Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 time period that the registrant was required to submit such files). Yes ☒ 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the Common Stock of Armstrong World Industries, Inc. held by non-affiliates based on the closing price ($~~97.20~~77.96 per share) on the New York Stock Exchange (trading symbol AWI) as of June ~~28, 2019~~30, 2020 was approximately ~~$4.7~~$3.7 billion. As of February ~~18, 2020,~~17, 2021, the number of shares outstanding of the registrant's Common Stock was ~~47,987,627.~~47,788,314.

Certain sections of Armstrong World Industries, Inc.’s definitive Proxy Statement for use in connection with its ~~2020~~2021 annual meeting of shareholders, to be filed no later than April ~~29, 2020~~30, 2021 (120 days after the last day of our ~~2019~~2020 fiscal year), are incorporated by reference into Part III of this Form 10-K Report where indicated.

When we refer to “AWI,” the “Company,” “we,” “our” and “us”, we are referring to Armstrong World Industries, Inc. and its subsidiaries.

Certain statements in this Annual Report on Form 10-K 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 residential and commercial markets and their effect on our operating results; the impacts of COVID-19 on our business; our expectations regarding the payment of dividends; and our ability to increase revenues, earnings and earnings before interest, taxes, depreciation and amortization (as discussed below). 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:

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.

Armstrong World Industries, Inc. (“AWI” or the “Company”) is a Pennsylvania corporation incorporated in 1891. When we refer to “we,” “our” and “us” in this report, we are referring to AWI and its subsidiaries.

We are a leading producer of ceiling systems for use in the construction and renovation of commercial and residential buildings. We design, manufacture and sell ceiling and wall systems ~~(primarily~~(primarily mineral fiber, fiberglass wool, metal, wood, wood fiber, glass-reinforced-gypsum and ~~felt)~~felt) throughout the Americas.

As an Americas-based ceilings and walls company, we are focused on driving profitable topline growth by growing our core business and expanding into new, adjacent business categories and sectors. Our key strategic initiatives aim to align to these objectives and leverage our strengths. Our initiatives are designed to enable us to: (i) lead in innovation and launch new products; (ii) expand our portfolio of solutions and manufacturing capabilities through a pipeline of acquisitions, partnerships and alliances, as well as new programs focused on the sustainability of our products and operations; (iii) lead in solutions design; (iv) expand category and sector access within the commercial and residential construction markets; (v) build and deliver compelling value propositions; and (vi) optimize service to our customers.

Through our expanding architectural specialties offerings, bolstered by our recent acquisitions, our continuously evolving innovative core ceilings portfolio, including our Healthy Spaces products, Total Acoustics® solutions and Sustain® family of products; and our development of digitally enabled systems and tools, we are increasing our capabilities to sell into more spaces and sell more into every space.

In December 2020, we acquired all of the issued and outstanding equity of Arktura LLC (“Arktura”) and certain subsidiaries with operations in the United States and Argentina. Arktura is a designer and fabricator of metal and felt ceilings, walls, partitions and facades with one manufacturing facility based in Los Angeles, California.

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.

In July 2020, we acquired all of 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.

In November 2019, we acquired the business and assets of MRK Industries, Inc. (“MRK”), based in Libertyville, Illinois. MRK is a manufacturer of specialty metal ceiling, wall and exterior solutions with one manufacturing facility. ~~MRK’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.~~

In March 2019, we acquired the business and assets of Architectural Components Group, Inc. (“ACGI”), based in Marshfield, Missouri. ACGI is a manufacturer of custom wood ceilings and walls with one manufacturing facility. ~~ACGI’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.~~

In August 2018, we acquired the business and assets of Steel Ceilings, Inc. (“Steel Ceilings”), based in Johnstown, Ohio. Steel Ceilings is a manufacturer of aluminum and stainless metal ceilings that include architectural, radiant and security solutions with one manufacturing facility. ~~Steel Ceilings’ operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.~~

In May 2018, we acquired the business and assets of Plasterform, Inc. (“Plasterform”), based in Mississauga, Ontario, Canada. Plasterform is a manufacturer of architectural cast ceilings, walls, facades, columns and moldings with one manufacturing facility. ~~Plasterform’s~~

The operations, ~~and its~~ assets and liabilities of these acquisitions are included ~~as a component of~~in our Architectural Specialties segment.

~~In January 2017, we acquired the business and assets of Tectum, Inc. (“Tectum”), based in Newark, Ohio. Tectum is a~~ ~~manufacturer of acoustical ceiling, wall and structural solutions for commercial building applications with two manufacturing facilities.~~ ~~Tectum’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.~~

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.

On July 18, 2018, we entered into an amendment to the Purchase Agreement, pursuant to which Knauf irrevocably and unconditionally paid AWI (i) $250.0 million of the purchase price on August 1, 2018, and (ii) $80.0 million of the purchase price on September 15, 2018, which payments were credited against the aggregate consideration payable at closing. The amendment also provided for the reduction (from a maximum of $35.0 million to a maximum of $20.0 million) of potential adjustments to the purchase price consideration for the transaction based on the impact of remedies required to satisfy competition conditions. Following receipt of these payments, During 2020, we remitted $70.0 million to WAVE in partial consideration of the purchase price payable in respect of the businesses and operations of WAVE under the transaction. WAVE subsequently paid each of AWI and Worthington a dividend of $35.0 million. We have recorded a $25.9 million ~~payable~~ to WAVE for their remaining portion of the proceeds from Knauf. Also during 2020, WAVE paid each of AWI and Worthington dividends of $13.0 million relating to these payments. During the third quarter of 2020, we remitted $6.4 million to Knauf for working capital and other adjustments. In January 2021, we finalized the post-closing adjustments to purchase price related to certain pension liabilities assumed by Knauf in the Sale. During the fourth quarter of 2020, we recorded a $12.0 million loss primarily related to this purchase price adjustment, which is reflected within ~~Accounts~~accounts payable and accrued expenses ~~in the Consolidated Balance Sheets~~ as of December 31, 2019. The transaction and final gain or loss amounts are subject to finalization of customary working capital and other adjustments, as provided in the Purchase Agreement. For the year ended December 31, 2019, payments to Knauf included $61.0 million of adjustments to cash consideration, estimated working capital adjustments and remedies, offset by $13.1 million of additional cash in international WAVE entities.

