8-K
ARMSTRONG WORLD INDUSTRIES INC (AWI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 22, 2022
ARMSTRONG WORLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 1-2116 | 23-0366390 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation or organization) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) |
| 2500 Columbia Avenue P.O. Box 3001<br><br>Lancaster, Pennsylvania | 17603 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (717) 397-0611
NA
(Former name or former address if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value per share | AWI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
On February 22, 2022, the Company issued a press release announcing its fourth quarter and full year 2021 consolidated financial results and earnings outlook for fiscal year 2022. The full text of the press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing.
Section 7 – Regulation FD
Item 7.01 Regulation FD Disclosure.
On February 22, 2022, the Company issued a press release announcing that it will report its fourth quarter and full year 2021 consolidated financial results via a webcast and conference call on February 22, 2022 at 10:00 a.m. Eastern Time which can be accessed through the “Investors” section of the Company’s website, www.armstrongceilings.com. During this report, the Company will reference a slide presentation, a copy of which is attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Act, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Caution Concerning Forward-Looking Statements
This Current Report on Form 8-K includes certain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Such forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of the Company, including the consummation of the Sale, and other statements that are not historical facts. These statements are based on the current expectations and beliefs of the Company’s management, and are subject to uncertainty and changes in circumstances. The Company cautions readers that any forward-looking information is not a guarantee of future performance and that actual results may vary materially from those expressed or implied by the statements herein, due to changes in economic, business, competitive, technological, strategic or other regulatory factors, as well as factors affecting the operation of the business of the Company. More detailed information about certain of these and other factors may be found in filings by the Company with the U.S. Securities and Exchange Commission, including its most recent Annual Report on Form 10-K in the sections entitled “Caution Concerning Forward-Looking Statements” and “Risk Factors”, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Various factors could cause actual results to differ from those set forth in the forward-looking statements including, without limitation, the risk that the anticipated benefits from the Sale may not be fully realized or may take longer to realize than expected. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter the forward-looking statements contained in this document, whether as a result of new information, future events or otherwise.
Section 9 – Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| No. 99.1 | Press Release of Armstrong World Industries, Inc. dated February 22, 2022 |
|---|---|
| No. 99.2 | Earnings Call Presentation Fourth Quarter 2021 dated February 22, 2022 |
| No. 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ARMSTRONG WORLD INDUSTRIES, INC. | |
|---|---|
| By: | /s/ Austin So |
| Austin So | |
| Senior Vice President, General Counsel, Secretary and Chief Compliance Officer |
Date: February 22, 2022
EX-99.1
Exhibit 99.1
Armstrong World Industries Reports Fourth-Quarter and Full Year 2021 Results
Key Fourth-Quarter Highlights
• Net sales up 18% versus the prior-year quarter
• Operating income up 26% and diluted earnings per share up 22% versus the prior-year quarter
• Adjusted EBITDA up 21% versus the prior-year quarter
• Issuing 2022 Guidance: Net Sales of +10% to 13%, adjusted EBITDA of +10% to 16% and adjusted Free Cash Flow of +13% to 24% versus the prior year
LANCASTER, Pa., Feb. 22, 2022 -- Armstrong World Industries, Inc. (NYSE:AWI), a leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions, today reported financial results for the fourth quarter and full year of 2021. For the full year 2021, operating income increased 2% versus the prior year and adjusted EBITDA was up 13% versus the prior year as the company continued to execute well despite variable market conditions and complex macro factors.
“We delivered strong results in the fourth quarter that contributed to double-digit growth in full year net sales and EBITDA,” said Vic Grizzle, President and CEO of Armstrong World Industries. “These results were driven by effective execution through an uneven market recovery and the continued strength of our total value proposition. These hallmarks of our company support our ability to more than offset inflationary pressures with our pricing strategies while maintaining investments in longer-term growth opportunities. The investments we've made throughout the pandemic in people, capabilities, new product development and our digital and Healthy Spaces initiatives, give us confidence in our growth outlook for 2022 and beyond.”
Fourth-Quarter Results from Continuing Operations
| (Dollar amounts in millions except per-share data) | For the Three Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | |||||
| Net sales | $ | 282.5 | $ | 238.7 | 18.3 | % | |
| Operating income | $ | 55.5 | $ | 44.1 | 25.9 | % | |
| Earnings from continuing operations | $ | 41.9 | $ | 34.8 | 20.4 | % | |
| Diluted earnings per share | $ | 0.88 | $ | 0.72 | 22.2 | % | |
| Additional Non-GAAP* Measures | |||||||
| Adjusted EBITDA | $ | 88 | $ | 73 | 20.6 | % | |
| Adjusted net income from continuing operations | $ | 52 | $ | 39 | 33.1 | % | |
| Adjusted diluted earnings per share | $ | 1.09 | $ | 0.81 | 34.6 | % |
* The Company uses non-GAAP adjusted measures in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods and are useful alternative measures of performance. Reconciliations of the most comparable GAAP measure are found in the tables at the end of this press release. Non-GAAP figures are rounded to the nearest million with the exception of per share data.
Fourth-quarter 2021 consolidated net sales increased 18.3% from prior-year results, driven primarily by favorable Average Unit Value (“AUV”) of $23 million and incremental sales from the acquisitions of Turf, Moz and Arktura in 2020 (“2020 Acquisitions”) of $14 million. Sales volumes for both segments continued to recover compared to prior-year results, although the resurgence of the pandemic in certain markets and global supply chain and labor disruptions have resulted in extended project timelines.
