awi-8k_20210803.htm
false 0000007431 0000007431 2021-08-03 2021-08-03

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 3, 2021

 

 

ARMSTRONG WORLD INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

 

Pennsylvania

 

1-2116

 

23-0366390

(State or other jurisdiction

of incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

 

 

 

 

2500 Columbia Avenue P.O. Box 3001

Lancaster, Pennsylvania

 

17603

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (717) 397-0611

NA

(Former name or former address if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value per share

 

AWI

 

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

 

 


 

 

Section 7 – Regulation FD

Item 7.01. Regulation FD Disclosure

 

On August 3, 2021, Armstrong World Industries, Inc. (the “Company”) issued a press release announcing that its senior management will be hosting investor meetings as part of the Jefferies Industrial Conference on August 4, 2021. In connection with this event, the Company has posted an updated Investor Presentation on its website that may be accessed on the Investor Relations section of the Company’s website at armstrongceilings.com.  Copies of the press release and Investor Presentation are attached as Exhibit 99.1 and Exhibit 99.2 hereto, respectively, and incorporated herein by reference.

 

The information contained in this report, including Exhibit 99.1 and Exhibit 99.2, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, or the Exchange Act.


Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

 

Description

 

 

 

No. 99.1

 

No. 99.2

 

No. 104

 

Press Release of Armstrong World Industries, Inc. dated August 3, 2021

 

Investor Presentation of Armstrong World Industries, Inc. dated August 3, 2021

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

 

 

 

2


 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

ARMSTRONG WORLD INDUSTRIES, INC.

 

 

By:

 

/s/ Mark A. Hershey

 

 

Mark A. Hershey

 

 

Senior Vice President, General Counsel, Secretary and Chief Compliance Officer

Date: August 3, 2021

 

 

3

awi-ex991_7.htm

 

Exhibit 99.1

Armstrong World Industries to Attend Jefferies Industrials Conference

 

 

LANCASTER, Pa., Aug. 3, 2021 – Armstrong World Industries, Inc. (NYSE:AWI), a leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions, will be hosting investor meetings with senior management at the Jefferies Industrial Conference tomorrow, Aug. 4. In connection with this event, the company has posted an updated Investor Presentation on its website. The presentation can be accessed on the Investor Relations page at armstrongceilings.com.

 

Contacts

Investors:Theresa Womble, tlwomble@armstrongceilings.com or (717) 396-6354

Media:Jennifer Johnson, jenniferjohnson@armstrongceilings.com or (866) 321-6677

 

About Armstrong

Armstrong World Industries, Inc. (AWI) is a global leader in the design and manufacture of innovative commercial and residential ceiling, wall and suspension system solutions in the Americas. With $937 million in revenue in 2020, AWI has approximately 2,800 employees and a manufacturing network of 15 facilities, plus six facilities dedicated to its WAVE joint venture. For more information, visit armstrongceilings.com.

 

 

Source: Armstrong World Industries

 

 

Armstrong World Industries
2500 Columbia Avenue, Lancaster, PA 17603

 

717.397.0611 | www.armstrongceilings.com

Slide 1

Armstrong World Industries Investor Presentation August 2021 Exhibit 99.2

Slide 2

Safe Harbor Statement Our disclosures in this presentation, including without limitation, those relating to future financial results market conditions and guidance, the impacts of COVID-19 on our business, and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Those statements provide our future expectations or forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward-looking statements. A more detailed discussion of the risks and uncertainties that may affect our ability to achieve the projected performance is included in the “Risk Factors” and “Management’s Discussion and Analysis” sections of our reports on Form 10-K and 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”). Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law. In addition, we will be referring to non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of the differences between these measures with the most directly comparable financial measures calculated in accordance with GAAP are included within this presentation and available on the Investor Relations page of our website at www.armstrongceilings.com. The guidance in this presentation is only effective as of the date given, July 27, 2021 and will not be updated or affirmed unless and until we publicly announce updated or affirmed guidance.

