afi-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-37589

ARMSTRONG FLOORING, INC.

(Exact name of Registrant as specified in its charter)

Delaware

47-4303305

(State or other jurisdiction of incorporation or organization)

(I.R.S. employer Identification number)

2500 Columbia Avenue

17603

Lancaster

Pennsylvania

(Address of principal executive offices)

(Zip Code)


	(717)	672-9611
(Registrant’s telephone number, including area code)


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, $0.0001 par value	AFI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files.) Yes þ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		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. ☐

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The Registrant had 21,685,862 shares of common stock, $0.0001 par value, outstanding at April 16, 2021.

Armstrong Flooring, Inc.

Table of Contents


		Page Number
	Cautionary Statement Concerning Forward-Looking Statements	1

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited)	2
	Condensed Consolidated Statements of Operations (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Condensed Consolidated Statements of Stockholders' Equity (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5	Other Information	25
Item 6.	Exhibits	26

SIGNATURES		27

Glossary of Defined Terms

Unless the context requires otherwise, "AFI," the "Company, " "we," "our," or "us" refers to Armstrong Flooring Inc., a Delaware corporation and its consolidated subsidiaries. The Company also uses several other terms in this Quarterly Report on Form 10-Q, which are further defined below:


Term						Description
Amended ABL Credit Facility						Third Amendment to the ABL credit facility
AOCI						Accumulated other comprehensive income (loss)
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
CEO						Chief Executive Officer
CFO						Chief Financial Officer
COVID-19						COVID-19 coronavirus

FASB						Financial Accounting Standards Board
LIBOR						London interbank offered rate
LVT						Luxury vinyl tile
MD&A						Management's Discussion and Analysis
OCI						Other comprehensive income (loss)
ROU						Right-of-use asset
SEC						Securities and Exchange Commission
Term Loan Agreement						Pathlight Capital L.P. term loan agreement
Term Loan Facility						Pathlight Capital L.P. term loan facility
U.S. GAAP						Generally accepted accounting principles in the United States of America

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q and the documents incorporated by reference may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, our expectations concerning our commercial and residential markets and their effect on our operating results, and our ability to increase revenues, income and earnings before interest, taxes, depreciation and amortization. Words such as “anticipate,” “expect,” “intend,” “plan,” “target,” “project,” “predict,” “believe,” “may,” “will,” “would,” “could,” “should,” “seek,” “estimate” and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors that could have a material adverse effect on our financial condition, liquidity, results of operations or future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

•execution of strategy;

•competition;

•availability and costs of raw materials and energy;

•key customers;

•construction activity;

•liquidity;

•debt covenants;

•debt;

•pandemics, epidemics or other public health emergencies such as the outbreak of COVID-19;

•global economic conditions;

•international operations;

•environmental and regulatory matters;

•information systems and transition services;

•personnel;

•intellectual property rights;

•claims and litigation;

•labor;

•outsourcing; and

•other risks detailed from time to time in our filings with the SEC, press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K and in the documents incorporated by reference.

Such forward-looking statements speak only as of the date they are made. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

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PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Armstrong Flooring, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in millions)


	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	16.7	$	13.7

Accounts and notes receivable, net	57.7		43.0
Inventories, net	125.1		122.9

Prepaid expenses and other current assets	12.9		12.9
Assets held-for-sale	—		17.8
Total current assets	212.4		210.3
Property, plant, and equipment, net	242.2		246.9
Operating lease assets	9.9		8.5
Intangible assets, net	17.3		19.0
Deferred income tax assets	4.4		4.4
Other noncurrent assets	6.7		4.4
Total assets	$	492.9	$	493.5
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term debt	$	8.2	$	5.5
Current installments of long-term debt	3.9		2.9
Trade accounts payable	82.1		78.5
Accrued payroll and other employee costs	13.9		14.8
Current operating lease liabilities	2.2		2.7
Other accrued expenses	14.7		17.7
Total current liabilities	125.0		122.1
Long-term debt, net of unamortized debt issuance costs	40.9		71.4
Noncurrent operating lease liabilities	7.7		5.8
Postretirement benefit liabilities	55.2		55.6
Pension benefit liabilities	4.6		4.6
Deferred income tax liabilities	1.6		2.4
Other long-term liabilities	8.2		9.0

