What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-27 compared with 2020-07-28 · 377 added, 271 removed, 718 unchanged (47% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of goods sold

Selling, general and administrative expenses

Gain on sale of fixed and intangible assets

Gain related to sale of fixed and intangible assets

Equity earnings from joint venture

5 unchanged sentences

Earnings (loss) from continuing operations

Net (loss) from discontinued operations, net of tax expense of $ -,

$ 4.8 , $ - and $ 4.7

Earnings (loss) from disposal of discontinued businesses, net of tax

expense (benefit) of $ -, $ 0.1 , ($ 1.4 ) and $ 0.1

Net earnings (loss) from discontinued operations

Net earnings from discontinued operations, net of tax

expense of $ -, $ 2.5 , $ - and $ 7.2

(Loss) from disposal of discontinued businesses, net of tax

(benefit) of $ -, ($ 5.0 ), ($ 1.4 ) and ($ 4.9 )

Net (loss) from discontinued operations

Net earnings (loss)

1 unchanged sentence

Foreign currency translation adjustments

Derivative (loss), net

Derivative gain (loss), net

Pension and postretirement adjustments

9 unchanged sentences

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

June 30, 2020

September 30, 2020

December 31, 2019

8 unchanged sentences

$ 491.0 and $ 447.5 , respectively

Operating lease assets

Finance lease assets

Prepaid pension costs

6 unchanged sentences

Current liabilities:

Short-term debt

Current installments of long-term debt

Accounts payable and accrued expenses

Operating lease liabilities

Finance lease liabilities

Income taxes payable

1 unchanged sentence

Long-term debt, less current installments

Operating lease liabilities

Finance lease liabilities

Postretirement benefit liabilities

6 unchanged sentences

Common stock, $ 0.01 par value per share, 200 million shares authorized, 62,512,968

shares issued and 47,856,179 shares outstanding as of June 30, 2020 and

shares issued and 47,859,751 shares outstanding as of September 30, 2020 and

62,263,395 , shares issued and 47,992,348 shares outstanding as of December 31, 2019

1 unchanged sentence

Retained earnings

Treasury stock, at cost, 14,653,217 shares as of June 30, 2020 and 14,271,047

Treasury stock, at cost, 14,653,217 shares as of September 30, 2020 and 14,271,047

shares as of December 31, 2019

6 unchanged sentences

(amounts in millions, except share data)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Treasury Stock

Comprehensive

March 31, 2020

June 30, 2020

Stock issuance, net

2 unchanged sentences

Other comprehensive (loss)

Acquisition of treasury stock

June 30, 2020

Six Months Ended June 30, 2020

September 30, 2020

Nine Months Ended September 30, 2020

Treasury Stock

6 unchanged sentences

Acquisition of treasury stock

June 30, 2020

Three Months Ended June 30, 2019

September 30, 2020

Three Months Ended September 30, 2019

Treasury Stock

Comprehensive

March 31, 2019

June 30, 2019

Stock issuance, net

1 unchanged sentence

Share-based employee compensation

Other comprehensive (loss)

Other comprehensive income

Acquisition of treasury stock

June 30, 2019

Six Months Ended June 30, 2019

September 30, 2019

Nine Months Ended September 30, 2019

Treasury Stock

7 unchanged sentences

Acquisition of treasury stock

June 30, 2019

September 30, 2019

See accompanying notes to Condensed Consolidated Financial Statements beginning on page 8.

2 unchanged sentences

(amounts in millions)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

3 unchanged sentences

Loss on disposal of discontinued operations

Gain on sale of fixed and intangible assets

Write-off debt refinancing fees

Gain related to sale of fixed and intangible assets

Deferred income taxes

5 unchanged sentences

Accounts payable and accrued expenses

Income taxes receivable and payable, net

Other assets and liabilities

4 unchanged sentences

Cash paid for acquisitions

Proceeds from the sale of assets

Payments of proceeds from Knauf to investment in joint venture

Payments to Knauf upon disposal of discontinued operations

Other investing activities

Net cash provided by (used for) investing activities

Net cash (used for) investing activities

Cash flows from financing activities:

Proceeds from short-term debt

Payments of short-term debt

Proceeds from revolving credit facility

Payments of revolving credit facility

Proceeds from long-term debt

Payments of long-term debt

Financing costs

Dividend paid

Payments from share-based compensation plans, net of tax

Payment for treasury stock acquired

Payments for treasury stock acquired

Payments for finance leases

Net cash (used for) financing activities

3 unchanged sentences

Cash and cash equivalents at beginning of year of continuing operations

Cash and cash equivalents at end of period

Cash and cash equivalents at end of period of discontinued operations

Cash and cash equivalents at end of period of continuing operations

12 unchanged sentences

Except as disclosed in this Note, the accounting policies used in preparing the Condensed Consolidated Financial Statements in this Form 10-Q are the same as those used in preparing the Consolidated Financial Statements for the year ended December 31, 2019.

These statements should therefore be read in conjunction with the Consolidated Financial Statements and notes that are included in the Form 10-K for the fiscal year ended December 31, 2019.

These statements should therefore be read in conjunction with the Consolidated Financial Statements and notes that are included in the Amendment No.

1 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2019.

In the opinion of management, all adjustments of a normal recurring nature have been included to provide a fair statement of the results for the reporting periods presented.

Operating results for the second quarter and first six months of 2020 and 2019 included in this report are unaudited.

Operating results for the third quarter and first nine months of 2020 and 2019 included in this report are unaudited.

Quarterly results are not necessarily indicative of annual earnings, primarily due to the different level of sales in each quarter of the year and the possibility of changes in general economic conditions.

2 unchanged sentences

The statements include management estimates and judgments, where appropriate.

Management utilizes estimates to record many items, including certain asset values, allowances for bad debts, inventory obsolescence and lower of cost and net realizable value charges, warranty reserves, workers’ compensation, general liability and environmental claims, and income taxes.

Management utilizes estimates to record many items, including certain asset values, contingent purchase price liabilities, allowances for bad debts, inventory obsolescence and lower of cost and net realizable value charges, warranty reserves, workers’ compensation, general liability and environmental claims, and income taxes.

When preparing an estimate, management determines the amount based upon the consideration of relevant information and may confer with outside parties, including external counsel.

Actual results may differ from these estimates.

Certain prior year amounts have been recast in the Condensed Consolidated Financial Statements to conform to the 2020 presentation.

Certain prior year amounts have been reclassified in the Condensed Consolidated Financial Statements to conform to the 2020 presentation.

In August 2020, we acquired the business and assets of Moz Designs, Inc.

(“Moz”), based in Oakland, California.

Moz is a designer and fabricator of custom architectural metal ceilings, walls, dividers and column covers for interior and exterior applications with one manufacturing facility.

Moz’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.

In July 2020, we acquired all the issued and outstanding capital stock of TURF Design Inc.

(“Turf”), with one manufacturing facility in Elgin, Illinois and a design center in Chicago, Illinois.

Turf is a designer and manufacturer of acoustic felt ceilings and wall products.

Turf’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.

In November 2019, we acquired the business and assets of MRK Industries, Inc.

