide 27: Product Conversion in Emerging Markets Will Drive Growth
Product Conversion in Emerging Markets Will Drive Growth Improvements in building standards and product performance benefits are accelerating conversion 27 Transition to Western building standards drives growth in our product forms Mineral Fiber ceilings Drywall ceilings Resilient floors Ceramic flo
Slide 28: Russia
Russia 3rd largest suspended ceiling market in the world with significant future growth Armstrong is # 1 - brought the suspended ceiling category to Russia in 1992 28 Resource commitment enhances foundation to drive differentiated future growth Two key market growth opportunities Increase New Build
Slide 29: China
China Policy driven investment in healthcare, education, and mass transit drives drives growth that outpaces overall market 29 Resource commitment enhances foundation to drive differentiated future growth Two key market growth opportunities Increase New Build penetration to western levels...>90% Con
Slide 30: Growth Opportunities Summary
Growth Opportunities Summary Opportunities for growth in core markets that don't involve a recovery in the U.S. or Europe Architectural Specialties and emerging markets sales can double in 4 to 6 years and are both natural extensions of our core businesses Geographic expansion Local manufacturing in
Slide 31: Financial Overview
@imstrong: Financial Overview
Slide 32: Focused on creating shareholder value
Focused on creating shareholder value Performance through the cycle Profitable and cash flow positive throughout the downturn Cost reduction and disciplined spending Achieve price to cover inflation Growth via recovery and aggressive organic investments / mid-cycle outlook ROIC goal driven Strong ba
Slide 33: Adjusted EBITDA History
Adjusted EBITDA History(1) 33 (CHART) $395 $275 ($445) ($120) $130 $10 ($40) $230 ($35) A history of driving Price > Inflation $400 ($ Million) (1) Management estimates. Leveraging our brand, commitment to innovation and leading market share positions to drive earnings progress in spite of significa
Slide 34: Performance Through the Cycle
Performance Through the Cycle 34 Trough 2009 2012 "Mid-Cycle" McGraw Hill Construction non residential starts (3) 776 703 ~1,400 U.S. Housing Starts (000) 554 780 ~1,200 Plants (1) 38 32 37 Sales $2.64 Billion $2.61 Billion ~$4 Billion Adjusted EBITDA Margin 11.6% 15.3% ~20% ROIC(2) 4.5% 9.8% > 15%
Slide 35: "Mid-cycle" Path to Growth
"Mid-cycle" Path to Growth 35 (CHART) ~20% (CHART) ~95% (1) Armstrong specific initiatives to drive mix, share and price > inflation. (2) UK, Western Europe and Australia. (3) North America, U.K, Western Europe and Australia. (CHART) ~85% (CHART) ~50% (1) (2) (3) (1) (1) ($ Millions) ($ Millions) ($
Slide 36: Path to Growth - Adjusted EBITDA margin
Path to Growth - Adjusted EBITDA margin 36 (CHART) (CHART) Margin on Incremental Volume Ceilings 30% - 40% Resilient 25% - 35% Wood 25% - 30% 30% 20% 10% 0% 30% 20% 10% 0% High incremental margins on new business expected to drive increased margins in "mid-cycle"
Slide 37: Balance Sheet
Balance Sheet 12/31/2012 37 Maturity Profile No significant maturities until 2015 Considerable covenant flexibility Liquidity Sufficient liquidity to manage operations, and execute capital spend and restructuring plans (CHART) (CHART) $620M
Slide 38: Investment Highlights
Investment Highlights Diversified $2.6 billion global building products company with leading positions in most key markets and products Leadership team executing strategy to drive strong EBITDA growth in all business, despite lower volumes, through disciplined focus on costs and pricing Pursue profi
Slide 39: Financial Overview Appendix
Financial Overview Appendix 39
Slide 40: EBITDA Bridge - Full Year 2012 vs. Prior Year
