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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-37589
ARMSTRONG FLOORING, INC.
(Exact name of Registrant as specified in its charter) 
Delaware47-4303305
(State or other jurisdiction of incorporation or organization) (I.R.S. employer Identification number)
1770 Hempstead Road17605
LancasterPennsylvania
(Address of principal executive offices)(Zip Code)
(717)672-9611
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueAFINew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   þ No   ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit such files.)  Yes   þ No  
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

The Registrant had 21,709,428 shares of common stock, $0.0001 par value, outstanding at October 15, 2021.
 



Armstrong Flooring, Inc.

Table of Contents
Page Number
PART I
Item 1.
3
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5
Item 6.




Glossary of Defined Terms

Unless the context requires otherwise, "AFI," the "Company," "we," "our," or "us" refers to Armstrong Flooring Inc., a Delaware corporation and its consolidated subsidiaries. The Company also uses several other terms in this Quarterly Report on Form 10-Q, which are further defined below:

TermDescription
Amended ABL Credit FacilityABL credit facility, as amended through the fourth amendment thereto
ASCAccounting Standards Codification
ASUAccounting Standards Update
CEOChief Executive Officer
CFOChief Financial Officer
COVID-19COVID-19 coronavirus
Form 10-QQuarterly Report on Form 10-Q
ROURight-of-use asset
SEC Securities and Exchange Commission
South Gate FacilityFacility formerly owned by the Company, located in South Gate, California sold March 10, 2021.
Amended Term Loan AgreementPathlight Capital L.P. term loan agreement, as amended through the first amendment thereto
Term Loan FacilityPathlight Capital L.P. term loan facility
U.S. GAAPGenerally accepted accounting principles in the United States of America


Table of Contents    

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

execution of strategy;
competition;
availability and costs of raw materials and energy;
key customers;
construction activity;
liquidity;
debt covenants;
debt;
pandemics, epidemics or other public health emergencies such as the outbreak of COVID-19;
global economic conditions;
international operations;
environmental and regulatory matters;
information systems and transition services;
personnel;
intellectual property rights;
claims and litigation;
labor;
outsourcing; and
other risks detailed from time to time in our filings with the SEC, press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K and in the documents incorporated by reference.

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


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PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Armstrong Flooring, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in millions)
September 30,
2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents$14.9 $13.7 
Accounts and notes receivable, net47.8 43.0 
Inventories, net128.6 122.9 
Prepaid expenses and other current assets20.1 12.9 
Assets held-for-sale 17.8 
Total current assets211.4 210.3 
Property, plant, and equipment, net233.7 246.9 
Operating lease assets18.9 8.5 
Intangible assets, net14.0 19.0 
Deferred income tax assets4.4 4.4 
Other noncurrent assets11.5 4.4 
Total assets$493.9 $493.5 
Liabilities and Stockholders’ Equity
Current liabilities:
 Short-term debt$5.9 $5.5 
Current installments of long-term debt (a)
67.3 2.9 
Trade accounts payable 89.2 78.5 
Accrued payroll and employee costs18.3 14.8 
Current operating lease liabilities2.7 2.7 
Other accrued expenses21.1 17.7 
Total current liabilities204.5 122.1 
Long-term debt (a)
0.9 71.4 
Noncurrent operating lease liabilities17.2 5.8 
Postretirement benefit liabilities54.2 55.6 
Pension benefit liabilities4.5 4.6 
Deferred income tax liabilities1.5 2.4 
Other long-term liabilities7.7 9.0 
Total liabilities290.5 270.9 
Commitments and contingencies
Stockholders’ equity:
Common stock   
Preferred stock   
Treasury stock, at cost(85.8)(87.1)
Additional paid-in capital678.0 677.4 
Accumulated deficit(330.4)(308.4)
Accumulated other comprehensive income (loss)(58.4)(59.3)
    Total stockholders' equity203.4 222.6 
Total liabilities and stockholders’ equity$493.9 $493.5 
(a) Net of unamortized debt issuance costs. See Note 1 - Business and Basis of Presentation, for additional details..