11 unchanged sentences

The purchase price of $ 330.0 million was previously paid by Knauf to us during 2018 and was subject to certain post-closing adjustments for cash and debt as provided in the Purchase Agreement dated as of November 17, 2017, by and between us and Knauf (the “Purchase Agreement”), including adjustments based on the economic impact of any required regulatory remedies and a working capital adjustment.

During the second quarter of 2020, we remitted $ 20.0 million to WAVE for a portion of their remaining proceeds from Knauf.

As of June 30 2020, we have recorded a $ 5.9 million payable to WAVE for their remaining portion of the proceeds from Knauf and a $ 6.2 million payable to Knauf for estimated working capital and other adjustments, both of which are reflected within Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets as of June 30, 2020.

The final loss amounts are subject to finalization of customary working capital and other adjustments, as provided in the Purchase Agreement.

We are currently in negotiations with Knauf related to the valuation of certain liabilities included in the Sale totaling $ 11 million, which we expect to be finalized in 2020.

We have no t accrued a liability for this matter as of June 30, 2020.

In 2019, we entered into a Transition Services Agreement with Knauf for its benefit and the benefit of the buyer of the divestment business, pursuant to which we are providing certain transition technology, finance and information technology support services through September 30, 2020.

In connection with the closing of the Sale, we also entered into (i) a royalty-free intellectual property License Agreement with Knauf under which they license patents, trademarks and know-how from us for use in licensed territories in which the business was conducted prior to the Sale, and (ii) a Supply Agreement with Knauf under which the parties may continue to

During the three and nine months ended September 30, 2020, we remitted $ 5.9 and $ 25.9 million, respectively, to WAVE for their portion of the proceeds from Knauf.

During the nine months ended September 30, 2020, WAVE paid each of AWI and Worthington dividends of $ 13.0

Armstrong World Industries, Inc., and Subsidiaries

1 unchanged sentence

(dollar amounts in millions, except share data)

purchase certain products from each other following the closing of the Sale.

million relating to these payments.

During the third quarter of 2020, we remitted $ 6.4 million to Knauf for working capital and other adjustments .

Final adjustments are subject to negotiations with Knauf related to the valuation of certain liabilities included in the Sale , which we expect to be finalized in 2020.

The final valuation could result in an increase to those liabilities of $ 11.0 million ;

however, we have no t accrued a liability for this matter as of September 30, 2020 as payment is not probable .

In 2019, we entered into a Transition Services Agreement with Knauf for its benefit and the benefit of the buyer of the divestment business, pursuant to which we provided certain transition technology, finance and information technology support services, which are now substantially complete.

WAVE also entered into similar agreements with Knauf for such purposes.

The term of the granted licenses, with respect to each intellectual property right, extend until the expiration or abandonment of each such intellectual property right.

The EMEA and Pacific Rim segment historical financial results for the three and six months ended June 30, 2019 have been reflected in AWI’s Condensed Consolidated Statements of Operations and Comprehensive Income as discontinued operations, while the assets and liabilities of discontinued operations were removed from AWI’s Condensed Consolidated Balance Sheet as of September 30, 2019.

The EMEA and Pacific Rim segment historical financial results for the three and nine months ended September 30, 2019 have been reflected in AWI’s Condensed Consolidated Statements of Operations and Comprehensive Income as discontinued operations, while the assets and liabilities of discontinued operations were removed from AWI’s Condensed Consolidated Balance Sheet as of September 30, 2019.

Recently Adopted Accounting Standards

9 unchanged sentences

The standard includes additional disclosure requirements for level 3 fair value measurements, including the requirement to disclose the changes in unrealized gains and losses in other comprehensive income during the period and permits the disclosure of other relevant quantitative information for certain unobservable inputs.

Effective January 1, 2020, we adopted this standard, which had no impact on our disclosures.

Effective January 1, 2020, we adopted this standard, which resulted in additional disclosures for level 3 fair value measurements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract,” which amends ASC 350-40 Intangibles – Goodwill and Other – Internal-Use Software.

8 unchanged sentences

In August 2018, the FASB issued ASU 2018-14, “ Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans,” which amends ASC 715-20, Compensation – Retirement Benefits – Defined Benefit Plans.

The ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The ASU modifies the

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The disclosure requirements to be removed include the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year, the amount and timing of plan assets expected to be returned to the employer and the effect of a one percentage point change in assumed health care cost trend rates on the aggregate service cost and benefit obligation for postretirement health care benefits.

2 unchanged sentences

We are evaluating the impact the adoption of this standard will have on our disclosures.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which removes exceptions to the general principles in ASC Topic 740 – Income Taxes for allocating tax expense between financial statement components, accounting basis differences resulting from an ownership change in foreign investments and interim period income tax accounting for year-to-date

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

losses that exceed projected losses.

This guidance is effective for fiscal years beginning after December 15, 2020.

11 unchanged sentences

states and by individual countries in the Americas.

We did not record any asset impairments, inventory charges or bad debt reserves related to COVID-19 during the second quarter and first six months of 2020 but future events may require such charges, which could have a material adverse effect on our financial condition, liquidity or results of operations.

Subsequent Event

On July 27, 2020, we completed the acquisition of all the issued and outstanding capital stock of TURF Design Inc.

(“Turf”), with its manufacturing facility in Elgin, Illinois and its design center in Chicago, Illinois, for total cash consideration of $ 70.0 million, together with contingent consideration payable upon achievement of certain future performance objectives through 2022.

The contingent consideration includes up to $ 24.0 million in additional cash consideration for performance at certain revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”) growth targets.

Full payout for target performance requires compounded annual growth rates in excess of 23 % through 2022.

The contingent consideration also includes up to $ 24.0 million in additional cash consideration for over-achievement performance against revenue and EBITDA growth targets.

Full payout for over-achievement performance requires compounded annual growth rates in excess of 38 % through 2022.

Turf is a designer and manufacturer of acoustic felt ceilings and wall products primarily used in commercial building applications with 2019 revenues in excess of $ 20.0 million.

We did not record any asset impairments, inventory charges or bad debt reserves related to COVID-19 during the third quarter and first nine months of 2020 but future events may require such charges, which could have a material adverse effect on our financial condition, liquidity or results of operations.

SEGMENT RESULTS

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Mineral Fiber

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Segment operating income (loss)

3 unchanged sentences

Total consolidated operating income

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total consolidated operating income

2 unchanged sentences

Earnings (loss) from continuing operations before income taxes

June 30, 2020

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

September 30, 2020

December 31, 2019

4 unchanged sentences

Total consolidated assets

During the second quarter of 2020, we sold our idled mineral fiber plant in China, which was recorded as a component of our Unallocated Corporate segment.

We recorded a gain of $ 14.1 million on the sale and a receivable of $ 20.8 million for the proceeds as of June 30, 2020.

During the three and nine months ended September 30, 2020, we recorded a gain related to the sale of our idled mineral fiber plant in China.

We received the majority of the proceeds in the third quarter of 2020 and the remaining receivable for the sale was $ 2.4 million as of September 30, 2020.

Revenue Recognition

27 unchanged sentences

Disaggregation of Revenues

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Our Mineral Fiber and Architectural Specialties operating segments both manufacture and sell ceiling and wall systems (primarily mineral fiber, fiberglass wool, metal, wood, wood fiber, glass-reinforced-gypsum and felt) throughout the Americas.

