Armstrong Flooring Reports Second Quarter 2021 Results
Armstrong Flooring, Inc. (“Armstrong Flooring” or the “Company”) a leader in the design and manufacture of innovative flooring solutions, today reported financial results for the second quarter ended June 30, 2021.
Michel Vermette, President and Chief Executive Officer, commented, “We continued to improve the business in the second quarter. We delivered 15.5% top-line growth compared to the second quarter 2020, and 12.9% top-line growth versus the first quarter 2021 led by strong Residential and Commercial recoveries, while facing a dynamic supply chain and inflationary environment. These headwinds are unlike any periods experienced in recent decades, and they significantly limited our ability to progress further against our long-term sales and EBITDA goals. Our team continues to work diligently and take action in addressing these dynamics, most recently by announcing our third price increase of 2021 and increasing our mix of products manufactured in the United States. Overall, we remain focused and agile in managing through the current volatile environment, and resolute in our long-term goal of transforming Armstrong Flooring into a more resilient business for our customers, our employees, and our shareholders.”
Multi-Year Transformation Update
Mr. Vermette continued, “In the second quarter, we remained steadfast in executing our multi-year transformation plan, while appropriately adjusting to the current environment. We saw positive accomplishments against the three pillars of our plan: expanding customer reach, simplifying product offerings and operations, and strengthening our core capabilities.
As it relates to expanding customer reach, we began selling Armstrong® Flooring Pro™ products to customers in the builder and multifamily channel and we continue to see positive customer reactions from our Armstrong® Flooring Signature™ products. We also made our initial sales into the hospitality channel in the second quarter, and our sales force is actively pursuing future growth opportunities in this new vertical.
With regard to simplifying product offerings and operations, we continued to experience strong momentum from our Quick Ship program, which just under one-year into its existence, experienced its strongest quarter, and the fourth sequential quarter of growth. In addition, we completed the closure of our South Gate, California facility in the second quarter, transitioning production to our existing U.S. manufacturing facilities. Collectively, these efforts have simplified our manufacturing footprint and streamlined our product delivery capabilities.
Furthermore, we continued to strengthen our portfolio and organization while remaining attentive to the dynamic supply chain environment, adapting our supply chain to increase safety stock to mitigate longer lead times, and also exploring additional suppliers and alternative shipping options to combat global shipping container shortages. Additionally, we opened our new corporate office headquarters. This move, along with the first quarter opening of a first of its kind technical center, gives our teams the ability to work cohesively in a modern and energized space and promotes further collaboration and innovation at Armstrong Flooring. Along with providing a fresh and modern space for us to continue our journey, our headquarters move also results in future cost savings of approximately 60% in corporate lease expenses compared to our prior facility.”
Second Quarter 2021 Results
In the second quarter of 2021, net sales increased 15.5% to $168.1 million from $145.6 million in the second quarter of 2020, reflective of growth in each region in which the Company operates. In North America, favorable product mix and impacts from previously announced pricing initiatives drove sales increases in both Commercial and Residential channels. This positive sales momentum however continued to be hampered throughout the quarter as a result of supply chain disruptions and product availability, despite strong demand in Commercial and Residential.
Operating loss in the quarter was $18.3 million versus a loss of $5.6 million in the second quarter of 2020. The increased loss is reflective of higher costs of goods sold due to supply chain disruptions and inflation, which outpaced recent pricing initiatives and resulted in costs of goods sold of 87.4% of net sales in the second quarter 2021 compared to 83.0% in the same quarter of the prior year. Additionally, the second quarter of 2021 includes $4.5 million of charges from accelerated depreciation and inventory write-downs related to asset and product rationalization efforts. Finally, selling, general & administrative expenses in the quarter were $39.5 million, compared to $30.3 million in the same quarter prior year. The increase year-over-year is primarily reflective of a larger sales force and increased advertising and promotional spend associated with product launches in 2021, and the normalization of staffing and employee-related costs, which were lower in 2020 due to COVID-19 related impacts.
Net loss in the second quarter of 2021 was $19.5 million, or diluted loss per share of $(0.89), as compared to a net loss of $6.3 million, or diluted loss per share of $(0.29), in the second quarter of 2020. Adjusted net loss was $17.3 million, or adjusted diluted loss per share of $(0.79), as compared to an adjusted net loss of $5.1 million, or adjusted diluted loss per share of $(0.23), in the prior year quarter.
Second quarter 2021 adjusted EBITDA was a loss of $3.5 million, as compared to adjusted EBITDA of $6.9 million in the prior year quarter. The decrease in adjusted EBITDA was primarily due to higher input costs, driven by the inflationary impacts of both raw materials and shipping costs, along with higher selling, general & administrative expenses in 2021, as well as lower operating expenses in the second quarter 2020, due to the COVID-19 related environment.
Liquidity and Capital Resources Update
At June 30, 2021, the Company had total liquidity of approximately $91.6 million including $14.6 million of cash plus availability under its credit facilities. The Company’s Net Debt on June 30, 2021, was $44.7 million. The Company believes it has ample financial resources to effectively execute its near- and long-term objectives.
For the full second quarter results, click here.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the design and manufacture of innovative flooring solutions that inspire beauty wherever your life happens. Headquartered in Lancaster, Pennsylvania, Armstrong Flooring 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. The company safely and responsibly operates seven 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 www.armstrongflooring.com.
Amy Trojanowski – Senior Vice President & CFO – firstname.lastname@example.org
Source: Armstrong Flooring, Inc.