armstrong flooring, inc.

ARMSTRONG
FLOORING, INC.
Investor Presentation
May 9, 2016
SAFE HARBOR STATEMENT
Disclosures in this release and in our other public documents and comments contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Those statements provide our future expectations or
forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”
“believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of
similar meaning in connection with any discussion of future operating or financial performance. Forward-looking
statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend
on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our
expected results and from those expressed in our forward looking statements. A more detailed discussion of the risks and
uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied is included
our reports filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date
they are made. We undertake no obligation to update any forward-looking statements beyond what is required under
applicable securities law. The information in this presentation is only effective as of the date given, May 9, 2016, and is
subject to change. Any distribution of this presentation after May 9, 2016 is not intended and will not be construed as
updating or confirming such information.
In addition, we will be referring to “non-GAAP financial measures” within the meaning of SEC Regulation G. A reconciliation
of the differences between these measures with the most directly comparable financial measures calculated in accordance
with GAAP can be found in the appendix section of this presentation.
Armstrong Flooring, Inc. competes globally in many diverse markets. References to "market" or "share" data are simply
estimations based on a combination of internal and external sources and assumptions. They are intended only to assist
discussion of the relative performance of product segments and categories for marketing and related purposes. No
conclusion has been reached or should be reached regarding a "product market," a "geographic market" or “market
share,” as such terms may be used or defined for any economic, legal or other purpose.
2
NEW, ENERGIZED EXECUTIVE TEAM
Motivated Management Team Driving the Business Forward
DON MAIER – PRESIDENT & CEO
 1 year as AFI CEO, 6 years with Armstrong
 29 years of operational experience across industries
 Prior experience with TPG and Hill-Rom
JAY THOMPSON – SVP & CFO
 1 year with Armstrong
 Previously CFO at Chobani
 Prior experience with PepsiCo, TPG, Bain & Co. and Goldman Sachs
DAVE SCHULZ – SVP & COO
 4 years with Armstrong, current AWI CFO
 Previously CFO at P&G’s Americas Snacks Division (14 years of experience at P&G)
 Previously served as an officer in the United States Marine Corps
DOMINIC RICE – SVP NORTH AMERICAN COMMERCIAL
 34 years with Armstrong
 Also leads Global Innovation and Corporate Communications
 Director and former Chairman of the Resilient Floor Covering Institute (RFCI)
JOE BONDI – SVP NORTH AMERICAN RESIDENTIAL
 2 years with Armstrong
 Prior experience with CertainTeed, Lutron and Sears
 18 years of experience in B2B and B2C
3
UNIQUE OPPORTUNITY TO BUILD VALUE
 Leading hard surfaces flooring company
 Most recognized brands
 Expansive product portfolio
 Renewed focus on innovation
 Differentiated go-to-market system
 Operational, financial and organizational transformation
4
NEED FOR TRANSFORMATION
Volume, Sales, and EBITDA “Flat” in Growing Market
Volume (M) and Adjusted Net Sales(1) ($M)
1,220
1,150
$1,230
$1,197
2013
1,179
KEY DRIVERS
$1,183
2014
Adj. Net Sales
2015
Square Feet

Inconsistent market, channel and customer strategies

Price and commodity relationships out-of-line with market

Focus on SG&A reductions to sustain margins impacted
Adjusted EBITDA ($M)
core capabilities

Standalone EBITDA (2)
5
(1)
(2)
$71
$71
$61
2013
2014
2015
European flooring business a drag on overall focus
Adjusted net sales based on 2016 budgeted FX rates; actual sales were $1,189 million in 2015, $1,220 million in 2014, and $1,263 million in 2013.
Standalone EBITDA adjusted for $40 million corporate G&A costs. GAAP operating income was $18 million, $11 million, $41 million, D&A was $38
million, $52 million, and $44 million, and comparability adjustments were $5 million, $8 million, and $14 million for 2015, 2014, and 2013 respectively.