1 unchanged sentence

Net sales by major customer channel are as follows:

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Distributors – represents net sales to building materials distributors who re-sell our products to contractors, subcontractors’ alliances, large architect and design firms, and major facility owners.

7 unchanged sentences

Geographically, this category includes sales throughout the U.S.

The following tables provide net sales by major customer group within our Mineral Fiber and Architectural Specialties segments for the three and six months ended June 30, 2020 and 2019:

The following tables provide net sales by major customer group within our Mineral Fiber and Architectural Specialties segments for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Mineral Fiber

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Architectural Specialties

1 unchanged sentence

Retailers and other

On November 25, 2019, we acquired the business and assets of MRK.

The $ 13.3 million purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values, with the remaining unallocated amount recorded as goodwill.

The total fair value of tangible assets acquired, less liabilities assumed, was $ 2.9 million, resulting in $ 10.4 million of goodwill.

We account for acquisitions under the acquisition method and the results of operations of acquired operations are included in the condensed consolidated financial statements from the acquisition date.

Acquisition related costs are expensed as incurred.

We allocate total consideration to the assets acquired and liabilities assumed based on their estimated fair values, with the remaining unallocated amount recorded as goodwill.

The fair value of acquired intangible assets is estimated by applying discounted cash flow models based on significant level 3 inputs not observable in the market.

Key assumptions are developed based on each acquirees’ historical experience, future projections and comparable market data including future cash flows, long-term growth rates, implied royalty rates, attrition rates and discount rates.

On August 24, 2020, we acquired the business and assets of Moz for a purchase price of $ 4.2 million and additional contingent consideration payable in 2022 not to exceed $ 4.7 million.

The total fair value of liabilities assumed, less tangible assets acquired, was $ 0.5 million.

The total fair value of identifiable intangible assets acquired was $ 3.2 million, comprised of non-amortizable tradenames of $ 1.7 million and amortizable customer relationships of $ 1.5 million, resulting in $ 4.0 million of goodwill.

All of the acquired goodwill is deductible for tax purposes .

On March 4, 2019, we acquired the business and assets of ACGI.

The $ 42.9 million purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values, with the remaining unallocated amount recorded as goodwill.

The total fair value of tangible assets acquired, less liabilities assumed, was $ 7.3 million.

The total fair value of identifiable intangible

The fair value of liabilities assumed included $ 2.5 million for contingent consideration.

Valuations for assets acquired and liabilities assumed are based on preliminary estimates that are subject to revisions and may result in adjustments to preliminary values as valuations are finalized.

The contingent consideration is payable upon achievement of certain future performance objectives through 2021.

The fair value of contingent consideration will be remeasured at each reporting period, and any future adjustments will be recorded as a component of

Armstrong World Industries, Inc., and Subsidiaries

1 unchanged sentence

(dollar amounts in millions, except share data)

assets acquired was $ 12.0 million, mostly comprised of amortizable customer relationships of $ 7.4 million and amortizable tradenames of $ 2.8 million, resulting in $ 23.6 million of goodwill.

selling, general and administrative (“SG&A”) expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income.

On July 27, 2020, we acquired all the issued and outstanding capital stock of Turf for a purchase price of $ 70.0 million and additional contingent consideration payable in 2022 and 2023 not to exceed $ 48.0 million.

The total fair value of tangible assets acquired, less liabilities assumed, was $ 4.8 million.

The total fair value of identifiable intangible assets acquired was $ 27.9 million, mostly comprised of non-amortizable tradenames of $ 9.6 million in addition to amortizable customer relationships of $ 7.7 million, patents of $ 5.8 million and a non-compete agreement of $ 3.3 million, resulting in $ 50.7 million of goodwill.

All of the acquired goodwill is deductible for tax purposes .

The ACGI and MRK acquisitions, both individually and in the aggregate, did not have a material impact on reported net sales or operating income for the three and six months ended June 30, 2020 and 2019.

The fair value of liabilities assumed included $ 13.4 million for contingent consideration.

The contingent consideration is payable upon achievement of certain future performance objectives through 2022.

The contingent consideration includes up to $ 24.0 million in additional cash consideration for performance at certain revenue and EBITDA growth targets.

Full payout for target performance requires compounded annual growth rates in excess of 23 % through 2022.

The contingent consideration also includes up to $ 24.0 million in additional cash consideration for performance over revenue and EBITDA growth targets.

Full payout for achievement over target performance requires compounded annual growth rates in excess of 38 % through 2022.

The fair value of contingent consideration will be remeasured at each reporting period, and any future adjustments will be recorded as a component of SG&A expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income.

On November 25, 2019, we acquired the business and assets of MRK for a purchase price of $ 13.3 million.

The total fair value of tangible assets acquired, less liabilities assumed, was $ 2.9 million, resulting in $ 10.4 million of goodwill.

All of the acquired goodwill is deductible for tax purposes .

On March 4, 2019, we acquired the business and assets of ACGI for a purchase price of $ 42.9 million.

The total fair value of tangible assets acquired, less liabilities assumed, was $ 7.3 million.

The total fair value of identifiable intangible assets acquired was $ 12.0 million, mostly comprised of amortizable customer relationships of $ 7.4 million and amortizable tradenames of $ 2.8 million, resulting in $ 23.6 million of goodwill.

All of the acquired goodwill is deductible for tax purposes .

The 2020 and 2019 acquisitions, both individually and in the aggregate, did not have a material impact on reported net sales or operating income for the three and nine months ended September 30, 2020 and 2019.

DISCONTINUED OPERATIONS

5 unchanged sentences

Net gains were only recorded to the extent of previous estimated losses.

During the three and six months ended June 30, 2019, we recorded a loss on sale of $ 6.8 million and $ 4.6 million, respectively.

We did not record a gain or loss during the three months ended June 30, 2020.

During the six months ended June 30, 2020, we recorded a loss of $ 5.0 million, representing preliminary working capital and other adjustments.

The final loss amounts are subject to finalization of customary working capital and other adjustments, as provided in the Purchase Agreement.

During the three and nine months ended September 30, 2019, we recorded a loss on sale of $ 27.3 million and $ 31.9 million, respectively.

During the three and nine months ended September 30, 2020, we recorded a loss of $ 0.2 million and $ 5.2 million, respectively, representing working capital and other adjustments.

See Note 1 for further discussion of the Sale.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

FLOORING BUSINESSES

3 unchanged sentences

European Resilient Flooring

During the three and six months ended June 30, 2020, we recorded a gain of $ 0.8 million related to AOCI adjustments from a previously discontinued foreign flooring entity, which was dissolved in the second quarter of 2020.

During the second quarter of 2020, we recorded a gain of $ 0.8 million related to Accumulated Other Comprehensive Income (“AOCI”) adjustments from a previously discontinued foreign flooring entity, which was dissolved in the second quarter of 2020.

The AOCI adjustments related to accumulated foreign currency translation amounts.

1 unchanged sentence

The following tables detail the businesses and line items that comprise discontinued operations on the Condensed Consolidated Statements of Operations and Comprehensive Income.

