00016550752021FYTRUEAmends Part III of the 2021 Form 10-K to include the information required by and not included in Part III of the 2021 Form 10-K.00016550752021-01-012021-12-3100016550752021-06-30iso4217:USD00016550752022-02-28xbrli:shares
    

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021
 OR
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)
      1770 Hempstead Road, Lancaster, PA 17605
(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
                Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   ¨ No   þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   ¨ No   þ

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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  Yes ☑    No  ¨

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 aggregate market value of the Common Stock of Armstrong Flooring, Inc. held by non-affiliates based on the closing price ($6.19 per share) on the New York Stock Exchange (trading symbol AFI) as of June 30, 2021 was approximately $94.0 million. As of February 28, 2022 the number of shares outstanding of the registrant’s Common Stock was 21,779,575.

DOCUMENTS INCORPORATED BY REFERENCE
None.
 

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EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K (the “2021 Form 10-K”) of Armstrong Flooring, Inc. ("AFI," the "Company," "we," "our," or "us" refers to Armstrong Flooring, Inc., a Delaware corporation and its consolidated subsidiaries) for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”) on March 9, 2022. We are filing this Amendment to amend Part III of the 2021 Form 10-K to include the information required by and not included in Part III of the 2021 Form 10-K.

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment also contains new certifications of the Company’s principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Because no financial statements are included in this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 or 308 of Regulation S-K promulgated by the SEC under the Exchange Act, paragraphs 3, 4 and 5 of the Section 302 certifications have been omitted. For the same reason, we are not filing currently dated certifications of the Company’s principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Except as described above, no other changes have been made to the 2021 Form 10-K. The 2021 Form 10-K continues to speak as of the date of the 2021 Form 10-K, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the 2021 Form 10-K other than as expressly indicated in this Amendment. Accordingly, this Amendment should be read in conjunction with the 2021 Form 10-K and with our filings with the SEC subsequent to the filing of the 2021 Form 10-K.

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Armstrong Flooring, Inc.

Table of Contents






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Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Performance Graph
The following graph presents the cumulative total shareholder return for our common stock compared with the Standards & Poor's (S&P) Small Cap Industrials 600 and Russell 2000 indices since our separation from Armstrong World Industries, Inc. on April 1, 2016.
afi-20211231_g1.jpg
*$100 invested on 4/4/2016 in stock or index.
AFI R2000 S&P AFI Russell 2000 Index S&P Small Cap 600 Industrials Index
4/4/2016 12.00 1108.54 728.73 4/4/2016 100 100 100
6/30/2016 16.95 1151.92 751.37 6/30/2016 141 104 103
9/30/2016 18.88 1251.65 816.66 9/30/2016 157 113 112
12/30/2016 19.91 1357.13 911.68 12/30/2016 166 122 125
3/31/2017 18.42 1385.92 915.48 3/31/2017 154 125 126
6/30/2017 17.97 1415.36 927.70 6/30/2017 150 128 127
9/30/2017 15.75 1490.86 1000.37 9/30/2017 131 134 137
12/29/2017 16.92 1535.51 1058.76 12/29/2017 141 139 145
3/31/2018 13.57 1529.43 1057.08 3/31/2018 113 138 145
6/30/2018 14.04 1643.07 1111.63 6/30/2018 117 148 153
9/30/2018 18.10 1696.57 1205.62 9/30/2018 151 153 165
12/31/2018 11.84 1348.56 922.44 12/31/2018 99 122 127
3/31/2019 13.60 1539.74 1036.08 3/31/2019 113 139 142
6/30/2019 9.85 1566.57 1103.38 6/30/2019 82 141 151
9/30/2019 6.39 1523.37 1107.20 9/30/2019 53 137 152
12/31/2019 4.27 1668.47 1184.56 12/31/2019 36 151 163
3/31/2020 1.43 1153.10 794.79 3/31/2020 12 104 109
6/30/2020 2.99 1441.37 969.91 6/30/2020 25 130 133
9/30/2020 3.45 1507.69 1030.60 9/30/2020 29 136 141
12/31/2020 3.82 1974.86 1313.25 12/31/2020 32 178 180
3/31/2021 4.89 2220.52 1538.70 3/31/2021 41 200 211
6/30/2021 6.19 2310.55 1535.49 6/30/2021 52 208 211
9/30/2021 3.13 2204.37 1500.46 9/30/2021 26 199 206
12/31/2021 1.98 2245.31 1640.49 12/31/2021 17 203 225

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers of the Company (as of April 29, 2022):
Name Age   Business Experience During the Last Five Years
Michel S. Vermette


  54  
Armstrong Flooring, Inc.
President and CEO (since September 2019)
Mohawk Industries, Inc.
President Residential Carpeting (2019 - September 2019)
President of Mohawk Group (2011 - 2019)
Amy P. Trojanowski
             

  52  
Armstrong Flooring, Inc.
SVP, Chief Financial Officer (since October 2020)
The Chemours Company.
   VP, Business Finance and Global Shared Services (2019 - August 2020)
   Chief Accounting Officer and VP, Controller (2015 - 2019)
                                                                                     
John C. Bassett   59  
Armstrong Flooring, Inc.
SVP, Chief Human Resources Officer (since March 2016)

Brent A. Flaharty
  49  
Armstrong Flooring, Inc.
   SVP & Chief Customer Experience Officer (since March 2017)
VP, Residential Sales (2016 - March 2017)
Mag Instrument, Inc.
   Chief Revenue Officer (2016)

Christopher S. Parisi

  51  
Armstrong Flooring Industries, Inc.
   SVP, General Counsel, Secretary & Chief Compliance Officer (since March 2016)

Phillip J. Gaudreau
45  
Armstrong Flooring, Inc.
VP, Controller (since September 2020)
Harsco Corporation.
   Director, Financial Reporting and Consolidation (2014 - September 2020)
  

All executive officers are appointed by our Board of Directors (the "Board") to serve in their respective capacities until their successors are appointed and qualified or until their earlier resignation or removal.

Code of Ethics
We have adopted a Code of Business Conduct that applies to all employees, executives and directors, specifically including our CEO, our CFO and our Controller. We have also adopted a Code of Ethics for Financial Professionals (together with the Code of Business Conduct, the “Codes of Ethics”) that applies to all professionals in our finance and accounting functions worldwide, including our CFO and our Controller.

The Codes of Ethics are intended to deter wrongdoing and to promote:
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely and understandable public disclosures;
compliance with applicable governmental laws, rules and regulations;
the prompt internal reporting of violations of the Codes of Ethics; and,
accountability for compliance with the Codes of Ethics.





 

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The Codes of Ethics are available at https://www.armstrongflooring.com/corporate/en-us/about/governance/codes-policies.html and in print free of charge. Any waiver of the Company’s Code of Business Conduct, particularly its conflicts-of-interest provisions, which may be proposed to apply to any director or executive officer also must be reviewed in advance by the Nominating and Governance Committee of the Board (The "Governance Committee"), which would be responsible for making a recommendation to the Board for approval or disapproval. The Board’s decision on any such matter would be disclosed publicly in compliance with applicable legal standards and the rules of the New York Stock Exchange (the "NYSE"). We intend to satisfy these requirements by making disclosures concerning such matters available on the “Investors” page of our website. There were no waivers or exemptions from the Code of Business Conduct in 2021 applicable to any director or executive officer.

The following table represents our Board:
Name Age   Position
Larry S. McWilliams
66 Chair of the Board
Michael F. Johnston
74 Management Development & Compensation Committee Chair
Kathleen S. Lane
64 Director
Jeffrey Liaw
45 Finance Committee Chair
Michael W. Malone
63 Audit Committee Chair
James C. Melville
70 Nominating & Governance Committee Chair
Michel S. Vermette
54 Director

DIRECTOR BIOGRAPHIES

Michael F. Johnston

Age: 74
Independent
Director Since: March 30, 2016
Committees Served: Audit; Finance; Management Development and Compensation (Chair)

Experience: CEO (2004 to 2008) and President and Chief Operating Officer (2000 to 2004) of Visteon Corporation, an automotive components supplier. President of North America/Asia Pacific, Automotive Systems Group (1999 to 2000), President of Americas Automotive Group (1997 to 1999), and other senior management positions at Johnson Controls, Inc., an automotive and building services company.

Other Public Company Board Experience: Dover Corporation (since 2013); Whirlpool Corporation (2003 to 2020); Armstrong World Industries, Inc. (2010 to 2016); Flowserve Corporation (2007 to 2013); and Chair and Director of Visteon Corporation (2004 to 2009).

Skills and Qualifications: Mr. Johnston’s executive leadership and board of directors experience offers our Board a seasoned corporate governance perspective, and he brings to our Board extensive operational, manufacturing and design, innovation, engineering, and financial experience.












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Kathleen S. Lane

Age: 64
Independent
Director Since: March 30, 2016
Committees Served: Audit; Management Development and Compensation; Nominating and Governance

Experience: Executive Vice President and Chief Information Officer of TJX Companies, Inc., a specialty multi-national apparel retailer with leading retail brands such as T-J-Maxx, Marshalls, and HomeGoods (2008 to 2013). Group Chief Information Officer at National Grid Plc., an international utility (2006 to 2008). Senior Vice President and Chief Information Officer of Gillette Company (Procter & Gamble) (2002 to 2006).

Other Public Company Board Experience: The Hanover Insurance Group (since 2018); EarthLink Holdings Corp. (2013-2017); and Bob Evans Farms, Inc. (2014 to 2017).

Skills and Qualifications: Ms. Lane has 30 years of IT experience, including chief information officer roles in the consumer products, financial services, utilities, and retail industries. From her multiple chief information officer roles, Ms. Lane provides the Board with a substantial IT and business process background as well as considerable global technical and business experience. Ms. Lane also brings gender diversity and public company board experience to our Board.

Jeffrey Liaw

Age: 45
Independent
Director Since: March 30, 2016
Committees Served: Audit; Finance (Chair)

Experience: Co-CEO of Copart, Inc., a leading global provider of online auctions and vehicle remarketing services (since April 1, 2022). President and CEO North America of Copart, Inc. (February 2021 to April 2022). President of Copart, Inc. (October 2020 to April 2022). President and CFO of Copart, Inc. (September 2019 to October 2020). CFO of Copart, Inc. (2016 to 2020). CFO of FleetPride, Inc., a privately-held company that distributes truck and trailer parts nationwide (2012 to 2015). Principal at TPG Capital active in TPG’s energy and industrial investing practice areas (2005 to 2012).