TRANSFORMATION UNDERWAY
Initiatives Starting to Show Results
FOCUS AREAS
Product
 Focus on product innovation
 Manage under-performing SKUs
 Improvements in price and mix
 Distributor and retailer support
Go-to-Market  Merchandising investments
 Consumer purchase journey
Completed
Capital
Investments
People
+4%
+20%
Q1 2016
TOTAL UNIT
VOLUME
ENGINEERED
WOOD VOLUME
+12%
+32%
 New LVT plant
 Expanded Asia capacity
 Increased Engineered Wood capacity
+34%
LVT VOLUME
+42%
 New leadership team
 Customer-focused organization
 Incentive plans tied to shareholder returns
+10%
ADJUSTED EBITDA
>100%
Note: Q4 2015 and Q1 2016 comparisons versus the same quarter in the prior year
6
Q4 2015
MEDIUM-TERM FINANCIAL GOALS
Growth and Operating Leverage Leading to Bottom-line Expansion
7
TOP-LINE GROWTH
REVENUE FLOW THROUGH
5 - 6%
20 - 30%
Annualized
Incr. EBITDA Margins
Note: “Medium-Term” defined as 3-5 years
EBITDA MARGIN
10%
AGENDA
OUR BUSINESS
INVESTMENT HIGHLIGHTS
FINANCIAL OUTLOOK
8
HARD SURFACE FLOORING: AN ATTRACTIVE CATEGORY
Hard Surface Growing at 2x Rate of Soft Surface
US Hard Surface Flooring Volume (’12-’16E)(1)
US Soft Surface Flooring Volume (’12-’16E) (1)
4%
CAGR
9.0
2012
9.5
2013
9.6
2014
10.0
10.5
2%
CAGR
2015E
2016E
8.3
8.2
8.4
8.7
8.0
2012
2013
2014
2015E
2016E
Key Consumer Demands
DURABILITY
9
DESIGN
FLEXIBILITY
CLEANLINESS
Source: US FLOOReport (Market Insights LLC and Floor Focus).
(1) Values are wholesale volume in billions of square feet. Soft surfaces include carpet and rugs; hard surfaces include all
other flooring types
AESTHETICS
AND TEXTURE
EASE OF
INSTALLATION
AFI - LEADER IN HARD SURFACE FLOORING
Integrated Business Across Resilient and Wood
2015 ADJ. NET SALES:
STANDALONE ADJ. EBITDA:
BRANDS THAT
CROSS PRODUCT
CATEGORIES
STRONG CHANNEL
OVERLAP
$1,183 million
$61 million(1)
LOGISTICS AND
CUSTOMER SERVICE
RESILIENT FLOORING SEGMENT
2015 Adj. Net Sales: $709 million
2015 Adj. EBITDA:
$40 million(1)
Plants:
6 US, 2 China, and
1 Australia
10
LEVERAGED
CORPORATE
SERVICES
WOOD FLOORING SEGMENT
&
(1) Standalone EBITDA adjusted for $40 million corporate G&A costs ($27 million in resilient and $13 million in wood)
2015 Adj. Net Sales: $474 million
2015 Adj. EBITDA:
$21 million(1)
Plants:
8 US
#1 IN US RESILIENT AND WOOD FLOORING
US Market Share Breakdown
RESILIENT FLOORING
(1)
WOOD FLOORING
(2)
Imports
&
Other Domestic
Imports
Metroflor
Mannington
Mohawk
Mohawk / IVC
Mullican
Tarkett
Congoleum
Other Domestic
Shaw
11
Shaw
Source: US FLOOReport (Market Insights LLC and Floor Focus)
(1) Represents 2014 wholesale dollars, excludes laminate flooring
(2) Represents 2014 wholesale dollars
Mannington
Somerset
Lumber Liquidators
BROAD PRODUCT MIX
RESILIENT FLOORING(1)