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
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Armstrong Flooring, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in millions, except per share data)


Three Months Ended
September 30,
Nine Months Ended September 30,
2021202020212020
Net sales$168.5 $156.6 $485.5 $440.9 
Cost of goods sold155.6 129.0 431.5 365.3 
Gross profit12.9 27.6 54.0 75.6 
Selling, general and administrative expenses41.7 37.7 119.3 104.6 
Gain on sale of property  (46.0) 
Operating income (loss) (28.8)(10.1)(19.3)(29.0)
Interest expense2.6 2.8 8.9 4.6 
Other expense (income), net(2.3)(1.5)(6.7)(2.4)
Income (loss) before income taxes(29.1)(11.4)(21.5)(31.2)
Income tax expense (benefit)0.6 0.3 0.5  
Net income (loss)$(29.7)$(11.7)$(22.0)$(31.2)
Basic earnings (loss) per share of common stock:
Basic earnings (loss) per share of common stock $(1.34)$(0.53)$(1.00)$(1.42)
Diluted earnings (loss) earnings per share of common stock:
Diluted earnings (loss) per share of common stock $(1.34)$(0.53)$(1.00)$(1.42)
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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Armstrong Flooring, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Dollars in millions)


Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Net income (loss) $(29.7)$(11.7)$(22.0)$(31.2)
Changes in other comprehensive income (loss), net of tax:
 Foreign currency translation adjustments(0.7)3.6 (0.4)2.7 
 Derivative adjustments0.4 (0.3)0.7 0.1 
 Pension and postretirement adjustments0.2 0.9 0.6 3.1 
 Total other comprehensive income (loss)(0.1)4.2 0.9 5.9 
 Total comprehensive income (loss)$(29.8)$(7.5)$(21.1)$(25.3)


See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

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Armstrong Flooring, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)
Nine Months Ended
September 30,
20212020
Cash flows from operating activities:
Net income (loss) $(22.0)$(31.2)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization
33.3 32.0 
Inventory write down1.2  
Deferred income taxes
(0.5)(0.9)
Stock-based compensation expense2.0 2.0 
Gain on sale of property(46.0) 
Gain from long-term disability plan change (1.1)
U.S. pension expense (income)(5.3)2.8 
Other non-cash adjustments, net
0.8 0.6 
Changes in operating assets and liabilities:
Receivables
(10.3)(7.7)
Insurance receivable3.8  
Inventories
(7.4)(18.0)
Accounts payable and accrued expenses
24.4 11.2 
Insurance liability(3.8) 
Other assets and liabilities(10.8)(6.0)
Net cash provided by (used for) operating activities(40.6)(16.3)
Cash flows from investing activities:
Purchases of property, plant and equipment
(16.1)(15.2)
Proceeds from sale of assets65.4 0.1 
Net cash provided by (used for) investing activities49.3 (15.1)
Cash flows from financing activities:
Proceeds from revolving credit facility
70.1 43.1 
Payments on revolving credit facility
(55.4)(79.2)
Issuance of long-term debt
0.2 70.0 
Financing costs
 (7.4)
Payments on long-term debt
(22.1)(0.2)
Value of shares withheld related to employee tax withholding
(0.2) 
Net cash provided by (used for) financing activities(7.4)26.3 
Effect of exchange rate changes on cash and cash equivalents (0.1)0.2 
Net increase (decrease) in cash and cash equivalents 1.2 (4.9)
Cash and cash equivalents at beginning of year13.7 27.1 
Cash and cash equivalents at end of period$14.9 $22.2 
Supplemental Cash Flow Disclosure:
    Cash paid for:
Interest paid$7.8 $3.6 
Income taxes paid, net0.5 0.4 
    Non-cash transaction:
Amounts in accounts payable for capital expenditures
2.4 2.9 

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
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Table of Contents    

Armstrong Flooring, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(Dollars in millions)