Three Months Ended June 30, 2020

Gain from disposal of discontinued businesses, before income tax

Income tax (benefit) expense

Gain from disposal of discontinued businesses, net of tax

Net earnings from discontinued operations

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

EMEA and Pacific Rim Businesses

Six Months Ended June 30, 2020

Three Months Ended September 30, 2020

(Loss) from disposal of discontinued businesses, before income tax

Income tax (benefit)

(Loss) from disposal of discontinued businesses, net of tax

Net (loss) from discontinued operations

EMEA and Pacific Rim Businesses

Nine Months Ended September 30, 2020

(Loss) gain from disposal of discontinued businesses, before income tax

3 unchanged sentences

EMEA and Pacific Rim Businesses

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Cost of goods sold

4 unchanged sentences

Income tax expense

Net (loss) from discontinued operations, net of tax

Net earnings from discontinued operations, net of tax

(Loss) from disposal of discontinued businesses, before income tax

Income tax expense

(Loss) from disposal of discontinued business, net of tax

Net (loss) from discontinued operations

Income tax (benefit)

(Loss) gain from disposal of discontinued business, net of tax

Net (loss) earnings from discontinued operations

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

EMEA and Pacific Rim Businesses

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Cost of goods sold

4 unchanged sentences

Income tax expense

Net (loss) from discontinued operations, net of tax

Net earnings from discontinued operations, net of tax

(Loss) from disposal of discontinued businesses, before income tax

Income tax expense

(Loss) from disposal of discontinued businesses, net of tax

Net (loss) from discontinued operations

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

The following is a summary of total estimated gains and losses, capital expenditures and operating lease information related to our former EMEA and Pacific Rim businesses, and gains on the dissolution of our previously discontinued flooring entity, which are presented as discontinued operations and included as components of operating and investing cash flows on our Condensed Consolidated Statements of Cash Flows.

Six Months Ended

Income tax (benefit)

(Loss) gain from disposal of discontinued businesses, net of tax

Net (loss) earnings from discontinued operations

The following is a summary of total gains and losses, capital expenditures and operating lease information related to our former EMEA and Pacific Rim businesses, and gains on the dissolution of our previously discontinued flooring entity, which are presented as discontinued operations and included as components of operating and investing cash flows on our Condensed Consolidated Statements of Cash Flows.

Nine Months Ended

September 30,

Loss on sale to Knauf (1)

7 unchanged sentences

Represents AOCI adjustments related to accumulated foreign currency translation amounts.

The amount of cash paid for amounts included in the measurement of lease liabilities was not materially different from the operating lease cost for the six months ended June 30, 2019.

The amount of cash paid for amounts included in the measurement of lease liabilities was not materially different from the operating lease cost for the nine months ended September 30, 2019.

Represents initial right-of-use assets recognized upon adoption on January 1, 2019.

We did no t obtain any new right-of-use assets in exchange for lease obligations during the six months ended June 30, 2019.

We did no t obtain any new right-of-use assets in exchange for lease obligations during the nine months ended September 30, 2019.

ACCOUNTS AND NOTES RECEIVABLE

June 30, 2020

September 30, 2020

December 31, 2019

5 unchanged sentences

We consider these factors and the financial condition of each customer when establishing our allowance for losses from doubtful accounts.

As of June 30, 2020, miscellaneous receivables includes a $ 20.8 million receivable related to the sale of our idled plant in China in the second quarter of 2020.

See Note 2 for further information.

June 30, 2020

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

As of September 30, 2020, miscellaneous receivables includes $ 5.7 million related to proceeds from company-owned life insurance policies and $ 2.4 million related to proceeds from the sale of our idled plant in China.

September 30, 2020

December 31, 2019

5 unchanged sentences

OTHER CURRENT ASSETS

June 30, 2020

September 30, 2020

December 31, 2019

2 unchanged sentences

Total other current assets

As of December 31, 2019, assets held for sale included the assets of our idled plant in China, which was sold during the second quarter of 2020.

As of December 31, 2019, assets held for sale included the assets of our idled mineral fiber plant in China, which was sold during the second quarter of 2020.

See Note 2 for further information.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

EQUITY INVESTMENT

2 unchanged sentences

The European and Pacific Rim businesses of WAVE were included in the Sale to Knauf on September 30, 2019.

Accordingly, beginning in 2017, WAVE’s European and Pacific Rim historical financial statement results have been reflected in WAVE’s consolidated financial statements as a discontinued operation for all periods presented.

Accordingly, WAVE’s European and Pacific Rim historical financial statement results have been reflected in WAVE’s consolidated financial statements as a discontinued operation for all periods presented.

Condensed financial statement data for WAVE is summarized below on a continuing operations basis.

Three Months Ended

Six Months Ended

We enter into operating leases for certain manufacturing plants, warehouses, equipment and automobiles.

Nine Months Ended

September 30,

In connection with the sale of WAVE’s European and Pacific Rim businesses and operations to Knauf on September 30, 2019, WAVE recorded a $ 50.9 million gain on sale.

As such, during the third quarter of 2019, we recorded our 50 % share of WAVE’s gain on sale of discontinued operations of $ 25.5 million, included as a component of Equity earnings from joint venture in our Condensed Consolidated Statements of Operations and Comprehensive Income .

We enter into operating and finance leases for certain manufacturing plants, warehouses, equipment and automobiles.

Our leases have remaining lease terms of 1 to 17 years .

3 unchanged sentences

Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

We have lease agreements with lease and non-lease components, which are accounted for separately.

We have lease agreements with lease and nonlease components, which we have elected to combine to determine the ROU assets and lease liabilities.

Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet.

We recognize lease expense for these leases on a straight-line basis over the lease term.

Short-term lease expense was not material for the three and six months ended June 30, 2020 and 2019.

Short-term lease expense and variable lease cost was not material for the three and nine months ended September 30, 2020 and 2019.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate (“IBR”) based on information that is available at the lease commencement date to compute the present value of lease payments.

Relevant information used in determining the IBR includes the transactional currency of the lease and the lease term.

We used the IBR on January 1, 2019 for operating leases that commenced prior to that date.

As of June 30, 2020, we did no t have any finance leases or any operating leases that had not yet commenced.

The following tables present our operating lease cost and supplemental cash flow information related to our operating leases:

Three Months Ended

Six Months Ended

Operating lease cost

Six Months Ended

ROU assets obtained in exchange for lease obligations

Includes initial ROU assets of $ 29.2 million recognized upon adoption on January 1, 2019.

The amount of cash paid for amounts included in the measurement of lease liabilities was not materially different from our operating lease cost for the six months ended June 30, 2020 and 2019.

Relevant information used in determining

Armstrong World Industries, Inc., and Subsidiaries

1 unchanged sentence

(dollar amounts in millions, except share data)

The following table presents supplemental balance sheet information related to our operating leases:

Balance Sheet Classification

June 30, 2020

December 31, 2019

Other non-current assets

Current portion of lease liabilities

Accounts payable and accrued expenses

Non-current lease liabilities

Other long-term liabilities

the IBR includes the transactional currency of the lease and the lease term.

We used the IBR on January 1, 2019 for operating leases that commenced prior to that date.