Operating income increased 25.9% from fourth-quarter 2020 results primarily due to positive AUV in the Mineral Fiber segment, the absence of the prior year charitable contribution to the Armstrong World Industries Foundation, the positive margin impact of incremental net sales from the 2020 Acquisitions and favorable WAVE equity earnings. This favorability was partially offset by higher manufacturing costs, the absence of environmental insurance recoveries recorded in the prior period, an increase in acquisition-related costs and intangible asset amortization attributable to the 2020 Acquisitions, the change in fair value related to the 2020 Acquisitions and the return of discretionary spending that we proactively reduced in 2020 in response to the COVID-19 pandemic.
Fourth-Quarter Segment Highlights
Mineral Fiber
| (Dollar amounts in millions) | For the Three Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | |||||
| Net sales | $ | 207.2 | $ | 183.1 | 13.2 | % | |
| Operating income | $ | 60.0 | $ | 45.0 | 33.3 | % | |
| Adjusted EBITDA* | $ | 77 | $ | 66 | 16.6 | % |
Fourth-quarter 2021 Mineral Fiber net sales increased 13.2% due to a 12% increase in AUV and a 1% increase in sales volumes. AUV performance was driven primarily by increases in like-for-like pricing and favorable channel mix compared to the fourth quarter of 2020.
Fourth-quarter Mineral Fiber operating income increased 33.3% from prior-year results primarily due to a $19 million benefit from favorable AUV, a $10 million impact from the absence of the prior year charitable contribution and a $4 million increase in WAVE equity earnings. This favorability was partially offset by an $8 million increase in manufacturing costs, $7 million of environmental recoveries recorded in the prior year period and $2 million of increased costs related to digital growth initiatives. Further offsetting the favorability was the return of discretionary spending that was reduced in the prior-year period.
Architectural Specialties
| (Dollar amounts in millions) | For the Three Months Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||||
| Net sales | $ | 75.3 | $ | 55.6 | 35.4 | % | ||
| Operating (loss) income | $ | (3.3 | ) | $ | 1.4 | Unfavorable | ||
| Adjusted EBITDA* | $ | 11 | $ | 7 | 58.3 | % |
Fourth-quarter 2021 net sales in Architectural Specialties increased 35.4% from prior-year results, driven by a $14 million increase from the 2020 Acquisitions and higher organic sales volumes.
The year-over-year decline in operating income was primarily driven by a $12 million increase in expenses, including intangible asset amortization and the change in fair value of contingent consideration, related to the 2020 Acquisitions, which was partially offset by the positive impact of increased sales versus the prior year period.
Unallocated Corporate
The Company reported an Unallocated Corporate operating loss of $1.2 million in the fourth quarter of 2021 compared to a loss of $2.3 million in the prior year period.
Year to Date from Continuing Operations
| (Dollar amounts in millions) | For the Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | |||||
| Net sales (as reported) | $ | 1,106.6 | $ | 936.9 | 18.1 | % | |
| Operating income (as reported) | $ | 260.0 | $ | 254.8 | 2.0 | % | |
| Adjusted EBITDA* | $ | 372 | $ | 330 | 12.6 | % |
Full year net sales increased 18.1% from prior-year results, driven by a $71 million increase from favorable AUV, a $64 million increase related to the 2020 Acquisitions and increased volumes in both segments as end markets began to recover from the troughs of the COVID-19 pandemic.
Full year operating income increased 2.0% from prior results, driven by favorable AUV, favorable WAVE equity earnings, the benefit of incremental sales from the 2020 Acquisitions, higher volumes in both segments, the absence of the prior year charitable contribution and a benefit related to a Coronavirus Aid, Relief, and Economic Recovery Act Employee Retention Credit. This favorability was partially offset by higher SG&A expenses related to the 2020 Acquisitions, including intangible asset amortization, higher manufacturing costs, an increase in incentive and deferred compensation expenses, the absence of environmental insurance recoveries recorded in 2020, a decrease in cost reimbursements, net of related expenses, earned under an expired transition services agreement with the buyer of our former international operations and an increase in spending related to digital growth initiatives. Further offsetting the favorability is the return of discretionary spending, including travel, compensation, and outside services that we proactively reduced in response to the COVID-19 pandemic. The prior year also benefitted from a $21 million gain related to the sale of fixed and intangible assets. Excluding this gain, operating income increased 11.2% versus the prior year.
Establishing 2022 Outlook
“Our teams did a great job in closing out 2021 and getting us well positioned for 2022,” said Brian MacNeal, AWI CFO. “We carry momentum into the new year and expect incremental growth from our digital, Healthy Spaces and innovation initiatives, supporting our full year guidance of net sales growth of 10% to 13% and adjusted EBITDA growth of 10% to 16% versus the prior year. With our strong balance sheet, we remain committed to our capital allocation priorities of reinvesting into the business, pursuing strategic acquisitions and partnerships and returning cash to shareholders.”
| For the Year Ended December 31, 2022 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollar amounts in millions except per-share data) | 2021 Actual | Current Guidance | VPY Growth % | ||||||||||
| Net sales | $ | 1,107 | $ | 1,215 | to | $ | 1,255 | 10 | % | to | 13 | % | |
| Adjusted EBITDA* | $ | 372 | $ | 410 | to | $ | 430 | 10 | % | to | 16 | % | |
| Adjusted diluted earnings per share* | $ | 4.36 | $ | 5.00 | to | $ | 5.20 | 15 | % | to | 19 | % | |
| Adjusted free cash flow* | $ | 190 | $ | 215 | to | $ | 235 | 13 | % | to | 24 | % |
Earnings Webcast
Management will host a live internet broadcast beginning at 10:00 a.m. E.T. today, to discuss fourth-quarter and full year 2021 results. This event will be broadcast live on the Company's website. To access the call and accompanying slide presentation, go to www.armstrongworldindustries.com and click Investors. The replay of this event will be available on the Company's website for up to one year after the date of the call.
