Armstrong World Industries (AWI) 8-K Armstrong World Industries Reports Third Quarter 2011 Results

Earnings Call Presentation3rd Quarter 2011

October 31, 2011

1

Safe Harbor Statement

Our disclosures in this presentation and in our other public documents and comments
contain forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995.Those statements provide our future expectations or forecasts and
can be identified by our use of words such as "anticipate," "estimate," "expect," "project,"
"intend," "plan," "believe," "outlook," and other words of phrases of similar meaning in
connection with any discussion of future operating or financial performance.Forward-
looking statements, by their nature, address matters that are uncertain and involve risks
because they 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 to achieve the projected performance is included in the “Risk Factors” and
“Management’s Discussion and Analysis” sections of our recent reports on Forms 10-K
and 10-Q filed with the SEC.As a result, our actual results may differ materially from our
expected results and from those expressed in our forward-looking statements.Forward-
looking statements speak only as of the date they are made.We undertake no obligation
to update any forward-looking statements beyond what is required under applicable
securities law.

In addition, we will be referring to non-GAAP financial measures within the meaning of
SEC Regulation G.A reconciliation of the differences between these measures with the
most directly comparable financial measures calculated in accordance with GAAP are
included within this presentation and available on the Investor Relations page of our
website at www.armstrong.com.

2

Basis of Presentation Explanation

	Comparable Dollars	Other Adjustments
Net Sales	Yes	No
Gross Profit	Yes	Yes
SG&A Expense	Yes	Yes
Equity Earnings	Yes	Yes
Operating Income	Yes	Yes
Net Income	Yes	Yes
Cash Flow	No	No
Return on Capital	Yes	Yes
EBITDA	Yes	Yes

•We report in comparable dollars to
remove the effects of currency
translation on the P&L.The budgeted
exchange rate for the current year is
used for all currency translations in the
current year and prior years.

•We remove the impact of discrete
expenses and income.Examples
include plant closures, restructuring
actions, and other large unusual items.

•Taxes for normalized Net Income and
EPS for all periods presented are
calculated using a constant 42%, which
is based on the full year historical tax
rate.

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

What Items Are Adjusted

All figures throughout the presentation are in $ millions unless otherwise noted.Figures may
not add due to rounding.

3

Key Metrics - Third Quarter 2011

Financial Overview

(1)As reported Net Sales:$774 million in 2011 and $740 million in 2010.

(2)As reported Operating Income:$93 million in 2011 and $45 million in 2010

(3)As reported EPS:$0.89 in 2011 and $0.42 in 2010.

	2011 Actual	2010 Actual	Variance
Net Sales (1)	$757	$752	0.7%
Operating Income (2)	97	83	16.9%
% of Sales	12.8%	11.0%	180 bps
EBITDA	124	112	10.7%
% of Sales	16.4%	14.9%	150 bps
Earnings Per Share (3)	$0.86	$0.82	4.9%
Free Cash Flow	73	79	(6)
Net (Cash) Debt	467	(236)	703

4

Third Quarter 2011 - Adjusted EBITDA to Reported Net Income

Financial Overview

	2011	2010	V
EBITDA- Adjusted	$124	$112	$12
Depreciation and Amortization	(27)	(29)	2
Operating Income - Adjusted	$97	$83	$14
Foreign Exchange Movements	2	(1)	3
Cost Reduction Initiatives	(3)	(7)	4
Laminate Duty Refund	-	7	(7)
Accelerated Depreciation (not included above)	-	(20)	20
CEO transition costs	-	(2)	2
Restructuring	(1)	(15)	14
Impairments	(2)	-	(2)
Operating Income - As Reported	$93	$45	$48
Interest (Expense) Income	(10)	-	(10)
EBT	$83	$45	$38
Tax (Expense) Benefit	(30)	(20)	(10)
Net Income	$53	$25	$28

5

Third Quarter Sales and EBITDA by Segment - 2011 vs. 2010

Financial Overview

6

EBITDA Bridge - Third Quarter 2011 versus Prior Year

Financial Overview

($9)

7

Free Cash Flow - Third Quarter 2011 versus Prior Year

Financial Overview

8

Key Metrics - September YTD 2011

Financial Overview

(1)As reported Net Sales:$2,207 million in 2011 and$2,124 million in 2010.

(2)As reported Operating Income:$218 million in 2011 and $111 million in 2010

(3)As reported EPS:$1.75 in 2011 and $0.55 in 2010.