Other Public Company Board Experience: Armstrong World Industries, Inc. (2012 to 2016); Graphic Packaging Holding Company (2008 to 2013).

Skills and Qualifications: Mr. Liaw offers our Board financial and senior management expertise and experience, including, previously, as a public company CFO within the industrials sector.

Michael W. Malone

Age: 63
Independent
Director Since: October 1, 2016
Committees Served: Audit (Chair); Finance; Nominating and Governance

Experience: Vice President – Finance and CFO of Polaris Industries Inc. (1997 to 2015; retired 2016). Corporate Secretary of Polaris Industries Inc. (1997 to 2010). Vice President and Treasurer of Polaris Industries Inc. (1994 to 1997). CFO and Treasurer of the predecessor company of Polaris Industries Inc. (1993 to 1994). Joined Polaris Industries Inc. in 1984 after four years with Arthur Andersen L.L.P.

Other Public Company Board Experience: Camping World Holdings, Inc. (since 2019).

Skills and Qualifications: Mr. Malone offers our Board extensive financial and senior management knowledge, including public company CFO experience, within the manufacturing industry.








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Larry S. McWilliams

Age: 66
Independent
Director Since: March 30, 2016

Experience: Interim CEO of Armstrong Flooring (May 2019 to September 2019). President and Chief Executive Officer of Keystone Foods, a supplier of proteins and distribution services (2011 to 2012). Senior Vice President at Campbell Soup Company (2001 to 2011). President of Campbell International (2005 to 2010). President of Campbell USA (2004 to 2005). President of Campbell Soup North America (2003 to 2004).

Other Public Company Board Experience: Armstrong World Industries, Inc. (since 2010, Chair since 2018); Bob Evans Farms, Inc. (2014 to 2017).

Skills and Qualifications: Mr. McWilliams offers our Board senior executive leadership capabilities and experience, as well as extensive knowledge of sales, marketing, customer service relationships, international markets, and distribution channels.

James C. Melville
Age: 70
Independent
Director Since: March 30, 2016
Committees Served: Nominating and Governance (Chair); Finance; Management Development and Compensation

Experience: Member of the Minneapolis, Minnesota-based law firm of Kaplan, Strangis and Kaplan, P.A., where he has practiced in the corporate, governance, mergers and acquisitions, securities, and financial areas since 1994. Previously practiced with Dorsey and Whitney in their Minneapolis and London, England offices. Associate member of the Council of Institutional Investors. National Association of Corporate Directors (NACD) Board Leadership Fellow and NACD Directorship Certified.

Other Public Company Board Experience: Armstrong World Industries, Inc. (since 2012).

Skills and Qualifications: Mr. Melville brings extensive knowledge of the law, mergers and acquisitions, executive compensation, finance, capital markets and corporate governance matters, as well as international experience and financial acumen to our Board.

Michel S. Vermette

Age: 54
Director Since: September 11, 2019

Experience: President and CEO (since September 2019). President, Residential Carpet at Mohawk Industries (February 2019 to September 2019), and Chief Sustainability Officer (2017 to 2019). Various leadership roles in Mohawk’s finance, sales and marketing, and business development operations, including President, Mohawk Group (2011 to February 2019) and Chief Financial Officer of Mohawk Industries’ North American Flooring Unit (2006 to 2010).

Skills and Qualifications: Mr. Vermette is a longtime executive in the flooring industry and brings extensive financial, domestic, and international operations and strategic expertise to our Board.

















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BOARD MEETINGS AND COMMITTEES

There are four (4) standing committees of the Board: the Audit Committee, the Management Development and Compensation Committee (the "Compensation Committee"), the Governance Committee, and the Finance Committee, as applicable, each described below.

Each standing committee has a charter and consists solely of ‘independent’ or ‘outside’ directors who meet applicable independence standards required by the NYSE, the SEC, and the Internal Revenue Service, and under our Certificate and Bylaws. Each committee reports to the Board regularly and evaluates the effectiveness of its performance annually. The membership of each committee is determined by the Board based on the recommendation of the Governance Committee. The Company’s Corporate Governance Guidelines provide that (i) directors who are currently fully employed should not serve on more than two (2) other corporate boards and (ii) other directors should not serve on more than four (4) other corporate boards.

Director Independent ^ Audit Committee Compensation Committee Governance Committee Finance Committee
Michael F. Johnston x x C   x
Kathleen S. Lane x x x x  
Jeffrey Liaw x x FE     C
Michael W. Malone x C FE   x x
Larry S. McWilliams x        
James C. Melville x   x C x
Michel S. Vermette  
2021 Meetings 10 9 7 4

^ As defined in NYSE listing standards, our Corporate Governance Guidelines and Bylaws. Chair of the committee.
FE ‘Audit Committee Financial Expert’ as defined by Item 407(d)(5) of SEC Regulation S-K.

Our Board met sixteen (16) times during 2021, nine (9) of which were special meetings. All directors who served on the Board during 2021 participated in at least approximately 95% of the meetings of the Board.

Audit Committee

The responsibilities of the Audit Committee are more fully described in its charter. Among other responsibilities delegated by the Board, the Audit Committee:

provides oversight of (i) auditing and accounting matters, including the selection, supervision and compensation of the Company’s independent registered public accounting firm and other independent auditors, (ii) the scope of the annual audits and non-audit services performed by our independent registered public accounting firm, and (iii) our accounting practices and internal accounting controls;
has sole authority to engage, retain and dismiss the independent registered public accounting firm;
reviews and discusses with management and our independent registered public accounting firm the annual audited financial statements and quarterly financial statements included in our SEC filings;
assists the Board in monitoring the integrity of our financial statements and the independent registered public accounting firm’s qualifications, independence, and performance;
considers risks associated with overall financial reporting, legal compliance, cybersecurity, and disclosure processes;
reviews our earnings guidance; and
supervises and reviews the effectiveness of our internal audit and legal compliance functions and our compliance with legal and regulatory requirements.

Each member of the Audit Committee meets the NYSE and SEC financial literacy requirements. The Board has determined that each of Mr. Liaw and Mr. Malone qualifies as an “Audit Committee Financial Expert” as defined in the Exchange Act. The Audit Committee regularly meets independently with our internal and independent auditors, with the leaders of our compliance function, and with management.



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Management Development and Compensation Committee

The responsibilities of the Compensation Committee are more fully described in its charter. Among other responsibilities delegated by the Board, the Compensation Committee:

oversees the design of our executive compensation and benefit programs and employment practices;
administers and makes recommendations regarding our incentive and equity compensation plans;
reviews and approves corporate goals and individual objectives relevant to the compensation of the CEO and evaluates the CEO’s performance relative to those goals and objectives, and recommends CEO compensation to the independent directors based on the evaluation;
oversees the evaluation of the other executive officers and establishes their compensation levels in collaboration with the CEO;
reviews incentive compensation to confirm that such compensation does not encourage unnecessary risk taking; and
monitors senior management succession planning.

Compensation Committee Interlocks and Insider Participation None of the members of the Compensation Committee has ever been an officer or employee of the Company or its subsidiaries, or had any relationship with the Company that requires disclosure under applicable SEC regulations.

Nominating and Governance Committee

The responsibilities of the Governance Committee are more fully described in its charter. Among other responsibilities delegated by the Board, the Governance Committee:

monitors the independence of nonemployee directors;
reviews and evaluates director candidates and makes recommendations to the Board concerning nominees for election as Board members;
establishes criteria for the selection of candidates to serve on the Board;
recommends directors for appointment to Board committees;
makes recommendations to the Board regarding corporate governance matters;
reviews and makes recommendations to the Board regarding the compensation of nonemployee directors;
oversees our insurance program for directors and officers liability;
reviews periodic reports, analyses and assessments regarding the Company’s environmental, social and governance program;
oversees the Company’s director education and orientation programs; and
coordinates an annual self-evaluation of the performance of the Board and each committee.

Finance Committee

The responsibilities of the Finance Committee are more fully described in its charter. Among other responsibilities delegated to it by the Board, the Finance Committee:

reviews and recommends matters related to our capital structure, including the issuance of debt and equity securities;
oversees banking arrangements, including the investment of corporate cash and management of foreign currency exchange hedges;
oversees management of the corporate debt structure;
reviews and approves material finance and other cash management transactions;
oversees and advises the Board on assessing capital expenditures, operating income, cash flow, cash management and working capital;
reviews investment strategies and policies;
assesses any dividend payment policy and capital structure plans and adjustments;
considers plans to repurchase our stock;
reviews our actual and forecasted operating performance; and
considers financial aspects of proposed mergers, acquisitions, divestitures, strategic investments, collaborations, and joint ventures.


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Other Committees In addition to the standing committees described above, members of the Board may meet on an ad hoc basis to discuss and approve matters through other committees that have been previously established by the Board. Such committees may address such matters as succession planning and crisis response.


SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act and the regulations thereunder require certain of our officers, as well as our directors and persons who own more than 10% of a registered class of our equity securities (collectively, the “reporting persons”) to file reports of ownership and changes in ownership with the SEC and to furnish us with copies of these reports. Based solely on our review of the copies of these reports within a prescribed period of time and written representations we received from the reporting persons, we believe that all filings required to be made by the reporting persons during or with respect to fiscal year 2021 were made on a timely basis.




