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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2022

OR

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

For the transition period from to

Commission File Number: 1-2116

 

ARMSTRONG WORLD INDUSTRIES, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Pennsylvania

23-0366390

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

2500 Columbia Avenue, Lancaster, Pennsylvania

17603

(Address of principal executive offices)

(Zip Code)

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

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value per share

 

AWI

 

New York Stock Exchange

Indicate by check mark whether the registrant (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 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 the registrant was required to submit such files). Yes No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

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

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

Number of shares of Armstrong World Industries, Inc.’s common stock outstanding as of July 21, 2022 – 46,390,741.

 

 


 

TABLE OF CONTENTS

 

 

 

 

 

PAGE

Cautionary Note Regarding Forward-Looking Statements

 

3

 

 

 

PART I - FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements

 

5

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

30

Item 4.

 

Controls and Procedures

 

30

 

 

 

PART II - OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

31

Item 1A.

 

Risk Factors

 

31

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

31

Item 3.

 

Defaults Upon Senior Securities

 

31

Item 4.

 

Mine Safety Disclosures

 

31

Item 5.

 

Other Information

 

31

Item 6.

 

Exhibits

 

32

Signatures

 

33

 

 

 

2


 

When we refer to “AWI,” the “Company,” “we,” “our” or “us,” we are referring to Armstrong World Industries, Inc. and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are subject to various risks and uncertainties and include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, our expectations concerning our markets and their effect on our operating results; the impacts of COVID-19 on our business; our expectations regarding the payment of dividends; and our ability to increase revenues, earnings and earnings before interest, taxes, depreciation and amortization (as discussed below). Words such as “anticipate,” “expect,” “intend,” “plan,” “target,” “project,” “predict,” “believe,” “may,” “will,” “would,” “could,” “should,” “seek,” “estimate” and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors that could have a material adverse effect on our financial condition, liquidity, results of operations or future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

Risks Related to Our Operations

key customers;
availability and costs of manufacturing inputs or sourced products;
Worthington Armstrong Venture, our joint venture with Worthington Industries, Inc;
labor;
costs savings and productivity initiatives;
sustainability;

Risks Related to Our Strategy

digitalization initiatives and new technology;
strategic transactions;

Risks Related to Financial Matters

negative tax consequences;
our indebtedness;
our liquidity;
covenants in our debt agreements;
defined benefit plan obligations;
the tax consequences of the separation of our flooring business from our ceilings business;

Risks Related to Legal and Regulatory Matters

environmental matters;
litigation;
claims;
intellectual property rights;
international operations;

Risks Related to General Economic and Other Factors

economic conditions;
construction activity;
competition;
customer consolidation;
information technology disruptions and cybersecurity breaches;
geographic concentration;
dividend payments;

3


 

public health epidemics or pandemics (like COVID-19); and
other risks detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, and in the documents incorporated by reference herein and therein.

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

4


 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Armstrong World Industries, Inc., and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Income

(amounts in millions, except per share data)

Unaudited

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

321.0

 

 

$

280.0

 

 

$

603.6

 

 

$

531.9

 

Cost of goods sold

 

 

203.1

 

 

 

175.1

 

 

 

383.5

 

 

 

339.5

 

Gross profit

 

 

117.9

 

 

 

104.9

 

 

 

220.1

 

 

 

192.4

 

Selling, general and administrative expenses

 

 

61.5

 

 

 

60.0

 

 

 

118.6

 

 

 

114.2

 

Loss (gain) related to change in fair value of contingent
   consideration

 

 

6.1

 

 

 

(9.7

)

 

 

6.2

 

 

 

(9.5

)

Equity (earnings) from joint venture

 

 

(21.3

)

 

 

(23.7

)

 

 

(39.5

)

 

 

(44.7

)

Operating income

 

 

71.6

 

 

 

78.3

 

 

 

134.8

 

 

 

132.4

 

Interest expense

 

 

5.8

 

 

 

5.6

 

 

 

10.9

 

 

 

11.3

 

Other non-operating (income), net

 

 

(1.4

)

 

 

(1.6

)

 

 

(2.7

)

 

 

(2.9

)

Earnings from continuing operations before income taxes

 

 

67.2

 

 

 

74.3

 

 

 

126.6

 

 

 

124.0

 

Income tax expense

 

 

15.0

 

 

 

19.2

 

 

 

30.0

 

 

 

31.4

 

Earnings from continuing operations

 

 

52.2

 

 

 

55.1

 

 

 

96.6

 

 

 

92.6

 