third party of certain mineral fiber and grid businesses and operations in Austria, Estonia, Germany, Ireland, Italy, Latvia, Lithuania, Portugal, Spain, Turkey and the United Kingdom (“UK”). This included our sales operations in each of the relevant countries, as well as our production facilities, and those of WAVE, located in Team Valley, UK.2020.

In 2019, we entered into a Transition Services Agreement with Knauf for its benefit and the benefit of ~~the~~a buyer of ~~the divestment business,~~certain businesses divested by Knauf, pursuant to which we ~~are providing~~provided certain transition technology, finance and information technology support ~~services during the period between March 18, 2019 and September 30,~~services. The Transition Services Agreement expired in 2020.

~~On September 23, 2019, the European Commission approved the Sale, as well as the terms of the sale of the divestment business by Knauf and the identity of the purchaser.~~

In connection with the closing of the Sale, we also entered into (i) ana royalty-free intellectual property License Agreement with Knauf ~~for its benefit (and, under sublicense, to the buyer of the divestment business)~~ under which they, and the buyers of certain businesses divested by Knauf, license ~~certain~~ patents, trademarks and know-how from us for use in ~~certain~~ 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 purchase certain products from each other following the closing of the Sale. 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 through September 30, 2019 have been reflected in AWI’s Consolidated Statements of ~~Earnings~~Operations and Comprehensive Income as discontinued operations for all periods presented, while the assets and liabilities of discontinued operations have been removed from AWI’s Consolidated Balance Sheet as of December 31, 2019.

See Notes 5 and 6 to the Consolidated Financial Statements for additional information related to our acquisitions and discontinued operations.

We are focused on driving sustainable shareholder value by consistently delivering profitable sales and earnings growth, while maintaining a balanced approach to capital allocation. Through our expanding architectural specialties offerings, bolstered by our acquisitions of Tectum, Plasterform, Steel Ceilings, ACGI and MRK, our innovative core ceilings portfolio, including our Total Acoustics® solutions and Sustain® family of products, and digitally enabled systems and tools, we are expanding our capabilities to sell into more spaces and sell more into every space.

We are well positioned in the industry sectors and categories in which we operate, often holding a leadership position. Our products compete against mineral fiber and fiberglass products from other manufacturers, as well as drywall and a wide range of specialty ceiling products. We compete directly with other domestic and international suppliers of these products. The major markets in which we compete are:

Commercial Construction. Our revenue opportunities come from new construction as well as renovation of existing buildings. Renovation work (also known as replacement/remodel) is estimated to represent the majority of the commercial market opportunity. Most of our revenue comes from the following sectors of commercial construction – office, education, transportation, healthcare ~~government~~ and retail. We monitor U.S. construction starts and project activity. Our revenue from new construction can lag behind construction starts by as much as ~~18 to~~ 24 months. We also monitor office vacancy rates, the Architecture Billings Index, state and local government spending, gross domestic product (“GDP”) and general employment levels, which can indicate movement in renovation and new construction opportunities. We believe that these statistics, taking into account the time-lag effect, provide a reasonable indication of our future revenue opportunity from commercial renovation and new construction. Additionally, we believe that customer preferences for product type, style, color, performance attributes (such as acoustics, sustainability and ~~sustainability)~~health attributes), availability, affordability and ease of installation also affect our revenue.

In our Mineral Fiber segment, we estimate that a majority of our commercial construction market sales are used for existing building renovation purposes by end-users of our products. In our Architectural Specialties segment, we estimate that a majority of our commercial market sales are used for new building construction ~~and remodel purposes~~ by end-users of our products. The end-use of our products is based on management estimates as such information is not easily determinable.

Residential Construction. We also sell mineral fiber products for use in single and multi-family housing. We estimate that existing home renovation work represents the majority of the residential construction market opportunity. Key U.S. statistics that indicate market opportunity include existing home sales (a key indicator for renovation opportunity), housing starts, housing completions, home prices, interest rates and consumer confidence.

We use our reputation, capabilities, service, innovation and brand recognition to develop long-standing relationships with our customers. We principally sell commercial products to building materials distributors, who re-sell our products to contractors, subcontractors’ alliances, large architect and design firms, and major facility owners. We have important relationships with national

home centers such as Lowe’s Companies, Inc. and The Home Depot, Inc., with wholesalers who re-sell our products to dealers who service builders, contractors and consumers, and also with architects and designers who specify products.

~~Approximately 73%~~In 2020, approximately 70% of our consolidated net sales are to distributors. Sales to large home centers ~~account~~accounted for ~~slightly less than~~approximately 10% of our consolidated net sales. Our remaining sales are primarily to direct customers and retailers.