As of September 30, 2020 , we did no t have any material leases that had not yet commenced .

The following table presents our lease costs:

Three Months Ended

Nine Months Ended

September 30,

Operating lease cost

Finance lease cost

Amortization of leased assets

Interest on lease liabilities

The following table presents supplemental cash flow information related to our leases:

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

ROU assets obtained in exchange for lease liabilities

Operating leases (1)

Finance leases

The nine months ended September 30, 2019 includes initial ROU assets of $ 29.2 million recognized upon adoption on January 1, 2019 .

The following table presents the weighted average assumptions used to compute our ROU assets and lease liabilities:

June 30, 2020

September 30, 2020

December 31, 2019

Weighted average remaining lease term (in years)

Operating leases

Finance leases

Weighted average discount rate

Undiscounted future minimum lease payments as of June 30, 2020, by year and in the aggregate, having non-cancelable lease terms in excess of one year are as follows:

Maturities of

Lease Liabilities

Operating leases

Finance leases

Undiscounted future minimum lease payments as of September 30, 2020, by year and in the aggregate, having non-cancelable lease terms in excess of one year are as follows:

Operating Leases

Finance Leases

Maturity of lease liabilities

Total lease payments

1 unchanged sentence

Present value of lease liabilities

Scheduled maturities of lease liabilities represent the time period of July 1, 2020 to December 31, 2020.

Scheduled maturities of lease liabilities represent the time period of October 1, 2020 to December 31, 2020.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

GOODWILL AND INTANGIBLE ASSETS

The following table details amounts related to our goodwill and intangible assets as of June 30, 2020 and December 31, 2019.

June 30, 2020

The following table details amounts related to our goodwill and intangible assets as of September 30, 2020 and December 31, 2019.

September 30, 2020

December 31, 2019

4 unchanged sentences

Developed technology

15 - 19 years

Trademarks and brand names

Non-compete agreements

Non-amortizing intangible assets

1 unchanged sentence

Total intangible assets

Six Months Ended

Nine Months Ended

September 30,

Amortization expense

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

The increase in goodwill and other intangible assets as of September 30, 2020 resulted from the acquisitions of Moz and Turf.

See Note 4 to the Condensed Consolidated Financial Statements for additional details.

OTHER NON-CURRENT ASSETS

June 30, 2020

September 30, 2020

December 31, 2019

2 unchanged sentences

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

June 30, 2020

September 30, 2020

December 31, 2019

Payables, trade and other

Current portion of lease liabilities

Employment costs

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Earnings (loss) from continuing operations before income taxes

1 unchanged sentence

Effective tax rate

The effective tax rate in the second quarter of 2020 was lower as compared to the same period in 2019, largely driven by the favorable tax impact of the gain on sale of our idled mineral fiber plant in China in the second quarter of 2020.

The effective tax rate for the first six months of 2020 was higher than the effective tax rate for the same period in 2019 primarily due to the tax effects of our first quarter of 2020 pension settlement, partially offset by the tax benefit from the second quarter of 2020 gain on sale of our idled mineral fiber plant in China.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

The effective tax rate in the third quarter of 2020 was higher than the same period in 2019, largely driven by the absence of the beneficial tax impact of our share of WAVE’s gain on sale of its discontinued European and Pacific Rim businesses and the absence of a benefit related to a statute closure, both recognized in 2019.

These increases were both partially offset by the current year tax benefit related to the sale of our idled mineral fiber plant in China.

The effective tax rate for the first nine months of 2020 was higher than the effective tax rate for the same period in 2019 primarily due to the tax effects of our first quarter of 2020 pension settlement and the absence of benefits related to the WAVE gain on sale and statute closure from 2019, partially offset by the benefits related to the sale of our idled mineral fiber plant in China.

See Note 16 for additional details related to our pension settlement.

In the first and second quarters of 2020, the U.S.

Department of Treasury deferred the due date for the first two estimated federal income tax payments to July 15, 2020 as part of its response to COVID-19.

As a result, no U.S.

federal income tax payments have been made for the six months ended June 30, 2020.

It is reasonably possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next twelve months.

1 unchanged sentence

Changes to unrecognized tax benefits could result from the completion of ongoing examinations, the expiration of statutes of limitations or other unforeseen circumstances.

As of June 30, 2020 and December 31, 2019, our long-term debt included borrowings outstanding under our $ 1,000.0 million variable rate senior credit facility, which is composed of a $ 500.0 million revolving credit facility (with a $ 150.0 million sublimit for letters of credit) and a $ 500.0 million Term Loan A.

As of June 30, 2020 and December 31, 2019, borrowings outstanding under our revolving credit facility were $ 130.0 million and $ 115.0 million, respectively.

Our Term Loan A was fully drawn as of June 30, 2020 and December 31, 2019.

As of September 30, 2020 and December 31, 2019, our long-term debt included borrowings outstanding under our $ 1,000.0 million variable rate senior credit facility, which is composed of a $ 500.0 million revolving credit facility (with a $ 150.0 million sublimit for letters of credit) and a $ 500.0 million Term Loan A.

As of September 30, 2020 and December 31, 2019, borrowings outstanding under our revolving credit facility were $ 185.0 million and $ 115.0 million, respectively.

Our Term Loan A was fully drawn as of September 30, 2020 and December 31, 2019.

We also have a $ 25.0 million letter of credit facility, also known as our bi-lateral facility.

In March 2020, we amended and decreased our $ 36.2 million Accounts Receivable Securitization Facility with the Bank of Nova Scotia (the “funding entity”) to $ 30.0 million and we extended the maturity to September 2020 .

Borrowings under this amended facility bear interest at a monthly commercial paper rate.

Under this facility, we sell accounts receivables to Armstrong Receivables Company, LLC (“ARC”), a Delaware entity that is consolidated in these financial statements.

During the third quarter of 2020, we repaid $ 30.0 million under our Accounts Receivable Securitization Facility with the Bank of Nova Scotia (the “funding entity”) which matured in September 2020 .

Interest on borrowings under this amended facility was calculated at a 90-day commercial paper rate.

Under this facility, we sold accounts receivables to Armstrong Receivables Company, LLC (“ARC”), a Delaware entity that is consolidated in these financial statements.

ARC is a 100 % wholly owned single member LLC special purpose entity created specifically for this transaction;

therefore, any receivables sold to ARC are not available

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

to the general creditors of AWI.

ARC can use this facility to borrow cash or issue letters of credit.

When ARC borrows cash under this facility, ARC sells an undivided percentage ownership interest in the purchased accounts receivables to the funding entity.

We have the unilateral right to repurchase the funding entity’s purchased interest in the accounts receivables and, as a result, borrowings under this facility are reported as debt in the Condensed Consolidated Balance Sheets.

Any borrowings under this facility are obligations of ARC and not AWI.

ARC contracts with and pays a servicing fee to AWI to manage, collect and service the purchased accounts receivables.

All new receivables under the program are continuously purchased by ARC with the proceeds from collections of receivables previously purchased.

As of June 30 , 2020, total borrowings outstanding under this facility were $ 30.0 million , which were classified as S hort-term debt in the Condensed Consolidated Balance Sheets, and no letters of credit were issued under this facility .

therefore, any receivables sold to ARC were not available to the general creditors of AWI.