Uncertainties Affecting Forward-Looking Statements
Disclosures in this release, including without limitation, those relating to future financial results, market conditions and guidance, the impacts of COVID-19 on our business, and in our other public documents and comments, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements provide our future expectations or forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward-looking statements. A more detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied is included in the “Risk Factors” and “Management’s Discussion and Analysis” sections of our reports on Form 10-K and 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”). Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.
COVID-19
The impact of the COVID-19 pandemic on our future consolidated results of operations remains uncertain. In 2020, we experienced a significant decrease in customer demand throughout our business during the second through fourth quarters due to COVID-19. Specifically, we noted delays in construction driven by temporary closures of non-essential businesses, with the most significant impacts in the major metropolitan areas impacted by COVID-19. In response to COVID-19, we temporarily reduced capital expenditures and discretionary spending including compensation, travel and marketing expenses in 2020. Customer demand continued to improve throughout 2021 but remained lower than pre-pandemic levels. We continue to monitor and manage the impact of COVID-19 and its potential impacts to our business, most notably global supply chain and labor disruptions, which have contributed to raw material and transportation cost inflation, in addition to construction activity delays.
About Armstrong and Additional Information
Armstrong World Industries, Inc. (AWI) is a leader in the design and manufacture of innovative commercial and residential ceiling, wall and suspension system solutions in the Americas. With over $1 billion in revenue in 2021, AWI has approximately 2,800 employees and a manufacturing network of 15 facilities, plus six facilities dedicated to its WAVE joint venture.
More details on the Company’s performance can be found in its report on Form 10-K for the year ended December 31, 2021 that the Company expects to file with the SEC today.
Contacts
Investors: Theresa Womble, tlwomble@armstrongceilings.com or (717) 396-6354
Media: Jennifer Johnson, jenniferjohnson@armstrongceilings.com or (866) 321-6677
Reported Financial Highlights
FINANCIAL HIGHLIGHTS
Armstrong World Industries, Inc. and Subsidiaries
(Amounts in millions, except for per-share amounts, quarterly data is unaudited)
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net sales | $ | 282.5 | $ | 238.7 | $ | 1,106.6 | $ | 936.9 | ||||
| Cost of goods sold | 180.0 | 155.9 | 701.0 | 603.8 | ||||||||
| Gross profit | 102.5 | 82.8 | 405.6 | 333.1 | ||||||||
| Selling, general and administrative expenses | 60.9 | 54.4 | 237.4 | 163.2 | ||||||||
| Loss (gain) related to change in fair value of contingent consideration | 5.7 | 0.1 | (4.1 | ) | 0.1 | |||||||
| (Gain) related to sale of fixed and intangible assets | - | - | - | (21.0 | ) | |||||||
| Equity (earnings) from joint venture | (19.6 | ) | (15.8 | ) | (87.7 | ) | (64.0 | ) | ||||
| Operating income | 55.5 | 44.1 | 260.0 | 254.8 | ||||||||
| Interest expense | 5.5 | 5.4 | 22.9 | 24.1 | ||||||||
| Other non-operating (income) expense, net | (1.3 | ) | (4.4 | ) | (5.6 | ) | 357.4 | |||||
| Earnings (loss) from continuing operations before income taxes | 51.3 | 43.1 | 242.7 | (126.7 | ) | |||||||
| Income tax expense (benefit) | 9.4 | 8.3 | 57.4 | (42.6 | ) | |||||||
| Earnings (loss) from continuing operations | 41.9 | 34.8 | 185.3 | (84.1 | ) | |||||||
| Net gain (loss) from discontinued operations | - | (12.0 | ) | (2.1 | ) | (15.0 | ) | |||||
| Net earnings (loss) | $ | 41.9 | $ | 22.8 | $ | 183.2 | $ | (99.1 | ) | |||
| Diluted earnings (loss) per share of common stock, continuing operations | $ | 0.88 | $ | 0.72 | $ | 3.86 | $ | (1.76 | ) | |||
| Diluted (loss) per share of common stock, discontinued operations | $ | - | $ | (0.25 | ) | $ | (0.04 | ) | $ | (0.31 | ) | |
| Net earnings (loss) per share of common stock | $ | 0.88 | $ | 0.47 | $ | 3.82 | $ | (2.07 | ) | |||
| Average number of diluted common shares outstanding | 47.7 | 48.1 | 47.9 | 47.9 |
SEGMENT RESULTS
Armstrong World Industries, Inc. and Subsidiaries
(Amounts in millions, quarterly data is unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | ||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||
| Net Sales | |||||||||||
| Mineral Fiber | $ | 207.2 | $ | 183.1 | $ | 818.5 | $ | 726.0 | |||
| Architectural Specialties | 75.3 | 55.6 | 288.1 | 210.9 | |||||||
| Total net sales | $ | 282.5 | $ | 238.7 | $ | 1,106.6 | $ | 936.9 | |||
| Three Months Ended | Twelve Months Ended | ||||||||||
| December 31, | December 31, | ||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||
| Segment operating income (loss) | |||||||||||
| Mineral Fiber | $ | 60.0 | $ | 45.0 | $ | 261.2 | $ | 218.7 | |||
| Architectural Specialties | (3.3 | ) | 1.4 | 4.2 | 22.3 | ||||||