Common StockTreasury StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Equity
SharesAmountSharesAmount
December 31, 202021,638,141$ 6,738,521 $(87.1)$677.4 $(59.3)$(308.4)$222.6 
Net income (loss)— — — — — — 27.2 27.2 
Stock-based employee compensation, net47,721  (47,721)0.9 (0.4)— — 0.5 
Other comprehensive income (loss)— — — — — (0.6)— (0.6)
March 31, 202121,685,862  6,690,800 (86.2)677.0 (59.9)(281.2)249.7 
Net income (loss)— — — — — — (19.5)(19.5)
Stock-based employee compensation, net    0.8 — — 0.8 
Other comprehensive income (loss)— — — — — 1.6 — 1.6 
June 30, 202121,685,862  6,690,800 (86.2)677.8 (58.3)(300.7)232.6 
Net income (loss)— — — — — — (29.7)(29.7)
Stock-based employee compensation, net23,566  (23,566)0.4 0.2 — — 0.6 
Other comprehensive income (loss)— — — — — (0.1)— (0.1)
September 30, 202121,709,428 $ 6,667,234 $(85.8)$678.0 $(58.4)$(330.4)$203.4 

Common StockTreasury StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Equity
SharesAmountSharesAmount
December 31, 201921,519,761 $ 6,837,897 $(88.9)$676.7 $(74.7)$(244.8)$268.3 
Net income (loss)— — — — — — (13.2)(13.2)
Stock-based employee compensation, net36,072 — (36,072)0.7  — — 0.7 
Other comprehensive income (loss)— — — — — 0.1 — 0.1 
March 31, 202021,555,833  6,801,825 (88.2)676.7 (74.6)(258.0)255.9 
Net income (loss)— — — — — — (6.3)(6.3)
Stock-based employee compensation, net37,689 — (18,685)0.3 0.3 — — 0.6 
Other comprehensive income (loss)— — — — — 1.6 — 1.6 
June 30, 202021,593,522  6,783,140 (87.9)677.0 (73.0)(264.3)251.8 
Net income (loss)— — — — — — (11.7)(11.7)
Stock-based employee compensation, net32,700 — (32,700)0.6  — — 0.6 
Other comprehensive income (loss)— — — — — 4.2 — 4.2 
September 30, 202021,626,222 $ 6,750,440 $(87.3)$677.0 $(68.8)$(276.0)$244.9 

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
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Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)




NOTE 1. BUSINESS AND BASIS OF PRESENTATION
Background
Armstrong Flooring, Inc. is a leading global producer of resilient flooring products for use primarily in the construction and renovation of residential, commercial, and institutional buildings. AFI designs, manufactures, sources and sells resilient flooring products in North America and the Pacific Rim.
Basis of Presentation
These condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The condensed consolidated financial statements include management estimates and judgments, where appropriate. Management uses estimates to record many items including allowances for expected credit losses, inventory obsolescence, lower of cost or market or net realizable value charges, warranty reserves, sales-related accruals, pension and post-retirement liabilities, 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. Management may confer with outside parties, including outside counsel. Actual results may differ from these estimates. 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 three and nine months ended September 30, 2021 and 2020 included in this Quarterly Report on Form 10-Q are unaudited. Quarterly results are not necessarily indicative of annual results, primarily due to the seasonality of the business and the possibility of changes in economic conditions between periods.
The accounting policies used in preparing the condensed consolidated financial statements in this Quarterly Report on Form 10-Q are the same as those used in preparing the Consolidated Financial Statements for the year ended December 31, 2020. These statements should therefore be read in conjunction with the Consolidated Financial Statements and notes that are included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
All significant intercompany transactions within AFI have been eliminated from the consolidated financial statements.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform with current year classifications.
Recently Adopted and Recently Issued Accounting Standards
On January 1, 2021 we adopted ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." This new standard eliminates certain exceptions in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, guidance on accounting for franchise taxes and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The adoption of the standard did not have a material impact on our financial condition, results of operations or cash flows.
There are no additional accounting standards that have been issued and become effective for the Company at a future date which are expected to have a material impact on our financial condition, results of operations or cash flows.









