LANCASTER, Pa. -- Armstrong Holdings Inc. reported that first quarter 2001 net sales of $716.5 million from continuing operations were 2.6% lower than in the first quarter of 2000.

Excluding the unfavorable effects of foreign exchange rates, the Installation Products Group ("IPG") divestiture and the Gema acquisition, net sales decreased 1.3%.

First quarter 2001 earnings from continuing operations were $23.6 million or 58 cents per share, down from $25.0 million or 62 cents per share in the first quarter of 2000. Included in 2001 was a pre-tax charge of $5.4 million to complete the restructuring commenced in the fourth quarter of 2000. Also, as a result of Armstrong World Industries' Chapter 11 filing, Armstrong incurred $3.0 million of net reorganization costs and did not record $21.4 million on contractual interest expense related to pre-petition debt, in accordance with generally accepted accounting principles.

The company said that the softening economy and customer inventory reductions, primarily on the retail side, resulted in reduced sales. Higher energy costs in building products and higher raw material costs primarily in floor coverings and wood products, coupled with reduced sales, resulted in lower earnings.

"The slowdown in sales and higher costs for raw materials and energy are in line with our expectations for the first quarter and we anticipate these conditions to continue," said Armstrong Chairman and CEO Michael D. Lockhart. "We maintain our focus on reducing costs in the face of a challenging economic environment. We are executing our restructuring efforts, giving us immediate cost savings and improving our long term cost structure."

Floor coverings net sales of $291.1 million were down 8.0% vs. prior year primarily due to the third quarter 2000 IPG divestiture, lower volume due to customer inventory reductions and the unfavorable impact of foreign exchange rates. Operating income was down 27.9% due to the sales decrease and increased raw material costs.

Wood products reported both lower sales, down 5.0%, and lower operating income, down 45.8%, due to a soft residential market for both cabinets and flooring, and higher lumber costs.

Building products sales of $216.4 million were up 8.8% over the first quarter of 2000 due to the second-quarter 2000 Gema acquisition and higher volume in commercial markets. However, operating income decreased by 28.0% due to significantly higher energy costs.