Armstrong Holdings Inc. has reported first quarter 2004 net sales of $845.0 million, a 9.0 percent increase over first quarter net sales of $774.9 million in 2003. Excluding the favorable effects of foreign exchange rates of $34.6 million, consolidated net sales increased by 4.4 percent.

The increase in sales was primarily driven by strong demand for product in the North American residential and commercial markets, the company said. Also contributing to the improvement in sales was the impact of price increases initiated in 2003.

Operating income of $39.8 million was recorded for the first quarter of 2004 compared to operating income of $11.3 million in the first quarter of 2003. During 2003 and continuing in the first quarter of 2004, Armstrong implemented several manufacturing and organizational changes to improve its cost structure. The improvements from these initiatives are reflected in lower selling, general and administrative (SG&A) expense as well as lower manufacturing overhead costs in the first quarter of 2004.

These cost improvements, together with the benefits of the increased sales volume and selling prices, were partially offset by higher raw material costs. The expense associated with the cost-reduction initiatives was $3.0 million in the first quarter of 2004 and $4.7 million in the first quarter of 2003.

Resilient Flooring net sales of $304.1 million in the first quarter of 2004 increased from net sales of $286.7 million in 2003. First quarter sales compared to 2003 were favorably impacted by $11.1 million from the translation effect of the changes in foreign exchange rates.

Operating income of $15.5 million in the quarter declined by $2.1 million from the operating income in 2003 of $17.6 million. The decline in operating income was primarily due to lower sales volume in Western Europe, increased costs to purchase PVC, wage and salary inflation, and certain European manufacturing inefficiencies.

Wood Flooring net sales of $197.4 million in the first quarter of 2004 increased 18.1 percent from $167.2 million in the prior year. This increase was primarily due to improved pricing and increased volume to the strong U.S. new home construction market.

Operating income of $10.3 million was recorded in the quarter compared to operating income of $2.2 million in the same period last year. The increase in operating income was primarily due to the sales volume gains and lower manufacturing overhead costs resulting from the cost- reduction initiatives. In the first quarter of 2004, higher lumber costs offset substantially all of the benefits realized from higher selling prices.

Textiles and Sports Flooring net sales of $62.3 million increased incrementally in the first quarter compared to $62.0 million in the first quarter of 2003. Excluding the translation effect of the changes in foreign exchange rates of $10.5 million, net sales decreased 14.1 percent due to weak European markets.

An operating loss of $1.9 million for the quarter decreased by $4.1 million from the operating loss of $6.0 million recorded for the same period last year, primarily due to reduced manufacturing overhead and SG&A costs resulting from the 2003 cost-reduction initiatives. 2003 results include restructuring expense of $2.3 million while 2004 results had a net reversal of $100,000 for restructuring activities.