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): October 26, 2021
ARMSTRONG WORLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 1-2116 | 23-0366390 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation or organization) | (Commission<br><br><br>File Number) | (IRS Employer<br><br><br>Identification No.) |
| 2500 Columbia Avenue P.O. Box 3001<br><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><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 October 26, 2021, the Company issued a press release announcing its third quarter 2021 consolidated financial results. 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 October 26, 2021, the Company issued a press release announcing that it will report its third quarter 2021 consolidated financial results via a webcast and conference call on October 26, 2021 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 October 26, 2021 |
|---|---|
| No. 99.2 | Earnings Call Presentation Third Quarter 2021 dated October 26, 2021 |
| --- | --- |
| 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/ Mark A. Hershey |
| Mark A. Hershey | |
| Senior Vice President, General Counsel, Secretary and Chief Compliance Officer |
Date: October 26, 2021
4
awi-ex991_151.htm
Exhibit 99.1
Armstrong World Industries Reports Third-Quarter 2021 Results
Key Highlights
| • | Net sales up 19% versus the prior-year quarter |
|---|---|
| • | Operating income flat versus the prior-year quarter |
| --- | --- |
| • | Adjusted EBITDA up 8% versus the prior-year quarter |
| --- | --- |
| • | Reaffirming the midpoints of 2021 guidance |
| --- | --- |
LANCASTER, Pa., October 26, 2021 -- Armstrong World Industries, Inc. (NYSE:AWI), a leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions, today reported year-over-year sales and adjusted EBITDA growth for the third quarter of 2021 as the company’s ability to manage inflationary and supply chain challenges helped offset uneven market conditions.
“As the market continued to recover throughout the third-quarter, we delivered solid sales growth driven by strong price realization and the sales benefits of the 2020 acquisitions we made to expand our Architectural Specialties business,” said Vic Grizzle, President and CEO of Armstrong World Industries. “Our employees executed well in the face of supply chain challenges and inflationary pressures to maintain our best-in-class service levels. Additionally, in the quarter we continued to advance our Healthy Spaces and digital growth initiatives, which
positions us to deliver further growth as the pace of the non-residential construction market recovery accelerates in 2022.”
Third-Quarter Results from Continuing Operations
| (Dollar amounts in millions except per-share data) | For the Three Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | |||||
| Net sales | $ | 292.2 | $ | 246.3 | 18.6 | % | |
| Operating income | $ | 72.1 | $ | 72.3 | (0.3 | )% | |
| Earnings from continuing operations | $ | 50.8 | $ | 54.2 | (6.3 | )% | |
| Diluted earnings per share | $ | 1.06 | $ | 1.13 | (6.2 | )% | |
| Net cash provided by operating and investing activities | $ | 57.4 | $ | 7.2 | 697.2 | % | |
| Additional Non-GAAP* Measures | |||||||
| Adjusted EBITDA | $ | 99 | $ | 92 | 8 | % | |
| Adjusted net income | $ | 56 | $ | 51 | 9 | % | |
| Adjusted diluted earnings per share | $ | 1.17 | $ | 1.07 | 9 | % | |
| Adjusted free cash flow | $ | 58 | $ | 46 | 28 | % |
* 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 and corresponding percentages are rounded to the nearest percent based on unrounded figures.
Third-quarter 2021 consolidated net sales increased 18.6% from prior-year results, driven primarily by favorable Average Unit Value (“AUV”) of $26 million and incremental sales from the acquisitions of Turf, Moz and Arktura in 2020 (“2020 Acquisitions”) of $16 million. Sales volumes for both segments continued to recover compared to prior-year results, although the resurgence of the pandemic in certain markets and supply chain and labor disruptions have resulted in project delays.
