AWI: Armstrong World Industries Inc Stock

Analysis
Armstrong World Industries Inc is associated with flooring products and ceiling systems for use
in construction as well as renovation of residential, institutional and commercial structures. This
company operates within 4 segments- building products, resilient flooring, wood flooring and
unallocated corporate. Brands here include Armstrong, Alterna, BBT, BioBased Tile, BioGuard,
Bruce Cirrus, Dune, Excelon, Imperial, Medintech and Perla.
Analysis of Results
Armstrong World Industries Inc reports financial results for the quarter closing March 31,
2016. AWI reported a revenue of US $570 million and net earnings of USD -11.60 million.
Gross margins narrowed from 23.42 percent to 22.82 percent compared to the same period in the
previous year.
Operating EBITDA margins are now 9.84 percent from 9.85 percent. Y-O-Y change in operating
cash flow of -90.62 is about the same as change in earnings, likely no significant movement in
accruals or reserves. Narrowing of operating margins led to fall in earnings. AWI's change in
revenue this period was 3.81 percent compared to the same as period last year as change in
earnings and averages the announced results thus far in the peer group.
For comparison purposes, revenues fell by -1.28 percent and earnings by -1.75 percent compared
to the same period last year. Earnings growth analysis reveals decline in earnings was influenced
by weakening of gross margins from 23.42 percent to 22.82 percent. Operating
margins/EBITDA margins went from 9.85 to 9.84 percent in this time frame. Gross margins
were 24.68 percent and EBITDA margins were 8.69 percent in the earlier period.
The fall in gross margins was offset by improvements in the balance sheet. Management of
working capital shows progress. Company's working capital also fell to 68.23 days from 69.97
days for the same period in the previous year.
Conclusion:
The company will be aided by opportunities in the American market, focus on new product
development as well as cost reduction initiatives. The fall in the price of natural gas, less
commodity prices and softness of the commercial market are some of the issues for the investors.
This company designs and manufactures floors, ceilings and cabinets with a revenue growth of 3
to 7 percent. Armstrong World expects low single digit growth in the Pacific Rim flooring
specific market in 2016. Armstrong World is focused on enhancing products and boosting
customer relationships.

Company will win over customers with innovative products and launched a new sustained
product line as well. Top performance ceiling solutions meet compliance and transparency
standards in the present market. AWI has also implemented cost reductions in Q4 of 2015. This
will offset market softness in the first quarter of 2016.
Armstrong World is also oriented towards natural gas prices fluctuations. The company strives to
lower cost volatility in hedging. Up till March 31, 2016, national amount of hedges was USD 3.9
million. AWI has experienced softness across commercial markets. Healthcare market was hit
by lowered customer sector and this has hit the flooring company.
Moreover, Armstrong World is exposed to weak international regions. Emerging markets has
been severely impacted by less commodity prices and rising challenges for Armstrong World.
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