Slide 3

Basis of Presentation Explanation All figures throughout the presentation are in $ millions and all comparisons are versus prior year unless otherwise noted. Figures may not sum due to rounding. When reporting our financial results within this presentation, we make several adjustments. Management uses these non-GAAP measures in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. As reported results will be footnoted throughout the presentation on a continuing operations basis (excludes corporate unallocated). Results throughout this presentation are presented on a normalized basis. We remove the impact of certain discrete expenses and income in certain measures including adjusted net sales, adjusted EBITDA, adjusted earnings per share (EPS) and adjusted free cash flow. The Company excludes certain acquisition related expenses (i.e. – changes in the fair value of earnouts, deferred compensation accruals(1), impact of adjustments related to the fair value of inventory and deferred revenue) for recent acquisitions. The Company excludes all acquisition-related amortization from adjusted earnings from continuing operations and in calculations of adjusted diluted earnings per share. Examples of other excluded items include plant closures, restructuring actions and related costs, impairments, separation costs, environmental site expenses and related insurance recoveries, endowment level charitable contributions, and other large unusual items. We also adjust for our U.S. pension plan (credit) expense(2). Our tax rate may be adjusted for certain discrete items which are identified in the footnotes. Investors should not consider non-GAAP measures as a substitute for GAAP measures. The deferred compensation accruals are for cash and stock awards that will be recorded over the vesting period, as such payments are subject to the sellers’ and employees’ continued employment with the Company. U.S. pension (credit) expense represents the actuarial net periodic benefit cost expected to be recorded as a component of earnings from continuing operations. For all periods presented, we were not required to and did not make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation.

Slide 4

The Armstrong Purpose…more relevant than ever…Healthy Spaces It matters to us, and it matters to our customers

Slide 5

One of the Most Unique Companies in Building Products

Slide 6

Ceilings are an integral part of creating healthy spaces Ceiling Category Is Unique Within Building Products Uniquely positioned in an attractive & stable category 

Slide 7

Ceilings Leader with Stable Demand Drivers and Diversified Sectors 35 – 40B sq. ft. installed base provides an annuity from R&R activity Revenue Mix* By Sector By Project Office 30% Education 20% Retail 20% Sales are weighted towards repair & remodel (R&R) activity New vs. R&R split and diversified end-market sectors allows us to perform well in all parts of the cycle The large installed base is a highly valuable intangible asset and renovates at a rate of ~3% per year *Source AWI internal estimates

Slide 8

Setting Our Sights on a Larger Opportunity Source: Internal company estimates of North American opportunities and positions; estimated AWI position includes 50% of sales by WAVE JV. AWI ~50% Driving growth in broader ceiling & wall solutions space AWI ~25%

Slide 9

Our Business Segments & Joint Venture Mineral Fiber (MF) Driving AUV Architectural Specialties (AS) Expand Into Adjacencies Deliver profitable top line growth by growing our core MF business and expanding into adjacencies through AS Leader in on-trend solutions Design through construction solutions leveraging digital technologies Double digit organic growth Overview Expand capabilities…Organically & through acquisitions Leverage acquisitions to strengthen competitive advantage Increase scale to drive margin expansion Outlook Note: AUV data is for US and Canada commercial channels - mineral fiber only. Complementary WAVE JV Unmatched value Overview Over $700M in dividends since 2010 130% ROIC...29 years of value creation Leader in core, specialty grid & integrated solutions Outlook Continue to drive price over inflation Leverage innovation to deliver unmatched value propositions Seamless Integration with AWI Founded in 1992

Slide 10

Clear Strategy Driving Value Creation Consistent strategic priorities enabling shareholder value creation Strategic Overview Healthy Spaces to drive renovation “renaissance” Product innovation to meet new customer needs and improve product mix kanopi e-commerce platform for new demand Continued integration of acquisitions Robust pipeline of additional opportunities Leverage new design capabilities across platform Mineral Fiber volume growth of 0% to 2% and AUV growth of 3% to 6% 10-3-1 path from optimization to disruption Digital platforms to reduce friction with customers Focus on productivity and scalability Consistent capex Invest for growth and productivity Return to shareholders via dividends and buybacks >15% Architectural Specialties top-line growth with margin expansion Declining net debt and adjusted FCF ~20% of sales Critical enabler for sales, productivity and efficiency improvements Value Creation Model* *Current management estimates; reflects medium-to-long term annual growth targets; Adjusted EPS Growth excludes acquisition-related amortization.