Operating income was essentially unchanged from third-quarter 2020 results, as positive AUV in the Mineral Fiber segment, an increase in WAVE equity earnings, the positive margin impact of incremental net sales from the 2020 Acquisitions and a 2020 CARES Act Employee Retention Credit (“ERC”) provided favorability. This favorability was offset by higher SG&A costs attributable to the 2020 Acquisitions, higher manufacturing costs, increased incentive and deferred compensation expenses, a resumption of more normalized discretionary spending compared to cost curtailments in the prior-year due to COVID-19 uncertainty, and investments for future growth. The prior-year period benefited from a gain on the sale of an idled, legacy Mineral Fiber plant in China. Excluding this gain, third-quarter operating income increased 10% versus prior-year results.
Third-Quarter Segment Highlights
Mineral Fiber
| (Dollar amounts in millions) | For the Three Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | |||||
| Net sales | $ | 214.5 | $ | 187.3 | 14.5 | % | |
| Operating income | $ | 68.5 | $ | 58.1 | 17.9 | % | |
| Adjusted EBITDA* | $ | 86 | $ | 79 | 10 | % |
Third-quarter 2021 Mineral Fiber net sales increased 14.5% due to a 14% 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 third quarter of 2020.
Third-quarter Mineral Fiber operating income increased 17.9% from prior-year results primarily due to a $20 million benefit from favorable AUV, an $8 million increase in WAVE equity earnings and a $4 million benefit related to the ERC, which was partially offset by a $10 million increase in manufacturing costs, a $4 million increase in incentive and deferred compensation expenses, higher SG&A expenses attributable to more normalized discretionary spending and investments in growth initiatives.
Architectural Specialties
| (Dollar amounts in millions) | For the Three Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | |||||
| Net sales | $ | 77.7 | $ | 59.0 | 31.7 | % | |
| Operating income | $ | 5.0 | $ | 9.1 | (45.1 | )% | |
| Adjusted EBITDA* | $ | 13 | $ | 13 | 1 | % |
Third-quarter 2021 net sales in Architectural Specialties increased 31.7% from prior-year results, driven by a $16 million increase from the 2020 Acquisitions and higher organic sales volumes due to recovering economic activity as COVID-19 impacts decline.
The year-over-year decline in operating income was primarily driven by an $8 million increase in SG&A expenses related to the 2020 Acquisitions and the negative margin impact from custom project delays in an inflationary environment, which were partially offset by the positive impact of increased sales.
Unallocated Corporate
The Company reported an Unallocated Corporate operating loss of $1.4 million in the third quarter of 2021 compared to income of $5.1 million in the third quarter of 2020, driven primarily by the $7 million gain reported in the prior-year period from the sale of an idled, legacy Mineral Fiber plant in China.
Current 2021 Outlook
“Although the recovery in our markets was uneven throughout the quarter, it is improving, and we see many strong indicators of future growth. We remain focused on our long-term strategic growth priorities by investing in our Healthy Spaces and digital initiatives that are driving higher SG&A and capital investments. In addition, with our robust cash flow generation, we remain confident in our ability to execute against all our capital allocation priorities,” said Brian MacNeal, AWI CFO. “In light of third-quarter results, we are narrowing our full year guidance and maintaining our prior mid-point guidance. We now expect increased net sales of 17% to 18% and adjusted EBITDA of 13% to 15% versus the prior year.”
| For the year ending December 31, 2021 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollar amounts in millions except per-share data) | Prior Guidance | Current Guidance | ||||||||
| Net Sales | $ | 1,085 | to | $ | 1,105 | $ | 1,095 | to | $ | 1,105 |
| Adjusted EBITDA* | $ | 370 | to | $ | 380 | $ | 372 | to | $ | 378 |
| Adjusted diluted earnings per share* | $ | 4.20 | to | $ | 4.40 | $ | 4.25 | to | $ | 4.35 |
| Adjusted free cash flow* | $ | 195 | to | $ | 210 | $ | 198 | to | $ | 208 |
Earnings Webcast
Management will host a live internet broadcast beginning at 10:00 a.m. E.T. today, to discuss third-quarter 2021 results. This event will be broadcast live on the Company's website. To access the call and accompanying slide presentation, go to www.armstrongceilings.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 in the first nine months of 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 $937 million in revenue in 2020, AWI has approximately 2,800 employees and a manufacturing network of 15 facilities, plus six facilities dedicated to its WAVE joint venture.