Gross sales to ~~two~~ commercial distributors ~~totaling $428.7~~GMS Inc. and Foundation Building Materials, Inc. totaled $370.3 million ~~included within our Mineral Fiber~~ and ~~Architectural Specialties segments,~~ individually exceeded 10% of our consolidated gross sales in ~~2019.~~ 2020. These sales were included within our Mineral Fiber and Architectural Specialties segments.

We produce goods for inventory and sell on credit to our customers. Generally, our distributors carry inventory as needed to meet local or rapid delivery requirements. We sell our products to select, pre-approved customers using customary trade terms that allow for payment in the future. These practices are typical within the industry.

The markets in which our products are sold are highly competitive. Principal attributes of competition include product performance, product styling, service and price. Competition comes from both domestic and international manufacturers. Additionally, some of our products compete with alternative products or finishing solutions, namely, drywall and exposed structure (also known as open plenum). Excess industry capacity exists for certain products, which tends to increase price competition. The following companies are our primary competitors:

CertainTeed Corporation (a subsidiary of Saint-Gobain), Chicago Metallic Corporation (owned by Rockwool International A/S), Georgia-Pacific Corporation, Rockfon A/S (owned by Rockwool International A/S), USG Corporation (owned by Gebr. Knauf KG), Ceilings Plus (owned by USG Corporation), Rulon International, and 9Wood.

We purchase raw materials from numerous suppliers worldwide in the ordinary course of business. The principal raw materials include: clays, felt, fiberglass, perlite, pigment, recycled paper, starch, ~~waste paper,~~ wood and wood fiber. We manufacture most of the production needs for mineral wool at one of our manufacturing facilities. Finally, we use aluminum and steel in the production of metal ceilings by us and by WAVE, our joint venture that manufactures ceiling grid.

We also purchase significant amounts of packaging materials and consume substantial amounts of energy, such as electricity and natural gas, and water.

In general, adequate supplies of raw materials are available to all of our operations. However, availability can change for a number of reasons, including environmental conditions, laws and regulations, shifts in demand by other industries competing for the same materials, transportation disruptions and/or business decisions made by, or events that affect, our suppliers. There is no assurance that these raw materials will remain in adequate supply to us.

Prices for certain high usage raw materials can fluctuate dramatically. Cost increases for these materials can have a significant adverse impact on our manufacturing costs. Given the competitiveness of our markets, we may not be able to recover the increased manufacturing costs through increasing selling prices to our customers.

Some of the products that we sell are sourced from third parties. Our primary sourced products include specialty ceiling products. We purchase some of our sourced products from suppliers that are located outside of the U.S., primarily from Europe and the Pacific Rim. Sales of sourced products represented approximately ~~12%~~9% of our total consolidated revenue in ~~2019.~~2020.

In general, we believe we have adequate supplies of sourced products. However, we cannot guarantee that the supply will remain adequate.

Generally, our sales tend to be stronger in the second and third quarters of our fiscal year due to more favorable weather conditions, customer business cycles and the timing of renovation and new construction. In comparison to the prior year, sales were weaker in the second through fourth quarters of 2020 due to reduced demand related to COVID-19. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K for further information.

Patent protection is important to our business. Our competitive position has been enhanced by patents on products and processes developed or perfected within AWI or obtained through acquisitions and licenses. In addition, we benefit from our trade secrets for certain products and processes.

Patent protection extends for varying periods according to the date of patent filing or grant and the legal term of a patent in the various countries where patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies. Although we consider that, in the aggregate, our patents, licenses and trade secrets constitute a valuable asset of material importance to our business, we do not believe we are materially dependent upon any single patent or trade secret, or any group of related patents or trade secrets.

Certain of our trademarks, including without limitation,

, Armstrong®, 24/7 Defend™, ACOUSTIBuilt™, ~~Airtite™~~AirAssure™, Airtite®, Arktura®, Calla®, Cirrus®, Cortega®, ~~DESIGNFlex™~~DESIGNFlex®, Dune™, Feltworks®, Humiguard®, Infusions®, InvisAcoustics™, Kanopi™, Lyra®, MetalWorks™, Moz™, Optima®, Plasterform™, Soundscapes®, Sustain®, Tectum®, Total Acoustics®, Turf®, Ultima®, and WoodWorks®, are important to our business because of their significant brand name recognition. Registrations are generally for fixed, but renewable, terms.

In connection with the separation and distribution of our former flooring business into a separate publicly-traded company, Armstrong Flooring, Inc. (“AFI”), in 2016, we entered into several agreements with AFI that, together with a plan of division, provided for the separation and allocation of assets between AWI and AFI. These agreements include a Trademark License Agreement and a Transition Trademark License Agreement. Pursuant to the Trademark License Agreement, AWI provided AFI with a perpetual, royalty-free license to utilize the “Armstrong” trade name and logo. Pursuant to the Transition Trademark License Agreement, AFI provided us with a ~~five-year~~ royalty-free license to utilize the “Inspiring Great Spaces” tagline, logo and related color ~~scheme.~~scheme, which expires December 31, 2021.

In connection with the closing of the Sale, we entered into ana royalty-free intellectual property License Agreement with Knauf for its benefit (and, under sublicense, to the ~~buyer~~buyers of ~~the divestment business)~~certain businesses divested by Knauf) under which they license certain patents, trademarks and know-how from us for use in certain licensed territories.

We review the carrying value of indefinite-lived trademarks at least annually for potential impairment. See the “Critical Accounting Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K for further information.

