Armstrong World Industries Inc. has reported its third quarter 2011 results. Highlights for are: Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $124 million, up 11 percent over the 2010 period. Operating Income of $92.8 million more than doubled from the 2010 period. The cost savings program has been accelerated, management lowers 2011 guidance ranges.

Consolidated net sales increased approximately $34 million or 5 percent compared to the prior year period. Excluding approximately $29 million of favorable foreign exchange impact for the quarter, sales were relatively flat compared to the prior year period. On a consolidated level, volume declines were offset by price and mix. Volumes decreased in Worldwide Resilient and European Building Products, while volumes grew in Wood Flooring, Cabinets and Building Products Americas.

Operating income and net income both increased due to the cost reduction actions initiated in 2010, which resulted in lower manufacturing costs and core SG&A expenses when compared to the same period last year. Input cost inflation increased $14 million vs. third quarter 2010, driven by a broad array of input items including PVC, plasticizers and Titanium Dioxide.

“On an adjusted basis, total company EBITDA was up 11 percent from Q3 2010 levels, on relatively flat sales, illustrating that the businesses continue to execute well in a tough operating environment,” said Matt Espe, President and CEO. “The economic climate continues to be a challenge and, as a result, we saw lower volumes across most of our businesses. We achieved increased profitability through the execution of our cost savings plans, pricing ability, mix gains from new products and leverage of LEAN investments. We continue to focus on running the businesses and managing factors within our control and, in the third quarter, we were encouraged to see our Wood Flooring business, in particular, have another strong earnings quarter following their impressive Q2 results.”

Improvements in adjusted operating income and EBITDA were driven by reductions in manufacturing costs, coupled with the impact of better pricing and reductions in SG&A expenses, which were partially offset by increased input costs. The reduction in free cash flow was primarily due to higher capital expenditures and interest expense.

The increase in net sales was driven by favorable foreign exchange of approximately $15 million and better price and mix, which were partially offset by lower volumes in Europe and the Pacific Rim where volumes declined in Australia, offsetting growth in China and India. Operating income increased as the benefits of price, mix, earnings from WAVE and SG&A savings offset inflationary headwinds and lower volumes in Europe.

Net sales decreased slightly as favorable foreign exchange of approximately $13 million and improved product mix and price were more than offset by volume declines in all geographies. Net sales declines in the European markets reflect the volume reductions related to the restructuring of the European flooring business that included the exit of the residential flooring business and simplification of our country and product offerings. Excluding the impact of these actions, volumes in the European markets were still down slightly.

The increase in operating income was due to reduced manufacturing costs, improved price and reductions in SG&A expenses, which were partially offset by volume declines and raw material inflation. Operating income for the 2011 period included $4.6 million of severance and impairment and restructuring related costs in Europe. Third quarter 2010 results were impacted by approximately $15.1 million of costs related to the restructuring of the European business, income of approximately $7.0 million related to laminate duty refunds, and charges of $5.5 million of costs related to the closure of its Montreal, Quebec, facility.

Net sales increased in the third quarter as higher volumes were partially offset by unfavorable prices and mix. Operating income increased as a result of reduced manufacturing and SG&A costs, favorable input costs when compared to the prior year, and volume gains. Additionally, the 2010 period included $10.5 million of fixed asset write downs and severance charges related to the closure of two manufacturing facilities.

Net sales increased as stronger volumes were partially offset by less favorable product mix. Operating income improved primarily due to reduced SG&A expenses and stronger volumes, which were partially offset by unfavorable product mix.

The company is updating its previous 2011 net sales and EBITDA guidance from its previously communicated range. Embedded in this update is a forecast for organic growth of slightly less than 4 percent for the full year, down from its previous expectation of 6 percent. This update is largely driven by reduced volumes in its domestic residential businesses and modest softness in European commercial markets.

“We continue to see prolonged weakness in our residential focused businesses, reflecting the reduced new housing and remodeling market opportunity. To compensate for weaker markets, we continue to drive plans to deliver cost savings, which is evidenced by our ability to accelerate $10 million of our cost savings program into 2011,” said Tom Mangas, senior vice president and CFO.

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