awi investor presentation 10-31-11 updated

8/3/2019 AWI Investor Presentation 10-31-11 Updated

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August 1, 2011

Investor Presentation

October 31, 2011

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Safe Harbor Statement

Our disclosures in this presentation and in our other public documents and commentscontain forward-looking statements within the meaning of the Private Securities LitigationReform Act. Those statements provide our future expectations or forecasts and can beidentified b our use of words such as "antici ate," "estimate," "ex ect," " ro ect," "intend,""plan," "believe," "outlook," etc. in discussions of future operating or financial performance

or the outcome of contingencies such as liabilities or legal proceedings. Forward-lookingstatements, by their nature, address matters that are uncertain and involve risks becausethey relate to events and depend on circumstances that may or may not occur in the future.A more detailed discussion of the risks and uncertainties that may affect our ability toachieve the projected performance is included in the Risk Factors and ManagementsDiscussion and Analysis sections of our recent reports on Forms 10-K and 10-Q filed withthe SEC. As a result, our actual results may differ materially from our expected results androm ose expresse n our orwar - oo ng s a emen s. orwar - oo ng s a emen sspeak only as of the date they are made. We undertake no obligation to update anyforward-looking statements beyond what is required under applicable securities law.

In addition, we will be referring to non-GAAP financial measures within the meaning ofSEC Regulation G. A reconciliation of the differences between these measures with themost directly comparable financial measures calculated in accordance with GAAP is

1

. . .


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Basis of Presentation Explanation

When reporting our financial results within this presentation, we make several adjustments. Management usesthe non-GAAP measures below in managing the business and believes the adjustments provide meaningfulcomparisons of operating performance between periods. As reported results will be footnoted throughout thepresentation.

What Items Are Adjusted

Comparable

Dollars

Other

Adjustments

Net Sales Yes No

remove the effects of currency

translation on the P&L. The budgetedexchange rate for the current year isused for all currency translations in the

Gross Profit Yes Yes

SG&A Expense Yes Yes

Equity Earnings Yes Yes

current year an pr or years.

We remove the impact of discrete

expenses and income. Examplesinclude lant closures, restructurin

Operating Income Yes Yes

Net Income Yes Yes

Cash Flow No No

actions, and other large unusual items.

Taxes for normalized Net Income andEPS for all periods presented are

Return on Capital Yes Yes

EBITDA Yes Yes

,is based on the full year historical taxrate.

2

All figures throughout the presentation are in $ millions unless otherwise noted. Figures maynot add due to rounding.


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Company Overview

3


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Armstrong at a Glance

for use in renovation and new construction.Significant U.S. cabinets business.

. on n sa es n

Market leader in businesses representing 80% of sales Serving global customers from seven countries

manu ac ur ng oca ons

Approximately 9,300 employees

. Strong balance sheet - $470 million of net debt

Significant NOL carry forward

300K average daily trading volume

64% owned by Armstrong Asbestos Trust and Armor TPG

AWI on the NYSE

4

Since October 2006 emergence from asbestos-related bankruptcy

Company Overview


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History

1,801

Emerge from

2006 2007 2008 2009 2010

Cancel Strategic $250M special TPG invests in New CEO and

bankruptcy

Initiate strategicreview and sale

sale process dividend Armstrong CFO

Leverage recap.and $800M

1,355

Investing in

emerging marketsHousing starts

906Idle: Nashville Sell Desseaux textile &

sports flooring business

Idle: MontrealMobile

Announce $150Mcost out initiative

Close: St. GallenOneida

554

587$3.50BSales $3.54B $3.21B $2.85B $2.83B

Close: AuburnNashville

MontrealTeeside

5Company Overview

$407M

11.6%

EBITDA $439M

12.4%

$384M

12.0%

$296M

10.4%

$303M

10.7%


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Present / Future

2011 2012 2013 2014

flooring plant inChina

New leader of

$165 million cost reduction initiative, ongoing LEAN efforts

Fix underperforming businessesEuropean flooring products profitable in 2012

Ceilings business

Approve new

ceilings plant in

Dramatic growth in priority emerging marketsThree new Chinese manufacturing facilities on-lineSignificant increase is sales and marketing resources across emerging markets

Cost out initiativeraised to $165million

ro a e grow n core mar e sFocus on product innovation, design and environmental leadership

Build a winning team and a global organizationImplement Organization Vitality and create a globally aligned organization

Idle: Statesville

Close: Beaver FallsHolmsund

Sales $2.85 2.9B

6Company Overview

EBITDA $380-$400M

~13.6%

ROIC > Cost of Capital


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Key Investment Highlights

New senior leadership team to execute strategy

Investments in emerging markets to continue to win and maintain

ROIC targets to return at least the cost of capital by 2013 with ~1M

Efficient balance sheet and sufficient liquidity to manage operations,execute ca ital s endin and restructurin lans

7Company Overview


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2010 Business Segment and End-Use Profile

Commercial renovation

Commercial new

Residential renovation

$1,150

$2,800

N.A. >75% renovation

Residential new

55%

20%

40%

$650

65%

65%

40%

40%

35%30%

$375

$150

10%

5%

Cabinets Resilient Flooring(Int'l)

Resilient Flooring(N.A.)

