Armstrong Flooring Reports Fourth Quarter and Full Year 2020 Results
February 17, 2021 at 07:06 AM EST
Armstrong Flooring, Inc. (NYSE: AFI) (“Armstrong Flooring” or the “Company”), a leader in the design and manufacture of innovative flooring solutions, today reported financial results for the fourth quarter and full year ended December 31, 2020.
Michel Vermette, President and Chief Executive Officer, commented, “I’m proud of the resilience our employees showed throughout the year while executing our business transformation. Our progress was evident in our fourth quarter results, which were largely in line with our expectations as we further invested in the multi-pronged transformation and modernization of our business.”
“Looking forward to 2021, macro trends further support Armstrong Flooring’s internal efforts. Residential housing construction remains positive for Armstrong Flooring, with this end market continuing to grow in importance, representing 40% of 2020 sales compared to 35% historically. Economic indicators for single-family residential construction and renovation are all pointing towards robust levels of activity to continue in 2021. We believe these residential tailwinds will support Armstrong Flooring’s strong brand, the timing of our direct sales efforts to select independent retailers, growing presence in big box retailers, and meaningfully enhanced sales efforts with our valued flooring distribution network. Commercial activity continues to gain momentum with sequential improvement in demand trending in the right direction since mid-year 2020. These factors combined with the significant steps that we are taking to structurally transform our business give us the confidence in our transformation plans.”
Fourth Quarter 2020 Results
In the fourth quarter of 2020, net sales increased 1.8% to $143.9 million from $141.3 million in the fourth quarter of 2019. The increase in net sales was due to higher volumes and a favorable mix of residential products which offset commercial project delays. Residential end market sales grew, mostly driven by volumes gains. Pricing actions from the second half of 2020 will have a positive impact into the first half of 2021. The Company continues to see strength in its residential sales, particularly in remodel. Commercial end market sales slipped as projects continued to be slowed by COVID-19.
The net loss in the fourth quarter of 2020 was $32.4 million, or diluted loss per share of $1.48, as compared to net loss of $25.1 million, or diluted loss per share of $1.14, in the prior year quarter. Adjusted net loss was $30.1 million, or adjusted diluted loss per share of $1.37, as compared to adjusted net loss of $23.1 million, or adjusted diluted loss per share of $1.05, in the prior year quarter.
Fourth quarter 2020 adjusted EBITDA was a loss of $14.5 million, as compared to an adjusted EBITDA loss of $4.3 million in the prior year quarter. The decrease in adjusted EBITDA was primarily due to higher raw materials, higher freight/shipping costs, and tariff headwinds. Operating results were also impacted by transition service agreement income in the prior year quarter which did not recur in the fourth quarter of 2020. Improved productivity in our manufacturing facilities was offset by investments to support long-term strategic growth initiatives, including our transition from our South Gate, CA facility.
Full Year 2020 Results
For the full year 2020, net sales declined 6.6% to $584.8 million from $626.3 million in the prior year, primarily due to the effects of COVID-19 on our business, particularly in the second and third quarter of 2020.
Full year 2020 net loss was $63.6 million, or diluted loss per share of $2.90, as compared to net loss of $58.5 million, or diluted loss per share of $2.42, in the prior year. Diluted loss per share from continuing operations was $2.90 in 2020, compared to $2.85 in the prior year. Adjusted net loss was $59.2 million, or adjusted diluted loss per share of $2.70, as compared to an adjusted net loss of $37.9 million, or adjusted diluted loss per share of $1.57, in the prior year.
Full year 2020 adjusted EBITDA was a loss of $6.3 million, as compared to adjusted EBITDA of $24.4 million in the prior year. The decrease in adjusted EBITDA was primarily attributable to lower net sales and increased investments to support the Company’s long-term growth and profit initiatives. Full year 2019 adjusted EBITDA included a $19 million benefit related to transition service agreement income, which did not recur in 2020.
