LANCASTER, Pa.--(BUSINESS WIRE)--Armstrong Flooring, Inc. (NYSE:AFI), North America’s largest producer of resilient flooring products, today reported financial results for the fourth quarter and full year ended December 31, 2018.
Don Maier, Chief Executive Officer, commented, “During 2018, we grew sales on strong volume growth in Luxury Vinyl Tile (“LVT”) as well as higher selling prices across many product categories. Our full year Adjusted EBITDA from continuing operations improved by 3.3% helped by productivity gains and cost saving actions in the face of strong inflationary pressure. Fourth quarter 2018 results were impacted by soft end market demand, along with the timing of customer purchases in response to delayed U.S. tariff increases.”
Mr. Maier continued, “We are pleased to enter 2019 as a focused resilient flooring Company with an attractive growth trajectory, stronger margin profile, and solid balance sheet. Our efforts are concentrated on LVT leadership, which is supported by our growth strategy to drive innovation across our award-winning product portfolio, strengthen our distribution partnerships, and leverage our strong positions in our other commercial categories. We believe we are now positioned to generate improved results in 2019 and beyond.”
Fourth Quarter and Full Year 2018 Results Compared with 2017 Results
In December 2018, the Company completed the previously announced sale of its wood flooring business. Proceeds from the sale were $90.2 million, net of closing costs, transaction fees and taxes. The transaction is subject to a customary post-closing working capital adjustment process, which is expected to be completed in the first quarter of 2019. As of the fourth quarter 2018, the wood flooring business is now classified as a discontinued operation. Amounts for the prior periods, including net sales and operating income, have been reclassified to conform to this presentation.
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||
| 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||
| Net sales | $153.8 | $159.4 | (3.5%) | $728.2 | $704.1 | 3.4% | |||||||
| Operating (loss) | ($16.6) | ($12.2) | N/M | ($17.4) | ($12.7) | N/M | |||||||
| Net (loss) | ($171.0) | ($20.7) | N/M | ($163.0) | ($41.8) | N/M | |||||||
| Diluted (loss) per share | ($6.57) | ($0.80) | N/M | ($6.27) | ($1.54) | N/M | |||||||
| Adjusted EBITDA | $1.8 | $4.9 | (63.5%) | $57.5 | $55.7 | 3.3% | |||||||
| Adjusted EBITDA margin | 1.2% | 3.1% | (190 bps) | 7.9% | 7.9% | 0 bps | |||||||
| Adjusted net (loss) income | ($9.0) | ($17.5) | N/M | $5.8 | $8.7 | (33.9%) | |||||||
| Adjusted diluted (loss) earnings per share | ($0.35) | ($0.68) | N/M | $0.22 | $0.32 | (31.0%) | |||||||
In the fourth quarter of 2018, net sales decreased 3.5% to $153.8 million as compared to $159.4 million in the fourth quarter of 2017, or 2.4% excluding the impact of currency. The decrease in net sales was primarily due to lower volumes, partly offset by improved mix and overall higher selling prices in response to inflationary pressure. Lower volumes in the fourth quarter of 2018 were impacted by elevated inventory levels in the distributor channel due to significant customer purchases in the third quarter of 2018 ahead of price increases implemented in October 2018 in response to higher anticipated U.S. tariffs.
Fourth quarter 2018 net loss was $171.0 million, or diluted loss per share of $6.57, as compared to net loss of $20.7 million, or diluted loss per share of $0.80, in the prior year quarter. Current year loss included $156.1 million related to the wood flooring business, which is now classified as a discontinued operation. Adjusted net loss was $9.0 million, or adjusted diluted loss per share of $0.35, as compared to an adjusted net loss of $17.5 million, or adjusted diluted loss per share of $0.68, in the prior year quarter.
Fourth quarter 2018 adjusted EBITDA was $1.8 million, as compared to $4.9 million in the prior year quarter. The decrease in adjusted EBITDA was primarily driven by lower net sales and increased input cost inflation pressure, partially offset by improved productivity and lower SG&A spending.
For the full year 2018, net sales increased 3.4% to $728.2 million as compared to $704.1 million in 2017. The improvement in net sales was primarily driven by favorable mix and overall higher selling prices in response to inflationary pressure, partly offset by lower volumes.
Full year 2018 net loss was $163.0 million, or diluted loss per share of $6.27, as compared to net loss of $41.8 million, or diluted loss per share of $1.54, in the prior year. Adjusted net income was $5.8 million, or adjusted diluted earnings per share of $0.22, as compared to an adjusted net income of $8.7 million, or adjusted diluted earnings per share of $0.32, in the prior year.
Full year 2018 adjusted EBITDA was $57.5 million, as compared to $55.7 million in the prior year. The increase in adjusted EBITDA was primarily driven by higher net sales, improved productivity and lower SG&A spending, which more than offset significant input cost inflation pressure.
Full Year 2019 Outlook
For the full year 2019, the Company expects adjusted EBITDA to be in the range of $58 million to $66 million, with growth heavily weighted to the second half as the overall market improves and elevated inventory levels in the channel are worked down. The Company expects capital expenditures to be in the range of $30 million to $35 million for the full year 2019.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the design and manufacture of innovative flooring solutions. Headquartered in Lancaster, Pennsylvania, Armstrong Flooring is North America’s largest producer of resilient flooring products. The Company safely and responsibly operates 8 manufacturing facilities globally, working to provide the highest levels of service, quality and innovation to ensure it remains as strong and vital as its 150-year heritage. Learn more at www.armstrongflooring.com.