($44) EBITDA Bridge - Full Year 2012 vs. Prior Year 40 $21 $32 $32 $1
Slide 41: Key Metrics - Guidance 2013
2013 Estimate Range (1) 2013 Estimate Range (1) 2013 Estimate Range (1) 2012(2) Variance Variance Variance Net Sales(3) 2,700 to 2,800 2,619 3% to 7% Operating Income(4) 280 to 310 300 (7)% to 3% EBITDA 390 to 420 400 (3)% to 5% Earnings Per Share(5) $2.30 to $2.60 $2.51 (8)% to 4% Free Cash Flow 75
Slide 42: 2013 Financial Outlook
2013 Financial Outlook $40 - $50 million increase 2.5% Annual Gross Productivity target ; Adjusted Gross Margin (25) to (75) bps vs. 2012 Down $10 million; 60% manufacturing, 40% SG&A $0 - $5 million vs. 2012 $25 - $50 million. Adjusted long-term ETR of ~39%(2) Sales(1) $600 - $650 million EBITDA $6
Slide 43: Full Year - Adjusted EBITDA to Reported Net Income
2012 2011 V EBITDA- Adjusted $400 $374 $26 Depreciation and Amortization (100) (102) 2 Operating Income - Adjusted $300 $272 $28 Foreign Exchange Movements 2 4 (2) Cost Reduction Initiatives (13) (15) 2 Accelerated Depreciation (not included above) (12) (9) (3) Impairment (6) (3) (3) Restructuring -
Slide 44: Management Team
@imstrong: Management Team
Slide 45: Matthew J. Espe, Chief Executive Officer and President
Matthew J. Espe, Chief Executive Officer and President In July 2010, Matthew J. Espe was appointed CEO of Armstrong World Industries, Inc., in Lancaster, Pennsylvania. He brings 30 years of experience in sales, marketing, distribution and management in global manufacturing businesses to Armstrong fr
Slide 46: Thomas B. Mangas, Senior Vice President and Chief Financial Officer
Thomas B. Mangas, Senior Vice President and Chief Financial Officer Thomas B. Mangas is senior vice president and CFO of Armstrong World Industries, Inc., in Lancaster, Pennsylvania. Mr. Mangas joined Armstrong in February 2010. Prior, he was vice president and CFO of the $28 billion beauty and groo
Slide 47: Victor Grizzle, Executive Vice President, CEO, Armstrong Building Products
Victor Grizzle, Executive Vice President, CEO, Armstrong Building Products Victor "Vic" Grizzle is executive vice president and CEO, Armstrong Building Products, in Lancaster, Pennsylvania. Mr. Grizzle has 23 years of experience in process improvement, sales, marketing and global business leadership
Slide 48: Frank J. Ready, CEO of Armstrong Floor Products Worldwide
Frank J. Ready is executive vice president and CEO of Armstrong Floor Products Worldwide, in Lancaster, Pennsylvania. Mr. Ready joined Armstrong in 1983 in Building Products Operations Sales and progressed through positions in Marketing before moving to the company's flooring business in 1996. He se
Slide 49: Thomas J. Waters, Vice President Treasury & Investor Relations
Thomas J. Waters, Vice President Treasury & Investor Relations Thomas J. Waters is Vice President, Treasury and Investor Relations of Armstrong World Industries, Inc. Mr. Waters joined Armstrong in 1998 as Manager, Capital Markets. Since then he has held the positions of Director of Investor Relatio
Slide 50: Kristy Rohrbaugh, Investor Relations Manager
Kristy Rohrbaugh, Investor Relations Manager Kristy Rohrbaugh is Investor Relations Manager of Armstrong World Industries, Inc., in Lancaster, Pennsylvania. Ms. Rohrbaugh became Investor Relations Manager in December of 2010 and has responsibility for managing all external investor communications. M
Slide 51: Investor Relations Contact Information
Investor Relations Contact Information 51 Kristy Rohrbaugh, CPA, MBA Investor Relations Manager Armstrong World Industries 2500 Columbia Avenue Lancaster, PA 17604 P: 717-396-6354 F: 717-396-6128 E: ksrohrbaugh@armstrong.com Thomas J. Waters VP, Treasury and Investor Relations Armstrong World Indust
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