More details on the Company’s performance can be found in its report on Form 10-Q for the quarter ended September 30, 2021 that the Company expects to file with the SEC today.
Reported Financial Highlights
FINANCIAL HIGHLIGHTS
Armstrong World Industries, Inc. and Subsidiaries
(Amounts in millions, except for per-share amounts)
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net sales | $ | 292.2 | $ | 246.3 | $ | 824.1 | $ | 698.2 | ||||
| Cost of goods sold | 181.5 | 155.1 | 521.0 | 447.9 | ||||||||
| Gross profit | 110.7 | 91.2 | 303.1 | 250.3 | ||||||||
| Selling, general and administrative expenses | 62.3 | 41.0 | 176.5 | 108.8 | ||||||||
| Change in fair value of contingent consideration | (0.3 | ) | - | (9.8 | ) | - | ||||||
| (Gain) related to sale of fixed and intangible assets | - | (6.9 | ) | - | (21.0 | ) | ||||||
| Equity (earnings) from joint venture | (23.4 | ) | (15.2 | ) | (68.1 | ) | (48.2 | ) | ||||
| Operating income | 72.1 | 72.3 | 204.5 | 210.7 | ||||||||
| Interest expense | 6.1 | 6.1 | 17.4 | 18.7 | ||||||||
| Other non-operating (income) expense, net | (1.4 | ) | (3.2 | ) | (4.3 | ) | 361.8 | |||||
| Earnings (loss) from continuing operations before income taxes | 67.4 | 69.4 | 191.4 | (169.8 | ) | |||||||
| Income tax expense (benefit) | 16.6 | 15.2 | 48.0 | (50.9 | ) | |||||||
| Earnings (loss) from continuing operations | 50.8 | 54.2 | 143.4 | (118.9 | ) | |||||||
| Net gain (loss) from discontinued operations | - | (0.2 | ) | (2.1 | ) | (3.0 | ) | |||||
| Net earnings (loss) | $ | 50.8 | $ | 54.0 | $ | 141.3 | $ | (121.9 | ) | |||
| Diluted earnings (loss) per share of common stock, continuing operations | $ | 1.06 | $ | 1.13 | $ | 2.98 | $ | (2.48 | ) | |||
| Diluted (loss) per share of common stock, discontinued operations | $ | - | $ | - | $ | (0.04 | ) | $ | (0.06 | ) | ||
| Net earnings (loss) per share of common stock | $ | 1.06 | $ | 1.13 | $ | 2.94 | $ | (2.54 | ) | |||
| Average number of diluted common shares outstanding | 47.8 | 48.0 | 48.0 | 47.9 |
SEGMENT RESULTS
Armstrong World Industries, Inc. and Subsidiaries
(Amounts in millions)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | September 30, | |||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||
| Net Sales | ||||||||||
| Mineral Fiber | $ | 214.5 | $ | 187.3 | $ | 611.3 | $ | 542.9 | ||
| Architectural Specialties | 77.7 | 59.0 | 212.8 | 155.3 | ||||||
| Total net sales | $ | 292.2 | $ | 246.3 | $ | 824.1 | $ | 698.2 | ||
| Three Months Ended | Nine Months Ended | |||||||||
| September 30, | September 30, | |||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||
| Segment operating income (loss) | ||||||||||
| Mineral Fiber | $ | 68.5 | $ | 58.1 | $ | 201.2 | $ | 173.7 | ||
| Architectural Specialties | 5.0 | 9.1 | 7.5 | 20.9 | ||||||
| Unallocated Corporate | (1.4 | ) | 5.1 | (4.2 | ) | 16.1 | ||||
| Total consolidated operating income | $ | 72.1 | $ | 72.3 | $ | 204.5 | $ | 210.7 |
Selected Balance Sheet Information
(Amounts in millions)
| (Unaudited)<br><br><br>September 30, 2021 | December 31, 2020 | |||
|---|---|---|---|---|
| Assets | ||||
| Current assets | $ | 310.3 | $ | 311.8 |
| Property, plant and equipment, net | 527.3 | 529.9 | ||
| Other noncurrent assets | 867.3 | 876.8 | ||
| Total assets | $ | 1,704.9 | $ | 1,718.5 |
| Liabilities and shareholders’ equity | ||||
| Current liabilities | $ | 194.3 | $ | 172.3 |