| Unallocated Corporate | (1.2 | ) | (2.3 | ) | (5.4 | ) | 13.8 | ||||
| Total consolidated operating income | $ | 55.5 | $ | 44.1 | $ | 260.0 | $ | 254.8 |
Selected Balance Sheet Information
(Amounts in millions)
| December 31, 2021 | December 31, 2020 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets | $ | 321.9 | $ | 311.8 |
| Property, plant and equipment, net | 542.8 | 529.9 | ||
| Other noncurrent assets | 845.3 | 876.8 | ||
| Total assets | $ | 1,710.0 | $ | 1,718.5 |
| Liabilities and shareholders’ equity | ||||
| Current liabilities | $ | 209.6 | $ | 172.3 |
| Noncurrent liabilities | 980.7 | 1,095.3 | ||
| Equity | 519.7 | 450.9 | ||
| Total liabilities and shareholders’ equity | $ | 1,710.0 | $ | 1,718.5 |
Selected Cash Flow Information
(Amounts in millions)
| For the Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Net earnings (loss) | $ | 183.2 | $ | (99.1 | ) | |
| Other adjustments to reconcile net earnings (loss) to net cash provided by operating activities | 26.1 | 301.6 | ||||
| Changes in operating assets and liabilities, net | (22.1 | ) | 16.3 | |||
| Net cash provided by operating activities | 187.2 | 218.8 | ||||
| Net cash (used for) investing activities | (13.9 | ) | (141.1 | ) | ||
| Net cash (used for) provided by financing activities | (212.1 | ) | 13.5 | |||
| Effect of exchange rate changes on cash and cash equivalents | — | 0.4 | ||||
| Net (decrease) increase in cash and cash equivalents | (38.8 | ) | 91.6 | |||
| Cash and cash equivalents at beginning of year | 136.9 | 45.3 | ||||
| Cash and cash equivalents at end of period | $ | 98.1 | $ | 136.9 |
Supplemental Reconciliations of GAAP to non-GAAP Results (unaudited)
(Amounts in millions, except per share data)
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company provides additional measures of performance adjusted to exclude the impact of certain discrete expenses and income including adjusted net sales, adjusted EBITDA, adjusted diluted earnings per share (EPS) and adjusted free cash flow. Investors should not consider non-GAAP measures as a substitute for GAAP measures. The Company excludes certain acquisition related expenses (i.e. – changes in the fair value of contingent consideration, deferred compensation accruals, impact of adjustments related to the fair value of inventory and deferred revenue) for recent acquisitions. The deferred compensation accruals are for cash and stock awards that are recorded over each award's respective vesting period, as such payments are subject to the sellers’ and employees’ continued employment with the Company. The Company excludes all acquisition-related intangible amortization from adjusted earnings from continuing operations and in calculations of adjusted diluted earnings per share. Examples of other excluded items include plant closures, restructuring charges and related costs, impairments, separation costs, environmental site expenses and related insurance recoveries, endowment level charitable contributions, and certain other gains and losses. The Company also excludes income/expense from its U.S. Retirement Income Plan (“RIP”) in the non-GAAP results as it represents the actuarial net periodic benefit credit/cost recorded. For all periods presented, the Company was not required and did not make cash contributions to the RIP based on guidelines established by the Pension Benefit Guaranty Corporation, nor does the Company expect to make cash contributions to the plan in 2022. Adjusted free cash flow is defined as cash from operating and investing activities, adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures, environmental site expenses and related insurance recoveries. The Company believes adjusted free cash flow is useful because it provides insight into the amount of cash that the Company generates for discretionary uses, after expenditures for capital investments and adjustments for acquisitions and divestitures. The Company uses these adjusted performance measures in managing the business, including communications with its Board of Directors and employees, and believes that they provide users of this financial information with meaningful comparisons of operating performance between current results and results in prior periods. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance, as well as prospects for its future performance. The Company also uses adjusted EBITDA and adjusted free cash flow as factors in determining at-risk compensation for senior management. These non-GAAP measures may not be defined and calculated the same as similar measures used by other companies. A reconciliation of these adjustments to the most directly comparable GAAP measures is included in this release and on the Company’s website. These non-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measures utilized by the Company may not be comparable to non-GAAP financial measures used by other companies.
In the following charts, numbers may not sum due to rounding. Non-GAAP figures are rounded to the nearest million and corresponding percentages are rounded to the nearest percent based on unrounded figures.