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Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)




Going Concern
These financial statements have been prepared assuming that the Company will continue as a going concern. For the nine months ended September 30, 2021, the Company had a net loss of $22.0 million. As of September 30, 2021, the Company had an accumulated deficit of $330.4 million.
The ability of the Company to continue as a going concern is dependent on the Company maintaining adequate capital and liquidity to fund operating losses until it returns to profitability. On November 1, 2021, the Company entered into the Fourth Amendment to its Credit Agreement, which amended its existing asset-backed revolving credit facility and the First Amendment to its Term Loan Agreement, which amended its existing Term Loan Agreement, both of which modify financial covenant requirements for the period ending September 30, 2021. The Company was in compliance with these covenants at September 30, 2021.
Based on current projections, as a result of worsening supply chain disruptions during the third quarter of 2021 and continued inflationary pressures related to transportation, labor and raw materials, which are expected to continue through 2022, the Company does not currently expect to remain in compliance with certain financial covenants under the asset-backed revolving Credit Agreement or the Term Loan Agreement, each, as amended, for the entirety of the twelve-month period from filing of this Form 10-Q. While the Company has implemented substantial pricing actions, continues to work with its lenders to secure longer-term relief and evaluates other initiatives that could enhance its liquidity, there can be no assurances that these actions will be successful. These factors raise substantial doubt about the Company’s ability to continue as a going concern. As a result, the Company has reclassified amounts outstanding under the Amended ABL Credit Facility and the Amended Term Loan Agreement from Long-term debt to Current installments of long-term debt at September 30, 2021 on the Condensed Consolidated Balance Sheets. See Note 7, Debt, for additional details.

Asset Impairment Review
The Company’s business transformation has been delayed by supply chain disruptions and inflationary pressures related to transportation, labor and raw materials. As a result, the Company has experienced continued losses and negative cash flows, which were higher than anticipated. These events constitute a triggering event that required impairment testing of our North America asset group as of the last day of the third quarter of 2021. The results of this impairment testing indicated that, as of September 30, 2021, our North America asset group is not impaired. While no long-lived asset impairment existed as of September 30, 2021, such charges are possible in the future, which could have a material adverse effect on future results.


NOTE 2. ACCOUNTS AND NOTES RECEIVABLE
The following table presents accounts and note receivables, net:
September 30,
2021
December 31,
2020
Customer trade accounts receivables$65.8 $52.4 
Miscellaneous receivables (a)
4.4 9.0 
Less: allowance for product claims, discounts, returns and losses(22.4)(18.4)
Total accounts and notes receivable, net$47.8 $43.0 
(a) Miscellaneous receivables primarily relate to the current portion of a distributor note receivable, tax claim receivables and medical insurance rebate receivables not included in Customer trade account receivables. The decrease in Miscellaneous receivables is primarily due to receipt of an insurance receivable associated with a shareholder lawsuit that was included in the balance at December 31, 2020. See Note 10, Litigation and Related Matters, for additional details.

Allowance for product claims, which is a portion of the allowance for product claims, discounts, returns and losses, represents expected reimbursements for cost associated with warranty repairs and customer accommodation claims, the majority of which is provided to our independent distributors through credits against customer trade accounts receivable from the independent distributor to AFI.
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Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)




The following table summarizes the activity for the allowance for product claims:
Nine Months Ended
September 30,
20212020
Balance as of January 1$(10.3)$(9.0)
Reductions for payments7.4 4.9 
Current year claim accruals(8.7)(5.9)
Balance as of September 30$(11.6)$(10.0)

NOTE 3. INVENTORIES
The following table presents details related to our inventories, net:
September 30,
2021
December 31,
2020
Finished goods$88.0 $94.0 
Goods in process5.6 5.7 
Raw materials and supplies35.0 23.2 
Total inventories, net$128.6 $122.9 

NOTE 4. PROPERTY, PLANT AND EQUIPMENT

The following table presents details related to our property, plant and equipment, net:

September 30,
2021
December 31,
2020
Land$10.3 $10.6 
Buildings83.0 81.8 
Machinery and equipment445.5 458.9 
Computer software18.4 15.9 
Construction in progress10.7 16.4 
Less: accumulated depreciation and amortization(334.2)(336.7)
Total property, plant and equipment, net$233.7 $246.9 

Three Months Ended
September 30,
   Nine Months Ended September 30,
2021202020212020
Depreciation expense$8.5 $9.3 $28.0 $26.8 






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Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)




On March 10, 2021 the Company sold its South Gate Facility, previously classified as assets held-for-sale, for a purchase price of $76.7 million. The Company received proceeds of $65.3 million, net of fees, expenses and certain amounts held in an environmental-related escrow account. The Company realized a gain of $46.0 million during the three months ended March 31, 2021 on the sale. At December 31, 2020, the Company had classified as Assets held-for-sale, $17.8 million of primarily land and buildings related to the South Gate Facility that met all related criteria under U.S. GAAP.

