During the fourth quarter of 2002, Armstrong recorded a non-cash charge of $2.5 billion to increase the company's estimated asbestos-related liability.
During 2003, Armstrong implemented several manufacturing and organizational cost changes to improve its cost structure and enhance its competitive position. The costs for these initiatives incurred in 2003 totaled approximately $55 million, of which approximately $33 million was for accelerated depreciation. The remaining amount was primarily for severances and related inventory obsolescence.
Armstrong also implemented several initiatives in 2002, primarily for reorganizing our flooring organizations in Europe. The cost of these initiatives in 2002 was approximately $2 million.
In addition to the above items, results for 2003 reflect higher raw material costs and the effects of lower sales volumes that were partially offset by lower selling, general and administrative (SG&A) costs. Pension income recorded in 2003 was $11.6 million, a decline of $27.6 million from the 2002 credit recorded of $39.2 million.
Resilient Flooring net sales of $1,181.5 million in 2003 increased from net sales of $1,152.3 million in 2002. 2003 sales compared to 2002 were favorably impacted by $43.9 million from the translation effect of the changes in foreign exchange rates. Amendments to distributor agreements in the fourth quarter of 2002 resulted in $19.2 million of revenue recorded in 2003 for products that were shipped in the fourth quarter of 2002. Operating income of $55.9 million in 2003 declined by $8.6 million from the operating income in 2002 of $64.5 million. Charges for various cost reduction initiatives accounted for approximately $11 million of the decrease, with $7 million being associated with accelerated depreciation. Partially offsetting the negative effects of these items were operating income gains from an increase in laminate sales, and significant reductions in SG&A costs and reduced spending on advertising.
Wood Flooring net sales of $738.6 million in 2003 increased 2.7 percent from $719.3 million in the prior year. This increase was driven primarily by improved pricing and increased volume in certain products. An operating loss of $4 million was recorded in 2003 compared to operating income of $53.0 million in 2002. Approximately $40 million of the $57 million decline in operating income was due to increases in lumber costs. Also contributing to the decline were $28.2 million of expenses associated with cost reduction initiatives, of which $24.6 million was for accelerated deprecation. Partially offsetting these expenses were gains from the selling price increases and reduced expenditures in SG&A, the latter partially as an effect of the cost reduction initiatives.