Armstrong World Industries Inc · NYSE:AWI
Armstrong World Industries — Investor Presentation (August 2011)
31 slides from Armstrong World Industries's investor presentation, Aug 1, 2011
Slide 1: Armstrong World Industries Investor Presentation
Armstrong World Industries Investor Presentation August 1, 2011
Slide 2: Safe Harbor Statement
Safe Harbor Statement Our disclosures in this presentation and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Those statements provide our future expectations or forecasts and can be identified by our
Slide 3: Basis of Presentation Explanation
Comparable Dollars Other Adjustments Net Sales Yes No Gross Profit Yes Yes SG&A Expense Yes Yes Equity Earnings Yes Yes Operating Income Yes Yes Net Income Yes Yes Cash Flow No No Return on Capital Yes Yes EBITDA Yes Yes Basis of Presentation Explanation • We report in comparable dollars to remove t
Slide 4: Company Overview
Company Overview
Slide 5: Armstrong at a Glance
Armstrong at a Glance Leading global manufacturer of floors and ceilings for use in renovation and new construction. Significant U.S. cabinets’ business. ¾ $2.8 billion in sales in 2010 § Market leader in businesses representing 80% of sales ¾ Serving global customers from seven countries ¾ 31 manuf
Slide 6: History
2006 2007 2008 2009 2010 § Emerge from bankruptcy § Initiate strategic review and sale process § Idle: Nashville History Company Overview $3.50B $407M 11.6% § Cancel Strategic sale process § Sell Desseaux textile & sports flooring business • Sales • EBITDA $3.54B $439M 12.4% $3.21B $384M 12.0% $2.85
Slide 7: Present / Future
2011 2012 2013 2014 § Approve second flooring plant in China § New leader of Ceilings business § Approve new ceilings plant in China § Cost out initiative raised to $165 million § Idle: Statesville § Close: Beaver Falls Holmsund Present / Future Company Overview § Competitive cost structure in place
Slide 8: Key Investment Highlights
Key Investment Highlights ¾ New senior leadership team to execute strategy ¾ $165M cost savings program to achieve competitive cost structure ¾ Investments in emerging markets to continue to win and maintain market leader strategy ¾ ROIC targets to return at least the cost of capital by 2013 with ~1
Slide 9: 2010 Business Segment and End-Use Profile
2010 Business Segment and End-Use Profile Majority of business is renovation - dampens cycles. Company Overview N.A. >75% renovation ¾ 9% of Sales from Emerging Markets
Slide 10: Business Segment Profile
Business Segment Profile Building Products delivers the bulk of worldwide income and has remained profitable through the economic cycle. 2010 EBITDA - Excludes unallocated corporate expense Company Overview
Slide 11: Industry Structure/Competitive Position
U.S. Resilient European Resilient Hardwood Building Products Cabinets Market Leadership Competitor Concentration Industry Capacity Utilization Low-Cost Manufacturer Key Favorable Neutral Unfavorable Industry Structure/Competitive Position Armstrong continuously focused on competitive dynamics. Compa
Slide 12: Business Segment Overview
Business Segment Overview
Slide 13: Worldwide Business Overview - Building Products
North America Mkt Size (B ft 2 ) AWI Rank Commercial 1.4 1 Residential 0.4 1 Europe, Africa, Middle- East Mkt Size (B ft 2 ) AWI Rank Western 1.2 1 Eastern 0.5 1 Africa / Mid- East 0.3 1 Asia, Australia Mkt Size (B ft 2 ) AWI Rank China 0.2 1 Australia <0.1 1 India <0.1 1 SE Asia <0.1 1 Worldwide Bu
Slide 14: ABP Key Strategies
1 Broadest Product Portfolio ¾ Complete product offering ¾ New product pipeline (Metal, Wood) ¾ Win versus soft fiber in Europe 2 Emerging Market Growth ¾ Plant #2 in China ¾ Distribution in Russia, Middle East ¾ Grid plant in India 4 Best-in-Class Service/Quality ¾ Best on-time delivery performance
Slide 15: Building Products (ABP) Sales by Geography
Contribution of WAVE JV Profit to Operating Margin 4% Worldwide EBITDA Margin 22% Building Products (ABP) Sales by Geography ($-Millions) Adding new engines to accelerate global growth. Business Segment Overview - Building Products ¾ Global market leader § Broadest Product Line § Innovation § Go-to-
Slide 16: Worldwide Business Overview - Floor Products