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Item 11. Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

In this section, we provide a detailed description of our compensation programs, including the underlying philosophy and strategy, the individual elements, the methodology and processes used by the Board and the Compensation Committee to make compensation decisions, and the relationship between AFI’s performance and compensation delivered in fiscal year 2021. The discussion in this Compensation Discussion and Analysis (“CD&A”) focuses on the compensation of individuals serving in the roles of Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and the next three most highly compensated senior executives for the fiscal year 2021, and all additional individuals for whom disclosure is required by Item 402(a)(3) of Regulation S-K. These individuals, referred to as AFI’s NEOs, were:

Michel S. Vermette, President and CEO
Amy Trojanowski, Senior Vice President, Chief Financial Officer
Christopher S. Parisi, Senior Vice President, General Counsel, Secretary & Chief Compliance Officer
Brent A. Flaharty, Senior Vice President, Chief Customer Experience Officer
John C. Bassett, Senior Vice President, Chief Human Resources Officer

OUR EXECUTIVE COMPENSATION PROGRAM

Philosophy and Objectives

Our long-term success and growth depend on attracting and retaining highly capable global business leaders with the experience and skills to deliver on our transformation strategy in a volatile and changing market environment. Our executive compensation programs are designed to attract, motivate and retain those high-quality leaders by rewarding them when they deliver long-term sustainable stockholder value. In developing and maintaining our executive compensation program, the Committee focuses on the following key objectives:

Align executive interests with stockholders’ interests to maximize long-term value creation;

Create a strong link between pay and performance by placing a significant portion of compensation ‘at risk’ based on performance against pre-established goals; and

Structure sufficiently competitive compensation packages globally, to enable access to high-quality executives in a highly competitive talent environment.

Consistent with our compensation philosophy, the compensation program is designed to provide competitive target total direct compensation opportunities for our senior executives and link actual compensation with performance. Our compensation program consists of:

Base salary

Short-term cash incentive award made annually (if earned) based on the relative achievement of annual goals under our AIP

Annual grants under our Long-term Incentive Plan, which contain a mix of performance and time-vested awards

How We Make Compensation Decisions

The Compensation Committee is responsible for executive compensation program design and the decision- making process relative to NEOs specifically, and broadly, as these programs apply to other senior leaders and participating employees. The Committee solicits input from the independent members of the Board, the CEO, other members of management, and its independent compensation consultant to assist with its responsibilities. The following summarizes the roles of each of the key participants in the executive compensation decision- making process.







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Roles of Key Participants

Management Development and Compensation Committee of the Board of Directors Comprised of independent members of the Board.
 
Sets the philosophy and principles that guide the executive compensation program.
 
Oversees the design of our executive compensation programs in the context of our culture, competitive practices, legal and regulatory landscape, and governance trends.
 
Reviews and approves short- and long-term incentive compensation design, including performance goals and the reward consequences for delivering above or below target performance.
 
Reviews our leadership development programs and succession planning for CEO and other senior executive positions.
 
Reviews and approves corporate goals and individual objectives relevant to the compensation of the CEO, evaluates the CEO’s performance relative to those goals and objectives, and recommends CEO compensation to the independent directors based on the evaluation.
 
Oversees the evaluation of the other senior executives and establishes their compensation levels in collaboration with the CEO.
Independent Members of the Full Board of Directors Participate in the performance assessment process for the CEO.
 
Approve CEO employment and compensation decisions, including base salary, AIP awards and LTIP awards.
Independent Compensation Consultant Provides analysis, independent advice and recommendations with regard to executive compensation.
 
Attends Committee meetings, as requested, and communicates between meetings with the Committee Chair.
 
Advises the Committee on market trends, regulatory issues and developments and how they may impact AFI’s executive compensation programs.
 
Provides the Committee with peer group development recommendations.
CEO Provides input to the Committee on senior executive performance and compensation recommendations other than for himself.

Independent Compensation Consultant
The Compensation Committee has engaged Willis Towers Watson as its independent consultant on executive compensation matters. At the request of the Committee, in addition to providing general executive compensation advice outlined above, Willis Towers Watson performed the following services during 2021:

Provided information on executive compensation trends and external developments, including regulatory changes.

Provided a competitive evaluation of total compensation for the NEOs, as well as overall compensation program share usage, dilution, and LTIP expense.

Reviewed the peer group used for market analyses.
Reviewed the competitiveness of actual pay delivered in relation to performance as compared to the peer group.


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Provided advice on the alignment between the AIP and LTIP performance metrics and the Company’s operating plan and stockholder value creation.

Provided recommendations on CEO total compensation.

Reviewed recommendations for our CEO’s compensation in relation to the other NEOs.

Reviewed Committee agendas and supporting materials in advance of each meeting and raised questions or issues with management and the Committee Chair, as appropriate. Provided guidance and recommendations on incentive plan design, including the rigor of metrics and goals.

Provided guidance and recommendations on incentive plan design, including the rigor of metrics and goals.

Reviewed drafts and commented on this CD&A and the related compensation tables.


AFI paid Willis Towers Watson approximately $224,218 for these services.

Willis Towers Watson also provided additional services unrelated to executive compensation during 2021. These services included actuarial and plan administration services for our Canadian pension plan. The aggregate fees paid for these services in 2021 were approximately $207,146. These services were approved by management in the ordinary course of business, and the Committee did not approve such services.

The Committee determined in 2021 that the work of Willis Towers Watson did not raise any conflicts of interest. In making this assessment, the Committee considered the independence factors enumerated in Rule 10C-1(b) under the Exchange Act and corresponding rules of NYSE, including the nature of the additional services that Willis Towers Watson provides, the level of fees received from us as a percentage of Willis Towers Watson’s total revenue, the policies and procedures employed by Willis Towers Watson to prevent conflicts of interest, and whether the individual Willis Towers Watson advisers to the Committee own any Common Shares of the Company or have any business or personal relationships with members of the Committee or our senior executives. After considering all of the factors required by the NYSE rules and all other factors relevant to Willis Towers Watson’s independence from management, the Committee has determined that Willis Towers Watson is independent.

Peer Group

Our peer group is composed of companies with business models and operations comparable to our own and companies that we believe have a similar financial and operational profile. Metrics used to select our peer group include revenue, market capitalization, business model comparability, global presence and competition for executive talent. We believe that our peer group reflects the type and complexity of business risks managed by our NEOs and that we compete with many of the companies in our peer group for executive talent.

In 2021, the Committee, in consultation with its independent compensation consultant, evaluated the continuing appropriateness of our peer group. Following its review, the Committee approved retaining the existing peer group. Our 2021 peer group, as determined by the Committee, was as follows:
2021 Peer Group
American Woodmark Corp Huttig Building Products, Inc.
Apogee Enterprises, Inc. Insteel Industries, Inc.
CSW Industrials, Inc. Interface, Inc.
Forterra, Inc. Glatfelter Corp.
Gibraltar Industries, Inc. PGT Innovations, Inc.
Griffon Corporation Quanex Building Products Corp.







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The Committee reviewed peer group proxy statement and published compensation survey data in evaluating our NEOs’ pay and published compensation survey data in evaluating our other senior executives’ pay. When assessing pay levels, the Committee also reviews the relative positioning of our senior executives with each other. In 2021, the Committee’s consultant advised the Committee that our overall competitive positioning for executive pay remained aligned with our pay for performance compensation philosophy.

Compensation Program Elements

Base Salary

The Board determined that NEOs would not receive base salary increases and maintained NEO salaries at 2020 levels.

Name Base Salary ($)
Michel Vermette 650,000 
Amy Trojanowski 425,000 
Christopher Parisi 339,722 
Brent Flaharty 332,000 
John Bassett 295,749 

2021 Annual Incentive Plan Design and Payouts

The Committee approves the performance goals and incentive levels for each of our NEOs under our AIP. The performance goals include various levels of performance, including a minimum, target and a maximum. Senior executives may receive up to a maximum of 180% of the target incentive if we exceed target on the corporate financial performance metrics. The performance metrics selected for 2021 continued to be Net Sales (40% of total AIP opportunity) and Gross Profit (40% of total AIP opportunity). The Company added three strategic goals, representing 20% of the Target Opportunity, that directly supported the transformation objectives. These goals have a maximum payout level of 100% of Target.

Sales directly to the builder channel (7% of AIP opportunity)

Manufacturing efficiency (7% of AIP opportunity)

Human capital, consisting of Employee Net Promoter Score ("eNPS") determined by our engagement surveys (3% of AIP opportunity), and key employee retention (3% of AIP opportunity)


Performance Metric Minimum Performance Level

(Payout 50% of Target)
Target Performance Level

(Payout 100% of Target)
Maximum Performance Level

(Payout 200% of Target)
Actual Performance

Net Sales
$628M $643M $675M $649.9M

Gross Profit
$125M $129M $137M $74M

Sales Directly to Builder Channel
$74M $76M $77M

Manufacturing Efficiency
70% 73% 70.3%

Human Capital
eNPS 59% 62% 52%
Retention
65% 80% 80%






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The AIP payouts approved by AFI’s Board were calculated at 61.25% under the AIP and are set forth below:

NEO
2021 Actual Base Salary ($)
Target Incentive (percent of base salary)
Target Incentive ($)
Maximum Incentive Opportunity ($)
Committee- Approved Payout (percent of Target)
Actual AIP Payout ($)
Michel Vermette 650,000 100  % 650,000 1,170,000 61.25 398,125 
Amy Trojanowski 425,000 65  % 276,250 497,250 61.25 169,204 
Christopher Parisi 339,722 55  % 186,847 336,325 61.25 114,444 
Brent Flaharty 332,000 55  % 182,600 328,680 61.25 111,843 
John Bassett 295,749 50  % 147,875 266,176 61.25 90,574 

2021 Long-Term Incentive Plan Design

Our 2021 LTIP grants were comprised of Performance Stock Units (“PSUs”), time-based Restricted Stock Units (“RSUs”) and time-based cash awards. The PSUs, which represent 70% of the NEOs’ long-term incentive opportunity, are cliff-vested after three years if they meet defined share price hurdles. The RSUs, which represent 20% of the NEOs’ long-term incentive opportunity, vest ratably over three years. The cash awards are cliff vested after two years. The level of grant was based on the average of AFI’s share price over the twenty trading days prior to the grant.

Share price for vesting of the PSU grants will be measured by the 20-day trading average following the 2024 release of 2023 full year and Q4 earnings. The PSU grants have the following payout schedule:

Performance Achievement Level
Vesting as a Percent of Target
Share Price Hurdle
Minimum 50  % $ 7.25 
Threshold 75  % $ 8.75 
Target 100  % $ 10.25 
Maximum 125  % $ 11.75 

The PSUs granted to our NEOs and other executives who have share ownership guidelines have a one-year, post-vesting holding period for any portion of the grant that vests above target, such that the vested above-target PSUs will not be available to be sold until the one-year anniversary following the vesting date of the PSUs, subject to limited exceptions. AFI does not pay a dividend; however, should it start paying dividends, any such dividend equivalents payable in connection with the PSUs are paid in cash.