As ~~of December 31, 2019,~~a leading building products manufacturer, we ~~had approximately 2,500 full time and part time employees. As of December 31, 2018, we had approximately 4,000 full-time and part-time employees, including 1,800 employees as part~~are committed to operating sustainably across all areas of our ~~EMEA~~business. This commitment is reflected in our ongoing initiatives to design and ~~Pacific Rim businesses. These employees were retained by Knauf and/or~~develop sustainable ceiling and wall products and solutions for every space. Sustainability in our business reflects our mission to make a difference in the ~~buyer~~lives of people where they live, work, learn, heal and play. Sustainability is designed to support our strategic priorities, align with stakeholder interests, and be visible and measurable.

Our sustainability function is organized around three program “pillars”: People, Planet and Product.

Under the People pillar of our program, we are broadly focused on increasing our engagement in the communities where we operate, evaluating our benefits and compensation structure for all levels of the ~~divestment business as~~organization, promoting and maintaining a ~~result of~~diverse, talented and growing workforce, encouraging and protecting human rights, and creating a safe working environment for our employees.

Under the ~~Sale. The increase in employees, after taking into account the attrition from the Sale, is primarily attributable to the acquisitions of ACGI and MRK during 2019.~~

~~As of December 31, 2019, approximately 62%~~Planet pillar of our ~~approximately 1,300 production employees~~program, we are broadly focused on reducing our greenhouse gas footprint, reducing or recapturing water in our operations, and reducing waste in our operations. These efforts include our ceilings recycling program, which diverts reclaimed ceiling tiles from landfills, and our reduction of our environmental operating footprint. Additionally, we are committed to complying with all environmental laws and regulations that are applicable to our operations.

Under the ~~U.S. were represented by labor unions. A collective bargaining agreement covering approximately 230 employees at one U.S. plant~~Product pillar of our program, we are broadly focused on ensuring our products are free of chemicals of concern, reducing our products’ water and greenhouse gas footprint, and continuing to invest in solutions that meet customer demand for building products that align with their sustainability goals. We expect that there will ~~expire during 2020.~~be increased demand over time for products, systems and services that meet evolving regulatory and customer sustainability standards and preferences and decreased demand for products that produce significant greenhouse gas emissions. We also believe that our ~~relations with~~ability to continue to provide these products, systems and services to our ~~employees are satisfactory.~~

~~Research and development (“R&D”) activities are important and~~customers, including through our Sustain® portfolio, will be necessary to maintain our competitive position in ~~helping us improve our products’ competitiveness. Principal R&D functions include~~ the ~~development and improvement of products and manufacturing processes.~~

The adoption of environmentally responsible building codes and standards such as the Leadership in Energy and Environmental Design (“LEED”) rating system established by the U.S. Green Building Council, has the potential to increase demand for products, systems and services that contribute to building sustainable spaces. Many of our products meet the requirements for the award of

LEED credits, and we are continuing to develop new products, systems and services to address market demand for products that enable construction of buildings that require fewer natural resources to build, operate and maintain. Our competitors also have developed and introduced to the market products with an increased focus on sustainability.

~~We expect that there~~Workforce Demographics. As of December 31, 2020 and 2019, we had approximately 2,700 and 2,500 full time and part time employees, respectively. The increase in employees was primarily attributable to the acquisitions of Arktura, Moz and Turf during 2020. During 2020, our total voluntary and involuntary turnover rates were approximately 5% and 3%, respectively, for non-production employees and 12% and 6%, respectively, for production employees.

As of December 31, 2020, approximately 59% of our approximately 1,300 production employees in the U.S. were represented by labor unions. Collective bargaining agreements covering approximately 500 employees at two U.S. plants will be increased demand over time for products, systems and services that meet evolving regulatory and customer sustainability standards and preferences and decreased demand for products that produce significant greenhouse gas emissions.expire during 2021. We ~~also~~ believe that our ~~ability~~relations with our employees are constructive and positive.

Employee Health and Safety. Safety is a core value at Armstrong and our culture is committed to making safety a personal core value for every employee. Our overall goal is to eliminate workplace injuries. We promote and foster an environment of empowerment and sharing throughout the company at all levels and in all locations. We engage our employees on safety with a focus on risk identification and elimination and through various leading indicators. We track Occupational Safety and Health Administration (“OSHA”) recordable injuries and lost time rates by location monthly. We establish safety targets annually, which are tracked and reported to leadership monthly and reviewed with our Board of Directors.

We offer competitive health and wellness benefits to eligible employees and periodically conduct analyses of plan utilization to further tailor our employee benefits to meet their ongoing needs. In response to COVID-19, we continue to follow guidelines from governmental and local health authorities across our facilities and have implemented preventative measures that include working remotely, providing personal protective equipment, limiting group meetings, enhancing cleaning and sanitizing procedures, and social distancing. Employees who can meet our customer commitments remotely are doing so, and a significant portion of our workforce began teleworking in mid-March 2020 and were continuing to telework as of December 31, 2020. During 2020, we implemented an Emergency Paid Leave policy for all employees which expired on December 31, 2020. This policy granted additional paid time off for any employee impacted by COVID-19. We implemented a COVID Leave Program effective January 1, 2021 that continues to provide ~~these products, systems~~similar benefits for employees impacted by COVID-19.