| Noncurrent liabilities | 988.4 | 1,095.3 | ||
| Equity | 522.2 | 450.9 | ||
| Total liabilities and shareholders’ equity | $ | 1,704.9 | $ | 1,718.5 |
Selected Cash Flow Information
(Amounts in millions)
(Unaudited)
| For the Nine Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Net earnings (loss) | $ | 141.3 | $ | (121.9 | ) | |
| Other adjustments to reconcile net earnings (loss) to net cash provided by operating activities | 12.9 | 284.9 | ||||
| Changes in operating assets and liabilities, net | (16.3 | ) | (14.6 | ) | ||
| Net cash provided by operating activities | 137.9 | 148.4 | ||||
| Net cash (used for) investing activities | (5.4 | ) | (52.2 | ) | ||
| Net cash (used for) financing activities | (175.1 | ) | (2.5 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents | — | (0.2 | ) | |||
| Net (decrease) increase in cash and cash equivalents | (42.6 | ) | 93.5 | |||
| Cash and cash equivalents at beginning of year | 136.9 | 45.3 | ||||
| Cash and cash equivalents at end of period | $ | 94.3 | $ | 138.8 |
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 will be recorded over the 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 2021. 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, legacy environmental matters and litigation. The Company believes adjusted free cash flow is useful because it provides insight into the amount of cash that the Company 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 September 30, | For the Nine Months Ended September 30, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||
| Earnings (Loss) from continuing operations, Reported | $ | 51 | $ | 54 | $ | 143 | $ | (119 | ) | |
| Add/(Less): Income tax expense (benefit), reported | 17 | 15 | 48 | (51 | ) | |||||
| Earnings (Loss) before tax, Reported | $ | 67 | $ | 69 | $ | 191 | $ | (170 | ) | |
| Add: Interest/other income and expense, net | 5 | 3 | 13 | 381 | ||||||
| Operating Income, Reported | $ | 72 | $ | 72 | $ | 205 | $ | 211 | ||
| Add: RIP expense (1) | 1 | 1 | 4 | 4 | ||||||
| Add: Acquisition-related impacts (2) | 3 | - | 1 | - | ||||||
| Add: Net environmental expenses | - | - | - | 1 | ||||||
| (Less): Gain on sale of idled China plant facility | - | (7 | ) | - | (21 | ) | ||||
| Operating Income, Adjusted | $ | 76 | $ | 67 | $ | 210 | $ | 195 | ||
| Add: Depreciation | 16 | 19 | 46 | 47 | ||||||
| Add: Amortization | 7 | 6 | 28 | 15 | ||||||
| Adjusted EBITDA | $ | 99 | $ | 92 | $ | 284 | $ | 257 | ||
| (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 and deferred compensation and restricted stock expenses. | |||||||||
| --- | --- |
Mineral Fiber
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Operating Income, Reported | $ | 69 | $ | 58 | $ | 201 | $ | 174 |
| Add: Net environmental expenses | - | - | - | 1 | ||||
| Operating Income, Adjusted | $ | 69 | $ | 58 | $ | 201 | $ | 175 |
| Add: D&A | 18 | 20 | 53 | 54 | ||||
| Adjusted EBITDA | $ | 86 | $ | 79 | $ | 254 | $ | 228 |
Architectural Specialties
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Operating Income, Reported | $ | 5 | $ | 9 | $ | 8 | $ | 21 |
| Add: Acquisition-related impacts (1) | 3 | - | 1 | - | ||||
| Operating Income, Adjusted | $ | 8 | $ | 9 | $ | 9 | $ | 21 |
| Add: D&A | 5 | 4 | 21 | 8 | ||||
| Adjusted EBITDA | $ | 13 | $ | 13 | $ | 29 | $ | 29 |
(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 and deferred compensation and restricted stock expenses.