Each NEO’s LTIP target was based on a percentage of salary. Target 2021 LTIP grants for our NEOs were as follows:

NEO
2021 LTIP Target as a Percent of Base Salary
Michel Vermette 200  %
Amy Trojanowski 100  %
Christopher Parisi 85  %
Brent Flaharty 75  %
John Bassett 75  %

Equity awards are subject to vesting, forfeiture and clawback provisions, as described in more detail below and in the sections following the Summary Compensation Table. Forfeiture and clawback provisions serve as a means to redress detrimental behavior by current and former employees. For additional information about our long-term incentive awards, see the narrative discussion titled “Stock Awards and Option Awards (Columns (d) and (e))” following the Summary Compensation Table below.

Prior Period LTIP Performance-Based Awards Vesting in 2021

The 2019 LTIP award performance period ended on December 31, 2021. The Free Cash Flow and EBITDA performance targets for these three-year cliff-vested awards were not met at the close of the performance period and the awards were cancelled without vesting.



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ADDITIONAL INFORMATION REGARDING OUR COMPENSATION PROGRAMS

Qualified and Nonqualified Defined Benefit Pension Plans

Mr. Bassett participates in our qualified defined benefit pension plan, the Retirement Income Plan (“RIP”), and the related Retirement Benefit Equity Plan (“RBEP”). Mr. Bassett’s benefits under the AFI RIP and RBEP were frozen effective February 2006. No other NEOs participate in the RIP or RBEP.

Qualified Defined Contribution Savings Plan and Nonqualified Deferred Compensation Plan

We provide a 401(k) plan with a match of 100% on the first 4% of employee contributions and a 50% match on the next 4% of employee contributions. All NEOs are eligible to participate in the 401(k) plan.

We offer an unfunded, nonqualified deferred compensation plan, the Nonqualified Deferred Compensation Plan (“NQDCP”). This plan restores Company contributions that would be lost due to Internal Revenue Code limits on compensation and contributions under the 401(k) plan and allows participants to voluntarily elect to defer up to 25% of eligible base salary earnings and 25% of the AIP payment until a future date. Participants receive a Company match identical to the 401(k) plan Company match up to a maximum contribution of 6% of eligible earnings.

Perquisites

We provide limited perquisites to our NEOs. These perquisites consist solely of executive long-term disability policies to reflect the compensation levels of our executives. Executive physicals were eliminated in 2021.

Change in Control (“CIC”) Agreements and Severance Pay Plan for Executives

Other than our CEO (who has an Employment Agreement, and whose CIC payments are set forth in “Qualifying Involuntary Termination in Connection with a Change in Control”, below), our NEOs have Change in Control Severance Agreements (“CIC Agreements”) with the Company, and they participate in the Severance Pay Plan for Executive Employees, which provides severance in the absence of a change in control.

None of the CIC agreements provides for tax gross-ups under Sections 280G and 4999 of the Code, nor does Mr. Vermette’s Employment Agreement. For more information regarding our NEO CIC Agreements, please refer to “CIC Agreements” below.
For more information regarding our Severance Pay Plan for Executive Employees, please refer to “Involuntary Termination without Cause in the Absence of CIC”, below.

Stock Ownership Guidelines

The Committee maintains stock ownership guidelines for our NEOs to ensure that our NEOs have significant long-term value creation tied to stock price appreciation. Ownership requirements and progress toward their achievement are reviewed annually as part of the compensation planning process. A significant percentage of each NEO’s compensation is directly linked to our stock price appreciation.

The stock ownership guidelines for our NEOs are calculated as a fixed number of shares using a required ownership multiple, the NEO’s annualized base salary as of a fixed date, and the stock price as of a fixed date. The required ownership multiple is five times annual base pay for our CEO and three times annual base pay for our other NEOs. Shares may be counted toward the policy’s ownership guidelines, whether held directly by the NEO or owned jointly, provided the shares are vested. For stock options, the fair market value of our stock must exceed the exercise price (“in-the-money” options). We include vested, unexercised, “in-the-money” stock options in the calculation. The NEOs are required to retain 100% of net shares acquired upon future vesting or exercise of equity awards until the ownership guidelines are met. As of December 31, 2021, none of our NEOs has satisfied the ownership requirement, and therefore have not sold any net shares.












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Recoupment Policy

In order to further align management’s interests with the interests of stockholders and support good governance practices, the Board maintains the Armstrong Flooring, Inc. “Executive Incentive Recoupment Policy (the “Clawback Policy”). Pursuant to the Clawback Policy, in the event of a material restatement of our financial results, the Board, the Committee or another Board committee may, to the extent permitted by applicable law and as the Board or a committee may in its sole discretion deem appropriate and in the best interests of the Company, seek the recoupment or forfeiture of any incentive-based compensation paid or awarded to current and former senior executives and any other officer who engaged in fraud, negligence or other misconduct that resulted in payment in excess of the amount that would have been paid or awarded to the officer under the restated financial statements. The Clawback Policy includes a look-back period of three years preceding the payment or award date, as applicable, of the incentive compensation unless the restatement resulted from fraud or misconduct by the officer, in which case the three-year look-back limitation would not apply.

To the extent that in the future the SEC adopts rules for clawback policies that require changes to our policy, we will revise our policy, if appropriate.

Prohibition on Hedging and Derivative Trading

All members of our Board and senior management, including our NEOs and certain other employees, are required to clear any transaction involving our securities with our General Counsel prior to entering into such transaction.

By policy, we prohibit derivative transactions in our securities, including:

Trading in puts, calls, covered calls, or other derivative products involving our securities;

Engaging in any hedging or monetization transaction with respect to our securities; and

Holding Company securities in a margin account or pledging our securities as collateral for a loan.

We permit senior management to utilize stock trading plans that comply with Rule 10b5-1 of the Exchange Act. All such plans are subject to our pre-approval, and the ability to enter into such plans remains subject to prohibitions on trading while in possession of material nonpublic information.

Assessment of Risk

We monitor the risks associated with our compensation program on an ongoing basis. In 2021, it was the assessment of the Committee, with the assistance of Willis Towers Watson and management, that our compensation programs are designed and administered with an appropriate balance of risk and reward and, by their design, do not encourage executives to take unnecessary, excessive, or inappropriate risks and do not create risks reasonably likely to have a material adverse effect on the company. In arriving at this determination, the Committee considered the following with respect to our compensation programs:

Whether the underlying pay philosophy, peer group and market positioning to support business objectives were appropriate.

Effective balance in:

Cash and equity mix;

Short- and long-term performance focus, with performance goals tied to profitability and absolute stock price performance;

Use of multiple performance metrics;

Performance objectives established using a reasonable probability of achievement; and

PSUs tied to operating performance over a multi-year performance period.




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The Committee’s ability to exercise discretion to reduce AIP amounts earned based on subjective evaluations of quality of earnings and individual performance.

The presence of meaningful risk mitigation policies, such as stock ownership guidelines, clawback provisions, and independent Committee oversight, and prohibitions on hedging against and pledging of our Common Shares.

Tax Deductibility of Compensation

Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount a public company may deduct for compensation paid to the company’s CEO, CFO or any of the company’s three other most highly compensated employees, as well as persons who were such “covered employees” in a prior year after 2016.

As in prior years, the Committee considers both tax and accounting treatment in establishing our compensation program. The Committee retains discretion to authorize compensation arrangements that are not tax deductible, as the Committee deems appropriate.

COMPENSATION COMMITTEE REPORT

The Management Development and Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management. Based on this review and discussion, the Management Development and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this statement.

Submitted by the Management Development and Compensation Committee

Michael F. Johnston (Chair)
Kathleen S. Lane
James C. Melville

This report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor incorporated by reference into any future SEC filing under the Securities Act of 1933 or the Exchange Act, except to the extent that we specifically incorporate it by reference therein.

CEO Pay Ratio

As required by Item 402(u) of Regulation S-K, and as a result of rules adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC requires disclosure of the CEO to median employee pay ratio. We identified the median employee in 2021 based on our review of all full-time, part-time, temporary, seasonal, and foreign employees employed by AFI and our subsidiaries. The compensation of permanent employees who were not employed for the entire year, such as new hires, was annualized. We applied a currency exchange rate for employees not paid in U.S. dollars using a 12-month average. We selected our median employee by (i) calculating the annual compensation described below for each of our employees, and (ii) ranking the annual compensation of all employees except for the CEO from lowest to highest.

To determine our median employee, we considered the following compensation elements, which we determined are the most commonly used elements of compensation for our employees worldwide:

Salary

Annual Incentive Plan payments

Sales Incentive Plan payments

Long-term incentive grant values

We performed a new analysis to determine the median employee for 2021.

Mr. Vermette’s total compensation for 2021 as shown in the Summary Compensation Table was $2,157,530 and the total compensation for the median employee in 2021 was $56,826, resulting in an estimated ratio of our CEO’s pay to the pay of our median employee for 2021 of 37 to 1. The calculation of annual total compensation of our median employee was determined in the same manner as the “Total Compensation” shown for our CEO in the Summary Compensation Table.


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2021 SUMMARY COMPENSATION TABLE

The table below sets forth the total compensation for our NEOs during 2021.