Diversity and ~~services~~Inclusion. We continue to take steps to expand our role as an employer that champions diversity and inclusion, as we believe it is a key to our ~~customers will be necessary to maintain our competitive position~~future success. This commitment is most recently reflected in the ~~marketplace.~~goals of the People Pillar of our Sustainability program, which is being led by our VP Talent Sustainability, who was hired in 2020. We measure gender and racial/ethnic representation and are ~~committed~~focusing on our incoming new hires to ~~complying with all environmental laws and regulations that are applicable to our operations.~~

~~As a leading building products manufacturer,~~assist in increasing diversity within the company. In addition, we are committed to ~~operating as a strong corporate citizen across all areas~~engaging in events and outreach that align with our goals to enhance our diversity and inclusion. Our strategy to grow our diversity over time includes (1) providing annual training to employees on diversity and inclusion topics, (2) demonstrating year over year improvement in the diversity of our ~~business. This commitment is reflected~~organization measured by representation of female, minorities and veterans at every level of the organization, and (3) providing employees an annual opportunity to share their views on topics that matter to them.

Research and development (“R&D”) activities are important and necessary in helping us improve our ~~ongoing initiatives to design~~products’ competitiveness. Principal R&D functions include the development and ~~develop sustainable ceiling and wall~~improvement of products and ~~solutions for every space.~~manufacturing processes.

Regulatory activities of particular importance to our operations include proceedings under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), and state Superfund and similar type environmental laws governing existing or potential environmental contamination at ~~three~~two domestically owned locations allegedly resulting from past industrial activity. We are one of several potentially responsible parties in these matters and have agreed to jointly fund required investigation, while preserving our defenses to the liability. We may also have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies.

Most of our facilities are affected by various federal, state and local environmental requirements relating to the discharge of materials or the protection of the environment. We make expenditures necessary for compliance with applicable environmental requirements at each of our operating facilities. We have not experienced a material adverse effect upon our capital expenditures or competitive position as a result of environmental control legislation and regulations.

On September 8, 2017, Roxul USA, Inc. (d/b/a Rockfon) (“Rockfon”) filed litigation against us in the United States District Court for the District of Delaware (the “Court”) alleging anticompetitive conduct seeking remedial measures and unspecified damages. Roxul USA, Inc. is a significant ceilings systems competitor with global headquarters in Europe and expanding operations in the Americas. On April 3, 2019, we entered into a confidential settlement agreement with Rockfon to fully resolve the litigation between us, and Rockfon filed a Stipulation of Dismissal with Prejudice (“Dismissal”) with the Court. Pursuant to the Dismissal, Rockfon formally dismissed all claims it had against AWI with prejudice. All claims in the litigation have been fully and finally dismissed and released with AWI making a payment to Rockfon for its costs, expenses and attorneys’ fees. Pursuant to the settlement, both parties acknowledged that (a) AWI denies all claims of wrongdoing and makes no admission of wrongdoing or of the truth of any of the claims or allegations contained in Rockfon’s complaint or otherwise alleged in the litigation; (b) all AWI exclusive distribution locations (i.e., any location where a reseller has agreed to sell only AWI ceiling system products) will remain exclusive to AWI under their respective distribution agreements, and (c) in all other non-exclusive or “open” distribution locations, resellers are free to purchase and resell ceiling systems products of any manufacturer at their discretion. During 2019, we incurred $19.7 million of expenses in connection with the matter, primarily relating to legal and professional fees incurred by us in connection with the litigation, including expenses and attorney’s fees paid under the settlement agreement. As a result of the settlement and Dismissal, we do not expect to incur additional future costs or expenses relating to the matter.

WeFrom time to time, we are involved in various other lawsuits, claims, investigations and other legal matters ~~from time to time~~ that arise in the ordinary course of business, including matters involving our products, intellectual property, relationships with suppliers, relationships with distributors, relationships with competitors, employees and other matters. From time to time, for example, we may be a party to various litigation matters that involve product liability, tort liability and other claims under various allegations, including illness due to exposure to certain chemicals used in the workplace, or medical conditions arising from exposure to product ingredients or the presence of trace contaminants. Such allegations may involve multiple defendants and relate to legacy products that we and other defendants purportedly manufactured or sold. We believe that any current claims are without merit and intend to defend them vigorously. For theseIn connection with those matters, we ~~also~~ may have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies. When applicable and appropriate, we will pursue coverage and recoveries under those policies, but are unable to predict the outcome of those demands. While complete assurance cannot be given to the outcome of any proceedings relating to these ~~proceedings,~~matters, 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.

Liabilities of ~~$1.6~~$1.2 million and ~~$12.4~~$1.6 million as of December 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, were recorded for environmental liabilities that we consider probable and for which a reasonable estimate of the probable liability could be made. See

Note 27 to the Consolidated Financial Statements and Risk Factors in Item 1A of this Form 10-K, for information regarding the possible effects that compliance with environmental laws and regulations may have on our businesses and operating results.

We maintain a website at http://www.armstrongceilings.com. Information contained on our website is not incorporated into this document. Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, all amendments to those reports and other information about us are available free of charge through this website as soon as reasonably practicable after the reports are electronically filed with the SEC. Reference in this Form 10-K to our website and the SEC’s website is an inactive text reference only.

~~Unstable market and economic conditions could have a material adverse impact on our financial condition, liquidity or results of operations.~~Risks Related to Our Operations

Our business is influenced by market and economic conditions, including inflation, deflation, interest rates, availability and cost of capital, consumer spending rates, energy availability and the effects of governmental initiatives to manage economic conditions. Volatility in financial markets and the continued softness or further deterioration of national and global economic conditions could have a material adverse effect on our financial condition, liquidity or results of operations, including as follows:

~~Continued or sustained deterioration of economic conditions would likely exacerbate and prolong these adverse effects.~~

~~Our business is dependent on construction activity. Downturns in construction activity could have a material adverse effect on our financial condition, liquidity or results of operations.~~

Our businesses have greater sales opportunities when construction activity is strong and, conversely, have fewer opportunities when such activity declines. The cyclical nature of commercial and residential construction activity, including construction activity funded by the public sector, tends to be influenced by prevailing economic conditions, including the rate of growth in gross domestic product, prevailing interest rates, government spending patterns, business, investor and consumer confidence and other factors beyond our control. Prolonged downturns in construction activity could have a material adverse effect on our financial condition, liquidity or results of operations.