Unallocated Corporate
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Operating (Loss) Income, Reported | $ | (1 | ) | $ | 5 | $ | (4 | ) | $ | 16 | ||
| Add: RIP expense (1) | 1 | 1 | 4 | 4 | ||||||||
| (Less): Gain on sale of idled China plant facility | - | (7 | ) | - | (21 | ) | ||||||
| Operating (Loss), Adjusted | - | - | (1 | ) | (1 | ) | ||||||
| Add: D&A | - | - | 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 September 30, | For the Nine Months Ended September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | ||||||||
| Net cash provided by operating activities | $ | 56 | $ | 70 | $ | 138 | $ | 148 | |||
| Net cash provided by (used for) investing activities | 1 | (63 | ) | (5 | ) | (52 | ) | ||||
| Net cash provided by operating and investing activities | $ | 57 | $ | 7 | $ | 133 | $ | 96 | |||
| Add: Acquisitions, net | 1 | 74 | 1 | 74 | |||||||
| (Less)/Add: Payments related to sale of international, net (1) | - | (20 | ) | 12 | (21 | ) | |||||
| Add: Environmental payments, net | - | - | - | 1 | |||||||
| Add: Net Payments to WAVE for Portion of Proceeds from Sale of International Business | - | 3 | - | 13 | |||||||
| (Less): Proceeds from sale of Idled China Plant facility | - | (19 | ) | - | (19 | ) | |||||
| Adjusted Free Cash Flow | $ | 58 | $ | 46 | $ | 145 | $ | 145 | |||
| (1) | Amounts for the three and nine months ended September 30, 2020 include related income tax impacts. | ||||||||||
| --- | --- |
Consolidated Results from Continuing Operations – Adjusted Diluted Earnings Per Share
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||
| Total | Per Diluted<br><br><br>Share | Total | Per Diluted<br><br><br>Share | Total | Per Diluted<br><br><br>Share | Total | Per Diluted<br><br><br>Share | ||||||||||||||
| Earnings (Loss) from continuing operations, Reported | $ | 51 | $ | 1.06 | $ | 54 | $ | 1.13 | $ | 143 | $ | 2.98 | $ | (119 | ) | $ | (2.48 | ) | |||
| Add/(Less): Income tax expense (benefit), reported | 17 | $ | 15 | 48 | (51 | ) | |||||||||||||||
| Earnings (Loss) from continuing operations before income taxes, Reported | 67 | $ | 69 | $ | 191 | $ | (170 | ) | |||||||||||||
| Add: RIP expense (1) | - | - | - | 370 | |||||||||||||||||
| Add: Acquisition-related impacts (2) | 3 | - | 1 | - | |||||||||||||||||
| Add: Acquisition related amortization (3) | 4 | 2 | 18 | 4 | |||||||||||||||||
| (Less)/Add: Net environmental expenses | - | - | - | 1 | |||||||||||||||||
| (Less): Gain on sale of idled China plant facility | - | (7 | ) | - | (21 | ) | |||||||||||||||
| Add: Accelerated Depreciation from closed facility | - | 3 | - | 3 | |||||||||||||||||
| Adjusted earnings from continuing operations before income taxes | $ | 74 | $ | 68 | $ | 210 | $ | 188 | |||||||||||||
| (Less): Adjusted income tax expense (4) | (18 | ) | (17 | ) | (53 | ) | (46 | ) | |||||||||||||
| Adjusted net income | $ | 56 | $ | 1.17 | $ | 51 | $ | 1.07 | $ | 157 | $ | 3.28 | $ | 142 | $ | 2.93 | |||||
| Adjusted EPS change versus Prior Year | 9% | 12% | |||||||||||||||||||
| Diluted Shares Outstanding (5) | 47.8 | 48.0 | 48.0 | 48.3 | |||||||||||||||||
| Adjusted Tax Rate (6) | 25% | 25% | 25% | 25% | |||||||||||||||||
| (1) | RIP 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. | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| (2) | Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation accruals. | ||||||||||||||||||||
| --- | --- |
(3) Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles.