Loss from disposal of discontinued businesses, net of tax expense
   of $
-, $-, $- and $1.7

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2.1

)

Net loss from discontinued operations

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2.1

)

Net earnings

 

$

52.2

 

 

$

55.1

 

 

$

96.6

 

 

$

90.5

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(0.9

)

 

 

0.5

 

 

 

(0.2

)

 

 

1.1

 

Derivative gain, net

 

 

3.0

 

 

 

1.1

 

 

 

13.6

 

 

 

4.9

 

Pension and postretirement adjustments

 

 

0.1

 

 

 

0.2

 

 

 

0.7

 

 

 

0.4

 

Total other comprehensive income

 

 

2.2

 

 

 

1.8

 

 

 

14.1

 

 

 

6.4

 

Total comprehensive income

 

$

54.4

 

 

$

56.9

 

 

$

110.7

 

 

$

96.9

 

Earnings per share of common stock, continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.12

 

 

$

1.15

 

 

$

2.06

 

 

$

1.93

 

Diluted

 

$

1.11

 

 

$

1.14

 

 

$

2.05

 

 

$

1.92

 

Loss per share of common stock, discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(0.04

)

Diluted

 

$

-

 

 

$

-

 

 

$

-

 

 

$

(0.04

)

Net earnings per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.12

 

 

$

1.15

 

 

$

2.06

 

 

$

1.89

 

Diluted

 

$

1.11

 

 

$

1.14

 

 

$

2.05

 

 

$

1.88

 

Average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

46.6

 

 

 

47.7

 

 

 

46.9

 

 

 

47.8

 

Diluted

 

 

46.7

 

 

 

48.1

 

 

 

47.0

 

 

 

48.1

 

 

See accompanying notes to Condensed Consolidated Financial Statements beginning on page 9.

 

 

5


 

Armstrong World Industries, Inc., and Subsidiaries

Condensed Consolidated Balance Sheets

(amounts in millions, except share and per share data)

 

 

 

Unaudited

 

 

 

 

 

 

June 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

79.3

 

 

$

98.1

 

Accounts and notes receivable, net

 

 

130.0

 

 

 

109.1

 

Inventories, net

 

 

108.8

 

 

 

90.2

 

Income taxes receivable

 

 

3.8

 

 

 

1.4

 

Other current assets

 

 

22.5

 

 

 

23.1

 

Total current assets

 

 

344.4

 

 

 

321.9

 

Property, plant, and equipment, less accumulated depreciation and amortization of
   $
519.7 and $494.0, respectively

 

 

539.5

 

 

 

542.8

 

Operating lease assets

 

 

20.4

 

 

 

21.0

 

Finance lease assets

 

 

17.2

 

 

 

18.4

 

Prepaid pension costs

 

 

111.5

 

 

 

109.0

 

Investment in joint venture

 

 

63.7

 

 

 

50.0

 

Goodwill

 

 

166.9

 

 

 

167.0

 

Intangible assets, net

 

 

412.7

 

 

 

421.4

 

Income taxes receivable

 

 

-

 

 

 

0.6

 

Other non-current assets

 

 

57.7

 

 

 

57.9

 

Total assets

 

$

1,734.0

 

 

$

1,710.0

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current installments of long-term debt

 

 

25.0

 

 

 

25.0

 

Accounts payable and accrued expenses

 

 

172.7

 

 

 

174.9

 

Operating lease liabilities

 

 

6.2

 

 

 

5.6

 

Finance lease liabilities

 

 

2.3

 

 

 

2.2

 

Income taxes payable

 

 

1.0

 

 

 

1.9

 

Total current liabilities

 

 

207.2

 

 

 

209.6

 

Long-term debt, less current installments

 

 

644.3

 

 

 

606.4

 

Operating lease liabilities

 

 

14.5

 

 

 

15.6

 

Finance lease liabilities

 

 

15.7

 

 

 

16.8

 

Postretirement benefit liabilities

 

 

69.6

 

 

 

71.1

 

Pension benefit liabilities

 

 

35.9

 

 

 

36.9

 

Other long-term liabilities

 

 

27.9

 

 

 

46.7

 

Income taxes payable

 

 

19.6

 

 

 

20.3

 

Deferred income taxes

 

 

171.5

 

 

 

166.9

 

Total non-current liabilities

 

 

999.0

 

 

 

980.7

 

Shareholders' equity:

 

 

 

 

 

 

Common stock, $0.01 par value per share, 200 million shares authorized, 62,875,832
   shares issued and
46,462,821 shares outstanding as of June 30, 2022 and
   