ARC used this facility to borrow cash or issue letters of credit.

When ARC borrowed cash under this facility, ARC sold an undivided percentage ownership interest in the purchased accounts receivables to the funding entity.

We had the unilateral right to repurchase the funding entity’s purchased interest in the accounts receivables and, as a result, borrowings under this facility were reported as debt in the Condensed Consolidated Balance Sheets.

Borrowings under this facility were obligations of ARC and not AWI.

ARC contracted with and paid a servicing fee to AWI to manage, collect and service the purchased accounts receivables.

All new receivables under the program were continuously purchased by ARC with the proceeds from collections of receivables previously purchased.

There were no borrowings outstanding under this facility as of December 31, 2019.

We utilize lines of credit and other commercial commitments in order to ensure that adequate funds are available to meet operating requirements.

Letters of credit are currently arranged through our revolving credit facility, our bi-lateral facility and our securitization facility.

Letters of credit are currently arranged through our revolving credit facility and our bi-lateral facility.

Letters of credit may be issued to third party suppliers, insurance and financial institutions and typically can only be drawn upon in the event of AWI’s failure to pay its obligations to the beneficiary.

The following table presents details related to our letters of credit facilities:

June 30, 2020

September 30, 2020

Financing Arrangements

1 unchanged sentence

Revolving credit facility

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

PENSIONS AND OTHER BENEFIT PROGRAMS

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

defined benefit plans:

4 unchanged sentences

Amortization of net actuarial loss

Special termination benefits

Net periodic pension cost (credit)

Retiree health and life insurance benefits

Service cost of benefits earning during the period

Interest cost on projected benefit obligation

4 unchanged sentences

This plan is reported as a component of our Unallocated Corporate segment.

Net periodic pension cost for this plan was immaterial for the three and six months ended June 30, 2020 and 2019.

The service cost component of net benefit cost has been presented in the Condensed Consolidated Statements of Operations and Comprehensive Income within cost of goods sold and selling, general and administrative (“SG&A”) expenses for all periods presented, which are the same line items as other compensation costs arising from services rendered by the pertinent employees during the period.

Net periodic pension cost for this plan was immaterial for the three and nine months ended September 30, 2020 and 2019.

The service cost component of net benefit cost has been presented in the Condensed Consolidated Statements of Operations and Comprehensive Income within cost of goods sold and SG&A expenses for all periods presented, which are the same line items as other compensation costs arising from services rendered by the pertinent employees during the period.

The other components of net benefit cost are presented in the Condensed Consolidated Statements of Operations and Comprehensive Income separately from the service cost component within other non-operating expense (income), net.

1 unchanged sentence

Retirement Income Plan (“RIP”) to AAIA and AANY.

Under the agreements, we effectively settled $ 1,045.3 million of retiree defined benefit pension

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

obligations related to approximately 10,300 retirees and beneficiaries (the “ Transferred Participants”) , which were irrevocably transferred to AAIA and AANY and which guarantee s the pension benefits of the Transferred Participants .

Under the agreements, we effectively settled $ 1,045.3 million of retiree defined benefit pension obligations related to approximately 10,300 retirees and beneficiaries (the “Transferred Participants”), which were irrevocably transferred to AAIA and AANY and which guarantees the pension benefits of the Transferred Participants.

During the third quarter of 2020, these amounts were immaterially adjusted due to customary data reconciliations with AAIA and AANY.

As a result of the transaction, we recorded a $ 374.4 million settlement loss in the first quarter of 2020, which was reflected as a component of other non-operating expense.

2 unchanged sentences

The expected long-term return on plan assets remained at 5.25 % and did not change as a result of the settlement.

During the third quarter of 2020, we offered an early retirement incentive benefit to employees at one of our manufacturing plants who met certain age and years of service criteria.

The consideration period for eligible employees ended on September 30, 2020.

Based on eligible employee elections to participate, we recorded a charge of $ 2.0 million within other non-operating expense, which increased the projected benefit obligation of the RIP.

The enhanced retirement benefits did not result in a curtailment.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

FINANCIAL INSTRUMENTS

1 unchanged sentence

The estimated fair values of our financial instruments are as follows:

June 30, 2020

September 30, 2020

December 31, 2019

2 unchanged sentences

Interest rate swap contracts

Contingent consideration

The carrying amounts of cash and cash equivalents, receivables, accounts payable, accrued expenses and short-term debt approximate fair value because of the short-term maturity of these instruments.

1 unchanged sentence

The fair value estimates for interest rate swap contracts are estimated by obtaining quotes from major financial institutions with verification by internal valuation models.

The fair value estimates for contingent consideration are estimated based on a Monte Carlo simulation.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

6 unchanged sentences

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The fair value measurement of interest rate swap contracts measured at fair value on a recurring basis and reported on the Condensed Consolidated Balance Sheets were valued using Level 2 (other observable) inputs as of June 30, 2020 and December 31, 2019.

We did not have any financial assets or liabilities that are valued using Level 1 (quoted, active market) or Level 3 (unobservable) inputs as of June 30, 2020 and December 31, 2019.

The fair value measurement of liabilities measured at fair value on a recurring basis and reported on the Condensed Consolidated Balance Sheets is summarized below:

September 30, 2020

December 31, 2019

Fair value based on

Assets/(liabilities), net:

Interest rate swap contracts

Contingent consideration

The contingent consideration liability represents estimated future contingent purchase price payments related to the Moz and Turf acquisitions.

The significant unobservable inputs used in the fair value measurement of the contingent consideration liability include the financial projections over the earn-out period, the volatility of the underlying financial metrics and estimated discount rates.

The following table summarizes the weighted-average of the significant unobservable inputs as of September 30, 2020:

Unobservable input

Discount rates

Unobservable inputs were weighted based on the relative fair value of the components of contingent consideration.

The fair value of the contingent consideration liability will be remeasured at each reporting period, and any future adjustments will be recorded as a

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

component of SG&A expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income.

See Note 4 for further information.

DERIVATIVE FINANCIAL INSTRUMENTS

5 unchanged sentences

We use derivative financial instruments as risk management tools and not for speculative trading purposes.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Counterparty Risk

11 unchanged sentences

Currency Rate Risk – Sales and Purchases

As of June 30, 2020, our only major foreign currency exposure is to the Canadian dollar.

As of September 30, 2020, our only major foreign currency exposure is to the Canadian dollar.

We currently have no outstanding positions and do not expect to enter into any foreign exchange derivative products.

2 unchanged sentences

These swaps are designated as cash flow hedges against changes in LIBOR for a portion of our variable rate debt.

The following table summarizes our interest rate swaps as of June 30, 2020:

The following table summarizes our interest rate swaps as of September 30, 2020:

Coverage Period

18 unchanged sentences

This is inclusive of a 0 % floor.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Under the terms of the March 2020 swap maturing in 2022 , we pay a fixed rate over the hedged amount and receive 1-month LIBOR.

2 unchanged sentences

These are inclusive of a 0 % floor.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Financial Statement Impacts

The following tables detail amounts related to our derivatives as of June 30, 2020 and December 31, 2019.