| (4) | Adjusted income tax expense is calculated using the adjusted tax rate multiplied by the adjusted earnings from continuing operations before income taxes. |
|---|---|
| (5) | Dilutive shares are as-reported. 2020 dilutive shares outstanding for the nine months ended September 30, 2020 include anti-dilutive common stock equivalents which are excluded from U.S. GAAP Accounting. |
| --- | --- |
| (6) | The tax rate for the three and nine months ended September 30, 2020 excludes the 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, 2021 | |||||||
|---|---|---|---|---|---|---|---|
| Low | High | ||||||
| Net income | $ | 189 | to | $ | 194 | ||
| Add: Interest expense | 23 | 23 | |||||
| (Less): RIP credit (1) | (4 | ) | (4 | ) | |||
| Add: Income Tax Expense | 62 | 63 | |||||
| Operating income | $ | 270 | to | $ | 277 | ||
| Add: RIP expense (2) | 4 | 4 | |||||
| Add: Depreciation | 63 | 63 | |||||
| Add: Amortization | 35 | 35 | |||||
| Adjusted EBITDA | $ | 372 | to | $ | 378 | ||
| (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 2021 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, 2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Low | Per Diluted<br><br><br>Share^(^^1)^ | High | Per Diluted<br><br><br>Share^(^^1)^ | ||||||||
| Net income | $ | 189 | $ | 3.94 | to | $ | 194 | $ | 4.04 | ||
| Add: Interest expense | 23 | 23 | |||||||||
| (Less): RIP Credit (2) | (4 | ) | (4 | ) | |||||||
| Add: Income tax Expense | 62 | 63 | |||||||||
| Operating income | $ | 270 | to | $ | 277 | ||||||
| Add: RIP expense (3) | 4 | 4 | |||||||||
| (Less): Interest expense | (23 | ) | (23 | ) | |||||||
| Add: Acquisition related amortization (4) | 21 | 21 | |||||||||
| Adjusted earnings before income taxes | $ | 272 | to | $ | 279 | ||||||
| (Less): Income tax expense (5) | (68 | ) | (70 | ) | |||||||
| Adjusted net income | $ | 204 | $ | 4.25 | to | $ | 209 | $ | 4.35 | ||
| (1) | Adjusted EPS guidance for 2021 is calculated based on an adjusted effective tax rate of 25% and based on ~48 million of diluted shares outstanding. | ||||||||||
| --- | --- | ||||||||||
| (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, 2021 | |||||||
|---|---|---|---|---|---|---|---|
| Low | High | ||||||
| Net cash provided by operating activities | $ | 203 | to | $ | 213 | ||
| Add: Return of investment from joint venture | 75 | 80 | |||||
| Adjusted net cash provided by operating activities | $ | 278 | to | $ | 293 | ||
| Less: Capital expenditures | (80 | ) | (85 | ) | |||
| Adjusted Free Cash Flow | $ | 198 | to | $ | 208 |
13
Earnings Call Presentation 3rd Quarter 2021 October 26, 2021 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 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, October 26, 2021 and will not be updated or affirmed unless and until we publicly announce updated or affirmed guidance.