Name
Principal Position
Year
Salary
($)
Bonus
($)
Stock Awards ($)1
Non-equity Incentive Plan Compensation
($)
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)2
All Other Compensation ($)3
Total
($)
Michel Vermette
President and CEO
2021
2020
2019
650,000
650,000
197,708

325,000
500,000
1,016,925
   204,750
3,822,670
398,125  28,022 
  64,458
    9,750
2,157,530 
Amy Trojanowski Senior Vice President and CFO 2021
2020
2019
425,000
 86,932

28,253
332,452
526,000
169,204  439 24,550  951,645 
Christopher Parisi Senior Vice President, General Counsel and CCO 2021
2020
2019
339,722
339,722
337,249

293,424
225,882
  45,486
457,700
114,444 
   11,483
     3,397
   21,834
19,449
    3,397
   21,834
710,980 
Brent Flaharty Senior Vice President and Chief Customer Experience Officer 2021
2020
2019
332,000
332,000
298,152

341,300
194,775
  39,218
451,900
111,843 
11,288
    11,870
    12,934
649,906 
John Bassett Senior Vice President and CHRO 2021
2020
2019
295,749
295,749
293,596

273,937
173,511
  34,934
392,700
90,574 
   -1,019
   45,912
  100,962
22,975
     3,120
    26,830
581,790 
1The amounts reflect the aggregate grant date fair value of stock awards granted in 2021, computed in accordance with Financial Accounting Standard Board’s Accounting Standards Codification Topic 718. For more information, please refer to “Note. 4 Stock-based Compensation” in our Annual Report on Form 10-K filed with the SEC. NEOs also received LTIP Cash awards which under their terms would not vest until 2023.
2The amount shown in the “Change in Pension Value & Nonqualified Deferred Compensation Earnings” represent changes in benefit value under the RIP and RBEP. Plan benefits for Mr. Bassett have been frozen. The Company does not provide above-market rates in its deferred compensation programs.
3The amounts shown in the “All Other Compensation” column include: (i) company matching contribution to the AFI 401(k) plan and the NQDCP; and (ii) personal benefits (“perquisites”) consisting of medical examination expense reimbursements to the extent the total perquisite value is $10,000 or greater per individual. For each NEO, the total value of all perquisites did not reach $10,000 and is not included in the amount shown.

The following table provides the detail for the amounts reported in the All Other Compensation column for 2021 for each NEO:

Name
Perquisites and other Benefits ($)
Company Match Savings Plan Contributions ($)
Severance ($)
Total ($)
Michel Vermette 18,958
Amy Trojanowski 11,980
Christopher Parisi 11,873
Brent Flaharty 11,288
John Bassett 15,419
















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GRANTS OF PLAN-BASED AWARDS

The table below shows information on awards granted to our NEOs under our AIP and LTIP in 2021. There is no assurance that the grant date fair value of stock awards will be realized by the executive.

Estimated Future Payouts Under Non-Equity Incentive Plan Awards1
Estimated Future Payouts Under Equity Incentive Plan Awards2
Name Grant Date Threshold (#) Target (#) Maximum (#) Threshold (#) Target (#) Maximum (#) All Other Stock Awards: Number of Shares of Stock or Units (#)
Grant Date Fair Value of Stock and Option Awards ($)3
Michel Vermette
N/A
4/1/21
325,000 650,000 1,170,000 86,832 173,664 217,080 49,618 1,016,925
Amy Trojanowski
N/A
4/1/21
138,125 276,250 497,250 28,388 56,775 79,969 16,221 332,452
Christopher Parisi
N/A
4/1/21
93,424 186,848 336,327 19,288 38,575 48,219 11,022 225,882
Brent Flaharty
N/A
4/1/21
91,300 182,600 328,680 16,632 33,263 41,579 9,504 194,575
John Bassett
N/A
4/1/21
73,937 147,874 222,174 14,816 29,631 37,039 8,466 173,511

1The amounts shown represent the 2021 AIP threshold, target and maximum opportunity for each NEO.
2Represent PSUs with share price hurdles that will vest in 2024 based on the 20-day trading average after the 2024 release of fourth quarter and full year 2022 results. The PSUs have a limited leverage model, with minimum vesting at 50% of target, mid vesting (between minimum and target) at 75% of Target, and maximum payout at 125% of target. The PSUs have a one-year, post-vesting holding period for any portion that vests above target, such that the vested above-target PSUs will not be available to be sold until the one-year anniversary following the vesting date of the PSUs, subject to limited exceptions. Any dividend equivalents payable in connection in the PSUs are paid in cash.
3Amounts represent the aggregate grant date fair value for long-term incentive equity awards granted in 2021, as calculated under the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using a Monte Carlo simulation based on the closing market price of our Common Shares on the date of the grant and the relevant share price hurdles.
































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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The table below shows the number of shares covered by exercisable and unexerciseable stock options and unvested RSUs and PSUs held by the NEOs as of December 31, 2021. Market or payout values in the table below are based on the closing price of our Common Shares as of that date, which was $1.98. The table below includes equity awards that were previously granted to NEOs by Armstrong World Industries (or “AWI”) and were converted to awards with respect to AFI stock in the spin-off from AWI. Equity Incentive Plan values represent Target performance.

Option Awards Stock Awards
Name Grant Date Number of Securities Underlying Unexercised Options Exercisable Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock that Have Not Vested Market Value of Shares or Units of Stock that Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($)
Michel Vermette
9/11/2019
3/24/2020
4/1/2021
85,838

33,079
169,959

65,496
371,4301
227,500
173,664
735,431
450,450
170,190
Amy Trojanowski
10/19/2020
4/1/2021
80,000
10,814
158,400
21,411
56,775 112,414
Christopher Parisi
2/20/2013
2/25/2014
11/7/2019
3/24/2020
4/1/2021
5,706
5,417
13.98
14.55
2/20/2023


30,000

20,682


59,400

20,268



50,540
38,575



49,529
76,378
Brent Flaharty
11/7/2019
3/24/2020
4/1/2021
40,000

6,336
79,200

12,545

43,575
33,263

86,278
65,860
John Bassett
2/28/2012
2/20/2013
2/25/2014
11/7/2019
3/24/2020
4/1/2021
7,194
8,720
7,568
11.67
13.98
14.55
2/28/2022
2/20/2023
2/28/2024



30,000

5,644



59,400

11,175




38,815
29,631




76,853
58,669

1 This PSU grant has a five-year performance period ending September 11, 2024. The PSU vesting is based on the achievement of applicable performance targets related to average share price hurdles which are reviewed annually.

OPTION EXERCISES AND STOCK VESTED

There were no stock options exercised by any of our NEOs during 2021. The following table shows the stock awards held by each of our NEOs that vested during 2021.

Stock Awards
Name
Number of Shares Acquired on Vesting (#)
Value Realized on Vesting ($)1
Michel Vermette 28,612 86,694
Amy Trojanowski 20,000 61,200
Christopher Parisi 30,380 99,547
Brent Flaharty 33,503 105,081
John Bassett 28,609 92,326

1 Represents the number of RSUs and PSUs that vested in 2021 multiplied by the share price on the date of vesting.




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PENSION BENEFITS

The only NEO eligible for pension benefits is Mr. Bassett. The table below shows the present value of accumulated benefits payable to Mr. Bassett, including the number of years of service credited to him under the RIP and RBEP as of December 31, 2021. The amounts were determined using the same interest and mortality rate assumptions used in our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021. The RIP and RBEP (which are successors to AWI plans) were closed to new salaried participants effective January 1, 2005, and were closed to existing salaried participants who did not meet the age and service requirements as of March 1, 2006. The RIP and RBEP were amended to freeze benefit accruals for salaried employees, including the NEOs, effective December 31, 2017. Mr. Bassett’s RIP and RBEP benefits were frozen February 28, 2006.

The RBEP was established to pay any benefit that cannot be paid under the RIP due to Internal Revenue Code compensation or benefits limitations. All pension benefits are paid by the Company. Benefits payable under the RIP and RBEP are based on a formula that yields an annual amount payable over the participant’s lifetime beginning at the age where the participant qualifies for an unreduced life annuity benefit. RBEP benefits are paid in the form of an annuity.

Name Plan Name
Number of Years Credited Service (#)
Present Value of Accumulated Benefit (S)
Payments During Last Fiscal Year ($)
John C. Bassett Retirement Income Plan for Employees of Armstrong Flooring, Inc. 8 379,819
Retirement Benefit Equity Plan of Armstrong Flooring, Inc. 8 19,071

Participants in the RIP may retire as early as age 55 provided the participant is vested under the plan. Participants become vested after completing five years of continuous employment having worked at least 1,000 hours in each year. Normal retirement date is the first of the month nearest the participant’s 65th birthday. Except as noted below, there is a reduction for early retirement for salaried participants who retire between the ages of 55 and 65. An employee who retires from active employment can receive an unreduced pension benefit commencing on the date of retirement if the employee’s age (minimum age 55) and total service totals 90 points (the “Rule of 90”). The unreduced Rule of 90 benefit is limited to the employee’s pension amount accrued to through 28, 2006. Employees receive credit for post-March 1, 2006, age and service for Rule of 90 eligibility.

The normal form of benefit payment is a monthly annuity. Except for payments having a lump sum present value of $10,000 or less under the RIP, no lump sum payments are permitted. Various forms of annuity payments (including life, joint and survivor, period certain and level income options) are available under the pension plans. The annuity payments for these options are determined by actuarially adjusting the life annuity pension amount for the selected form of payment. The formula for the regular life annuity pension benefit for salaried employees under the RIP is based on the following factors:

the participant’s Average Final Compensation (the “AFC”) which is the average of the three highest years of eligible compensation (base salary plus annual incentive) during the last ten years of employment with AWI and AFI;

the participant’s number of years of total service (credited years of employment with AWI and AFI) used to calculate the pension amount; and

the participant’s Adjusted Covered Compensation (the “ACC”), which is a percentage of the average Social Security tax base for the 35-year period ending with the year the participant will qualify for an unreduced Social Security pension benefit.

The unreduced annual life annuity pension is the sum of the following four calculations, each of which may not be less than zero

1. AFC x 0.009 x total service to a maximum of 35 years; plus

2. (AFC – ACC) x 0.005 x total service to 35 years; plus

3. (AFC – 2 x ACC) x 0.0015 x total service to 35 years; plus

4. AFC x 0.012 x total service over 35 years.

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To the extent the participant is eligible for a frozen ESOP Pension Account annuity benefit that can be paid from the RIP, all of the allowable portion of the calculated annuity benefit will be added to the regular pension amount.

Special provisions apply if the RIP is terminated within five years following an Extraordinary Event, as this term is defined in the RIP. Upon the occurrence of such an event, plan liabilities would first be satisfied, and then remaining plan assets would be applied to increase retirement income to employees. The amount of the increase assumes that the employee would have continued employment with AFI until retirement. Our NEO who is eligible for RIP pension benefits would be entitled to this benefit under these circumstances.

The assumptions used to calculate the actuarial present values shown in the table above are as follows:

Discount rate used to value benefit obligations equals 2.85%;

Post-Retirement Mortality using PR2012 projected from 2012 with MP2021;
EPA interest rate of 1.62%;

Retirement at age 65 or Rule of 90 eligibility, as specified.