Total liabilities	$	243.2	$	270.9
Commitments and contingencies
Stockholders’ equity:
Common stock	—		—
Preferred stock	—		—
Treasury stock, at cost	(86.2)		(87.1)
Additional paid-in capital	677.0		677.4
Accumulated deficit	(281.2)		(308.4)
Accumulated other comprehensive income (loss)	(59.9)		(59.3)
Total stockholders' equity	249.7		222.6
Total liabilities and stockholders’ equity	$	492.9	$	493.5

See accompanying notes to condensed consolidated financial statements (Unaudited).

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Armstrong Flooring, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in millions, except per share data)


	Three Months Ended March 31
	2021		2020
Net sales	$	148.9	$	138.7
Cost of goods sold	129.0		115.4
Gross profit	19.9		23.3
Selling, general and administrative expenses	38.1		36.6
Gain on sale of property	(46.0)		—
Operating income (loss)	27.8		(13.3)

Interest expense	3.5		0.6
Other expense (income), net	(2.1)		(0.4)
Income (loss) from before income taxes	26.4		(13.5)
Income tax expense (benefit)	(0.8)		(0.3)



Net income (loss)	$	27.2	$	(13.2)

Basic earnings (loss) per share of common stock:
Basic earnings (loss) per share of common stock	$	1.24	$	(0.60)



Diluted earnings (loss) earnings per share of common stock:
Diluted earnings (loss) per share of common stock	$	1.23	$	(0.60)

See accompanying notes to condensed consolidated financial statements (Unaudited).

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Armstrong Flooring, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(Dollars in millions)


	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	27.2	$	(13.2)
Changes in other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(0.8)		(2.5)
Derivative adjustments	0.1		1.3
Pension and postretirement adjustments	0.1		1.3
Total other comprehensive income (loss)	(0.6)		0.1
Total comprehensive income (loss)	$	26.6	$	(13.1)

See accompanying notes to condensed consolidated financial statements (Unaudited).

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Armstrong Flooring, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)


	Three Months Ended March 31
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	27.2	$	(13.2)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	9.9		10.6

Deferred income taxes	(0.5)		(0.5)
Stock-based compensation expense	0.6		0.7
Gain on sale of property	(46.0)		—
Gain from long-term disability plan change	—		(1.1)
U.S. pension expense (income)	(1.8)		0.9
Other non-cash adjustments, net	0.1		1.4
Changes in operating assets and liabilities:
Receivables	(16.2)		(4.8)
Inventories	(2.4)		(8.1)
Accounts payable and accrued expenses	2.6		1.2

Other assets and liabilities	(1.3)		(4.2)
Net cash provided by (used for) operating activities	(27.8)		(17.1)
Cash flows from investing activities:
Purchases of property, plant and equipment	(7.0)		(7.5)
Proceeds from sale of assets	65.3		—
Net cash provided by (used for) investing activities	58.3		(7.5)
Cash flows from financing activities:
Proceeds from revolving credit facility	26.6		30.0
Payments on revolving credit facility	(33.8)		—


Payments on long-term debt	(20.1)		(0.1)


Value of shares withheld related to employee tax withholding	(0.1)		—
Net cash provided by (used for) financing activities	(27.4)		29.9
Effect of exchange rate changes on cash and cash equivalents	(0.1)		(0.5)
Net increase (decrease) in cash and cash equivalents	3.0		4.8
Cash and cash equivalents at beginning of year	13.7		27.1
Cash and cash equivalents at end of period	$	16.7