62,775,155 shares issued and 47,302,299 shares outstanding as of December 31, 2021

 

 

0.6

 

 

 

0.6

 

Capital in excess of par value

 

 

565.7

 

 

 

561.3

 

Retained earnings

 

 

1,086.0

 

 

 

1,011.4

 

Treasury stock, at cost, 16,413,011 shares as of June 30, 2022 and 15,472,856 
   shares as of December 31, 2021

 

 

(1,029.0

)

 

 

(944.0

)

Accumulated other comprehensive loss

 

 

(95.5

)

 

 

(109.6

)

Total shareholders' equity

 

 

527.8

 

 

 

519.7

 

Total liabilities and shareholders' equity

 

$

1,734.0

 

 

$

1,710.0

 

 

See accompanying notes to Condensed Consolidated Financial Statements beginning on page 9.

6


 

Armstrong World Industries, Inc., and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(amounts in millions, except share data)

Unaudited

 

 

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Total

 

March 31, 2022

 

 

47,018,645

 

 

$

0.6

 

 

$

563.9

 

 

$

1,044.8

 

 

 

15,773,861

 

 

$

(974.0

)

 

$

(97.7

)

 

$

537.6

 

Stock issuance, net

 

 

83,326

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cash dividends - $0.231 per common share

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11.0

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11.0

)

Share-based employee compensation

 

 

-

 

 

 

-

 

 

 

1.8

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1.8

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

52.2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

52.2

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2.2

 

 

 

2.2

 

Acquisition of treasury stock

 

 

(639,150

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

639,150

 

 

 

(55.0

)

 

 

-

 

 

 

(55.0

)

June 30, 2022

 

 

46,462,821

 

 

$

0.6

 

 

$

565.7

 

 

$

1,086.0

 

 

 

16,413,011

 

 

$

(1,029.0

)

 

$

(95.5

)

 

$

527.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Total

 

December 31, 2021

 

 

47,302,299

 

 

$

0.6

 

 

$

561.3

 

 

$

1,011.4

 

 

 

15,472,856

 

 

$

(944.0

)

 

$

(109.6

)

 

$

519.7

 

Stock issuance, net

 

 

100,677

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cash dividends - $0.462 per common share

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22.0

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22.0

)

Share-based employee compensation

 

 

-

 

 

 

-

 

 

 

4.4

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4.4

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

96.6

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

96.6

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14.1

 

 

 

14.1

 

Acquisition of treasury stock

 

 

(940,155

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

940,155

 

 

 

(85.0

)

 

 

-

 

 

 

(85.0

)

June 30, 2022

 

 

46,462,821

 

 

$

0.6

 

 

$

565.7

 

 

$

1,086.0

 

 

 

16,413,011

 

 

$

(1,029.0

)

 

$

(95.5

)

 

$

527.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Total

 

March 31, 2021

 

 

47,828,464

 

 

$

0.6

 

 

$

556.6

 

 

$

895.0

 

 

 

14,811,145

 

 

$

(873.9

)

 

$

(104.7

)

 

$

473.6

 

Stock issuance, net

 

 

98,937

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cash dividends - $0.21 per common share

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10.3

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10.3

)

Share-based employee compensation

 

 

-

 

 

 

-

 

 

 

(1.9

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1.9

)

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

55.1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

55.1

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1.8

 

 

 

1.8

 

Acquisition of treasury stock

 

 

(194,458

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

194,458

 

 

 

(20.0

)

 

 

-

 

 

 

(20.0

)

June 30, 2021

 

 

47,732,943

 

 

$

0.6

 

 

$

554.7

 

 

$

939.8

 

 

 

15,005,603

 

 

$

(893.9

)

 

$

(102.9

)

 

$

498.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Retained

 

 

Treasury Stock

 

 

Comprehensive

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Shares

 

 

Amount

 

 

(Loss)

 

 

Total

 

December 31, 2020

 

 

47,913,821

 

 

$

0.6

 

 

$

553.7

 

 

$

869.8

 

 

 

14,685,510

 

 

$

(863.9

)

 

$

(109.3

)

 

$

450.9

 

Stock issuance, net

 

 

139,215

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Cash dividends - $0.42 per common share

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(20.5

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(20.5

)

Share-based employee compensation

 

 

-

 

 

 

-

 

 

 

1.0

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1.0

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

90.5

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

90.5

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6.4

 

 

 

6.4

 

Acquisition of treasury stock

 

 

(320,093

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

320,093

 

 

 

(30.0

)

 

 

-

 

 

 

(30.0

)

June 30, 2021

 

 

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