Slide 11

Sustainability / ESG…Bringing our WHY to life Lead a transformation in the design and building of spaces fit for today and tomorrow

Slide 12

Our Winning Formula Unique Position Our Winning Formula Winning through key elements of differentiation

Slide 13

Revitalize the Mineral Fiber Category

Slide 14

Industry Trends… What the Market Is Looking for Solutions to address current and future market needs Simple, centralized, easy to access information Digital Platforms offering end to end solutions Higher end interior finishes with less design constraints Product Transparency Inspirational Flexible Design Digitalization Products without “chemicals of concern” Innovative solutions free of “red-list chemicals” Custom looks with standard lead times Acoustical Comfort Acoustical comfort and privacy in every environment Ideal combination of sound absorption & blocking What the market seeks…. What AWI delivers… Healthy Spaces Healthier spaces with protection from pathogens; a place to feel safe Suite of products to contain, clean, and protect

Slide 15

Suite of products to contain, clean, and protect spaces Healthy Spaces a catalyst for sizable renovation opportunity Digital transformation underway to address frictions and drive volume Revitalizing Mineral Fiber Category Driving growth in AUV & volume Total Accoustics DESIGN Flex Digital Sustain Breaking mineral fiber design paradigms Selling more into each space…Accelerate Renovation Innovation Platforms Healthy Spaces

Slide 16

Where We Are Going…Revitalizing Mineral Fiber Our new solutions get us into more space more of the time Total Acoustics & Sustain DesignFlex Ceilings Systems Digital Journey “AcoustiBuilt” Seamless Mineral Fiber Healthy Spaces – 24/7 Defend 8,000+ SKU portfolio New Solutions Custom design w/ standard lead time 4x-6x AUV vs 2x2 MF DesignFlex Digital Journey AcoustiBuilt Total Acoustics & Sustain Path to a frictionless customer experience Drive incremental MF volume Drywall look with Acoustics Access to 250 million sq.ft. annual market Class A office standard 7-10% growth rate Healthy Spaces Contain, Clean, and Protect against pathogens Substantial Mix-Up opportunity

Slide 17

Healthy Spaces – Ecosystem / Ceiling Focus Areas Healthy Spaces must support the planet and well being of people Healthy Spaces Ecosystem Air … just as important as outdoor air quality. We have gained a whole new appreciation for proper air circulation, ventilation, filtration and cleaning to eliminate dirt, dust and contagions   Placeholder 01 Placeholder 01 Design & Sustainability… must be centered on the health and well being of the planet and people … so we feel good and want to be where we are. Light … affects our mood, our energy, our cognition, even how well we sleep at night. The best balance and rhythm of natural and supplemental light can optimize how we think and feel.   Sound & Temperature … no one is comfortable or operating at their best in a space that’s too loud or too quiet or too hot or too cold. The noise level and temperature must be just right.  

Slide 18

Ceilings Matter in Creating Healthy Spaces Ceilings help contain, clean, and protect Objective: Inhibit airflow through the ceiling plane resulting in pathogen containment from room to room Contain: ceilings can help prevent pathogens from spreading room to room Clean: ceilings can direct more air to cleaning devices Protect: ceilings can provide structurally tighter enclosures to maintain proper pressure differential to enhance indoor air quality Building community looks to ASHRAE for guidance around COVID mitigation strategies and reopening spaces…we are designing solutions to align to ASHRAE guidance. The WELL Health-Safety Rating includes more than 20 features across core areas…we are designing solutions to align to WELL standards. Note: Gasketed ceiling solution designed to reduce air leaks through ceiling plane by up to four times over standard ceilings.