We did no t have any derivative assets or liabilities not designated as hedging instruments as of June 30, 2020 or December 31, 2019.

The derivative asset and liability amounts below are shown in gross amounts and we have not netted assets with liabilities.

The following tables detail amounts related to our derivatives as of September 30, 2020 and December 31, 2019.

We did no t have any derivative assets or liabilities not designated as hedging instruments as of September 30, 2020 or December 31, 2019.

The derivative asset and liability amounts below are shown gross and have not been netted.

Derivative Assets

1 unchanged sentence

Balance Sheet

September 30,

Balance Sheet

September 30,

Interest rate swap contracts

11 unchanged sentences

from AOCI into Net Earnings (Loss)

Six Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Derivatives in cash flow hedging relationships

2 unchanged sentences

Total gain (loss)

As of June 30, 2020, the amount of existing losses in AOCI expected to be recognized in earnings over the next twelve months was $ 9.3 million.

As of September 30, 2020, the amount of existing losses in AOCI expected to be recognized in earnings over the next twelve months was $ 8.1 million.

OTHER LONG-TERM LIABILITIES

June 30, 2020

September 30, 2020

December 31, 2019

Lease liabilities

Long-term deferred compensation arrangements

Fair value of derivative liabilities

Fair value of contingent consideration related to acquired businesses

Total other long-term liabilities

5 unchanged sentences

On July 31, 2018, we announced that our Board of Directors had approved an additional $ 300.0 million authorization to repurchase shares, increasing the total authorized amount under the Program to $ 700.0 million, excluding commissions.

During March 2020, we temporarily suspended our share repurchase program.

On July 28, 2020, we announced that our Board of Directors had approved an additional $ 500.0 million authorization to repurchase shares, increasing the total authorized amount under the Program to $ 1.2 billion, excluding commissions, and extending the currently suspended Program through December 31, 2023.

Repurchases under the Program may be made through open market, block and privately-negotiated transactions, including Rule 10b5-1 plans, at such times and in such amounts as management deems appropriate, subject to market and business conditions, regulatory

On July 28, 2020, we announced that our Board of Directors had approved an additional $ 500.0 million authorization to repurchase shares, increasing the total authorized amount under the Program to

Armstrong World Industries, Inc., and Subsidiaries

1 unchanged sentence

(dollar amounts in millions, except share data)

requirements and other factors.

$ 1,200.0 m illion, excluding commissions, and extending the Program through December 31, 2023.

The Program was temporarily suspended in the first quarter of 2020 in response to uncertainties surrounding COVID-19.

On October 21, 2020, we elected to restart the Program and currently have $ 603.8 million remaining under the Board’s repurchase authorization.

The Program does not obligate AWI to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice.

During the six months ended June 30, 2020, we repurchased 0.4 million shares under the Program for a total cost of $ 34.4 million, excluding commissions, or an average price of $ 89.99 per share.

Since inception, through June 30, 2020, we have repurchased 9.6 million shares under the Program for a total cost of $ 596.2 million, excluding commissions, or an average price of $ 62.13 per share.

In February and April 2020, our Board of Directors declared $ 0.20 per share quarterly dividends, which were paid to shareholders in March and May 2020 , respectively.

On July 22, 2020, our Board of Directors declared a $ 0.20 per share quarterly dividend to be paid in August 2020 .

During the nine months ended September 30, 2020, we repurchased 0.4 million shares under the Program for a total cost of $ 34.4 million, excluding commissions, or an average price of $ 89.99 per share.

Since inception, through September 30, 2020, we have repurchased 9.6 million shares under the Program for a total cost of $ 596.2 million, excluding commissions, or an average price of $ 62.13 per share.

In February, April and July 2020, our Board of Directors declared $ 0.20 per share quarterly dividends, which were paid to shareholders in March, May and August 2020 , respectively.

On October 21, 2020, our Board of Directors declared a $ 0.21 per share quarterly dividend to be paid in November 2020 .

Accumulated Other Comprehensive (Loss)

2 unchanged sentences

Comprehensive

Balance, March 31, 2020

Other comprehensive income (loss) before reclassifications,

net of tax benefit (expense) of $ -, $ 0.4 , $ - and $ 0.4

Balance, June 30, 2020

Other comprehensive (loss) income before reclassifications,

net of tax (expense) of $ -, ($ 0.9 ), ($ 0.2 ) and ($ 1.1 )

Amounts reclassified from accumulated other

comprehensive (loss)

Net current period other comprehensive income (loss)

Balance, June 30, 2020

Net current period other comprehensive (loss) income

Balance, September 30, 2020

Translation Adjustments

2 unchanged sentences

Balance, December 31, 2019

Other comprehensive (loss) before reclassifications,

net of tax benefit (expense) of $ -, $ 4.4 , ($ 2.9 ) and $ 1.5

Other comprehensive (loss) income before reclassifications,

net of tax (expense) benefit of $ -, $ 3.5 , ($ 3.1 ) and $ 0.4

Amounts reclassified from accumulated other

comprehensive (loss)

Net current period other comprehensive income (loss)

Balance, June 30, 2020

Net current period other comprehensive (loss) income

Balance, September 30, 2020

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Translation Adjustments

2 unchanged sentences

Comprehensive

Balance, March 31, 2019

Other comprehensive (loss) before reclassifications,

Balance, June 30, 2019

Other comprehensive (loss) income before reclassifications,

net of tax benefit (expense) of $ -, $ 1.1 , ($ 0.1 ) and $ 1.0

2 unchanged sentences

Net current period other comprehensive income (loss)

Balance, June 30, 2019

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Balance, September 30, 2019

Translation Adjustments

9 unchanged sentences

Net current period other comprehensive income (loss)

Balance, June 30, 2019

Balance, September 30, 2019

Amounts are net of tax.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

Reclassified from

5 unchanged sentences

and Comprehensive

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Derivative Adjustments:

11 unchanged sentences

Income tax expense

Total (income) loss from continuing operations, net of tax

Adjustments related to Sale to Knauf (1)

Total (income) loss, net of tax

Foreign currency translation adjustments related to

Sale to Knauf (1)

Total reclassifications for the period

Includes activity from discontinued operations.

Represents estimated amounts reclassified out of AOCI as of September 30, 2019 related to the Sale and included as a component of (Loss) gain from disposal of discontinued operations on the Condensed Consolidated Statements of Operations and Comprehensive Income.

LITIGATION AND RELATED MATTERS

4 unchanged sentences

While these expenditures are not typically material, the applicable regulatory requirements continually change and, as a result, we cannot predict with certainty the amount, nature or timing of future expenditures associated with environmental compliance.

Environmental Sites

We are actively involved in the investigation, closure and/or remediation of existing or potential environmental contamination under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and state Superfund and similar environmental laws at three domestically owned locations allegedly resulting from past industrial activity.

Armstrong World Industries, Inc., and Subsidiaries

1 unchanged sentence

(dollar amounts in millions, except share data)

Environmental Sites

In each location, we are one of multiple potentially responsible parties and have agreed to jointly fund the required investigation and remediation, while preserving our defenses to the liability.

9 unchanged sentences

These settlements were recorded as a $ 9.2 million reduction to cost of goods sold and a $ 30.6 million reduction to SG&A expenses reflecting the same income statement categories where environmental expenditures were historically recorded.