HardwoodFlooring

Building Products(Ceilings)

Consolidated

30% 35%10% 10% 10%5%50%

45%

9% of Sales from Emerging Markets

8

a or y o us ness s renova on ampens cyc es.

Company Overview


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Business Segment Profile

Cabinets

2010 EBITDA

Resilient

Flooring19%

0%

WoodFlooring

2%BuildingProducts(Ceilings)

79%

Excludes unallocated corporate expense

9

remained profitable through the economic cycle.

Company Overview


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Industry Structure/Competitive Position

U.S. Resilient

European

Resilient Hardwood

Building

Products Cabinets

Competitor Concentration

Industry Capacity Utilization

Low-Cost Manufacturer

Key Favorable Neutral Unfavorable

10

Armstrong continuously focused on competitive dynamics.

Company Overview


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Business Segment Overview

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Worldwide Business Overview Building Products

North America

Mkt

Size(B ft2)

AWI

Rank

Commercial 1.4 1

urope, r ca, e-

EastMktSize

AWIRank

Asia, AustraliaMktSize

AWIRank

Residential 0.4 1(B ft2)

Western 1.2 1

Eastern 0.5 1

t

China 0.2 1

Australia


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ABP Key Strategies

1 Broadest Product Portfolio

Complete product offering

2 Emerging Market Growth

Plant #2 in China

New product pipeline (Metal, Wood)

Win versus soft fiber in Europe

Distribution in Russia, Middle East

Grid plant in India

4 Best-in-Class Service/Quality

Best on-time delivery performance

3 Innovation Leadership

Sustainability leadership owes c a ms ra e

Best product availability Custom solutions (Metal, Wood)

Recycling program

13Business Segment Overview - Building Products


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Building Products (ABP) Sales by GeographyCeilings & Grid

700800

($-Millions) Global market leader Broadest Product Line Innovation Go-to-Market

350400

Best cost, quality, service

>90% sales commercial

Grid 50/50 joint venture

$115

0

200

Americas Europe Asia


Contribution of WAVE JV Profit to Operating Margin 4%

Worldwide EBITDA Margin 22%

14

Adding new engines to accelerate global growth.

Business Segment Overview - Building Products


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Worldwide Business Overview Floor Products *

Europe, Africa,Middle-East

Asia, AustraliaMktSize

AWIRank

Mkt

Size(B ft2)

AWI

Rank

or mer ca

MktSize

(B ft2)

AWIRank

(B ft2)

China 0.4 3

Australia 0.1 2

.

Eastern /Africa /

Mid-East

0.3 5Commercial 1.0 1

Residential 2.0 1

Wood 0.6 1

India


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AFP Key Strategies

1 Best Product Portfolio

2 Complete Market Coverage

Drive mix

Quality leadership

Merchandising presence

Sales coverage effectiveness

3 Low-Cost Manufacturing

Lean deployment

4 Innovation Leadership

Environmental solutions, . ., ,wood automation

Rationalize footprint

, ,installation

5 Drive China Growth Focus on market development

Plant investments to support

6 Restructure Europe Exited Residential

Simplify Commercial participation

16Business Segment Overview - Worldwide Floor Products

os -ou p an s an


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Floor Products (AFP) Sales by Geography

800

($-Millions)

Wood

Worldwide Resilient

475

400

600

90200

Americas Americas Europe Asia


Worldwide Adjusted EBITDA Marginexcluding Europe

5%7%

17

Continued profitability through bottom of residential downturn.

Business Segment Overview - Worldwide Floor Products


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European Floor Products

2009 2011Sales (1) $330M

EBITDA(2)

($ 15M)

Sales $280M

EBITDA(2)

$ 0M

Linoleum37%

Other16%

13%

Linoleum45%

15%

Transform the business

Vinyl34%

Commercial

87%

Vinyl40%

Commercial

Exited Residential segment

Simplified Commercial business country and product participation

100%

SG&A restructuring 38% decrease in headcount

18Business Segment Overview - European Floor Products

(1)

Includes intercompany sales, (2) Excludes restructuring expense

EBITDA break even in 2011 Profitable in 2012.