Consolidated Results from Continuing Operations – Adjusted EBITDA
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||
| Earnings (Loss) from continuing operations, Reported | $ | 42 | $ | 35 | $ | 185 | $ | (84 | ) | |
| Add/(Less): Income tax expense (benefit), as reported | 9 | 8 | 57 | (43 | ) | |||||
| Earnings (Loss) before tax, Reported | $ | 51 | $ | 43 | $ | 243 | $ | (127 | ) | |
| Add: Interest/other income and expense, net | 4 | 1 | 17 | 382 | ||||||
| Operating Income, Reported | $ | 56 | $ | 44 | $ | 260 | $ | 255 | ||
| Add: RIP expense (1) | 1 | 1 | 5 | 6 | ||||||
| Add: Acquisition-related impacts (2) | 9 | 2 | 10 | 3 | ||||||
| (Less): Net environmental (recoveries) | - | (7 | ) | - | (6 | ) | ||||
| (Less): Gain on sale of idled China plant facility | - | - | - | (21 | ) | |||||
| Add: Charitable contribution - AWI Foundation (3) | - | 10 | - | 10 | ||||||
| Operating Income, Adjusted | $ | 65 | $ | 50 | $ | 275 | $ | 246 | ||
| Add: Depreciation | 16 | 17 | 63 | 64 | ||||||
| Add: Amortization | 6 | 6 | 34 | 21 | ||||||
| Adjusted EBITDA | $ | 88 | $ | 73 | $ | 372 | $ | 330 |
(1) RIP expense represents only the plan service cost that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP.
(2) Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration, deferred compensation and restricted stock expenses.
(3) Donation to the AWI Foundation.
Mineral Fiber
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||
| Operating Income, Reported | $ | 60 | $ | 45 | $ | 261 | $ | 219 | ||
| (Less): Net environmental (recoveries) | - | (7 | ) | - | (6 | ) | ||||
| Add: Charitable Contribution - AWI Foundation (1) | - | 10 | - | 10 | ||||||
| Operating Income, Adjusted | $ | 60 | $ | 48 | $ | 261 | $ | 222 | ||
| Add: D&A | 17 | 18 | 70 | 72 | ||||||
| Adjusted EBITDA | $ | 77 | $ | 66 | $ | 331 | $ | 294 |
(1) Donation to the AWI Foundation.
Architectural Specialties
| For the Three Months Ended December 31, | For the Year Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | ||||||
| Operating (Loss) Income, Reported | $ | (3 | ) | $ | 1 | $ | 4 | $ | 22 |
| Add: Acquisition-related impacts (1) | 9 | 2 | 10 | 3 | |||||
| Operating Income, Adjusted | $ | 5 | $ | 3 | $ | 14 | $ | 25 | |
| Add: D&A | 6 | 3 | 27 | 11 | |||||
| Adjusted EBITDA | $ | 11 | $ | 7 | $ | 40 | $ | 36 |
(1) Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration, deferred compensation and restricted stock expenses.
Unallocated Corporate
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Operating (Loss) Income, Reported | $ | (1 | ) | $ | (2 | ) | $ | (5 | ) | $ | 14 | |
| Add: RIP expense (1) | 1 | 1 | 5 | 6 | ||||||||
| (Less): Gain on sale of idled China plant facility | - | - | - | (21 | ) | |||||||
| Operating (Loss), Adjusted | - | (1 | ) | (1 | ) | (1 | ) | |||||
| Add: D&A | - | 1 | 1 | 1 | ||||||||
| Adjusted EBITDA | $ | - | $ | - | $ | - | $ | - |
(1) RIP expense represents only the plan service cost that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP.
Adjusted Free Cash Flow
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net cash provided by operating activities | $ | 49 | $ | 70 | $ | 187 | $ | 219 | ||||
| Net cash provided by (used for) investing activities | (9 | ) | (89 | ) | (14 | ) | (141 | ) | ||||
| Net cash provided by operating and investing activities | $ | 41 | $ | (19 | ) | $ | 173 | $ | 78 | |||
| Add: Acquisitions, net | - | 90 | 1 | 165 | ||||||||
| (Less)/Add: Payments (proceeds) related to sale of international, net (1) | - | 1 | 12 | (20 | ) | |||||||
| (Less): Net environmental (recoveries) | (1 | ) | (12 | ) | (1 | ) | (12 | ) | ||||
| Add: Net Payments to WAVE for portion of proceeds from sale of international business | - | - | - | 13 | ||||||||
| Add: Arktura deferred compensation (2) | 5 | - | 5 | - | ||||||||
| Add: Charitable contribution - AWI Foundation (3) | - | 10 | - | 10 | ||||||||
| (Less): Proceeds from sale of idled China plant facility | - | (2 | ) | - | (22 | ) | ||||||
| Adjusted Free Cash Flow | $ | 45 | $ | 68 | $ | 190 | $ | 212 |
(1) Amounts for the three and twelve months ended December 31, 2020 include related income tax impacts.
(2) Contingent compensation payments related to the acquisition.
(3) Donation to the AWI Foundation.