Slide 19

Latest Launch – 24/7 Defend Making a difference for healthier, safer spaces CleanAssure™ Portfolio Cleanable and disinfectable ceiling, wall and suspension systems based on CDC-recommendations, with foggable, sprayable, and wipeable options VidaShield UV24™ System Unobtrusive system draws air into a chamber above the ceiling, exposes it to UV light and returns clean air to the room Health Zone AirAssure™ High performance ceilings with sealed edges that inhibit airflow through the ceiling plane for better air filtration, improved air quality and reduced risk of pathogen transfer …and more to come… 2 Major Product Launches within months of the National shutdowns across the U.S.

Slide 20

Converting Market Knowledge Into Value Creation Mineral Fiber AUV* New Product Vitality Index Note: New product sales as % of total sales Differentiated innovation driving our results Note: AUV growth 50/50 split between price & mix 5% CAGR Note: AUV data is for US and Canada commercial channels - mineral fiber only. *AUV = Average Unit Value

Slide 21

Accelerate Architectural Specialties

Slide 22

Growing through Share Gains and Acquisitions Acquisitions are growth accelerators for Architectural Specialties *Acquisitions represent reportable AWI sales $ in the year acquired + next calendar year sales. Double digit organic growth (excl. 2020 acquisitions) Leveraging new designs & technologies across AWI’s scale and distribution Manufacturing synergies driven by AWI’s proven expertise in Lean Target 1-3 acquisitions per year to add unique capabilities for broader participation in commercial spaces 20% CAGR

Slide 23

Expanding AS Capabilities with the Right Acquisitions 2017 2018 2019 2020 Tectum High impact wood fiber ceilings, walls & roofdeck $25M Revenue Plasterform Glass reinforced gypsum…ultra expressive $10M Revenue Steel Ceilings Architectural, radiant, security $10M Revenue ACGI Custom wood ceilings and walls $35M Revenue MRK Specialty metal interior and exterior Turf Design Custom felt ceilings and walls $25M Revenue Moz Designs Custom metal ceilings and walls $10M Revenue Arktura Specialty metal and felt ceiling and walls $40M Revenue *Revenue figures LTM at time of acquisition. Excludes MRK due to prior supplier relationship. $155M* acquisition-related topline benefit (2017 – 2020)…with post-synergy multiples from 6x-8x EBITDA Timing & Financial Impact Target 1-3 per year ~$50M in total acquisition spend Healthy Pipeline, timing often driven by seller’s succession planning 8 closed transactions since 2017 Average purchase price: 10X EBITDA Average annual revenue: $20M+ at time of purchase

Slide 24

Accelerate Digital Transformation

Slide 25

Digitalization to Support Growth and Productivity Focus on Step Change, continue to work optimization Level of Impact Level of Disruption Optimization Opportunities ~ 3 Step Change Outcomes ~1 Industry Disruption ~10 kanopi ProjectWorks       A continuous & collaborative approach across all levels throughout the company to develop, test, and realize our digital ambition. Additional focus and resources infused into Step Change Outcomes.

Slide 26

kanopi - A New Digital Platform to Accelerate Renovation Addressing key customer friction – What to buy & where to buy it To inspire & enable healthy spaces via ceiling remodel and renovation www.kanopibyarmstrong.com Check it out! @

Slide 27

Cash Flow & Capital Allocation

Slide 28

Consistent Ability To Grow AUV & Expand Margins Note: AUV data is for US and Canada commercial channels - mineral fiber only. EBITDA Margin data is for total AWI. Increases in Average Unit Value (AUV) Over Time ... …Yielding Significant Adjusted EBITDA Margin Expansion 35% 19% Millions Continuous price/mix & productivity driving margin expansion