NONQUALIFIED DEFERRED COMPENSATION

Name
Executive Contributions in 2021 ($)1
Registrant Contributions in 2021 ($)2
Aggregate Earnings in 2021 ($) Aggregate Withdrawals/Distributions ($) Aggregate Balance at 12/31/2021 ($) Aggregate Balance at 12/31/2020 ($)
Michele Vermette 119,167  45,500  28,022  249,391  56,701 
Amy Trojanowski 20,950  12,570  439  33,960 
Christopher Parisi 7,576  7,576  11,483  93,491  66,857 
Brent Flaharty
John Bassett 12,594  7,556  15,046  179,861  144,665 
1The amount in this column is also reported as either Salary or Bonus in the SCT.
2 The amount in this column is also reported in the All Other Compensation column of the SCT.

The NQDCP was established to provide benefits similar to the 401(k) plan as it applies to eligible employees whose eligible earnings (base salary plus annual incentive) exceed the Internal Revenue Code compensation limit in effect for the plan year. A participant may elect to defer up to 25% of eligible base salary earnings and up to 25% of eligible AIP payout that in 2021 exceeded $243,750. The company matching contribution is the same as that provided under the AFI 401(k) plan. Participants may transfer account balances between available investment options on a notational basis.

Participants become vested in the Company matching contributions after completing three years of continuous service in which the participant worked at least 1,000 hours in each year.

Under the NQDCP, except in the case of an unforeseeable emergency or having reached age 70, no in-service distributions are permitted. Participants can elect to receive plan benefits as a single lump sum or in 120-month installments commencing after the date of the participant’s termination. All elections must comply with the Internal Revenue Code requirements. If the total account value is less than $10,000, the entire account balance will be paid as a single lump sum distribution at the time of termination. In the event of a participant’s death, any remaining payments shall be paid to the participant’s designated beneficiary or estate.

Under the NQDCP, the company reserves the right to cause the participant to forfeit or require repayment of the Company match benefits where the participant is discharged for willful, deliberate or gross misconduct, or where the participant has engaged in conduct that is injurious to the company.












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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The tables below summarize the estimated value of the potential payments and benefits under the Company’s plans and arrangements to which each NEO would be entitled upon termination of employment under the circumstances indicated. Except for the continuation of health and welfare benefits and outplacement support, amounts would be paid as a lump sum at termination. The amounts shown assume that such termination was effective December 31, 2021 and represent the share price at that date.

The “Change in Control” column assumes that there is no limitation on payments under the “best net” provision in each CIC agreement relating to tax under Sections 280G and 4999 of the Internal Revenue Code. Under the “best net” provision, if the payments and benefits otherwise payable to an NEO would constitute excess parachute payments within the meaning of Section 280G of the Internal Revenue Code, then the Company will reduce such payments and benefits to an amount that would avoid any excise taxes under Section 4999 of the Internal Revenue Code, provided that such reduction would provide the NEO with a greater net after-tax benefit than if there were no reduction. Amounts in the “Change in Control” column are “double trigger” payments and are therefore applicable only in the event both a CIC event and either an involuntary (without Cause) termination or a termination for Good Reason under the CIC agreement occur. The 2019 PSUs did not vest and were canceled in early 2022 based on the Committee’s certification that performance did not meet the minimum goals. The Performance Shares below are valued at target. Note that there are no payouts for an involuntary termination for cause or voluntary resignation.

Michel Vermette
Reason for Termination
Program Element
Involuntary Termination without Cause or Termination for Good Reason
Change in Control
Cash Severance 2,600,000 3,250.000
Health & Welfare Benefit Continuation 60,706 60,706
Outplacement Support 30,000 30,000
Pro-rated Bonus 650,000 650,000
Accelerated Long-Term Incentives
Performance Shares 261,261 794,305
Restricted Stock 18,883 235,456
Stock Options
LTIP Cash Grant 341,250 520,000
Total 3,962,100 5,540,467


Amy Trojanowski
Reason for Termination
Program Element
Involuntary Termination without Cause or Termination for Good Reason
Change in Control
Cash Severance 1,051,875 1,402,500
Health & Welfare Benefit Continuation 38,072 44,880
Outplacement Support 20,000 30,000
Pro-rated Bonus 276,250 276,250
Accelerated Long-Term Incentives
Performance Shares 112,415
Restricted Stock 9,900 179,812
Stock Options
LTIP Cash Grants 42,500
Total 1,396,097 2,088,357





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Christopher Parisi
Reason for Termination
Program Element Involuntary Termination without Cause or Termination for Good Reason Change in Control
Cash Severance 789,854 1,053,138
Health & Welfare Benefit Continuation 37,929 50,572
Outplacement Support 20,000 30,000
Pro-rated Bonus 186,848 186,848
Accelerated Long-Term Incentives
Performance Shares 58,040 176,448
Restricted Stock 4,950 100,350
Stock Options
LTIP Cash Grants 7,557 115,516
Total 1,105,178 1,712,872
Brent Flaharty
Reason for Termination
Program Element Involuntary Termination without Cause or Termination for Good Reason Change in Control
Cash Severance 771,900 1,029,200
Health & Welfare Benefit Continuation 38,718 51,624
Outplacement Support 20,000 30,000
Pro-rated Bonus 182,600 182,600
Accelerated Long-Term Incentives
Performance Shares 50,041 152,139
Restricted Stock 6,599 91,745
Stock Options
LTIP Cash Grants 65,362 99,600
Total 1,135,220 1,536,908

John Bassett
Reason for Termination
Program Element Involuntary Termination without Cause or Termination for Good Reason Change in Control
Cash Severance 665,436 887,248
Health & Welfare Benefit Continuation 37,904 50,538
Outplacement Support 20,000 30,000
Pro-rated Bonus 147,875 147,875
Accelerated Long-Term Incentives
Performance Shares 44,574 135,523
Restricted Stock 4,950 70,575
Stock Options
LTIP Cash Grants 58,222 88,721
Total 978,961 1,410,480





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Resignation or Involuntary Termination for Cause

No incremental benefits are provided to any of our NEOs in the event of a voluntary resignation or an involuntary termination for Cause.

Involuntary Termination without Cause in the Absence of CIC

We maintain the Executive Severance Plan to provide severance pay in a situation other than a CIC. All NEOs, except for Mr. Vermette, participate in the Executive Severance Plan. Mr. Vermette’s severance payments and benefits are set forth in his employment agreement and described below.

The Executive Severance Plan provides each NEO with severance payments and benefits in the event of the NEO’s termination of employment by the Company without Cause, including (1) due to a reduction in force; (2) due to the elimination of the NEO’s position; or (3) for any reason approved by the Executive Severance Plan administrator, provided that the NEO is not provided with Reasonable Alternative Employment (described below). For purposes of the Severance Plan, “Cause” shall mean any of the following conduct by a NEO, as determined in the sole discretion of the Committee: (a) conviction of a felony or a crime involving moral turpitude; (b) fraud, dishonesty, misrepresentation, theft or misappropriation of funds with respect to the company; (c) violation of AFI’s Code of Conduct or employment policies, as in effect from time to time; (d) breach of any written non-competition, confidentiality or non-solicitation covenant of the NEO with respect to the company; or (e) gross misconduct in the performance of the NEO’s duties with the company. “Reasonable Alternative Employment” shall mean an offer of employment where (i) the base salary is equal to at least 90% of the NEO’s current base salary, and (ii) the distance between the NEO’s residence or current place of employment and the new place of employment is within 50 miles, or the distance of the NEO’s current commute, whichever is greater.

Severance payments and benefits under the Executive Severance Plan include the following, provided that the NEO delivers an effective release of claims in favor of the Company and its affiliates and executes a restrictive covenants agreement containing non-competition, non-solicitation, confidentiality and non-disparagement covenants:

In the case of the CEO (if the CEO participates in the Executive Severance Plan), a lump sum payment equal to two times the sum of the CEO’s base salary and target annual incentive under the AIP, and in the case of each other NEO, a lump sum payment equal to one and one-half times the sum of the NEO’s base salary and target annual incentive under the AIP.

Each NEO can participate as an “active employee” under the applicable health, dental and vision plans as of the NEO’s termination date, less the active monthly employee rate for the severance period.

A lump sum prorated AIP for the fiscal year in which the NEO’s termination date occurs, calculated based on actual Company performance through the end of the fiscal year and the period that the NEO was employed with the Company during such fiscal year. The prorated AIP, if any, will be paid at the same time annual incentives are paid to active employees under the AIP.

Up to 12 months of outplacement services, not to exceed $20,000 in cost.

Information in the tables above assumes that any termination was effective December 31, 2021 and is based on the program parameters in effect as of December 31, 2021, as outlined above.

Qualifying Involuntary Termination in Connection with a Change in Control

All NEOs, except for Mr. Vermette, have CIC Agreements. Under the CIC Agreement, the NEO is entitled to receive severance payments upon involuntary termination without Cause or resignation for Good Reason within two years following a CIC, or within six months preceding a CIC if the termination is in connection with a potential CIC.

“Cause” is defined in the CIC Agreements as (i) the willful and continued failure by the NEO to substantially perform the NEO’s duties after a written demand for substantial performance is delivered to the NEO by the Board, or (ii) the willful engaging by the NEO in conduct which is demonstrably and materially injurious to the company, or (iii) the NEO’s conviction of any felony.





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Resignation for Good Reason as defined in each NEO’s individual CIC agreement means:

(i)the assignment to the NEO of any duties inconsistent with the NEO’s status as an executive officer of the Company or a substantial adverse alteration in the nature or status of the NEO’s responsibilities, including diminution as a result of the Company no longer being a publicly traded corporation following the CIC;

(ii)a reduction by the Company in the NEO’s annual base salary;

(iii)relocation of the NEO’s principal place of employment to a location more than 50 miles from the principal place of employment immediately before the CIC;

(iv)failure by the Company to pay to the NEO any portion of the NEO’s current compensation; or

(v)by the Company to continue in effect any compensation or benefit plan in which the NEO participates immediately prior to a CIC which is material to the NEO’s total compensation unless an equitable arrangement has been made.