Basis of Presentation Explanation When reporting our financial results within this presentation, we make several adjustments. Management uses these non-GAAP measures in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. As reported results will be footnoted throughout the presentation on a continuing operations basis (excludes corporate unallocated).
All 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. 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 contingent consideration, deferred compensation accruals(1), impact of adjustments related to the fair value of inventory and deferred revenue) for recent acquisitions. The Company excludes all acquisition-related amortization from adjusted earnings from continuing operations and in calculations of adjusted diluted earnings per share. Examples of other excluded items include plant closures, restructuring actions and related costs, impairments, separation costs, environmental site expenses and related insurance recoveries, endowment level charitable contributions, and other large unusual items. We also adjust for our U.S. pension plan (credit) expense(2). Our tax rate may be adjusted for certain discrete items which are identified in the footnotes. Investors should not consider non-GAAP measures as a substitute for GAAP measures. 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. U.S. pension (credit) expense represents the actuarial net periodic benefit cost expected to be recorded as a component of earnings from continuing operations. For all periods presented, we were not required to and did not make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation.
+15% +31% Third-Quarter 2021 Highlights Q3 performance supports maintaining midpoints of guidance Adjusted Net Sales* Adjusted EBITDA* +8% Market conditions continue to improve driving strong sales growth versus prior year Record-level Mineral Fiber (MF) Average Unit Value (AUV) growth, up 14% on both like-for-like price and mix improvements…price over inflation Growth initiatives continue to gain traction…Healthy Spaces, digital and acquisitions Strong service performance despite supply chain challenges throughout the industry…MF sales per shipping day improved sequentially *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. $246 $292
Third Quarter 2021 Consolidated Company Key Metrics As defined by the terms of our credit agreement. Excludes change in depreciation Excludes change in amortization $9 $92 $99 *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure.
Mineral Fiber Third Quarter 2021 Results Price over inflation & sales per shipping day improvement continues Key Highlights AUV up 14% vs. Q3 2020 on positive like-for-like pricing and channel mix improvements Sequential improvement in sales per shipping day AUV fall-through at historical rate Strong performance from WAVE joint venture *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure.
Architectural Specialties Third Quarter 2021 Results Organic* growth and 2020 Acquisitions offset project pushouts Key Highlights *AS organic excludes 2020 Acquisitions of Turf, Moz, Arktura. **Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. 2020 Acquisitions added $16 in sales and $2 in EBITDA versus prior year Improved sales and pricing actions drove organic* sales growth of 6% Adjusted EBITDA** margin expanded 350 bps sequentially…third consecutive quarter of expansion Project delays continue to pressure segment due to longer lead times and inflationary backdrop
Consolidated Company Key Metrics – Q3 YTD 2021 Excludes change in depreciation Excludes change in amortization ($14) ($11) $35 $43 *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure.
Adjusted Free Cash Flow* Bridge – Q3 YTD 2021 vs. PY ($15) Planned increase in CapEx vs prior year offsets YTD cash favorability $15 $1 ($7) (1) Includes cash earnings, working capital, and other current assets and liabilities $145 $7 *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure.