Slide 29

Historical Indexed Adj. Cash Conversion (2006 = 100) Stability Through the Cycle *Peer index includes ALLE, AOS, APOG, AYI, DOOR, FBHS, JHX, LII, MAS, MHK, NCS, OC, SHW, SSD, & TILE. Represents growth in Adjusted Cash Conversion (Adjusted EBITDA – Capex) of peers applied to index value from previous year. Source: Bloomberg. Americas cash conversion never fell below 2006 levels … even through the recession

Slide 30

2021 Guidance – July Update ⁽¹⁾ $3.74 Adjusted EBITDA* Adjusted EPS* Adjusted Free Cash Flow* Revenue $937 $330 MF AUV 6%-9%, positive like-for-like pricing & mix Growth Initiatives, primarily kanopi & Healthy Spaces, drive MF volume up 2% - 4% 2020 acquisitions benefit AS 20% - 25% AUV and volume gains fall through Manufacturing productivity and improved earnings from WAVE drive margin improvement Includes benefit of 2020 acquisitions Investment in growth initiatives continues in 2021 $80-$85 million of Cap Ex $25 million of cash interest expense Cash tax rate 20% - 25% Higher Working Capital due to increased sales 2020 Actual Current Guidance $25 million of interest expense 25% book tax rate ~$63 million depreciation, ~$35 million amortization 48 million average diluted shares outstanding Excludes $21 million of acquisition amortization $212 *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. Adjusted EPS excludes $0.11 in relation to acquisition-related amortization in 2020. ⁽¹⁾Assumes no significant pandemic-related shutdowns or project delays due to supply chain disruptions. As issued on July 27, 2021. Updated from prior guide Prior Guidance

Slide 31

Value Creation Model Significant value creation through free cash flow generation Revenue 5% – 10% annual growth Adjusted EBITDA and Margins >10% annual growth 35% – 40% margin Adjusted EPS 15% – 20% annual growth Adjusted Free Cash Flow 10-15% annual growth >50% of Adjusted EBITDA 0% – 2% Mineral Fiber volume growth 3% – 6% AUV increase >15% Architectural Specialties volume 1-3 Acquisitions add 100 – 300 bps ~60% incremental margin in mineral fiber Continue to price over inflation Productivity – Manufacturing and SG&A Architectural Specialties margin expansion WAVE equity earnings growth Declining net debt due to significant cash generation 25% book tax rate Excludes impact of acquisition-related amortization 20 - 25% cash tax rate $25 million cash interest expense Stable level of capital expenditures Balanced capital allocation

Slide 32

Strongest Position & Margins of Any Public Building Products Business A unique position versus the best businesses in building products Note: Figures estimates only and based on externally sourced available data. Companies shown represent the following industries (position within industry): Acuity – Lighting (#1); Armstrong – Commercial Ceilings (#1); Azek – Residential Segment (#2); Caesarstone – Quartz Surfaces (#3); James Hardie – Siding (#1); Jeld-Wen – Doors (T-#1); Masonite – Doors (T-#1); Mohawk – Flooring (#1); Owens Corning (Insulation) -- #1; Owens Corning (Roofing) – Roofing (#2); Sherwin Williams – Architectural Paint (#1); Stanley Black & Decker – Power Tools (#1); Trex – Residential Segment (#1). Low High High

Slide 33

Unique Cash Flow Generation Capabilities Valuation upside based on best-in-class free cash flow Note: Valuation multiples and FCF margins reflect parent company values, not the individual segments plotted on the previous page. *FCF margin defined as (EBITDA – capex) / sales.