During the second quarter of 2021, the Company accelerated $3.3 million of depreciation expense for property, plant and equipment for which no future alternative use was identified as part of the Company's business transformation initiatives.


NOTE 5. LEASES
The Company's leases, excluding short-term leases, have remaining terms of less than one year to ten years, some of which include options to extend for up to ten years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The following table summarizes components of lease expense:

Three Months Ended
September 30,
Nine Months Ended September 30,
2021202020212020
Finance lease cost$0.1 $0.1 $0.3 $0.3 
Operating lease cost1.5 0.5 3.7 3.3 
Short-term lease cost0.5  1.8 0.7 
Total lease cost$2.1 $0.6 $5.8 $4.3 

The following table summarizes supplemental balance sheet information related to leases:

Lease CategoryBalance Sheet ClassificationSeptember 30,
2021
December 31, 2020
Assets
   Operating lease assetsOperating lease assets$18.9 $8.5 
   Finance lease assetsProperty, plant and equipment, net1.2 1.0 
Total lease assets$20.1 $9.5 
Liabilities
   Current
      Operating lease liabilitiesCurrent operating lease liabilities$2.7 $2.7 
      Finance lease liabilitiesCurrent installments of long-term debt0.5 0.3 
   Noncurrent
      Operating lease liabilitiesNoncurrent operating lease liabilities17.2 5.8 
      Finance lease liabilitiesLong-term debt, net of unamortized debt issuance costs0.7 0.7 
Total lease liabilities$21.1 $9.5 




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Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)




The following table summarizes supplemental cash flow information related to leases:

Nine Months Ended
September 30,
2021
September 30,
2020
Cash paid for amounts included in the measurement of lease liabilities:
   Operating cash flows from operating leases$3.0 $3.2 
   Financing cash flows from finance leases0.3 0.2 
ROU assets obtained in exchange for lease obligations:
   Operating leases12.4 2.8 
   Finance leases0.4 0.7 

During the nine months ended September 30, 2021, the Company added $11.6 million of additional ROU assets related to the commencement of the Technical Center and Headquarters leases.

The following table summarizes weighted average remaining lease term and weighted average discount rate:

September 30,
2021
December 31, 2020
Weighted average remaining lease term - Operating leases (in years)7.74.1
Weighted average remaining lease term - Finance leases (in years)2.73.0
Weighted average discount rate - Operating leases (%)11.5 %9.5 %
Weighted average discount rate - Finances leases (%)8.3 %7.1 %

Maturities of lease liabilities at September 30, 2021 were as follows:

Operating LeasesFinance Leases
2021 (excluding the nine months ended September 30, 2021)$1.2 $0.1 
20224.5 0.5 
20234.2 0.4 
20243.9 0.2 
20253.3 0.1 
Thereafter13.5  
Total lease payments30.6 1.3 
Less: Unamortized interest10.7 0.1 
Total$19.9 $1.2 







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Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)



NOTE 6. INTANGIBLE ASSETS

Intangible assets, net consist of the following:

September 30, 2021December 31, 2020
Estimated Useful LifeGross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
Finite-lived intangible assets:
   Contractual arrangements5 years$33.4 $28.4 $33.4 $23.6 
   Land use rights50 years3.2 0.6 3.2 0.5 
   Intellectual property
2-15 years
5.7 2.3 5.6 2.0 
      Subtotal42.3 31.3 42.2 26.1 
Indefinite-lived intangible assets:
   Trademarks and brand namesIndefinite3.0 2.9 
Total intangible assets, net$45.3 $31.3 $45.1 26.1 

Three Months Ended
September 30,
Nine Months Ended September 30,
2021202020212020
Amortization expense$1.8 $1.7 $5.3 $5.2 

2021 (a)
2022202320242025Thereafter
Estimated amortization expense$1.8 $3.7 $0.4 $0.4 $0.4 $2.0 
(a) Amortization remaining in current year.



