CIC Agreements – Key Terms

We will not provide tax gross-ups under Sections 280G and 4999 of the Internal Revenue Code to any of our NEOs. Set forth below are certain key terms of the CIC Agreements (including those set forth in Mr. Vermette’s employment agreement):

Term of Agreement
Fixed one-year term that automatically renews for an additional year unless notice is given at least 90 days prior to the anniversary of intent not to renew; term automatically continues for two years if the CIC occurs during term.
Severance Benefits
2.5 times base salary plus target AIP for Mr. Vermette, 2 times base salary plus target AIP for Ms. Trojanowski and Messrs. Flaharty, Parisi and Bassett.
Pro rata AIP
Prorated target AIP for year of termination
Health & Welfare Benefit Continuation
Continued life, disability, accident and health insurance benefits (including for the NEO’s dependents) for 24 months following the NEO’s termination date, less the active employee costs for such benefits.
Outplacement
Up to $30,000 in outplacement fees assistance
Accelerated Equity Vesting
Double-trigger accelerated vesting (requires a CIC and qualifying termination of employment) for stock options, RSUs, PSUs and other equity grants to vest if assumed by the acquirer; the Company may cash out equity grants if not assumed by the acquirer.
LTIP Cash Awards
Double-trigger accelerated vesting (requires a CIC and qualifying termination of employment) for Cash LTIP grants
Restrictive Covenants
Non-competition and non-solicitation restrictions for twenty-four (24) months post-employment in the case of Mr. Vermette and eighteen (18) months for other NEOs
Parachute Tax
Any amounts paid under the CIC Agreement will be reduced to the maximum amount that can be paid without being subject to the excise tax imposed under Internal Revenue Code Section 4999, but only if the after-tax benefit of the reduced amount is higher than the after-tax benefit of the unreduced amount.

“Change in Control” (or “CIC”) generally means the occurrence of one of the following events:

I. Any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 35% or more of the combined voting power of the Company’s then outstanding securities, excluding any person who becomes such a beneficial owner in connection with a transaction described in Clause (i) of Paragraph (III) below; or



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II. the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least 2/3 of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or;

III. there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the Board of Directors of the company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a subsidiary, the ultimate parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the company or its affiliates) representing 35% or more of the combined voting power of the Company’s then outstanding securities; or

IV. the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the Board of Directors of the entity to which such assets are sold or disposed or any parent thereof.

Notwithstanding the foregoing, a CIC shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the Common Shares of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Securities authorized for issuance under equity compensation plans as of December 31, 2021.

(a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights (b) Weighted-average exercise price of outstanding options, warrants, and rights (c) Number of securities remaining available for future Issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holder(s)
3,043,975 (1)
$12.86 (2)
2,655,843 (3)
Equity compensation plans not approved by security holder(s) Not Applicable
Totals 3,043,975 $12.86 2,655,843
(1)Includes RSUs, PSAs, PSUs and stock options to purchase Common Shares granted under the Company’s 2016 LTIP (including awards granted under the Armstrong World Industries, Inc. 2011 Long-Term Incentive Plan (or predecessor plans) and converted to awards on Common Shares of the Company and assumed effective as of April 1, 2016 under 2016 LTIP) and 2016 Directors Stock Unit Plan.
(2)Represents the weighted-average exercise price of the outstanding stock options only; the outstanding RSUs and PSUs are not included in this calculation.
(3)Reflects shares available pursuant to the issuance of stock options, RSUs, PSUs, or other stock-based awards under the 2016 LTIP and 2016 Directors Stock Unit Plan. This number includes all shares that have been and may be issued under the LTIP since its inception in 2016 including awards granted under the Armstrong World Industries, Inc. 2011 Long-Term Incentive Plan (or predecessor plans) and converted to awards on Common Shares of the Company and assumed effective as of April 1, 2016 under the 2016 LTIP.












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COMPENSATION OF NONEMPLOYEE DIRECTORS

In establishing our nonemployee director compensation program, including the overall value of compensation and the mix of cash and equity, the Board analyzes competitive market data and any underlying director compensation trends generally, and compares our program to those of similarly sized companies in comparable industries. Our nonemployee directors are compensated through a combination of annual cash and equity retainers. The annual equity retainers are paid in the form of restricted stock unit awards which constitute more than fifty percent (50%) of nonemployee directors’ overall annual retainer value in order to align their compensation with the interests of stockholders. The Board believes that this level of compensation supports the Company’s ability to attract nonemployee directors with suitable backgrounds and experiences. A director who is an officer or employee of the Company or its subsidiaries is not compensated for service on the Board or on any committee of the Board. Nonemployee directors are reimbursed for business expenses related to attendance at Board and committee meetings and for attendance at qualified third-party director education programs. Chair positions receive a fee for such additional services. Directors do not receive meeting fees or perquisites.

The Governance Committee, which is composed solely of independent directors, has the primary responsibility to review and consider any revisions to the nonemployee director compensation program. The Governance Committee reviewed the nonemployee director compensation program in 2021 with assistance from the Compensation Committee’s independent consultant; the review included an assessment of related trends and benchmarking against peer programs. There have been no material changes to the nonemployee director compensation program since 2016.

The following table describes the elements of the nonemployee director compensation program:

2021/2022 NONEMPLOYEE DIRECTOR RETAINERS
CASH
Annual Retainer (1)
$ 90,000 
Chair Fees (1):
Board Chair $ 60,000 
Audit Committee Chair $ 20,000 
Management Development and Compensation Committee Chair $ 20,000 
Nominating and Governance Committee Chair $ 20,000 
Finance Committee Chair $ 20,000 
Special Assignment Fees (2)
$ 2,500  (3)
EQUITY (4)
Annual Retainer (Board Chair)
$ 160,000 
Annual Retainer $ 105,000 

(1)paid in quarterly installments, in arrears
(2)may be paid in connection with one-on-one meetings with the CEO; plant and/or field visits not part of a regular Board meeting; or other non-scheduled significant activities
(3)per diem; $1,250 for less than four hours
(4)annual (or pro-rated) grant of restricted stock units; effective as of the first business day following the date of the annual meeting of stockholders, and the amount of each grant is determined by the NYSE closing price of our Common Shares on such date.

NONEMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES

Our nonemployee directors are subject to robust stock ownership guidelines. Annual restricted stock unit awards constitute more than fifty percent (50%) of the nonemployee directors’ annual retainers. Nonemployee directors are required to acquire and retain Common Shares (including restricted stock units) with an aggregate value equal to at least five (5) times their annual cash retainer within five (5) years of joining the Board. No nonemployee director has sold any Common Shares since the Company’s inception following the spinoff from Armstrong World Industries, Inc. (“AWI”) in April 2016 (the “Separation”).







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NONEMPLOYEE DIRECTOR COMPENSATION TABLE – 2021/2022

Name
(a)
Fees Earned or Paid in Cash ($) (b)
Stock Awards ($)(1) (c)
Total ($)
(h)
Mr. Johnston
110,000
105,000
215,000
Ms. Lane
90,000
105,000
195,000
Mr. Liaw
110,000
105,000
215,000
Mr. Malone
110,000
105,000
215,000
Mr. McWilliams
150,000
160,000
310,000
Mr. Melville
110,000
105,000
215,000

(1)Represents amounts that are in units of our Common Shares. The amounts reported represent the aggregate grant date fair value for Director RSUs granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our Common Shares on the date of the grant.

NONEMPLOYEE DIRECTORS – AGGREGATE OWNERSHIP

The table below sets forth, as of April 19, 2022 additional detail as to each nonemployee director’s ownership and rights to ownership in the Company’s equity.

Name
Common Shares (1)
Vested Restricted Stock Units (2)
Unvested Restricted Stock
Units (3)(4)
Total Equity
Total Value (5)
Michael F. Johnston 124,949 18,229 143,178 $ 243,403 
Kathleen S. Lane 16,242 58,433 18,229 92,904 157,937 
Jeffrey Liaw 17,396 63,605 18,229 99,230 168,691 
Michael W. Malone 37,659 55,069 18,229 110,957 188,627 
Larry S. McWilliams 76,533 66,750 27,777 171,060 290,802 
James C. Melville 2,114 58,433 18,229 78,776 133,919 
Total 149,944 427,239 118,922 696,105 $ 1,183,379 

1.Includes, for Mr. Melville, shares acquired in a pro rata distribution by AWI as a result of the Separation (every 2 shares of AWI common stock resulted in 1 Common Share). In the case of each of Mr. McWilliams and Mr. Liaw, Common Shares acquired following the vesting of restricted stock units (“Director RSUs”) granted to him as part of his retainer for services in 2016 and 2017, and 2018 and 2019, respectively. In the case of each of Ms. Lane (16,242), Mr. Malone (37,659) and McWilliams (54,000), includes open market purchases (March 2020).
2.In all cases, includes Director RSUs that have vested but are not yet acquirable by the director which were granted under the AFI 2016 Directors Stock Unit Plan and payment (1 Common Share for each Director RSU) was deferred under the terms of the Plan. Also includes, in the cases of Messrs. Johnston and Liaw, Director RSUs that have vested but are not acquirable by them under the director compensation program of AWI prior to the Separation; amounts were adjusted based on exchange ratio calculated based on the closing price of AWI’s common stock on April 1, 2016 and the opening price of the Common Shares on April 4, 2016, both as reported on the NYSE. The Exchange Ratio was 3.70248. Vested units will be acquirable by the director (x) for units granted prior to June 2011, six (6) months following the termination of the director’s service on the Board, and, (y) for units granted during and after June 2011, at the time of the termination of the director’s service on the Board.
3.Director RSUs granted on June 7, 2021 under the terms of the 2016 Directors Stock Unit Plan. The Director RSUs vest (contingent upon the director’s continued service as of such date) on the earlier of (i) the next annual stockholders meeting following the grant; (ii) the death or total and permanent disability of the director; or (iii) the date of any Change in Control (as defined in the Plan). Shares will be issued for vested units within 60 days of (x) the vesting date, or (y), a later deferral date if deferred by the director under the terms of the Plan.
4.Under the terms of the 2016 Directors Stock Unit Plan, Director RSUs vest on the date of the Company’s annual meeting of stockholders that immediately follows the grant date. The Director RSUs in this column will vest on June 7, 2022 (contingent upon the director’s continued service as of such date).
5.Represents an amount equal to the sum of the number of Common Shares beneficially owned, plus the number of vested and unvested Director RSUs, as applicable, multiplied by $1.70, which was the closing price of the Company’s Common Shares on the NYSE on April 19, 2022. Rounding may immaterially affect totals.