Slide 34

Appendix Management Biographies Balance Sheet Data Reconciliations to GAAP Other

Slide 35

Management Biographies Brian MacNeal Senior Vice President and Chief Financial Officer, Armstrong World Industries Vic Grizzle is the chief executive officer and a member of the board of directors of Armstrong World Industries (AWI). He joined the company in January 2011. Vic brings 23 years of experience in process improvement, sales, marketing and global business leadership to the business, and under his leadership, AWI shareholder returns have increased over 50%. Prior to joining the company, he was group president of Global Structures, Coatings and Tubing for Valmont Industries, a $2 billion global leader of infrastructure support structures for utility, telecom and lighting markets, and manufacturer of mechanized irrigation equipment for large scale farming. Before Valmont, he was president of the commercial power division of EaglePicher Corporation, a $700 million diversified manufacturer and marketer of advanced technology and industrial products for space, defense, automotive, filtration, pharmaceutical, environmental and commercial applications. Earlier in his career, Vic spent 16 years at GE in expatriate assignments in Europe and Asia. Vic serves on the Boards of Directors of Franklin Electric, a global leader in the production and marketing of systems and components for water and automotive fuels, and for WAVE, the Worthington-Armstrong Joint Venture that manufactures suspended ceiling grid systems. He holds a bachelor’s degree in mechanical engineering from California Polytechnic University. Brian MacNeal is chief financial officer of Armstrong World Industries. He joined the company in 2014 as vice president of Global Finance. Prior, he spent 20 years at the Campbell Soup Company in roles of increasing responsibility. Brian’s finance and accounting experience with Campbell’s spanned multiple assignments in manufacturing, marketing and project management. His most recent role was director of Finance for U.S. Soup where he led the strategy to enter emerging markets in Russia and China. He began his career with Price Waterhouse Coopers in the audit department. Brian graduated cum laude from Villanova University with a bachelor’s degree in Accounting. He is a certified public accountant and serves on the Board of Directors of WAVE, the Worthington-Armstrong Joint Venture that manufactures suspended ceiling grid systems. Victor Grizzle Chief Executive Officer and President, Armstrong World Industries

Slide 36

Capital Structure & Liquidity Strong balance sheet and liquidity position to support growth and capital allocation priorities Liquidity $419 million Retirement income plan (RIP) fully funded as of year-end 2020 No cash contributions in over 30 years *As defined in credit agreement

Slide 37

Market Drivers Broad array of sector drivers that impact demand; Recovery underway

Slide 38

Non-Residential Activity Timeline (New and Major Reno) Extended nature of projects reduce variation in demand Design Development Plans and Specs Start 60 days to break-ground Design Architect selected 30 GC Bidding Bids accepted AWI budget #s 24 21 AWI Shipments 18 0 Months Subcontractor bidding ABI Bids Starts External Indicators

Slide 39

Performance Through the Downturn (2008-2011) Resilience through poor economic conditions Volume declined 20% in 2009 AUV increased every year Price exceeded inflation every year Manufacturing footprint restructured SG&A was right-sized Capital spending was tightened Margins were restored by 2010 2011 adjusted EBITDA 40% above 2009 Note: Margin data is adjusted for standard exclusions as well as for stranded overhead costs associate with the separation from flooring and the sale of our international businesses. This provides consistent year to year comparability.

Slide 40

Adjusted EBITDA Reconciliation RIP expense represents only the plan service cost that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP. Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation and restricted stock expenses.

Slide 41

Adjusted Diluted Earnings Per Share Reconciliation (1) RIP expense (credit) represents the entire actuarial net periodic pension expense (credit) recorded as a component of earnings from continuing operations. For all periods presented, we were not required to and did not make cash contributions to our RIP. (2) Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation accruals. (3) Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles. (4) Adjusted income tax expense is calculated using the adjusted tax rate multiplied by the adjusted earnings from continuing operations before income taxes. (5) Dilutive shares are as-reported. 2020 dilutive shares outstanding for the six months ended June 30, 2020 include anti-dilutive common stock equivalents which are excluded from U.S. GAAP Accounting. (6) The tax rate for the three and six months ended June 30, 2020 excludes the first quarter pension annuitization and the gain on the sale of our idled China facility.