Resilient Sheet
Luxury Vinyl Tile (LVT)
40%
Laminate / Other
Resilient Tile
15%
35%
WOOD FLOORING(1)
Solid Wood
60%
12
(1) Figures represent AFI 2015 approximate percentage sales breakdown
Engineered Wood
40%
10%
POSITIONED TO LEVERAGE MARKET RECOVERY
Outlook Supports Industry Volume Growth
2015 NET SALES BY END USE
US Housing Starts (millions)
11%
9%
CAGR
CAGR
15%
RESIDENTIAL
65% of Sales
0.9
1.1
1.2
1.4
1.0
2013
2014
2015
2016E
2017E
US Existing Home Sales (millions)
50%
5%
2%
CAGR
CAGR
5.1
4.9
2013
2014
5.2
5.5
2015
2016E
5.8
10%
COMMERCIAL
35% of Sales
25%
US Non-Residential Construction ($Bn)(1)
Total Net Sales
New
13
2017E
Renovation
Source: Mortgage Bankers Association, Dodge Data & Analytics and US Census Bureau
(1) Includes commercial and institutional end-market sales
10%
9%
CAGR
CAGR
$303
$333
$253
$272
2013
2014
2015E
2016E
$369
2017E
PROFITABILITY IMPROVING IN PACIFIC RIM
2015 Pacific Rim Net Sales Breakdown
CHINA
~50%
KEY FACTS
ASIA (EX-CHINA)
~20%
AUSTRALIA
~30%
14

Approximately $100 million in 2015 revenue

Strong share positions

Advanced manufacturing in place

Future alternative supply source for North
American Commercial Sheet
AGENDA
OUR BUSINESS
INVESTMENT HIGHLIGHTS
FINANCIAL OUTLOOK
15
16
3
4
BOTTOM-LINE DRIVERS
 Most recognized brands
 Expansive product portfolio
 Advantaged go-to-market system
2
TOP-LINE GROWTH
1 COMPETITIVE ADVANTAGES
TRANSFORMATION
INVESTMENT HIGHLIGHTS
MOST RECOGNIZED BRANDS AND MOST
VISITED MANUFACTURER WEBSITE
KEY AFI BRANDS (1)
MONTHLY WEBSITE VISITS (2)
300,000
200,000
SHAW
100,000
17
(1) Based on survey completed by The Boston Consulting Group
(2) Based on data from CompetePRO.com and Adobe Analytics. US Residential sites only.
DEC 2015
OCT 2015
JUL 2015
APR 2015
JAN 2015
MOHAWK
MANNINGTON
1
EXPANSIVE PRODUCT PORTFOLIO
1
Leadership Position Creates Opportunity
VCT
#1
Commercial Sheet
#1
Engineered Wood
Residential Vinyl Tile
#1
Solid Wood
Residential Sheet
#1
LVT (1)
Linoleum
New pic
#1
#1
AFI MARKET POSITION
18
Source: US FLOOReport (Market Insights LLC and Floor Focus)
(1) LVT includes both Residential and Commercial LVT products
#2
#4
GO-TO-MARKET SYSTEM CREATES
COMPETITIVE ADVANTAGE
Distribution + Direct Model Best Serves Customers
DISTRIBUTION SALES
 Support to ~15,000 local and regional
retailers and contractors
 Superior coverage, service, and availability
 Complements AFI specification strengths
~55%
19
DIRECT SALES
&
 Large, national customers
 Home centers
 Direct relationships for cost
efficiency
 Key consumer touchpoint
~45%
1
20
2
TRANSFORMATION
 Positioning to high growth categories
 Renewed focus on distribution
 Improved innovation process
3
4
BOTTOM-LINE DRIVERS
COMPETITIVE ADV.
1
TOP-LINE GROWTH
INVESTMENT HIGHLIGHTS
POSITIONING TO GROW IN ATTRACTIVE
HARD SURFACE CATEGORIES
2012-2016E US Sales Growth (CAGR) by Category
11%
11%
10%
3%
3%
3%
Commercial Carpet Tile
Rubber
Carpet ex Carpet Tile
Solid Wood
Ceramic
Engineered Wood
LVT
4%
Other Resilient(1)
6%
AFI’s Product Segments
21
Source: US FLOOReport (Market Insights LLC and Floor Focus). Indicates wholesale sales dollars
(1) Other Resilient includes VCT, sheet, linoleum, residential tile, residential sheet and laminate
2
WINNING WITH DISTRIBUTION
2
OPPORTUNITY TO DOUBLE CURRENT DISTRIBUTOR SALES
DISTRIBUTOR “SHARE OF WALLET” OPPORTUNITY
PERCENT OF AFI DISTRIBUTOR SALES IN 2015 – TOTAL $2.6B
~1/3
Current Sales of AFI Products
~1/3
Addressable Opportunity
~1/3
Non – AFI Products
DISTRIBUTION INITIATIVES
STRATEGIC
ALIGNMENT
22
Source: Floor Covering Weekly and AFI internal estimates
GREATER
COMMUNICATION
STREAMLINED
PROCESSES
JOINT DEMAND
GENERATION
REFOCUSED INNOVATION PLATFORM
Establishing a Pipeline for Growth
PRODUCT DEVELOPMENT INITIATIVES
STRUCTURE
RESULTS
 New R&D leader
 Global R&D organization
 Regional innovation centers
~45%
% of 2015 Sales from New Products(1)
PROCESS
23
 Consumer driven
 Leverage across products
 Repeatable processes
(1) New products defined as those introduced during previous five years
4x
Increase in
Annual US
Patents Filed
(2011 to 2015)
2
INCREASED RATE OF PRODUCT
INNOVATION
Durability
Design
DIAMOND10™ Technology
Materials
2
Installation
LUXE PLANK® with
Rigid Core Technology
Fastak™ and I-Set™
VIVERO™ Luxury Vinyl Tile
Performance Plus™
Performance Plus™ with
Acrylic Impregnation
24
Alterna™ Luxury Vinyl Tile and
Architectural Remnants™ Laminate
Striations BBT™ Bio-flooring
VIVERO™ with IntegriLock™
INVESTMENT HIGHLIGHTS
25
3
TOP-LINE GROWTH
 Consumer-centric innovation
 VIVERO™ LVT Case Study
4
BOTTOM-LINE DRIVERS
2
TRANSFORMATION
COMPETITIVE ADV.
1
TOP-LINE GROWTH STRATEGY
3
Repeatable Process to Drive Disciplined Market Share Gains
1
4
26
2
CONSUMER INSIGHT
INNOVATION
PURCHASE JOURNEY
GO-TO-MARKET
3
CASE STUDY: VIVEROTM LVT
AFI’s new Luxury Vinyl Tile with
DIAMOND10™ Technology
27
TM
CASE STUDY: VIVERO LVT
1
3
INNOVATION
CONSUMER INSIGHT
2
“A product that looks great, no
matter what life throws at it.”
Increasing Importance
Consumer Demands
Durability
Style / Look
Price
Material
Low Maintenance
Ease of Installation
4
28
PURCHASE JOURNEY
GO-TO-MARKET
3
TM
CASE STUDY: VIVERO LVT
1
CONSUMER INSIGHT
3
INNOVATION
2
“Best-in-Class”
scratch and stain resistance
4
29
PURCHASE JOURNEY
GO-TO-MARKET
3
TM
CASE STUDY: VIVERO LVT
1
CONSUMER INSIGHT
Simplified pricing and marketing
3
INNOVATION
“Share of
Wallet”
Opportunity
2
AFI LVT
TOTAL DISTRIBUTOR LVT SALES
4
30
PURCHASE JOURNEY
GO-TO-MARKET
3
TM
CASE STUDY: VIVERO LVT
1
CONSUMER INSIGHT
Retailer programs
that close the sale
4
31
PURCHASE JOURNEY
3
INNOVATION




2
Retailer training
Merchandising
Market development
Promotional programs
GO-TO-MARKET
3
INVESTMENT HIGHLIGHTS
32
3
TOP-LINE GROWTH
2
TRANSFORMATION
COMPETITIVE ADV.
1
4
BOTTOM-LINE DRIVERS
 Portfolio mix
 Wood economics
 Continuous improvement
IMPROVING PORTFOLIO MIX
4
Shift in Mix Will Improve Profit per Square Foot
Average Retail Price Per SF and Growth Rates(1)
KEY FACTS
$6
$5
$5
$2
Focus Areas
Resilient (ex-LVT)
3%
LVT
Solid Wood
11%
11%
6%
2012 to 2016E Market Growth Rates
Average Independent Retail Price
(Dollars per square foot)
33
Eng Wood
Retail Price Range
(Dollars per square foot)
(1) Values are based on company estimates and indicative of pricing at specialty flooring retailers. Actual pricing
varies significantly by region and retailer

Market growth favoring product categories
with higher retail prices per square foot

AFI will benefit from market growth in higher
profit categories given a positive correlation
between retail price and profit per square foot

We are taking actions to further accelerate our
revenue weighting in these categories
DRIVING WOOD PROFITABILITY
4
Core to AFI Growth Strategy
US WOOD FLOORING MARKET(1)
9%
CAGR
$3.1 B
$2.2 B
INNOVATION
$1.8
60%
$1.2
55%
2012
2012
34
PRODUCT &
CHANNEL MIX
$1.3
40%
$1.0
45%
Engineered Wood
INITIATIVES TO ENHANCE VALUE
2016E
Solid Wood
2016E
Source: US FLOOReport (Market Insights LLC and Floor Focus)
(1) Indicates wholesale sales dollars
OPERATIONAL
IMPROVEMENTS
CULTURE OF CONTINUOUS IMPROVEMENT
PRODUCTIVITY SAVINGS
SELECTED EXAMPLES
$20M
/ year
RESILIENT
Migrated an off-line, manual packing
operation into the mainstream production
process
WOOD
Shifted solid wood plants from 3 to 2 shifts
through process redesign and technology
investment
$9
$6
$5
Resilient
Wood
(5 yr. avg.)
Pacific Rim
(2 yr. avg.)
Average Gross Productivity ($M)
35
PACIFIC RIM
Expanded Wujiang, China homogeneous
plant capacity by 33% through process
reengineering
4
AGENDA
OUR BUSINESS
INVESTMENT HIGHLIGHTS
FINANCIAL OUTLOOK
36
KEY HIGHLIGHTS – FIRST QUARTER 2016
(Dollars in Millions)
2016
2015
Variance
Adjusted Net Sales (1)
$285
$257
11%
Adjusted Operating (Loss) Income (2)
($2)
($7)
nm
(1%)
(3%)
200 bps
10
3
>100%
3%
1%
235 bps
% of Sales
Adjusted EBITDA (3)
% of Sales
• Unit volume growth of 12% driven by Americas Resilient +6% and Wood +23%
• Adjusted EBITDA improvement due to volume increase, partially offset by expenses for luxury vinyl tile (LVT) plant ramp up
• LVT plant operating, but at lower than expected throughput
• Completed spin off from Armstrong World Industries on April 1
(1)
(2)
(3)
37
As reported Net Sales $284M in 2016 and $259M in 2015
As reported Operating (Loss) Income ($5M) in 2016 and ($3M) in 2015
See slide 11 for a reconciliation of Adjusted EBITDA to the nearest GAAP measure
AFI FIRST QUARTER RESULTS
Reported Net Sales ($M)
$284
Key Highlights
$259
$121
• Net sales increased 11% on a constant currency basis
$103
$164
• Volume increased 12% driven by Wood
• Price reduced sales by 3% reflecting pricing actions to
remain competitive in a deflationary environment
$157
• Mix was positive due to strong growth in LVT
2016
2015
Resilient
Q1 2015 Adjusted EBITDA
Volume
Price
Mix/Other
Mfg & Input Costs
SG&A
Q1 2016 Adjusted EBITDA
38
Wood
$3M
12
(7)
(1)
4
(1)
$10M
• Fall through on incremental volume offset by price
pressure in LVT, Wood
• Benefit of lower input costs and productivity in Wood
partially offset by LVT plant ramp up expenses
• Increase in SG&A reflects continued spending to support
go-to-market initiatives
BALANCE SHEET AND CASH FLOW
March 31,
2016
December 31,
2015
--
--
Accounts & Notes Receivable
$100
$72
Inventory
$240
$243
Property, Plant & Equipment, Net
$433
$434
Other Assets
$109
$114
$882
$863
$145
$161
--
$10
Other Liabilities
$74
$74
AWI Equity
$663
$618
$882
$863
(Dollars in Millions)
Cash & Cash Equivalents
Total Assets
Accounts Payable, Accrued
Expenses & Deferred Income Tax
Debt
Total Liabilities and AWI Equity
39
• Expect net pension liability of $33M ($383M
projected pension obligation and fair value of
approximately $350M of pension assets)
• On April 1, entered into five year, $225M
credit facility at L+150
• Draw of $100M against facility; $50M
dividend payment to AWI (remaining balance
net of fees available for operating liquidity)
• Leverage of 1x net debt to EBITDA
• First quarter operating cash flow a draw of
$29M compared to draw of $35M in prior
year quarter; net cash used for investing
activities ($8M) and ($11M) in the first
quarter of 2016 and 2015, respectively
MEDIUM-TERM FINANCIAL GOALS
Growth and Operating Leverage Leading to Bottom-line Expansion
REASONS TO BELIEVE
PROVEN
NEW TEAM
40
MANUFACTURING
INVESTMENTS
OPERATIONAL
TRANSFORMATION
TOP-LINE GROWTH
REVENUE FLOW THROUGH
5 - 6%
20 - 30%
Annualized
Incr. EBITDA Margins
Note: “Medium-Term” defined as 3-5 years
REFOCUSED
INNOVATION
GO-TO-MARKET
INVESTMENTS
EBITDA MARGIN
10%
2016 OUTLOOK
ADJ. NET SALES
2015
2016
$1,183 million(1)
$1,200 - $1,250 million
1% - 6% growth
ADJ. EBITDA
$61million(1)
CAPITAL EXPENDITURES
$62 million
$50 - $60 million
Negative
Positive
FREE CASH FLOW(2)
41
$65 - $80 million
7% - 31% growth
(1) Based on 2016 budgeted exchange rates; see appendix for reconciliation
(2) Free cash flow is defined as net cash from operating activities less net cash from investing activities
UNIQUE OPPORTUNITY TO BUILD VALUE
 Leading hard surfaces flooring company
 Most recognized brands
 Expansive product portfolio
 Renewed focus on innovation
 Differentiated go-to-market system
 Operational, financial and organizational transformation
42
Investor Relations Contact Information
Douglas B. Bingham
VP, Treasury and Investor Relations
Armstrong Flooring, Inc.
2500 Columbia Avenue
Lancaster, PA 17603
P: (717) 672-9300
F: (717) 481-5121
E: [email protected]
43
Appendix
44
FLOOR TYPE DEFINITIONS
• Resilient Tile - Highly durable commercial flooring (VCT: “Vinyl Composition Tile”) and economical, easy to install “peel-andstick” tiles used in residential applications.
• Resilient Sheet - Vinyl sheet flooring available in a variety of constructions to meet the performance, design and cost needs
for commercial and residential applications.
• Luxury Vinyl Tile (“LVT”) - Cutting-edge printing and photographic designs on a vinyl foundation layer with design, aesthetic
and shape flexibility.
• Linoleum - Among the “greenest” of floors, linoleum is made from natural materials, is naturally anti-bacterial and
biodegradable.
• Laminate - High-resolution printed image design layer topped with a synthetic wear layer sealed to a dense, fiberboard core.
• Solid Wood - Classic oak, maple and other solid hardwood boards milled from a single piece of lumber cut to different
widths and lengths.
• Engineered Wood - Multiple wood veneers bonded together with a hardwood ‘face’ layer to create a dimensionally stable
product offering greater design and installation options than solid wood products.
45
BASIS OF PRESENTATION EXPLANATION
• When reporting our financial results within this presentation,
we make several adjustments. Management uses non-GAAP
measures in managing the business and believes the
adjustments provide meaningful comparisons of operating
Item Adjustments
performance between periods. Reconciliations to the
Comparable
Dollars
Other
Adjustments
Net Sales
Yes
No
Gross Profit
Yes
Yes
currency translation on the P&L. The budgeted exchange
SG&A Expense
Yes
Yes
rate for 2016 is used for all currency translations in 2016
Operating Income
Yes
Yes
and prior years.
Cash Flow
No
No
EBITDA
Yes
Yes
nearest equivalent GAAP measures are presented on the
following pages.
• We report in comparable dollars to remove the effects of
• We remove the impact of certain discrete expenses and
income. Examples include plant closures, restructuring
actions, separation costs and other large unusual items.
The non-cash expense impact of the U.S. pension is also
excluded.
46
RECONCILIATION OF ADJUSTED EBITDA
(Dollars in Millions)
2016
2015
EBITDA – Adjusted
$10
$3
Depreciation and Amortization
(11)
(9)
Operating (Loss) Income – Adjusted
($2)
($7)
Cost Reduction (Expense)/Income and Multilayered Wood Flooring Duties
(0)
1
US Pension Expense
(2)
(3)
Adjustment for Corporate Expense(1)
(1)
4
Foreign Exchange Rate Comparability
0
1
($5)
($3)
Interest/Other (Expense)
(0)
0
Tax (Expense)
0
(1)
($4)
($4)
2
43
($3)
$39
Operating (Loss) Income – As Reported
Net (Loss) Earnings from Continuing Operations
Net Earnings from Discontinued Operations, net of tax
Net (Loss) Earnings
(1) 2015 reflects $9M of pro forma, standalone corporate costs net of the adjustments of allocated AWI corporate
expenses for carve out accounting
Rows and columns may not sum due to rounding
47
RESILIENT SEGMENT
Reported Net Sales ($M)
Key Highlights
$164
• Net sales increased 6% on a constant currency basis
$157
• Volume increased 5%; growth in the Americas of 6%
driven by LVT and VCT
• Price reduced sales by 1%; mix was positive due to
strong growth in LVT
2016
2015
Resilient
Q1 2015 Adjusted EBITDA
Volume
Price
Mix/Other
Mfg & Input Costs
SG&A
Q1 2016 Adjusted EBITDA
48
$4M
4
(2)
1
(3)
1
$4M
• Fall through on incremental volume partially offset by
price pressure in LVT
• Mix positive due to strong growth in LVT
• Benefit of lower input costs more than offset by LVT plant
ramp up expenses, including product qualifications
WOOD SEGMENT
Reported Net Sales ($M)
Key Highlights
• Net sales increased 18% on a constant currency basis
$121
• Volume increased 23% (including load in of major
accounts) driven by growth in engineered wood of 32%
$103
• Price reduced sales by 4% reflecting continued
reductions to be competitive in the market
2016
2015
Wood
Q1 2015 Adjusted EBITDA
Volume
Price
Mix/Other