Our markets are highly competitive. Competition could reduce demand for our products or negatively affect our sales mix or price realization. Failure to compete effectively by meeting consumer preferences, developing and marketing innovative solutions, maintaining strong customer service and distribution relationships, and expanding our solutions capabilities and reach could adversely affect our results.

Our customers consider our products’ performance, product styling, customer service and price when deciding whether to purchase our products. Shifting consumer preference in our highly competitive markets, from acoustical solutions to other ceiling and wall products, for example, whether for performance or styling preferences or our inability to develop and offer new competitive performance features could have an adverse effect on our sales. Similarly, our ability to identify, protect and market new and innovative solutions is critical to our long-term growth strategy, namely to sell into more spaces and sell more solutions in every space. If our competitors offer discounts on certain products or provide new or alternative offerings that the marketplace perceives as more cost-effective, it could adversely affect our price realization. Any broad-based change to our price realization could cause our revenues and margins to decline.

Sales fluctuations to and changes in our relationships with key customers could have ~~a material~~an adverse effect on our financial condition, liquidity or results of operations.

The loss, reduction, or fluctuation of sales to key customers, including independent distributors, or any adverse change in our business relationship with them, whether as a result of competition, industry consolidation or otherwise, could have a material adverse effect on our financial condition, liquidity ~~or results of operations.~~

~~Customer consolidation, and competitive, economic and other pressures facing our customers, may negatively impact our operating margins and profitability.~~

A number of our customers, including distributors and contractors, have consolidated in recent years and consolidation could continue. Further consolidation could impact margin growth and profitability as larger customers may realize certain operational and other benefits of scale. The economic and competitive landscape for our customers is constantly changing, and our customers' responses to those changes could impact our business. These factors and others could have a material adverse impact on our business, financial condition or results of operations.

If the availability of raw materials or energy decreases, or the costs increase, and we are unable to pass along increased costs, our financial condition, liquidity or results of operations could be adversely affected.

The availability and cost of raw materials, packaging materials, energy and sourced products are critical to our operations and our results of operations. For example, we use substantial quantities of natural gas and petroleum-based raw materials in our manufacturing operations. The cost of some of these items has been volatile in recent years and availability has been limited at times. We source some materials from a limited number of suppliers, which, among other things, increases the risk of unavailability. Limited availability could cause us to reformulate products or limit our production. Decreased access to raw materials and energy or significant increased cost to purchase these items and any corresponding inability to pass along such costs through price increases could have a material adverse effect on our financial condition, liquidity or results of operations.

The performance of our WAVE joint venture is important to our financial results. Changes in the demand for, or quality of, WAVE products, or in the operational or financial performance of the WAVE joint venture, could have ~~a material~~an adverse effect on our financial condition, liquidity or results of operations. Similarly, if there is a change with respect to our joint venture partner that adversely impacts its relationship with us, WAVE’s performance could be adversely impacted.

Our equity investment in our WAVE joint venture remains important to our financial results. WAVE’s markets are highly competitive and changes in the demand for, or quality of, WAVE products, or in the operational or financial performance of the WAVE joint venture, could have a material adverse effect on its financial condition, liquidity or results of operations. Similarly, the availability and cost of raw materials, packaging materials, energy and sourced products are critical to WAVE’s operations and its results of operations.

We believe another important element in the success of this joint venture is the relationship with our partner, Worthington Industries, Inc. If there is a change in ownership, a change of control, a change in management or management philosophy, a change in business strategy or another event with respect to our partner that adversely impacts our relationship, WAVE’s performance could be adversely impacted. In addition, our partner may have economic or business interests or goals that are different from or inconsistent with our interests or goals, which may impact our ability to influence or align WAVE’s strategy and operations.

~~The geographic concentration~~From time to time, we engage in cost-saving and productivity initiatives. Any such initiatives may not achieve expected savings in our operating costs or improved operating results.

We aggressively look for ways to make our operations more efficient and effective. We may reduce, move, modify and expand our plants and operations, as well as our sourcing and supply chain arrangements, as needed, to control costs and improve productivity. Such actions involve substantial planning, often require capital investments and may result in charges for fixed asset impairments or obsolescence and substantial severance costs. Our ability to achieve cost savings and other benefits within expected time frames is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic, competitive and other uncertainties, some of which are beyond our ~~business~~control. If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur, our financial condition, liquidity or results of operations could ~~subject us to greater risk than our competitors~~be materially and adversely affected.

Increased costs of labor, labor disputes, work stoppages or union organizing activity could delay or impede production and could have an adverse effect on our financial condition, liquidity or results of operations.

Increased costs of labor, including the costs of employee benefits plans, labor disputes, work stoppages or union organizing activity could delay or impede production and have a material adverse effect on our financial condition, liquidity or results of operations.

