Armstrong World Industries Reports Second-Quarter 2023 Results

Armstrong World Industries, Inc., a leader in the design, innovation and manufacture of ceiling and wall solutions in the Americas, today reported second-quarter 2023 financial results featuring strong operating income and adjusted EBITDA growth and margin expansion with positive contributions from both the Mineral Fiber and Architectural Specialties segments.

“Our results this quarter continue to demonstrate the resilience of our business model and our team’s strong focus on execution. We delivered double-digit adjusted EBITDA growth with meaningful margin expansion in both the Mineral Fiber and Architectural Specialties segments, while navigating softer market conditions,” said Vic Grizzle, President and CEO of Armstrong World Industries. “With the relentless commitment of our team to deliver results, we are on track to generate solid sales, earnings and cash flow growth for 2023, even as challenging market conditions persist. We also remain focused on furthering our digital and healthy spaces initiatives and pursuing attractive, bolt-on acquisitions, including our acquisition of BOK Modern, a design leader in metal architectural solutions. BOK Modern is a strong complement to our existing metal portfolio, and we are excited to welcome their team and work together to accelerate growth in this attractive category.”

Second-Quarter Results

Second-quarter 2023 consolidated net sales increased 1.4% from prior-year results, driven by favorable Average Unit Value (dollars per unit sold, or “AUV”) of $17 million which was partially offset by lower volumes of $12 million. Architectural Specialties net sales increased $5 million and Mineral Fiber net sales decreased slightly from the prior-year period.

Second-quarter 2023 operating income increased 21.5% versus the prior-year period driven primarily by favorable AUV performance, lower acquisition-related charges, primarily related to a prior-year quarter loss on the change in fair value of contingent consideration related to our 2020 acquisition of TURF Design, Inc., and an increase in Worthington Armstrong Joint Venture (‘WAVE”) equity earnings. These benefits were partially offset by impacts from lower volumes and an increase in selling expense.

Second-Quarter Segment Results

Mineral Fiber

Mineral Fiber net sales decreased in the second quarter of 2023 due to $17 million of lower volumes, partially offset by $16 million of favorable AUV. The year-over year decrease in volumes was driven primarily by softer market demand. The increase in AUV in the second quarter was primarily due to favorable like-for-like price, while mix was essentially unchanged compared to prior year as positive product mix offset channel mix headwinds.

Second-quarter 2023 operating income for Mineral Fiber increased 5.7% primarily due to a $14 million benefit from favorable AUV, a $4 million increase in WAVE equity earnings and benefits driven by current year cost savings initiatives. These increases were partially offset by a $12 million decrease from lower sales volumes and a $2 million increase in selling expenses, primarily in support of our digital initiatives.

Architectural Specialties

Second-quarter 2023 net sales in Architectural Specialties increased 5.7% from prior-year results, driven by growth across most product categories and favorable project mix.

The increase in second-quarter Architectural Specialties operating income was driven by a $7 million benefit from increased sales volumes and improved project margins. Also contributing to the increase in operating income was a $7 million reduction in acquisition-related expenses, primarily due to a prior-year quarter loss on the change in fair value of contingent consideration recorded in the prior-year period related to our 2020 acquisition of TURF Design, Inc. These benefits were partially offset by a $2 million increase in manufacturing costs and a $1 million increase in selling expenses.

Cash Flow

Cash flows from operating activities for the first six months of 2023 increased $31 million versus the prior-year period, while cash flows used for investing activities decreased $4 million versus the prior-year period. The net $26 million, or 43%, increase in operating and investing cash flows was primarily due to favorable working capital changes, most notably in inventories and receivables, and an increase in dividends from WAVE, partially offset by an increase in purchases of property, plant and equipment and the acquisition of co-ownership interest in certain software-related intellectual property.

Share Repurchase Program

During the second quarter of 2023, we repurchased 0.4 million shares of common stock for a total cost of $30 million, excluding the cost of commissions and taxes. As of June 30, 2023, there was $292 million remaining under the Board of Directors’ current authorized share repurchase program. On July 18, 2023 the Board of Directors authorized an additional $500 million to be added to the Company’s existing share repurchase program authorization and extended the authorization through December 2026**.

Acquisition of BOK Modern

In July 2023, the Company acquired BOK Modern, LLC (“BOK”) for a total cash consideration of $13.8 million and additional contingent consideration payable upon the achievement of certain future performance objectives through 2025. BOK is a leading designer of metal architectural solutions based in California with 2022 revenues of approximately $12 million.

Updating 2023 Outlook

“Our first half results are in-line with our expectations of delivering top line, bottom line and adjusted free cash flow growth in 2023. We are modestly updating our full year 2023 outlook to reflect our confidence in delivering the full year,” said Chris Calzaretta, AWI CFO. “Strong execution at our plants drove manufacturing productivity and operational efficiencies, while rigorous cost control discipline continued in the quarter. We remain confident in our growth strategy and the cash flow generation of the business which enables us to fund all of our capital allocation priorities.”

To view to full second quarter results, click here.

^{**In July 2016, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $150 million of our outstanding common stock through July 2018 (the “Program”). Pursuant to additional authorization and extensions of the Program approved by our Board of Directors, including $500 million authorized on July 18, 2023, we are authorized to purchase up to $1,700 million of our outstanding shares of common stock through December 2026. Since inception and through June 30, 2023, we have repurchased 13.2 million shares under the Program for a total cost of $908 million, excluding commissions and taxes.}

About Armstrong World Industries

Armstrong World Industries, Inc. is a leader in the design, innovation and manufacture of innovative ceiling and wall system solutions in the Americas. With $1.2 billion in revenue in 2022, AWI has approximately 3,000 employees and a manufacturing network of 16 facilities, plus seven facilities dedicated to its WAVE joint venture.

Contact:

Theresa Womble – Investor & Media Relations – tlwomble@armstrongceilings.com – (717) 396-6354

Source: Armstrong World Industries, Inc.