LANCASTER, Pa. -- Beset by a year ending with weaker sales and escalating raw material and energy costs that took a toll on profitability, Armstrong Holdings Inc. has reported its financial results for the fourth quarter and full year of 2000.

Sales in the fourth quarter from continuing operations were $659.1 million, a decrease from $722.8 million in the same period a year earlier. Sales in the floor coverings segment declined 26%. Weaker demand at retail and significant customer inventory reductions in the United States combined with the impact of foreign currency translation and lower pricing in Europe to produce the sales decrease. Wood products segment sales increased by 1.7% and building products segment sales rose 8.7%. The increase in the building products segment was the result of additional sales from its Gema metal ceilings business, which was acquired in 2000.

A loss from continuing operations of $86.7 million in the fourth quarter compared to a loss of $185.9 million in the same period of 1999. The 2000 results include pre-tax charges of $103.3 million in reorganization costs related to the Chapter 11 filing by Armstrong World Industries on Dec. 6, and $2.3 million in severance costs for positions eliminated in the quarter. The 1999 results include a pre-tax charge of $335.4 million to increase the estimated asbestos-related liability. After excluding these unusual items, the decline in earnings from continuing operation was primarily the result of lower sales and significantly higher raw material and energy costs.

The net loss for the fourth quarter was $100.3 million or $2.48 per share, compared to a net loss of $178.5 million or $4.46 per share in the fourth quarter of 1999.

"The slowdown in the U.S. economy that we started to see at the end of the third quarter came into full bloom during the final three months of the year," said Chairman and CEO Michael D. Lockhart. “This slowdown, coupled with the higher costs of raw materials and energy, hurt the business in the fourth quarter, which in turn significantly affected our performance for the entire year.

"We expect this weakness to continue into 2001, which will mean continued volume and pricing pressure," he added.

For the year ending Dec. 31, 2000, Armstrong sales from continuing operations were $3 billion or 1.5% below sales of $3.05 billion in 1999. Both years' numbers were restated to account for the textiles and sports flooring, and insulation products segments as discontinued operations. Excluding the impact of unfavorable foreign exchange rates in 2000 and the divestitures of the gasket and textile businesses in 1999, Armstrong sales were $65.2 million or 2.2% above the prior year.

Floor coverings' sales decreased 7.5%, but wood products increased by 7.9% and building products were up 5.4% for the year.

The loss from continuing operations in 2000 was $89.0 million or $2.21 per share. This includes a pre-tax charge of $236.0 million to increase the estimated liability for asbestos-related claims and $103.3 million of Chapter 11 reorganization costs. Additionally, results include a pre-tax gain of $60.2 million from the sale of the Installation Products Group, which was part of the floor coverings segment and a $19.4 million charge for restructuring actions in Europe and the U.S.

For the fourth quarter of 2000 the company realized net sales of $659.1 million, a decrease from sales of $722.8 million in the fourth quarter of 1999. Wood products sales increased 1.7%. Floor coverings sales decreased 26% with sales in the Americas and Europe both down similar percentages. Americas sales declined due to a slow down in retail sales and significant inventory reductions within the wholesale and retail channels, while European sales declined due to translation losses associated with weaker European currencies and lower pricing driven by excess industry capacity. Building products sales increased 8.7% due to the additional Gema sales.

A loss from continuing operations of $86.7 million in the fourth quarter of 2000 compared to a loss from continuing operations of $185.9 million in the fourth quarter of 1999. An additional 2000 pre-tax charge of $2.3 million primarily related to severance and enhanced retirement benefits for 15 corporate and line-of-business staff positions (all salaried positions) as a result of streamlining the organization to reflect staffing needs for current business conditions. The 2000 loss also reflects $3.8 million of lower ESOP compensation expense compared to 1999. A pre-tax charge of $335.4 million was recorded in the fourth quarter of 1999 to increase the estimated liability net of the corresponding insurance asset for asbestos-related claims. In 1999, $1.4 million of the 1998 pre-tax reorganization charge was reversed, related to severance accruals that were no longer necessary.

The fourth quarter of 2000 included $103.3 million in reorganization costs related to the Chapter 11 filing. A net loss of $100.3 million or $2.48 per share compared to a net loss of $178.5 million or $4.46 per share in the fourth quarter of 1999.

Net sales for all of 2000 were $3 billion -- 1.5% lower than net sales of $3.05 billion in 1999. Excluding the impact of unfavorable foreign exchange rates in 2000 and the divestitures of the gasket and textile businesses in 1999, Armstrong sales were $65.2 million, or 2.2%, above the prior year. Floor coverings sales decreased 7.5%; building products sales increased 5.4%; and wood products sales increased by 7.9%. Further excluding the 1999 divestitures, sales increased 1.0% in the Americas and declined 3.1% in the Pacific Area. European sales decreased 3.3% but would have increased 10.4% without the impact of unfavorable foreign exchange rates.