	2011 Actual	2010 Actual	Variance
Net Sales (1)	$2,172	$2,145	1.3%
Operating Income (2)	246	170	44.7%
% of Sales	11.3%	7.9%	340 bps
EBITDA	325	256	27.0%
% of Sales	15.0%	11.9%	300 bps
Earnings Per Share (3)	$2.07	$1.61	28.6%
Free Cash Flow	79	137	(58)
Net (Cash) Debt	467	(236)	703

9

September YTD Sales and EBITDA by Segment - 2011 vs. 2010

Financial Overview

10

EBITDA Bridge - September YTD 2011 versus Prior Year

Financial Overview

($22)

11

Key Metrics- Guidance 2011

Financial Overview

	2011 Estimate Range			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.

12

2011 Financial Outlook

Financial Overview

¾Raw Material & Energy Inflation $50 - $60 million increase

¾Manufacturing Productivity*Gross Margin +150 to +200 bps vs. 2010

¾U.S. Pension Credit~$25 million, down ~$25 million vs. 2010
60% manufacturing, 40% SG&A

¾Earnings from WAVE$5 - $10 million vs. 2010

¾Cash Taxes/ETR~$25 million. Adjusted ETR of 42%

¾Q4Sales $645 - $695 million
EBITDA $55 - $75 million

¾Capital Spending*~$150-$170 million

¾Exclusions fromEBITDA*~$22 - $25 million associated with already
announced actions

* Changed from July Outlook

13

Appendix

14

September YTD- Adjusted EBITDA to Reported Net Income

Financial Overview Appendix

	2011	2010	V
EBITDA- Adjusted	$325	$256	$69
Depreciation and Amortization	(79)	(86)	7
Operating Income - Adjusted	$246	$170	$76
Foreign Exchange Movements	3	(2)	5
Cost Reduction Initiatives	(12)	(9)	(3)
Laminate Duty refunds	-	7	(7)
Accelerated Depreciation (not included above)	(9)	(19)	10
CEO transition costs	-	(13)	13
Restructuring	(8)	(15)	7
Impairments	(2)	(8)	6
Operating Income - As Reported	$218	$111	$107
Interest (Expense) Income	(36)	(6)	(30)
EBT	$182	$105	$77
Healthcare Reform- Medicare Subsidy Elimination	-	(22)	22
Tax (Expense) Benefit	(78)	(51)	(27)
Net Income	$104	$32	$72

15

Adjusted Operating Income to Free Cash Flow

Financial Overview Appendix

	2011 Estimate Range
Adjusted Operating Income	275	to	295
D&A	105
Adjusted EBITDA	380	to	400
Changes in Working Capital	(10)	to	10
Capex	(150)	to	(170)
Pension Credit	(25)
Interest Expense	(50)
Cash Taxes	(25)
Other, including cash payments for restructuring and one-time items	(30)
Free Cash Flow	80	to	120

16

Consolidated Results

Financial Overview Appendix

Third Quarter
	2011 Reported	Comparability(1)  Adjustments	FX(2) Adj	2011 Adjusted	2010 Reported	Comparability(1) Adjustments	FX(2) Adj	2010 Adjusted
Net Sales	774	-	(17)	757	740	-	12	752
Operating Income	93	6	(2)	97	45	37	1	83
EPS	$0.89	($0.02)	($0.01)	$0.86	$0.42	$0.40	$ -	$0.82
September YTD
	2011 Reported	Comparability(1)  Adjustments	FX(2) Adj	2011 Adjusted	2010 Reported	Comparability(1) Adjustments	FX(2) Adj	2010 Adjusted
Net Sales	2,207	-	(35)	2,172	2,124	-	21	2,145
Operating Income	218	31	(3)	246	111	59	-	170
EPS	$1.75	$0.34	($0.02)	$2.07	$0.55	$1.06	$-	$1.61

(1)See earnings press release and 10-Q for additional detail on comparability adjustments

(2)Eliminates impact of foreign exchange movements

17

Segment Operating Income (Loss)

Financial Overview Appendix

(1)Eliminates impact of foreign exchange movements and non-recurring items; see earnings press release and 10-Q for additional detail.

Third Quarter
	2011 Reported	Comparability(1) Adjustments	2011 Adjusted	2010 Reported	Comparability(1) Adjustments	2010 Adjusted
Building Products	72	1	73	59	10	69
Resilient Flooring	11	4	15	10	14	24
Wood Flooring	17	-	17	(13)	11	(2)
Cabinets	2	-	2	(1)	-	(1)
Unallocated Corporate (Expense) Income	(9)	-	(9)	(10)	4	(6)
September YTD
	2011 Reported	Comparability(1) Adjustments	2011 Adjusted	2010 Reported	Comparability(1) Adjustments	2010 Adjusted
Building Products	191	11	202	155	11	166
Resilient Flooring	21	18	39	15	15	30
Wood Flooring	34	(1)	33	(14)	12	(2)
Cabinets	2	-	2	(6)	1	(5)
Unallocated Corporate (Expense) Income	(30)	-	(30)	(39)	20	(19)

18

Cash Flow

Financial Overview Appendix

	Third Quarter		September YTD
($ millions)	2011	2010	2011	2010
Net Cash From Operations	98	85	130	141
Less: Net Cash from Investing	(25)	(6)	(51)	(4)
Equals Free Cash Flow	73	79	79	137