2021 Guidance – October Update ⁽¹⁾ $3.74 Adjusted EBITDA* Adjusted EPS* Adjusted Free Cash Flow* Revenue $937 $330 MF AUV 9%-11%, positive like-for-like pricing & mix Growth initiatives, kanopi and Healthy Spaces drive MF volume up 1% - 2% 2020 acquisitions benefit AS ~30% AS organic growth of mid-to-high single digits AUV and volume gains fall through Manufacturing productivity and improved earnings from WAVE drive MF margin improvement Includes benefit of 2020 acquisitions Investment in growth initiatives continues in 2021 $80-$85M of Cap Ex $23M of cash interest expense Cash tax rate 23% - 25% Higher Working Capital due to increased sales 2020 Actual Current Guidance $23M of interest expense 25% book tax rate ~$63M depreciation; ~$35M amortization, of which $21M is excluded related to acquisition amortization 48 million average diluted shares outstanding $212 *Non-GAAP measure. See appendix for reconciliation to nearest GAAP measure. Adjusted EPS excludes $0.11 in relation to acquisition-related amortization in 2020. ⁽¹⁾Assumes no significant pandemic-related shutdowns or project delays due to supply chain disruptions. $4.20 – $4.40 12% – 18% YoY $1,085 – $1,105 16% – 18% YoY $370 – $380 12% – 15% YoY $195 – $210 (8%) – (1%) YoY 19% FCF Margin Updated from prior guide Prior Guidance $4.25 – $4.35 14% – 16% YoY $1,095 – $1,105 17% – 18% YoY $372 – $378 13% – 15% YoY $198 – $208 (7%) – (2%) YoY 19% FCF Margin
Clear Strategy Driving Value Creation Consistent strategic priorities enabling shareholder value creation Strategic Overview Healthy Spaces to drive renovation “renaissance” Product innovation to meet new customer needs and improve product mix kanopi e-commerce platform for new demand Continued integration of acquisitions Robust pipeline of additional opportunities Leverage new design capabilities across platform
Mineral Fiber volume growth of 0% to 2% and AUV growth of 3% to 6% 10-3-1 path from optimization to disruption Digital platforms to reduce friction with customers Focus on productivity and scalability
Consistent capex Invest for growth and productivity Return to shareholders via dividends and buybacks
>15% Architectural Specialties top-line growth with margin expansion Declining net debt and adjusted FCF ~20% of sales Critical enabler for sales, productivity and efficiency improvements Value Creation Model* *Current management estimates; reflects medium-to-long term annual growth targets; Adjusted EPS Growth excludes acquisition-related amortization.
Appendix
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 accruals.
Adjusted Diluted Earnings Per Share Reconciliation (1) RIP 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. (2) Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation accruals. (3) Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles. (4) Adjusted income tax expense is calculated using the adjusted tax rate multiplied by the adjusted earnings from continuing operations before income taxes. (5) Dilutive shares are as-reported. 2020 dilutive shares outstanding for the nine months ended September 30, 2020 include anti-dilutive common stock equivalents which are excluded from U.S. GAAP Accounting. (6) The tax rate for the three and nine months ended September, 2020 excludes the first quarter pension annuitization and the gain on the sale of our idled China facility.
Adjusted Free Cash(1) Flow Reconciliation Adjusted free cash flow is defined as cash from operations and dividends received from the WAVE joint venture, less expenditures for property and equipment, and is adjusted to remove the impact of cash used or proceeds received for acquisitions and divestitures, legacy environmental matters and litigation. The Company believes adjusted free cash flow is useful because it provides insight into the amount of cash that the Company has available for discretionary uses, after expenditures for capital commitments and adjustments for acquisitions and divestitures. Free cash flow includes discontinued international operations.
Segment Reported Operating Income (Loss) to Adjusted EBITDA RIP expense represents only the plan service cost related to the RIP that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP. Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration and deferred compensation accruals.
Adjusted Net Sales Reconciliation Represents the impact of acquisition-related deferred revenue adjustments to fair value.
2021 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.
2021 Adjusted EPS Guidance Reconciliation Adjusted EPS guidance for 2021 is calculated based on an adjusted effective tax rate of 25% and based on ~48 million of diluted shares outstanding. RIP credit represents the actuarial net periodic benefit expected to be recorded as a component of other non-operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. RIP expense represents only the service cost related to the U.S. pension plan and is recorded as a component of operating income. We do not expect to be required to make, nor do we plan to make cash contributions to our U.S. Retirement Income Plan based on guidelines established by the Pension Benefit Guaranty Corporation. Represents the intangible amortization related to acquired entities, including customer relationships, developed technology, software, trademarks and brand names, non-compete agreements and other intangibles. Adjusted income tax expense is based adjusted earnings before income tax.
2021 Adjusted Free Cash Flow Guidance Reconciliation