Consolidated Results from Continuing Operations – Adjusted Diluted Earnings Per Share
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
| Total | Per Diluted<br>Share | Total | Per Diluted<br>Share | Total | Per Diluted<br>Share | Total | Per Diluted<br>Share | |||||||||||||||||
| Earnings (Loss) from continuing operations, As Reported | $ | 42 | $ | 0.88 | $ | 35 | $ | 0.72 | $ | 185 | $ | 3.86 | $ | (84 | ) | $ | (1.76 | ) | ||||||
| Add/(Less): Income tax expense (benefit), as reported | $ | 9 | $ | 8 | 57 | (43 | ) | |||||||||||||||||
| Earnings (Loss) from continuing operations before income taxes, As Reported | $ | 51 | $ | 43 | $ | 243 | $ | (127 | ) | |||||||||||||||
| (Less)/Add: RIP (credit) expense (1) | - | (2 | ) | - | 368 | |||||||||||||||||||
| Add: Acquisition-related impacts (2) | 9 | 2 | 10 | 3 | ||||||||||||||||||||
| Add: Acquisition-related amortization (3) | 4 | 2 | 21 | 7 | ||||||||||||||||||||
| (Less): Net environmental (recoveries) | - | (7 | ) | - | (6 | ) | ||||||||||||||||||
| (Less): Gain on sale of idled China plant facility | - | - | - | (21 | ) | |||||||||||||||||||
| Add: Accelerated Depreciation from closed facility | - | - | - | 3 | ||||||||||||||||||||
| Add: Charitable contribution - AWI Foundation (4) | - | 10 | - | 10 | ||||||||||||||||||||
| Adjusted earnings from continuing operations before income taxes | $ | 64 | $ | 48 | $ | 274 | $ | 236 | ||||||||||||||||
| (Less): Adjusted income tax expense (5) | $ | (12 | ) | (9 | ) | (65 | ) | (56 | ) | |||||||||||||||
| Adjusted net income from continuing operations | $ | 52 | $ | 1.09 | $ | 39 | $ | 0.81 | $ | 209 | $ | 4.36 | $ | 180 | $ | 3.74 | ||||||||
| Adjusted EPS change versus Prior Year | 35 | % | 17 | % | ||||||||||||||||||||
| Diluted Shares Outstanding (6) | 47.7 | 48.1 | 47.9 | 48.2 | ||||||||||||||||||||
| Adjusted Tax Rate (7) | 18 | % | 19 | % | 24 | % | 24 | % |
(1) RIP (credit) expense represents the entire actuarial net periodic pension (credit) expense recorded as a component of earnings from continuing operations. For all periods presented, we were not required to and did not make cash contributions to our RIP.
(2) Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration, deferred compensation and restricted stock expenses.
(3) Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles.
(4) Donation to the AWI Foundation
(5) Adjusted income tax expense is calculated using the adjusted tax rate multiplied by the adjusted earnings from continuing operations before income taxes.
(6) Dilutive shares are as-reported. 2020 dilutive shares outstanding for the twelve months ended December 31, 2020 include anti-dilutive common stock equivalents which are excluded from U.S. GAAP.
(7) The tax rate for the three and twelve months ended December 31, 2020 excludes the impact of our first quarter 2020 pension annuitization and the gain on the sale of our idled China facility.
Adjusted EBITDA Guidance
| For the Year Ending December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|
| Low | High | ||||||
| Net income | $ | 232 | to | $ | 241 | ||
| Add: Interest expense | 22 | 26 | |||||
| (Less): RIP credit (1) | (5 | ) | (5 | ) | |||
| Add: Income Tax Expense | 76 | 79 | |||||
| Operating income | $ | 325 | to | $ | 340 | ||
| Add: RIP expense (2) | 5 | 5 | |||||
| Add: Depreciation | 65 | 68 | |||||
| Add: Amortization | 16 | 17 | |||||
| Adjusted EBITDA | $ | 410 | to | $ | 430 |
(1) RIP credit represents the actuarial net periodic benefit expected to be recorded as a component of other non-operating income. We do not expect to and do not plan to make cash contributions to our RIP in 2022 based on guidelines established by the Pension Benefit Guaranty Corporation.
(2) RIP expense represents only the plan service cost that is recorded within Operating Income. For all periods presented, we were not required and did not make cash contributions to our RIP.
Adjusted Diluted Earnings Per Share (EPS) Guidance
| For the Year Ending December 31, 2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Low | Per Diluted<br>Share(1) | High | Per Diluted<br>Share(1) | ||||||||
| Net income | $ | 232 | $ | 4.87 | to | $ | 241 | $ | 5.05 | ||
| Add: Interest expense | 22 | 26 | |||||||||
| (Less): RIP credit (2) | (5 | ) | (5 | ) | |||||||
| Add: Income tax expense | 76 | 79 | |||||||||
| Operating income | $ | 325 | to | $ | 340 | ||||||
| Add: RIP expense (3) | 5 | 5 | |||||||||
| (Less): Interest expense | (22 | ) | (26 | ) | |||||||
| Add: Acquisition related amortization (4) | 8 | 8 | |||||||||
| Adjusted earnings before income taxes | $ | 316 | to | $ | 328 | ||||||
| (Less): Income tax expense (5) | (79 | ) | (82 | ) | |||||||
| Adjusted net income | $ | 237 | $ | 5.00 | to | $ | 246 | $ | 5.20 |
(1) Adjusted EPS guidance for 2022 is calculated based on an adjusted effective tax rate of 25% and based on ~47.7 million of diluted shares outstanding.
(2) RIP credit represents the actuarial net periodic benefit expected to be recorded as a component of other non-operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our RIP based on guidelines established by the Pension Benefit Guaranty Corporation.
(3) RIP expense represents only the plan service cost related to the U.S. pension plan and is recorded as a component of operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our RIP based on guidelines established by the Pension Benefit Guaranty Corporation.
(4) Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles.
(5) Adjusted income tax expense is based on adjusted earnings before income tax.