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Cabinets

Small player


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Financial Overview

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Financial Summary

Profitable and cash flow positive through downturn

Focus on cost control / productivity

Strong free cash flow

one million

Continuing to fully invest in businesses

Strong balance sheet: leverage, liquidity and maturity profile

Overfunded US ension lan

Positioned for considerable operational leverage on modest marketrecovery

21Financial Overview


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$170$600Figures rounded to nearest $5 million

EBITDA Bridge (2006-2009)

$500

$295$55$300

$400

$85 ($5)

($385)

$200

$-

$100

2006 Actual Price / Mix Volume Input Costs Mfg Costs SG&A WAVE 2009 Actual


os re uc on an mprove pr ce m x s gn can y o sedramatic volume declines.


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Figures rounded to nearest $1 million

EBITDA Bridge (2009-2010)

$303$296

$15 $48$20

$5$300

$350

($26)

($31)

$200

$250

$100

$150

$50

-2009

ActualPrice / Mix Volume Raw

Materials /Energy

Mfg Costs SG&A Change inD&A

WAVE 2010Actual


Cost reduction offsets volume and input cost headwinds.


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EBITDA Bridge September YTD 2011 versus Prior Year

$400

$57 $62

$36 $8

$325$350

($19) ($6)

$256$250($47)

($22)

$150

$200

$50

$100

$02010 Price /

MixVolume Input

CostsMfgCost

SG&A WAVE PensionCredit

Changein D&A

2011


Price offsets inflation, cost savings drives improved results


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Cost Savings Program

SG&A Savin s Structural Manufacturin and Labor Savin s TBA

$80

$90

$100

)

$55$60

$70

Savings

($M

$15$30

$40

Inc

remental

TBATBA

$20

$35 $25

$0

$10

$20

$5

2010 2011 2012

Savings from manufacturing and SG&A, net of inflation.

Cumulative Savings $35M $135M

25

Manufacturing savings driven by plant closures and LEAN.

Financial Overview


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Balance Sheet 9/30/2011

(Millions)

Maturity Profile

No significant maturities until 2015$400

$800

(2%)

Considerable covenant flexibility

$0

(14%)

TermLoans IDBs/Other

250100

$500$600$700$800

LCs

$655 Liquidity

Sufficient liquidity to manageoperations, and execute capital

375(70)

$0$100$200$300

Securitization

Revolver

Cash

spen an res ruc ur ng p ans

26

($200)

Financial Overview


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Financial Overview Appendix

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Key Metrics Guidance 2011

2011Estimate Ran e 2010 Variance

Net Sales(1) 2,850 to 2,900 2,766 3% to 5%

Operating Income(2) 275 to 295 189 46% to 56%

EBITDA 380 to 400 303 25% to 32%

Earnings Per Share(3) $2.25 to $2.45 $1.73 30% to 42%

Free Cash Flow 80 to 120 180 (56%) to (33%)

(1) Sales figures include foreign exchange impact.(2) As reported Operating Income: $235- 255 million in 2011 and $81 million 2010.

(3) As reported earnings per share: $1.86- $2.06 in 2011 and $0.19 in 2010.


We undertake no obligation to update guidance, beyond what is required by securities law.


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2011 Financial Outlook

Raw Material & Energy Inflation $50 - $60 million increase

Manufacturing Productivity* Gross Margin +150 to +200 bps vs. 2010

U.S. Pension Credit ~$25 million, down ~$25 million vs. 201060% manufacturing, 40% SG&A

- .

Cash Taxes/ETR ~$25 million. Adjusted ETR of 42%

EBITDA $55 $75 million

Capital Spending* ~$150-$170 million

Exclusions from EBITDA* ~$22 - $25 million associated with alreadyannounced actions


* Changed from July Outlook

F ll Y 2010 Adj d O i I


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Full Year 2010 Adjusted Operating Income toReported Net Income

Operating Income Adjusted $188 $157 $31

Foreign Exchange Movements 2 - 2

am nate uty e un -

Cost Reduction Initiatives (50) (16) (34)

Asset Impairments (31) (18) (13)

Restructuring (22) - (22)

Executive Transition (15) - (15)

Gain on Settlement of Note Receivable 2 - 2Accelerated Vesting - (32) 32

Operating Income As Reported $81 $91 ($10)

Interest (Expense) Income (14) (16) 2

EBT $67 $75 ($8)

Tax (Expense) Benefit (56) 3 (59)

Net Income $11 $78 ($67)

30Financial Overview Appendix

awi investor presentation 10-31-11 updated

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