Armstrong Flooring Reports Fourth Quarter and Full Year 2020 Results
Armstrong Flooring, Inc. (“Armstrong Flooring” or the “Company”), a leader in the design and manufacture of innovative flooring solutions, reported financial results for the fourth quarter and full year ended December 31, 2020.
Fourth Quarter 2020 Highlights
– Net Sales of $143.9 Million, Up Year-Over-Year Led by Residential Demand
– Net Loss of $32.4 Million and Adjusted Net Loss of $30.1 Million
– Adjusted EBITDA loss of $14.5 Million
– Investments of $9.8 Million to Support Strategic Long-term Growth and Profit Initiatives
Full Year 2020 Highlights
– Net Sales of $584.8 Million
– Net Loss of $63.6 Million and Adjusted Net Loss of $59.2 Million
– Adjusted EBITDA loss of $6.3 Million
– Investments of $16.5 Million to Support Strategic Long-term Growth and Profit Initiatives
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
– Expanded direct sales teams to service key independent retailers, commercial national accounts, and large flooring contractors
– Added teams to address key addressable markets, such as hospitality
Simplifying product offerings and operations
– Reduced SKU count by approximately 30% in 2020
– Consolidated U.S. manufacturing facilities and improved efficiencies
– Announced the relocation of corporate headquarters, effective summer 2021, with estimated cost savings of approximately 60% of current corporate lease expense
Strengthening core capabilities
– Launched new branding, rolled out innovative in-store displays and accelerated new product introductions
– Introduced Quick Ship program to service accelerated customer project timelines
– Invested in product innovation with a focus on U.S. based manufacturing
– Augmented our logistics capabilities to align with customer expectations, including the addition of a VP of Logistics and other investments in process and personnel
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.
For the full fourth quarter results, click here.
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.
Amy Trojanowski – Senior Vice President & CFO – email@example.com
Source: Armstrong Flooring, Inc.