As ~~a result of~~ the ~~recent divestiture~~majority of our ~~Europe, Middle East~~manufacturing employees are represented by unions and ~~Africa (including Russia) and Pacific Rim businesses~~covered by collective bargaining or similar agreements, we often incur costs attributable to ~~Knauf International GmbH, we primarily operate in the United States, Canada and Latin America. Our concentrated operations in the Americas could subject us~~periodic renegotiation of those agreements, which may be difficult to ~~a greater degree of risk relative to our global, diversified competitors.~~ project. We are particularly vulnerable to adverse events (including acts of terrorism, natural disasters, weather conditions, labor market disruptions and government actions) and economic conditions in the United States, Canada and Latin America. Adverse events or conditions in these geographic areas could have a material adverse effect on our financial condition, liquidity or results of operations.also subject

to the risk that strikes or other conflicts with organized personnel may arise or that we may become the subject of union organizing activity at our facilities that do not currently have union representation. Prolonged negotiations, conflicts or related activities could also lead to costly work stoppages and loss of productivity.

We may pursue strategic transactions, including mergers, acquisitions, joint ventures, strategic alliances or other investments, which could create risks and present unforeseen integration obstacles or costs, any of which could have ~~a material~~an adverse effect our financial condition, liquidity or results of operations.

We regularly evaluate potential mergers, acquisitions, joint ventures, strategic alliances or other investments that we believe could complement, enhance or expand our current businesses or product lines or that might otherwise offer us growth opportunities. Any such strategic transaction involves a number of risks, including potential disruption of our ongoing business and distraction of management, difficulty with integrating or separating personnel and business operations and infrastructure, and increasing or decreasing the scope, geographic diversity and complexity of our operations. Strategic transactions could involve payment by us of a substantial amount of cash, assumption of liabilities and indemnification obligations, regulatory requirements, incurrence of a substantial amount of debt or issuance of a substantial amount of equity. Certain strategic opportunities may not result in the consummation of a transaction or may fail to realize the intended benefits and synergies. If we fail to identify, consummate and integrate our strategic transactions in a timely and cost-effective manner, our financial condition, liquidity or results of ~~operation~~operations could be materially and adversely affected.

~~Negative tax consequences can have an unanticipated effect on our financial results.~~

We are subject to the tax laws of the many jurisdictions in which we operate. The tax laws are complex, and the manner in which they apply to our operations and results is sometimes open to interpretation. Our income tax expense and reported net income may fluctuate significantly, and may be materially different than forecasted or experienced in the past. Our financial condition, liquidity, results of operations or tax liability could be adversely affected by changes in effective tax rates, changes in our overall profitability, changes in tax legislation, the results of examinations of previously filed tax returns, and ongoing assessments of our tax exposures.

Our financial condition, liquidity, results of operations or tax liability could also be adversely affected by changes in the valuation of deferred tax assets and liabilities. We have substantial deferred tax assets related to U.S. domestic foreign tax credits (“FTCs”), a capital loss carryforward, and state net operating losses (“NOLs”), which are available to reduce our U.S. income tax liability and to offset future state taxable income. However, our ability to utilize the current carrying value of these deferred tax assets may be impacted as a result of certain future events, such as changes in tax legislation and insufficient future taxable income prior to expiration of the FTCs, capital loss carryforwards, and NOLs.

We may be subject to liability under, and may make substantial future expenditures to comply with, environmental laws and regulations, which could have a material adverse effect on our financial condition, liquidity or results of operations.

We are actively involved in environmental investigation and remediation activities relating to several domestically owned, formerly owned and non-owned locations allegedly resulting from past industrial activity, for which our ultimate liability may exceed the currently estimated and accrued amounts. See Note 27 to the Consolidated Financial Statements for further information related to our current environmental matters and the potential liabilities associated therewith. It is also possible that we could become subject to additional environmental matters and corresponding liabilities in the future.

The building materials industry has been subject to claims relating to raw materials such as silicates, polychlorinated biphenyl (“PCB”), PVC, formaldehyde, fire-retardants and claims relating to other issues such as mold and toxic fumes, as well as claims for incidents of catastrophic loss, such as building fires. We have not received any significant claims involving our raw materials or our product performance; however, product liability insurance coverage may not be available or adequate in all circumstances to cover claims that may arise in the future.

In addition, our operations are subject to various environmental, health, and safety laws and regulations. These laws and regulations not only govern our current operations and products, but also impose potential liability on us for our past operations. Our costs to comply with these laws and regulations may increase as these requirements become more stringent in the future, and these increased costs may have a material adverse effect on our financial condition, liquidity or results of operations.

~~Our operating and information systems may experience a failure, a compromise of security, or a violation of data privacy laws or regulations, which could interrupt or damage our operations.~~

In the conduct of our business, we collect, use, transmit and store data on information systems, which are vulnerable to disruption and an increasing threat of continually evolving cybersecurity risks. These information systems may be disrupted or fail as a result of ~~events that are wholly or partially beyond our control, including events such as natural disasters, power loss, software “bugs”, hardware defects, hacking, computer viruses, malware, ransomware or other cyber-attacks.~~ ~~All of these risks are also applicable where we rely on outside vendors to provide services, which may operate in a cloud environment. We are dependent on third-party vendors~~

to operate secure and reliable systems which may include data transfers over the internet. Any events which deny us use of vital operating or information systems may seriously disrupt our normal business operations.

We also compete through our use of information technology. We strive to provide customers with timely, accurate, easy-to-access information about product availability, orders and delivery status using state-of-the-art systems. While we have processes for short-term failures and disaster recovery capability, a prolonged disruption of systems or other failure to meet customers’ expectations regarding the capabilities and reliability of our systems may have a material adverse effect on our operating results.

