Armstrong World Industries Inc. Reports Operating Results (10-Q)
Armstrong World Industries Inc. has a market cap of $2.61 billion; its shares were traded at around $45.65 with a P/E ratio of 38 and P/S ratio of 1. AWI is in the portfolios of Chuck Royce of Royce& Associates, George Soros of Soros Fund Management LLC, Richard Pzena of Pzena Investment Management LLC, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:Equity earnings from our WAVE joint venture were $13.2 million for the third quarter of 2010 compared to $12.8 million in the third quarter of 2009, and $38.6 million for the first nine months of 2010 compared to $30.1 million in first nine months of 2009. See Note 7 to the Condensed Consolidated Financial Statements for further information.
Other non-operating income was $4.1 million for the third quarter of 2010 compared to $0.9 million in the third quarter of 2009, and $5.6 million in the first nine months of 2010 compared to $2.6 million in the first nine months of 2009. In 2010, both periods included $2.5 million of interest income related to laminate duty refunds received as a result of ongoing customs litigation.
Operating income decreased for the third quarter but improved for the first nine months of 2010 compared to the same periods in 2009. In both periods reduced manufacturing and SG&A expenses offset the margin impact of lower sales and raw material inflation. The third quarter and first nine months of 2010 include charges of $15.1 million related to the restructuring of the European business, and the first nine months of 2010 includes $2.1 of asset impairment charges. Including these charges, the European Resilient Flooring business incurred losses of $14.5 million for the third quarter and $28.8 million for the first nine months of 2010, compared to income of $0.2 million and a loss of $20.5 million, respectively, for the same periods in 2009. In the third quarter of 2010 Resilient Flooring operating income also included approximately $5.5 million of costs related to the closure of our Montreal, Canada facility and approximately $7.0 million due to laminate duty refunds. See Note 18 to the Condensed Consolidated Financial Statements for further information.
Unallocated Corporate Unallocated corporate expense of $9.8 million in the third quarter of 2010 and $39.2 million for the first nine months decreased from $34.0 million and $41.4 million, respectively, in the prior year. The first nine months of 2010 included $13.5 million for CEO transition costs and $6.1 million of asset impairment charges related to the termination of our flight operations. In addition to the factors discussed above, both the third quarter and first nine months of 2010 were negatively impacted compared to the same periods of 2009 by a lower pension credit and costs related to the support of our LEAN initiatives. The third quarter and first nine months of 2009 included $31.6 million related to a change in control event which resulted in accelerated stockbased compensation expense.
Net cash used by investing activities was $3.9 million for the first nine months of 2010. This was primarily due to capital expenditures of $52.2 million, partially offset by a distribution from WAVE of $37.5 million and proceeds from the sales of fixed assets of $10.8 million, which included $9.2 million received from the sale of one of our European metal ceilings manufacturing facilities. Net cash used for investing activities was $11.9 million for the first nine months of 2009. This was primarily due to capital expenditures of $63.6 million partially offset by a distribution from WAVE of $42.0 million, and the receipt of the remaining proceeds from the divestiture of the European Textile and Sports Flooring business of $8.0 million.
Liquidity Our liquidity needs for operations vary throughout the year. We retain lines of credit to facilitate our seasonal needs. On October 2, 2006, Armstrong executed a $1.1 billion senior credit facility with Bank of America, N.A., JPMorgan Chase Bank, N.A. and Barclays Bank PLC. This facility was made up of a $300 million revolving credit facility (with a $150 million sublimit for letters of credit), a $300 million Term Loan A (due in October 2011), and a $500 million Term Loan B (due in 2013). There were no outstanding borrowings under the revolving credit facility, but $38.1 million in letters of credit were outstanding as of September 30, 2010 and, as a result, availability under the revolving credit facility was $261.9 million.
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