12




Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)




NOTE 7. DEBT
September 30,
2021
December 31,
2020
Credit lines (international)$4.5 $4.5 
Insurance premiums financing1.4 1.0 
Short-term debt5.9 5.5 
Current installment of Term Loan Facility48.3 2.6 
Amended ABL Credit Facility24.1  
Current installment of finance leases0.5 0.3 
Less: Deferred financing costs(5.6)— 
Current installments of long-term debt67.3 2.9 
Noncurrent portion of Term Loan Facility 67.4 
Amended ABL Credit Facility 10.0 
Other financing payable (including finance leases)0.9 0.7 
Total principal balance outstanding, long-term debt0.9 78.1 
Less: Deferred financing costs (6.7)
Long-term debt, net of unamortized debt issuance costs:0.9 71.4 
Total$74.1 $79.8 

Upon the sale of our South Gate Facility, we made a mandatory payment of $20.0 million to Pathlight Capital L.P. towards the principal balance on our Term Loan Facility as required by the Term Loan Agreement. As part of the mandatory payment, we paid an additional $0.4 million in prepayment premium fees. Additional proceeds from the South Gate Facility sale were applied to outstanding borrowings under our Amended ABL Credit Facility. Upon completion of the sale, the temporary $30.0 million restriction on available liquidity under the Amended ABL Credit Facility was removed.

During March 2021, we entered a new line of credit in China. The new credit limit is $9.3 million with a one-year maturity date and a variable interest rate of 3.85% to 4.35%. The loan is secured by the land and building of our Chinese facility.






















13




Armstrong Flooring, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in millions, except per share data)




NOTE 8. PENSION AND OTHER POSTRETIREMENT BENEFIT PROGRAMS
The following table summarizes our pension and postretirement expense (benefit):
Three Months Ended
September 30,
     Nine Months Ended September 30,
2021202020212020
Defined-benefit pension, U.S.
Service cost$0.2 $0.6 $0.7 $1.9 
Interest cost2.6 3.2 7.7 9.4 
Expected return on plan assets(5.3)(5.3)(15.9)(16.0)
Amortization of net actuarial (gain) loss0.7 2.5 2.2 7.6 
Total, defined-benefit pension, U.S.$(1.8)$1.0 $(5.3)$2.9 
Defined-benefit pension, Canada
Interest cost$0.1 $0.1 $0.3 $0.3 
Expected return on plan assets(0.1)(0.1)(0.4)(0.4)
Amortization of net actuarial (gain) loss0.1 0.1 0.2 0.3 
Settlement/curtailment losses  0.2  
Total, defined-benefit pension, Canada$0.1 $0.1 $0.3 $0.2 
Defined-benefit postretirement, U.S.
Interest cost$0.3 $0.5 $1.0 $1.5 
Amortization of prior service credits(0.3) (0.8)(0.2)
Amortization of net actuarial (gain) loss(0.3)(1.2)(1.0)(3.6)
Total, defined-benefit postretirement, U.S.$(0.3)$(0.7)$(0.8)$(2.3)
The caption Other assets on the Company's Condensed Consolidated Balance Sheets include prepaid pension assets of $8.6 million and $1.1 million at September 30, 2021 and December 31, 2020, respectively.
We expect to contribute an additional $1.3 million to our U.S. postretirement benefit plans for the remainder of 2021.

NOTE 9. FINANCIAL INSTRUMENTS
The fair value of cash, accounts and notes receivable, trade accounts payable and accrued expenses approximate their carrying amounts due to the short-term maturities of these assets and liabilities.
Fair value of all other financial instruments are as follows:
Fair Value at September 30, 2021
Carrying amountLevel 1Level 2Level 3Total
Financial liabilities
Foreign exchange contracts