Adjusted Free Cash Flow Guidance
| For the Year Ending December 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|
| Low | High | ||||||
| Net cash provided by operating activities | $ | 210 | to | $ | 230 | ||
| Add: Return of investment from joint venture | 95 | 105 | |||||
| Adjusted net cash provided by operating activities | $ | 305 | to | $ | 335 | ||
| Less: Capital expenditures | (90 | ) | (100 | ) | |||
| Adjusted Free Cash Flow | $ | 215 | to | $ | 235 |
4th Quarter 2021 Earnings Presentation February 22, 2022 Exhibit 99.2
Safe Harbor Statement Our disclosures in this presentation, including without limitation, those relating to future financial results market conditions and guidance, the impacts of COVID-19 on our business, and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Those statements provide our future expectations or forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward-looking statements. A more detailed discussion of the risks and uncertainties that may affect our ability to achieve the projected performance is included in the “Risk Factors” and “Management’s Discussion and Analysis” sections of our reports on Form 10-K and 10-Q filed with the U.S. Securities and Exchange Commission (“SEC”). Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law. In addition, we will be referring to non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of the differences between these measures with the most directly comparable financial measures calculated in accordance with Generally Accepted Accounting Principles (“GAAP”) are included within this presentation and available on the Investor Relations page of our website at www.armstrongceilings.com. The guidance in this presentation is only effective as of the date given, February 22, 2022, and will not be updated or affirmed unless and until we publicly announce updated or affirmed guidance.
Basis of Presentation Explanation Results throughout this presentation are presented on a normalized basis. We remove the impact of certain discrete expenses and income in certain measures including adjusted net sales, adjusted EBITDA, adjusted earnings per share (EPS) and adjusted free cash flow. The Company excludes certain acquisition related expenses (i.e. – changes in the fair value of earn-outs, deferred compensation accruals(1), impact of adjustments related to the fair value of inventory and deferred revenue) for recent acquisitions. The Company excludes all acquisition-related amortization from adjusted earnings from continuing operations and in calculations of adjusted diluted earnings per share. Examples of other excluded items include plant closures, restructuring actions and related costs, impairments, separation costs, environmental site expenses and related insurance recoveries, endowment level charitable contributions, and certain other gains and losses. The Company also adjusts for our U.S. pension plan (credit) expense(2). Our tax rate may be adjusted for certain discrete items which are identified in the footnotes. Investors should not consider non-GAAP measures as a substitute for GAAP measures. Non-GAAP figures are rounded to the nearest million and corresponding percentages are rounded to the nearest percent based on unrounded figures. The deferred compensation accruals are for cash and stock awards that will be recorded over the vesting period, as such payments are subject to the sellers’ and employees’ continued employment with the Company. RIP (credit) expense represents the entire actuarial net periodic pension (credit) expense recorded as a component of earnings from continuing operations. For all periods presented, we were not required to and did not make cash contributions to our RIP. All dollar figures throughout the presentation are in $ millions, except per share data, and all comparisons are versus prior year unless otherwise noted. Figures may not sum due to rounding.
1 Exceeded Mineral Fiber (MF) volume expectations in the quarter, lifting FY 2021 volume growth to 3% 2 Strong level of MF Average Unit Value (AUV) growth at 13% in Q4, driven by like-for-like price and mix improvements 3 Architectural Specialties (AS) Q4 EBITDA margin expanded 220bps VPY driven by both organic performance and 2020 Acquisitions(1) 4 Our investments throughout the pandemic position AWI for further growth in 2022 Solid Close to Year Providing Momentum for 2022 Q4 2021 Highlights *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. (1) The “2020 Acquisitions” include acquisitions made in 2020 of Turf, Moz and Arktura. “Organic” excludes the 2020 Acquisitions. Adj. Net Sales* $ Million $239 $283 +13% +34% +18% +21% Adj. EBITDA* $ Million
2020 Acquisitions 3 6 - - (1) (3) - 5 Quality Q4 Results Driven by Execution and Strong AUV Q4 2021 Consolidated Company Key Metrics Q4 2020 Q4 2021 Variance Adj. Net Sales ($M) $239 $283 18% Adj. EBITDA*($M) $73 $88 21% Adj. EBITDA Margin*(%) 31% 30% 60bps Adj. Earnings Per Share* $0.81 $1.09 35% Adj. Free Cash Flow* ($M) $68 $45 (34%) Cash ($M) $137 $98 ($39) Liquidity(1) ($M) $412 $433 $21 Net Debt(2) ($M) $579 $533 ($46) Leverage(3) 1.8x 1.4x (4) Excludes change in depreciation throughout presentation. (5) Excludes change in amortization throughout presentation. *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. $73 $10 $19 ($10) $1 ($9) $4 $88 (1) Liquidity is comprised of cash and cash equivalents and availability on our revolving credit facility. (2) Net Debt is comprised of current and long term debt less cash and cash equivalents. (3) As defined by the terms of our credit agreement.