Asia, Australia Mkt Size (B ft 2 ) AWI Rank China 0.4 3 Australia 0.1 2 India <0.1 1 SE Asia 0.1 1 Europe, Africa, Middle-East Mkt Size (B ft 2 ) AWI Rank Central 0.3 1 Eastern / Africa / Mid-East 0.3 5 Western Europe 0.9 4 North America Mkt Size (B ft 2 ) AWI Rank Commercial 1.0 1 Residential 2.0 1
Slide 17: AFP Key Strategies
1 Best Product Portfolio ¾ Offer broadest assortment ¾ Drive mix ¾ Quality leadership 2 Complete Market Coverage ¾ Brand leadership ¾ Merchandising presence ¾ Sales coverage effectiveness 3 Low-Cost Manufacturing ¾ Lean deployment ¾ Capability investment, e.g., glass, wood automation ¾ Rationalize f
Slide 18: Floor Products (AFP) Sales by Geography
Worldwide Adjusted EBITDA Margin excluding Europe 5% 7% Floor Products (AFP) Sales by Geography ($-Millions) Continued profitability through bottom of residential downturn. Business Segment Overview - Worldwide Floor Products Resilient & Wood Wood Worldwide Resilient ¾ 4% of Sales from Emerging Mark
Slide 19: European Floor Products
2009 Sales (1) $330M EBITDA (2) ($ 15M) 2011 Sales $280M EBITDA (2) $ 0M Transform the business European Floor Products Commercial 87% Residential 13% Business Segment Overview - European Floor Products (1) Includes intercompany sales, (2) Excludes restructuring expense ¾ Exited Residential segment
Slide 20: Cabinets
% of Sales Company-Owned Service Centers 51% Distribution 27% Multi-Family 22% Cabinets ¾ Small player…<5% share ¾ Focus on small-/medium-size builder ¾ Go-to-Market Current Situation 2010 Sales = $150M ¾ Niche player… both new and remodel ¾ Restructure costs to reflect market reality ¾ Non-core bus
Slide 21: Financial Overview
Financial Overview
Slide 22: Financial Summary
Profitable and cash flow positive through downturn ¾ Focus on cost control / productivity ¾ Strong free cash flow ¾ ROIC greater than cost of capital in 2013, with new home starts at one million ¾ Continuing to fully invest in businesses ¾ Strong balance sheet: leverage, liquidity and maturity profi
Slide 23: EBITDA Bridge (2006-2009)
Figures rounded to nearest $5 million Financial Overview Cost reduction and improved price / mix significantly offset dramatic volume declines. EBITDA Bridge (2006-2009)
Slide 24: EBITDA Bridge (2009-2010)
(Millions) Figures rounded to nearest $1 million Financial Overview Cost reduction offsets volume and input cost headwinds. EBITDA Bridge (2009-2010)
Slide 25: EBITDA Bridge - 1H 2011 versus Prior Year
EBITDA Bridge -1H 2011 versus Prior Year Financial Overview ($13)
Slide 26: $165 Million Savings Program
$165 Million Savings Program $165M savings from manufacturing and SG&A, net of inflation. Manufacturing savings driven by plant closures and LEAN. Cumulative Savings $35M $125M $165M Financial Overview
Slide 27: Balance Sheet 6/30/2011
(2%) (14%) Balance Sheet 6/30/2011 Financial Overview $580 (Millions) Maturity Profile ¾ No significant maturities until 2015 ¾ Considerable covenant flexibility Liquidity ¾ Sufficient liquidity to manage operations, and execute capital spend and restructuring plans
Slide 28: Financial Overview Appendix
Financial Overview Appendix
Slide 29: Key Metrics - Guidance 2011
2011 Estimate Range 2010 Variance Net Sales (1) 2,900 to 3,000 2,766 5% to 8% Operating Income (2) 280 to 310 189 48% to 64% EBITDA 385 to 415 303 27% to 37% Earnings Per Share (3) $2.29 to $2.58 $1.73 32% to 49% Free Cash Flow 80 to 120 180 (56%) to (33%) Key Metrics - Guidance 2011 Financial Overv
Slide 30: 2011 Financial Outlook
2011 Financial Outlook Financial Overview Appendix ¾ Raw Material & Energy Inflation* $50 - $60 million increase ¾ Manufacturing Productivity* Gross Margin +175 to +225 bps vs. 2010 ¾ U.S. Pension Credit ~$25 million, down ~$25 million vs. 2010 60% manufacturing, 40% SG&A ¾ Earnings from WAVE $5 - $
Slide 31: Full Year 2010 - Adjusted Operating Income to Reported Net Income
2010 2009 V Operating Income - Adjusted $188 $157 $31 Foreign Exchange Movements 2 - 2 Laminate Duty Refund 7 - 7 Cost Reduction Initiatives (50) (16) (34) Asset Impairments (31) (18) (13) Restructuring (22) - (22) Executive Transition (15) - (15) Gain on Settlement of Note Receivable 2 - 2 Accelera
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