In the first six months of 2020, we entered into two new settlement agreements totaling $ 0.2 million.

In the first nine months of 2020, we entered into two new settlement agreements totaling $ 0.2 million.

These settlements were recorded as a reduction to SG&A expenses.

17 unchanged sentences

As a result of the settlements with ODEQ and Kaiser, and these actions by ODEQ, we do not expect to incur any future material costs relating to this matter.

Environmental Protection Agency (the “EPA”) has listed two landfills located on a portion of our facility in Macon, GA, along with the former Macon Naval Ordnance Plant landfill adjacent to our property, portions of Rocky Creek, and certain tributaries leading to Rocky Creek (collectively, the “Macon Site”) as a Superfund site on the National Priorities List due to the presence of contaminants, most notably polychlorinated biphenyls (“PCBs”).

In September 2010, we entered into an Administrative Order on Consent for a Removal Action (the “Removal Action”) with the EPA to investigate PCB contamination in one of the landfills on our property, the Wastewater Treatment Plant Landfill (the “WWTP Landfill,” also known as “Operable Unit 1”).

After completing an investigation of the WWTP Landfill and submitting our final Engineering Evaluation/Cost Analysis, the EPA issued an Action Memorandum in July 2013 selecting our recommended remedy for

Armstrong World Industries, Inc., and Subsidiaries

1 unchanged sentence

(dollar amounts in millions, except share data)

leading to Rocky Creek (collectively, the “Macon Site”) as a Superfund site on the National Priorities List due to the presence of contaminants, most notably polychlorinated biphenyls (“ PCBs”).

the Removal Action.

The Operable Unit 1 response action for the WWTP Landfill is complete and the final report was submitted to the EPA on October 11, 2016 .

5 unchanged sentences

The PRPs submitted a complete RI/FS work plan in the second quarter of 2019, which the EPA approved on September 11, 2019.

Investigative work on this portion of the site commenced in December 2019 and we anticipate that the EPA will require significant investigative work for Operable Unit 2.

Investigative work on this portion of the site commenced in December 2019 and remains ongoing.

We anticipate that the EPA will require significant investigative work for Operable Unit 2.

We may ultimately incur costs in remediating any contamination discovered during the RI/FS.

16 unchanged sentences

The EPA published an Interim Action Proposed Plan for the site in April 2018 seeking public comment through June 7, 2018.

The EPA has evaluated comments, including ours, and has published its Interim Record Of Decision selecting an interim cleanup approach.

The EPA evaluated comments, including ours, and has published its Interim Record Of Decision selecting an interim cleanup approach.

On September 25, 2018, AWI and CBS received a Special Notice Letter from the EPA under CERCLA inviting AWI and CBS to enter into the negotiation of a settlement agreement to conduct or finance the response action at the site.

During the third quarter of 2018, we increased our reserve for the cost of the interim cleanup, which we expect to be shared with CBS and the Navy.

In response to the September 2018 Special Notice Letter, AWI and CBS submitted a good faith offer to EPA on May 28, 2019.

In response to the September 2018 Special Notice Letter, AWI and CBS submitted a good faith offer to EPA on May 28, 2019, and negotiations among parties remain ongoing.

The current estimate of future liability at this site includes only our estimated share of the costs of the interim remedial action that, at this time, we anticipate the EPA will require the PRPs to perform.

2 unchanged sentences

Summary of Financial Position

Total liabilities of $ 1.5 million and $ 1.6 million as of June 30, 2020 and December 31, 2019, respectively, were recorded for environmental liabilities that we consider probable and for which a reasonable estimate of the probable liability could be made.

As of June 30, 2020, the total liabilities were reflected as other long-term liabilities.

As of December 31, 2019, $ 0.1 million of

Total liabilities of $ 1.5 million and $ 1.6 million as of September 30, 2020 and December 31, 2019, respectively, were recorded for environmental liabilities that we consider probable and for which a reasonable estimate of the probable liability could be made.

As of September 30, 2020 and December 31, 2019, $ 0.5 million and $ 0.1 million, respectively, of environmental liabilities were reflected within Accounts payable and accrued expenses.

During the three and nine months ended September 30, 2020, we did no t record any additional reserves for environmental liabilities.

During the three months ended September 30, 2019, we did not record any additional reserves for environmental liabilities.

During the nine months ended September 30, 2019, we recorded $ 1.0 million of additional reserves for environmental liabilities.

Where existing data is sufficient to estimate the liability, that estimate has been used;

where only a range of probable liabilities is available and no amount within that range is more likely than any other, the lower end of the range has

Armstrong World Industries, Inc., and Subsidiaries

1 unchanged sentence

(dollar amounts in millions, except share data)

environmental liabilities w ere reflected within Accounts payable and accrued expenses.

During the three and six months ended June 30, 2020 , we did no t record any additional reserves for environmental liabilities.

During the three and six months ended June 30, 2019 , we recorded $ 1.0 million of additional reserves for environmental liabilities.

Where existing data is sufficient to estimate the liability, that estimate has been used;

where only a range of probable liabilities is available and no amount within that range is more likely than any other, the lower end of the range has been used.

As assessments and remediation activities progress at each site, these liabilities are reviewed to reflect new information as it becomes available and adjusted to reflect amounts actually incurred and paid.

26 unchanged sentences

While complete assurance cannot be given to the outcome of these proceedings, we do not believe that any current claims, individually or in the aggregate, will have a material adverse effect on our financial condition, liquidity or results of operations.

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

EARNINGS PER SHARE

The following table is a reconciliation of earnings (loss) to earnings (loss) attributable to common shares used in our basic and diluted (Loss) Earnings Per Share (“EPS”) calculations for the three and six months ended June 30, 2020 and 2019.

EPS components may not add due to rounding.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Earnings (loss) from continuing operations

1 unchanged sentence

Earnings (loss) from continuing operations attributable to common shares

The following table is a reconciliation of basic shares outstanding to diluted shares outstanding for the three and six months ended June 30, 2020 and 2019 (shares in millions):

Armstrong World Industries, Inc., and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(dollar amounts in millions, except share data)

The following table is a reconciliation of basic shares outstanding to diluted shares outstanding for the three and nine months ended September 30, 2020 and 2019 (shares in millions):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Basic shares outstanding

1 unchanged sentence

Diluted shares outstanding

Due to the net loss for the six months ended June 30, 2020, all common stock equivalents were considered anti-dilutive.

Anti-dilutive stock awards excluded from the computation of diluted EPS for the three and six months ended June 30, 2020 were 25,588 and 441,722 , respectively.

Anti-dilutive stock awards excluded from the computation of diluted EPS for the three and six months ended June 30, 2019 were 19 and 15,195 , respectively.

Due to the net loss for the nine months ended September 30, 2020, all common stock equivalents were considered anti-dilutive.

Anti-dilutive stock awards excluded from the computation of diluted EPS for the three and nine months ended September 30, 2020 were 26,460 and 340,750 , respectively.

Anti-dilutive stock awards excluded from the computation of diluted EPS for the three and nine months ended September 30, 2019 were 549 and 10,313 , respectively.

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements