ARMSTRONG

FLOORING, INC.
First Quarter 2016 Results
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.

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.
3

Overview and Highlights

Operating and Financial Results

Balance Sheet and Cash Flow
Outlook

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

>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)

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

BUILDING VALUE: UNIQUE OPPORTUNITY

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

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

Q4 2015

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
8

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

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
9

$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

10

($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

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)

US Pension Expense

(2)

(3)

Adjustment for Corporate Expense(1)

(1)

Foreign Exchange Rate Comparability

($5)

($3)

Interest/Other (Expense)

(0)

Tax (Expense)

(1)

($4)

($4)

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

11

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

12

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
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

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)

13

$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

BUILDING VALUE: UNIQUE OPPORTUNITY

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

14

Appendix

15

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

16

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

17

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