MF AUV and Volume Growth Drive Strong Performance Mineral Fiber Q4 2021 Results Q1 Q2 Q3 Q4 Current Quarter Comments 2020 Adjusted EBITDA* $87 $62 $79 $66 AUV 2 13 20 19 Positive price and favorable mix, more price vs mix Volume (10) 21 1 1 Increased demand vs PY impacted by COVID-19 Manufacturing 3 (0) (1) 2 Productivity more than offset return of 2020 temporary reductions Input costs 1 (5) (8) (10) Raw material, energy and freight inflation SG&A (7) (11) (13) (5) Return of 2020 temporary reductions, growth investments WAVE 2 10 8 4 Price and mix more than offset inflation 2021 Adjusted EBITDA* $78 $90 $86 $77 Q4 MF EBITDA margin expanded 110 bps % Change (10%) 44% 10% 17% *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. (1) Worthington Armstrong 50/50 Joint Venture (“WAVE”). Net Sales ($ Million) +13% Mineral Fiber Key Highlights AUV up 13% vs. Q4 2020 on positive like-for-like pricing and favorable channel mix Volumes increased on more normalized demand vs. impacts from COVID-19 in prior-year period Continued to achieve price over elevated inflation and expanded gross margin Strong performance from WAVE(1) joint venture
Q1 Q2 Q3 Q4 Current Quarter Comments 2020 Adjusted EBITDA* $10 $6 $13 $7 Sales 8 15 8 9 Incremental sales driven by both organic and acquisitions Period Expense (6) (6) (3) (2) Expense from acquired companies and capacity investments SG&A (4) (6) (4) (3) Expense from acquired companies 2021 Adjusted EBITDA* $7 $10 $13 $11 Q4 AS margin expanded 220 bps % Change (29%) 48% 1% 58% Organic Growth & 2020 Acquisitions Contribute to Solid Performance Architectural Specialties Q4 2021 Results *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. AS organic excludes the 2020 Acquisitions. 2020 Acquisitions added $14 in sales and $2 in EBITDA vs. prior year Organic(1) sales up 12% driven by increased volumes and pricing actions Adjusted EBITDA* up 58% on both organic and inorganic contributions Adjusted EBITDA* margin expanded 220 bps, driven by improved scale on increased sales +34% Key Highlights Adj. Net Sales* ($ Million)
Strong FY Rebound From COVID Depressed 2020 Results Consolidated Company Key Metrics – FY 2021 *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. 2020 Acquisitions 5 38 - - (13) (15) - 16 FY 2020 FY 2021 Variance Adj. Net Sales* ($M) $938 $1,107 18% Adj. EBITDA*($M) $330 $372 13% Adj. EBITDA Margin (%) 35% 34% (160bps) Adj. Earnings Per Share* $3.74 $4.36 17% Adj. Free Cash Flow* ($M) $212 $190 (10%) $24 ($55) $330 $372 ($13) ($21) $52 $55
Cash Earnings Decline Driven by Planned Capex Increase vs. 2020 *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. (1) Includes cash earnings, working capital and other current assets and liabilities. ($24) ($2) $3 ($8) $190 $10 Adjusted Free Cash Flow* Bridge – Full Year 2021 vs. PY ($ Million)
2021 Actual 2022 Guidance Key Assumptions 2022 Guidance Double-digit growth on both top and bottom line $1,107 $1,215 – $1,255 10% – 13% YoY MF AUV 8-10% on positive like-for-like pricing & mix benefits Market recovery and benefits from growth initiatives expected to drive MF volume up 2% - 4% AS >10%; guidance does not include any future acquisitions Net Sales Adjusted EBITDA* Adjusted EPS* Adjusted Free Cash Flow* $372 $410 – $430 10% – 16% YoY Higher than average AUV fall through, continued price over inflation Manufacturing productivity and improved earnings from WAVE Investing to support growth AS margin expansion $4.36 $5.00 – $5.20 15% – 19% YoY ~$25 million of interest expense 25% book tax rate $66 million depreciation, $16 million amortization, of which ~$8 million of acquisition amortization is excluded ~48 million average diluted shares outstanding $190 $215 – $235 13% – 24% YoY $90-$100 million of Cap Ex $20 - $25 million of cash interest expense Cash tax rate 20% - 25% *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure.
Appendix
2021 Adjusted EBITDA Reconciliation RIP expense represents only the plan service cost that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP. Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation & restricted stock expenses. Donation to the AWI Foundation.
2021 Adjusted Diluted Earnings per Share Reconciliation RIP (credit) expense represents the entire actuarial net periodic pension expense (credit) recorded as a component of earnings from continuing operations. For all periods presented, we were not required to and did not make cash contributions to our RIP. Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation & restricted stock expenses. Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles. Donation to the AWI Foundation. Adjusted income tax expense is calculated using the adjusted tax rate multiplied by the adjusted earnings from continuing operations before income taxes. Dilutive shares are as-reported. 2020 dilutive shares outstanding for the twelve months ended December 31, 2020 include anti-dilutive common stock equivalents which are excluded from U.S. GAAP. The tax rate for the three and twelve months ended December 31, 2020 excludes the first quarter pension annuitization and the gain on the sale of our idled China facility.
2021 Adjusted Free Cash Flow Reconciliation Amounts for the three and twelve months ended December 31, 2020 include related income tax payments. Contingent compensation payments related to the acquisition. Donation to the AWI Foundation.
2021 Segment Reported Operating Income (Loss) to Adj. EBITDA RIP expense represents only the plan service cost related to the RIP that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP. Donation to the AWI Foundation. Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation accruals.
2021 Adjusted Net Sales Reconciliation Represents the impact of acquisition-related deferred revenue adjustments to fair value.
2022 Adjusted EBITDA Guidance Reconciliation RIP credit represents the actuarial net periodic benefit expected to be recorded as a component of other non-operating income. We do not expect to be and do not plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. RIP expense represents only the service cost related to the U.S. pension plan that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our U.S. Retirement Income Plan.
2022 Adjusted EPS Guidance Reconciliation Adjusted EPS guidance for 2022 is calculated based on an adjusted effective tax rate of 25% and based on 47.7 million of diluted shares outstanding. RIP credit represents the actuarial net periodic benefit expected to be recorded as a component of other non-operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. RIP expense represents only the service cost related to the U.S. pension plan and is recorded as a component of operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles. Adjusted income tax expense is based adjusted earnings before income tax.
2022 Adjusted Free Cash Flow Guidance Reconciliation