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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Certain Beneficial Owners

The following table sets forth information regarding persons or groups known to us to be beneficial owners of more than 5% of our outstanding Common Shares as of February 28, 2022 or the date of any applicable reports filed by such persons or groups prior to that date. Beneficial ownership is determined in accordance with applicable rules of the SEC.

Name and Address of Beneficial Owner
Amount and Nature of Beneficial Ownership
Percentage of Class Outstanding (1)
22NW, LP (2)
1455 NW Leary Way, Suite 400
Seattle, WA 98107
3,196,336 14.7  %
GAMCO Investors, Inc. (3)
One Corporate Center
Rye, NY 10580
1,988,171 9.1  %
180 Degree Capital Corp. (4)
7 N. Willow Street
Montclair, NJ 07042
1,097,918 5.0  %
(1)Based on 21,779,575 Common Shares outstanding as of February 28, 2022, as reported on the Company’s Annual Report on Form 10-K.
(2)On a Schedule 13G Amendment No. 2 filed with the SEC on February 14, 2022, 22NW, LP reported sole voting and dispositive power as of December 31, 2020 with respect to 3,196,336 shares.
(3)On a Schedule 13D Amendment Number 12 filed with the SEC on March 18, 2021, Gabelli Funds, LLC reported sole voting and dispositive power with respect to 161,600 shares, GAMCO Asset Management Inc. reported sole voting power with respect to 1,750,571 shares and sole dispositive power with respect to 1,815,571 shares, and Gabelli Foundation, Inc. reported sole voting and dispositive power with respect to 11,100 shares, all as of March 17, 2021.
(4)On a Schedule 13G filed with the SEC on February 14, 2022, 180 Degree Capital Corp. reported as of December 31, 2021 shared voting and dispositive power with respect to 1,097,918 shares.




































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Management and Directors
The following table sets forth, as of April 19, 2022, the number of Common Shares beneficially owned by all directors, currently-serving NEOs (as identified in the “Compensation Discussion and Analysis”) and all directors and executive officers as a group in accordance with applicable SEC rules.

Name
Number of Common Shares Beneficially Owned
Number of Shares Subject
to Options (1) Exercisable or Which Become Exercisable Within
60 Days
Total Number of Shares Beneficially Owned (2)
Restricted Stock Units (3) / Unvested Options
Total Common Shares Beneficially Owned Plus Restricted Stock
Units and Unvested Options
John C. Bassett 76,513 16,288 92,801 104,090 196,891
Brent A. Flaharty 75,774 75,774 123,174 198,948
Michael F. Johnston 0 0 143,178 143,178
Kathleen S. Lane 16,242 16,242 76,662 92,904
Jeffrey Liaw 17,396 17,396 81,834 99,230
Michael W. Malone 37,659 37,659 73,298 110,957
Larry S. McWilliams 76,533 76,533 94,527 171,060
James C. Melville 2,114 2,114 76,662 78,776
Christopher S. Parisi 45,213 11,123 56,336 139,797 196,133
Michel S. Vermette 249,034 249,034 891,511 1,140,545
Amy P. Trojanowski 48,298 48,298 147,589 195,887
Directors and Executive Officers as a group (12 persons) (4)
644,776 27,411 672,187 1,973,249(4) 2,635,925(4)

(1)Directors do not receive stock option grants under the 2016 Directors Stock Unit Plan or as part of the compensation program for nonemployee directors.
(2)No individual director or executive officer other than Mr. Vermette beneficially owns 1% of the Common Shares outstanding as of April 19, 2022 (Mr. Vermette beneficially owns approximately 1%). The directors and executive officers as a group beneficially own approximately 3% of the Common Shares outstanding as of April 19, 2022.
(3)Represents, in the case of NEOs, unvested time-based and performance based (share price performance only) restricted stock units (“NEO RSUs”) granted to them under the 2016 AFI long-term incentive plan and, in the case of nonemployee directors, vested and unvested stock units (Director RSUs) granted to them as part of their annual retainer for Board service that are not acquirable by the director within 60 days of April 19, 2022 under the terms of the 2016 Directors Stock Unit Plan. See Directors Aggregate Ownership table on page 31 for further information. Neither the unvested NEO RSUs nor the Director RSUs have voting power.
(4)Includes 20,927 unvested RSUs for Philip J. Gaudreau, VP and Controller.

 

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Item 13. Certain Relationships and Related Transactions, and Director Independence

Director Independence

It is our policy that the Board consist of a majority of directors who are not employees and are ‘independent’ under all applicable legal and regulatory requirements, including the independence requirements of the New York Stock Exchange (the “NYSE”). For purposes of evaluating the independence of directors, in accordance with our Corporate Governance Guidelines, the Board will consider all relevant facts and circumstances, including the persons or organizations with which the director has an affiliation. Consistent with our Corporate Governance Guidelines, the Governance Committee has established qualifications to assist in the determination of ‘independence,’ which either meet or exceed the independence requirements of the NYSE.

The Board has determined that all of our directors, with the exception of Mr. Vermette, our President and CEO, are independent within the meaning of the NYSE listing standards and the standards established in our Corporate Governance Guidelines. In addition, the Board has further determined that each of the members of the Audit Committee, the Compensation Committee and the Governance Committee are independent within the meaning of the NYSE listing standards, any applicable minimum standards required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the enhanced standards required for membership on such committees contained in our Bylaws that directors serving on such committees meet the independence criteria under both NYSE rules and Rule 10A-3(b)(1) under the Exchange Act, and in the case of the Compensation Committee, Rule 16b-3 under the Exchange Act and as an ‘outside director’ under Section 162(m) of the Internal Revenue Code of 1986, as amended.

Certain Relationships And Related Party Transactions
Pursuant to our Conflicts of Interest and Related Party Transactions Policy, any related party transaction that may arise is required to be reviewed and approved by the Governance Committee, who must have no connection with the transaction. Related party transactions would include transactions by the Company or any subsidiary with any director, director nominee, executive officer, stockholders owning more than 5% of the Company’s outstanding Common Shares, or immediate family member of any of the foregoing, and transactions with businesses affiliated with any director or director nominee that meet the specifications in Item 404 of Regulation S-K under the Exchange Act. There were no such related party transactions to report for 2021. The Chair of the Governance Committee has authority to approve transactions involving sums less than the disclosure threshold set in Item 404. The material details of any such matters are required to be disclosed to the Governance Committee at its next regular meeting.



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Item 14. Principal Accountant Fees and Services

Our independent registered public accounting firm is KPMG LLP, Philadelphia, PA, Auditor Firm ID: 185.

Aggregate fees for professional services rendered by KPMG LLP, our independent registered public accounting firm, for 2021 and 2020 are set forth in the table below.

(amounts in thousands)
2021 2020
Audit Fees (1) $ 2,435  $ 1,849 
Audit Related Fees (2)
Audit and Audit Related Fees Subtotal 2,437  1,851 
Tax Fees (3) 100  91 
All Other Fees —  — 
Total Fees $ 2,537  $ 1,942 

(1)Audit Fees are for services rendered in connection with the audit of Armstrong Flooring’s consolidated financial statements as of and for the year ended December 31, 2021 and 2020, for which a portion of the billings occurred in the following year. Audit fees were also incurred for reviews of condensed consolidated financial statements included in Armstrong Flooring’s quarterly reports on Form 10-Q, services normally provided in connection with statutory and regulatory filings, and services for consents.
(2)Audit Related Fees consisted principally of fees for accounting research assistance on technical accounting topics.
(3)Tax Fees were primarily for tax consultation and compliance services.

The Audit Committee has considered whether the provision by KPMG LLP of the non-audit services described above was allowed under Rule 2-01(c)(4) of Regulation S-X and was compatible with maintaining auditor independence, and has concluded that KPMG LLP was and is independent of the Company in all respects.

Audit Committee Pre-Approval Policy

The Audit Committee adheres to a policy that requires the Audit Committee’s prior approval of any audit, audit- related and non-audit services provided by the firm that serves as our independent registered public accounting firm. Pursuant to this policy, management cannot engage the firm for any services without the Audit Committee’s pre-approval. The Audit Committee delegates to the Audit Committee Chair the authority to pre-approve non-audit services not exceeding 5% of the total audit fees for the year for purposes of handling immediate needs, with a report to the full Audit Committee of such approvals at its next meeting. The policy complies with Section 10A(i) of the Exchange Act.


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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) - Financial Statements are included in Part II, Item 8 of the Form 10-K.
(a)(2) - Schedule II - Valuation and Qualifying Accounts is submitted as a separate section of this report. Schedules I, III, IV and V are not applicable to the Company and, therefore, have been omitted.
(a)(3) - Listing of Exhibits
Exhibit
Number
  Description
2.1

3.1  

3.2
3.3  

4.1

10.1  

10.2  

10.3  

10.4

10.5

10.6

10.7


36





Exhibit
Number
  Description
10.8

10.9

10.10

10.11
 
10.12
 
10.13
10.14

10.15
 
10.16
 
10.17

10.18


37





Exhibit
Number
  Description
10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33
 

38





Exhibit
Number
  Description
10.34
 
10.35
 
10.36
 
10.37
 
10.38
 
10.39
 
10.40
 
10.41
 
10.42
10.43

10.44

10.45

10.46

10.47

10.48


39





Exhibit
Number
  Description
10.49

10.50

10.51

10.52

10.53

10.54

10.55

10.56

10.57

10.58

10.59

10.60
 
10.61
 
18.1
21.1


40





Exhibit
Number
  Description
23.1

31.1

31.2
 
31.3


31.4

 
32.1

32.2

101.INS XBRL Instance Document†
101.SCH XBRL Taxonomy Extension Schema Document†
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document†
101.DEF XBRL Taxonomy Extension Definition Linkbase Document†
101.LAB XBRL Taxonomy Extension Label Linkbase Document†
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document†
104 Cover Page Interactive Data File [formatted as inline XBRL)†
 
* Management Contract or Compensatory Plan.
Filed herewith.


41





SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Armstrong Flooring, Inc.
(Registrant)
   
Date: May 2, 2022
   
By: /s/ Amy P. Trojanowski
   
  Amy P. Trojanowski
  Senior Vice President and Chief Financial Officer
  (As Duly Authorized Officer)




42

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