Slide 42

Adjusted Free Cash⁽¹⁾ Flow Reconciliation Adjusted free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures, legacy environmental matters and litigation. The Company believes adjusted free cash flow is useful because it provides insight into the amount of cash that the Company has available for discretionary uses, after expenditures for capital commitments and adjustments for acquisitions and divestitures. Free cash flow includes discontinued international operations.

Slide 43

Segment Reported Operating Income (Loss) to Adjusted EBITDA RIP expense represents only the plan service cost related to the RIP that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP. Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation accruals.

Slide 44

Adjusted Net Sales Reconciliation Represents the impact of acquisition-related deferred revenue adjustments to fair value.

Slide 45

2021 Adjusted EBITDA Guidance Reconciliation Adjusted EBITDA RIP credit represents the actuarial net periodic benefit expected to be recorded as a component of other non-operating income. We do not expect to be and do not plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. RIP expense represents only the service cost related to the U.S. pension plan that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our U.S. Retirement Income Plan.

Slide 46

2021 Adjusted EPS Guidance Reconciliation Adjusted Diluted Earnings Per Share Adjusted EPS guidance for 2021 is calculated based on an adjusted effective tax rate of 25% and based on ~48 million of diluted shares outstanding. RIP credit represents the actuarial net periodic benefit expected to be recorded as a component of other non-operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. RIP expense represents only the service cost related to the U.S. pension plan and is recorded as a component of operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles. Adjusted income tax expense is based adjusted earnings before income tax.

Slide 47

2021 Adjusted Free Cash Flow Guidance Reconciliation Adjusted Free Cash Flow

Slide 48

Where We Were… Armstrong before the 2000s Products: Fissured Ceilings AUV: $.40 SF (MF AUV) Sales: $500M Key Facts Fissured Ceilings

Slide 49

Where We Are Today… Expanding the portfolio to align with market trends Mineral Fiber Ceilings Tectum Ceilings & Walls Wood Ceilings & Walls Metal Ceilings & Walls Smooth White Acoustical Tile (SWAT) Note: AUV data is for US and Canada commercial channels - mineral fiber only.

Slide 50

Ultima Health Zone Ultima Average Unit Value 3X fissured mineral fiber ceilings Project Profile: Penn Presbyterian Type of Space: Hospital Location: Philadelphia, PA Features: Total Acoustics & Sustain MF Ceilings (Scrubbable/Washable)

Slide 51

WOODWORKS Grille Ceilings WOODWORKS Average Unit Value 15X mineral fiber ceilings Project Profile: Salk Middle School Type of Space: School Location: Spokane, WA Features: Design & Acoustical Wood Ceilings

Slide 52

METALWORKS Torsion Spring Our products are now being specified in statement spaces Project Profile: Academy Tower Type of Space: Office Lobby Location: Los Angeles, CA Features: Custom Design Metal Ceilings

Slide 53

Tectum Walls & Ceilings More spaces in the same building Project Profile: Boys & Girls Club Type of Space: Gymnasium Location: Lancaster, PA Features: Durability & Acoustics with Tectum Walls & Ceilings

Slide 54

Total Acoustics & Sustain Total Acoustics & Sustain market penetration continues to grow Project Profile: BrandStar Offices Type of Space: Office Location: Deerfield Beach, FL Features: Great acoustics with no “chemicals of concern”

Slide 55

DESIGNFlex DESIGNFlex adds a never before seen look to mineral fiber ceilings Project Profile: Armstrong Avenue Type of Space: Statement Spaces Location: Lancaster, PA Features: Custom design with standard product lead time

Slide 56

Exposed Structure Portfolio Our Exposed Structure portfolio allows us to enter new spaces Project Profile: Suburban Beer Type of Space: Exposed Structure Location: Malvern, PA Features: Acoustics & design for Exposed Structure spaces

Slide 57

“AcoustiBuilt” - Seamless Mineral Fiber Seamless mineral fiber gains share from drywall ceilings Project Profile: University (confidential) Type of Space: Auditorium Location: United States Features: Drywall look with acoustics