Liquidity and Capital Resources Update
At December 31, 2020, the Company had total liquidity of approximately $52.7 million, including $13.7 million of cash plus availability under its credit facilities. Under the terms of the Company’s credit agreements, beginning in the fourth quarter of 2020, $30.0 million of availability under the credit facilities was withheld until such time the Company sells its South Gate property in California. The Company believes it has ample financial resources to effectively execute its near and long-term objectives.
Multi-Year Transformation Update
During 2020, the Company took meaningful steps in executing the multi-year transformation plan introduced in March 2020.
Expanding customer reach
Simplifying product offerings and operations
Strengthening core capabilities
For the full year 2021, the Company expects revenue to grow compared to 2020 supported by anticipated positive residential trends, new product introductions, late 2020 pricing actions, and sales channel enhancement efforts. The Company expects adjusted EBITDA improvement to be supported by top line growth, business transformation initiatives and manufacturing productivity.
Webcast and Conference Call
The Company will hold a live webcast and conference call to review financial results and conduct a question-and-answer session on Wednesday, February 17, 2021 at 10:00 a.m. ET. The live webcast will be available in the Investors section of the Company’s website at www.armstrongflooring.com. For those unable to access the webcast, the conference call will be accessible by dialing 877-407-0789 (domestic) or 201-689-8562 (international). A replay of the conference call will be available for 90 days, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13715779.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a leading global manufacturer of flooring products and one of the industry’s most trusted and celebrated brands. The company continually builds on its resilient, 150-year legacy by delivering on its mission to create a stronger future for customers through adaptive and inventive solutions. Headquartered in Lancaster, Pennsylvania, Armstrong Flooring safely and responsibly operates eight manufacturing facilities globally. Learn more at www.armstrongflooring.com.
Forward Looking Statements
Disclosures in this release and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements provide our future expectations or forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward looking statements. A more detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied is included in our reports filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.
Free cash flow is a non-GAAP financial measure and consists of cash flows from operating activities less capital expenditures net of proceeds from asset sales. The Company’s management believes Free cash flow is meaningful to investors because management reviews Free cash flow in assessing and evaluating performance. However, this measure should be considered in addition to, rather than a substitute for cash flows used for operating activities provided in accordance with GAAP. The Company’s method of calculating Free cash flow may differ from methods used by other companies and, as a result, Free cash flow may not be comparable to other similarly titled measures disclosed by other companies.
(a) Does not total due to rounding.
Adjusted net (loss) is a non-GAAP financial measures and consists of net (loss) adjusted to remove the impact of business transformation costs, U.S. pension expense, other (income) expense; discontinued operations and adjust such items for the related tax impacts. Adjusted diluted (loss) per share is a non-GAAP financial measure and consists of Adjusted net (loss) divided by weighted average diluted shares outstanding for the corresponding period. The Company’s management believes Adjusted net (loss) and Adjusted diluted (loss) per share are meaningful to investors because management reviews Adjusted net (loss) and Adjusted diluted (loss) per share in assessing and evaluating performance. However, these measures should be considered in addition to, rather than a substitute for net (loss) and diluted (loss) per share provided in accordance with GAAP. The Company’s method of calculating Adjusted net (loss) and Adjusted diluted (loss) per share may differ from methods used by other companies and, as a result, Adjusted net (loss) and Adjusted diluted (loss) per share may not be comparable to other similarly titled measures disclosed by other companies.
(a) Site exit costs exclude $4.9 million and $4.6 million of accelerated depreciation in both the three months and year ended December 31, 2020 and 2019, respectively, that are added back as part of the Depreciation and amortization expense.
Adjusted EBITDA is a non-GAAP financial measure and consists of net (loss) adjusted to remove the impact of discontinued operations, income taxes, other (income) expense, interest expense, depreciation and amortization, U.S. pension expense and business transformation costs. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for net (loss) provided in accordance with GAAP. The Company's method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.