Armstrong World Industries Inc. has a market cap of $2.5 billion; its shares were traded at around $43.55 with a P/E ratio of 35.41 and P/S ratio of 0.9. AWI is in the portfolios of Tom Russo of Gardner Russo & Gardner, Chuck Royce of Royce& Associates, Richard Pzena of Pzena Investment Management LLC, Michael Price of MFP Investors LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.
Highlight of Business Operations:Income tax expense for the first quarter of 2010 was $29.6 million on pre-tax income of $10.2 million. Income tax expense for the first quarter of 2009 was $8.8 million on pre-tax loss of $2.4 million. Income tax expense for the first quarter of 2010 was negatively affected by $21.6 million as a result of a deferred income tax charge related to the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act of 2010. Income tax expense for both periods was negatively affected by additional valuation allowances on foreign deferred income tax assets. Income tax expense for 2009 was also negatively affected by interest expense on uncertain tax positions.
Unallocated Corporate Unallocated corporate expense of $18.6 million in the first quarter of 2010 increased from $5.5 million in the prior year. 2010 included $11.2 million of severance and related expenses to reflect the separation costs for our former Chairman and Chief Executive Officer and a $3.1 million asset impairment charge related to the termination of our flight operations. 2009 included $3.4 million of employee separation costs, partially offset by a reduction of our stock based compensation expense of $1.6 million related to stock grants that were forfeited by employees.
Operating activities in the first quarter of 2010 used $28.0 million of cash. This was primarily due to an increase in accounts receivable of $52.7 million (because March 2010 sales were greater than December 2009 sales) partially offset by lower inventory in all business units totaling $16.6 million. Operating activities in the first quarter of 2009 used $40.6 million of cash. This was primarily due to an increase in accounts receivable of $54.5 million (because March 2009 sales were greater than December 2008 sales) partially offset by lower inventory in all business units totaling $26.4 million.
Net cash used by investing activities was $1.6 million for the first quarter of 2010. This was primarily due to capital expenditures of $13.0 million partially offset by a distribution from WAVE of $11.0 million. Net cash provided by investing activities was $3.4 million for the first quarter of 2009. This was primarily due to the receipt of the remaining proceeds from the divestiture of the European Textile and Sports Flooring business of $8.0 million and a distribution from WAVE of $13.5 million, partially offset by capital expenditures of $19.5 million.
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 $41.8 million in letters of credit were outstanding as of March 31, 2010 and, as a result, availability under the revolving credit facility was $258.2 million.
As of March 31, 2010, our foreign subsidiaries had available lines of credit totaling $25.8 million, of which $2.3 million was used and $2.0 million was available only for letters of credit and guarantees, leaving $21.5 million of unused lines of credit available for foreign borrowings. However, these lines of credit are uncommitted, and poor operating results or credit concerns at the related foreign subsidiaries could result in the lines being withdrawn by the lenders. We have been able to maintain and, as needed, replace credit facilities to support our foreign operations.
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