Over the course of 2012, Armstrong World Industries (Lancaster, Pa.) saw a 13.1% increase in operating income, ending with $271.2 million; this is despite a decrease of 3.8% in net sales, from $2.7 billion in 2011 to $2.6 billion at the end of 2012.
The company says about $48 million of the decrease in sales was due to unfavorable foreign exchange; excluding that, sales decreased 2% as the result of softness in the commercial and European markets, lower sales in the U.S. home center channel and the sale of the Patriot wood flooring distribution business during the third quarter.
The sale of the Patriot distribution business in the third quarter of 2012 also resulted in a 3.3% drop in the wood flooring segment's net sales in the fourth quarter to $107 million. The company reported the 17.6% drop in the segment's operating income was due to increased lumber costs, which negated an increase in volume in the builder channel.
Overall, Armstrong's fourth-quarter operating income increased 77% to $42.3 million compared with the fourth quarter of 2011. The company cited cost reduction efforts as a factor in the jump.
Looking forward, Armstrong expects 2013 full year sales to be between $2.7 and $2.8 billion. The company predicts the first quarter will yield $600 to $650 million in sales.
"Given the macro-economic backdrop and the lag between starts and when our products get installed in the cycle, our outlook for 2013 remains tempered, but I'm confident we've built a competitive cost structure and our strategic investments in emerging markets, like China and Russia, will position Armstrong to capitalize on improving economic conditions as world economies begin to recover," said Tom Mangas, Senior Vice President and CFO.