Mfg & Input Costs
SG&A
Q1 2016 Adjusted EBITDA
49
($2M)
8
(5)
(2)
8
(2)
$5M
• Volume increase driven by strong demand and full
engineered wood capability at Somerset, KY facility
• Lumber costs lower than previous year, but sequentially
higher through the quarter
• SG&A higher to support go to market activities
NET SALES RECONCILIATION
($ millions)
Net Sales - AFI
2015 - Q1
2015 - Q2
2015 - Q3
2015 - Q4
257
2
324
3
322
1
280
-
1,183
6
280
$ 1,189
Adjusted Net Sales at 2016 budgeted FX rates
2016 comparability FX adjustment
Net Sales - As Reported
(1)
Net Sales - Resilient
$
259
$
327
$
323
$
2015 - Q1
2015 - Q2
2015 - Q3
2015 - Q4
155
2
198
2
191
1
165
(1)
Adjusted Net Sales at 2016 budgeted FX rates
2016 comparability FX adjustment
Net Sales - As Reported (1)
$
Net Sales - Wood
2015 - Q1
2015 - Q2
2015 - Q3
2015 - Q4
102
1
126
-
130
-
116
-
Adjusted Net Sales at 2016 budgeted FX rates
2016 comparability FX adjustment
Net Sales - As Reported (1)
$
157
103
$
$
200
127
$
$
192
130
$
$
164
116
(1) Reflects net sales on carve-out basis consistent with Form 10 for 2015; 2016 sales as reported in the 10-Q for the period ending March 31, 2016
Note: rows and columns may not sum due to rounding
50
2015
2015
2016 - Q1
285
(1)
$
2016 - Q1
709
4
$
713
2015
164
(1)
$
475
164
2016 - Q1
474
1
$
284
121
(0)
$
121
EBITDA RECONCILIATION – AFI
($ millions)
Total Company
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Standalone Adjusted EBITDA at 2016 budgeted FX rates
Depreciation and amortization
Cost reduction (expense)/income and multilayered wood flooring duties
U.S. non-cash pension
Adjustment for standalone corporate expenses
Carve-out adjustments of AWI corporate expenses, excluding non-cash U.S. pension
Comparability FX adjustment
AFI Operating Income (Loss) - As Reported
$
$
$
$
Resilient Segment
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Standalone Adjusted EBITDA at 2016 budgeted FX rates
Depreciation and amortization
Cost reduction (expense)/income and multilayered wood flooring duties
U.S. non-cash pension
Adjustment for standalone corporate expenses
Carve-out adjustments of AWI corporate expenses, excluding non-cash U.S. pension
Comparability FX adjustment
Resilient Segment Operating Income (Loss) - As Reported
$
$
$
$
Wood Segment
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Standalone Adjusted EBITDA at 2016 budgeted FX rates
Depreciation and amortization
Cost reduction (expense)/income and multilayered wood flooring duties
U.S. non-cash pension
Adjustment for standalone corporate expenses
Carve-out adjustments of AWI corporate expenses, excluding non-cash U.S. pension
Comparability FX adjustment
Wood Segment Operating Income (Loss) - As Reported
$
$
$
$
Note: rows and columns may not sum due to rounding
51
$
$
$
3
(9)
1
(3)
9
(5)
1
(3)
4
(6)
1
(3)
6
(3)
1
-
(2)
(3)
3
(2)
(4)
$
$
$
28
(9)
(4)
(2)
10
(9)
1
15
22
(6)
(2)
7
(7)
1
15
6
(3)
(4)
3
(3)
1
-
$
$
$
24
(10)
(4)
10
(9)
1
12
16
(7)
(1)
(3)
7
(6)
(1)
5
11
(3)
(1)
3
(3)
7
$
$
$
6
(10)
(1)
(4)
11
(8)
1
(5)
(2)
(7)
(3)
7
(4)
(9)
7
(3)
4
(4)
4
2015
$
$
61
(38)
(4)
(12)
40
(32)
3
18
2015
$
$
40
(26)
(10)
27
(21)
1
11
2015
$
$
21
(12)
(4)
(1)
13
(12)
2
7
2016 - Q1
$
$
10
(11)
(2)
na
(1)
(5)
2016 - Q1
$
$
4
(8)
(2)
na
1
(5)
2016 - Q1
$
$
5
(3)
na
1