We could also experience a compromise of our information security due to technical system flaws, clerical, data input or record-keeping errors, or tampering or manipulation of our systems by employees or unauthorized third parties. Information security risks also exist with respect to the use of portable ~~electronic devices, such as laptops and smartphones, which are particularly vulnerable to loss and theft.~~ Any security breach or compromise of our information systems could significantly damage our reputation, cause the disclosure of confidential customer, employee, supplier or company information, including our intellectual property, and result in significant losses, litigation, fines and costs. The security measures we have implemented to protect against unauthorized access to our information systems and data may not be sufficient to prevent breaches. The regulatory environment related to information security, data collection and privacy is evolving, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs.

~~Adverse results caused by regulatory actions, product claims, environmental claims and other litigation could be costly. Insurance coverage may not be available or adequate in all circumstances.~~

In the ordinary course of business, we are subject to various claims and litigation. Any such claims, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention and resources. While we strive to ensure that our products comply with applicable government regulatory standards and internal requirements, and that our products perform effectively and safely, customers from time to time could claim that our products do not meet warranty or contractual requirements, and users could claim to be harmed by use or misuse of our products. These claims could give rise to breach of contract, warranty or recall claims, or claims for negligence, product liability, strict liability, personal injury or property damage. They could also result in negative publicity.

In addition, claims and investigations may arise related to patent infringement, distributor relationships, commercial contracts, antitrust or competition law requirements, employment matters, employee benefits issues, and other compliance and regulatory matters, including anti-corruption and anti-bribery matters. While we have processes and policies designed to mitigate these risks and to investigate and address such claims as they arise, we cannot predict or, in some cases, control the costs to defend or resolve such claims.

We currently maintain insurance against some, but not all, of these potential claims. In the future, we may not be able to maintain insurance at commercially acceptable premium levels. In addition, the levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact. We cannot assure that the outcome of all current or future litigation will not have a material adverse effect on our financial condition, liquidity or results of operations.

We may not experience the anticipated benefits from our strategic initiatives, including investments in digitalization and new technology.

We continue to evaluate and may pursue strategic initiatives involving the development or utilization of new or innovative products, solutions and tools, as well as the expansion of our capabilities through digitalization. These initiatives are designed to grow revenue, improve profitability and increase shareholder value. Our results of operations and financial position could be materially and adversely affected if we are unable to successfully identify, execute and integrate these initiatives or if we are unable to complete these initiatives in a timely and efficient manner to realize competitive advantages and opportunities.

Negative tax consequences can have an unanticipated effect on our financial results.

We are subject to the tax laws of the many jurisdictions in which we operate. The tax laws are complex, and the manner in which they apply to our operations and results is sometimes open to interpretation. Our income tax (benefit) expense and reported net (loss) income may fluctuate significantly, and may be materially different than forecasted or experienced in the past. Our financial condition, liquidity, results of operations or tax liability could be adversely affected by changes in effective tax rates, changes in our overall profitability, changes in tax legislation, the results of examinations of previously filed tax returns, and ongoing assessments of our tax exposures.

Our financial condition, liquidity, results of operations or tax liability could also be adversely affected by changes in the valuation of deferred tax assets and liabilities. We have substantial deferred tax assets related to U.S. domestic foreign tax credits (“FTCs”), capital loss carryforwards, and state net operating losses (“NOLs”), which are available to reduce our U.S. income tax liability and to offset future state taxable income. However, our ability to utilize the current carrying value of these deferred tax assets may be impacted as a result of certain future events, such as changes in tax legislation and insufficient future taxable income prior to expiration of the FTCs, capital loss carryforwards, and NOLs.

The agreements that govern our indebtedness contain a number of covenants that impose significant operating and financial restrictions, including restrictions on our ability to engage in activities that may be in our best long-term interests.

The agreements that govern our indebtedness include covenants that, among other things, may impose significant operating and financial restrictions, including restrictions on our ability to engage in activities that may be in our best long-term interests. These covenants may restrict our ability to:

Under the terms of our senior secured credit facility, we are required to maintain specified leverage and interest coverage ratios. Our ability to meet these ratios could be affected by events beyond our control, and we cannot assure that we will meet them. A breach of any of the restrictive covenants or ratios would result in a default under the senior secured credit facility. If any such default occurs, the lenders under the senior secured credit facility may be able to elect to declare all outstanding borrowings under our facilities, together with accrued interest and other fees, to be immediately due and payable, or enforce their security interest. The lenders may also have the right in these circumstances to terminate commitments to provide further borrowings.

Our indebtedness may adversely affect our cash flow and our ability to operate and invest in our business, ~~make payments~~execute on our ~~indebtedness~~strategic initiatives and declare dividends on our capital stock.

We may also incur additional indebtedness, which could exacerbate the risks described above. In addition, to the extent that our indebtedness bears interest at floating rates, our sensitivity to interest rate fluctuations will increase.

Any of the above listed factors could have a material adverse effect on our financial condition, liquidity or results of operations.

We require a significant amount of liquidity to fund our operations, and borrowing has increased our exposure to negative unforeseen events.

Our liquidity needs vary throughout the year. If our business experiences materially negative unforeseen events, we may be unable to generate sufficient cash flow from operations to fund our needs or maintain sufficient liquidity to operate and remain in compliance with our debt covenants, which could result in reduced or delayed planned capital expenditures and other investments and have a material adverse effect on our financial condition or results of operations.

Significant changes in factors and assumptions used to measure our defined benefit plan obligations, actual investment returns on pension assets and other factors could negatively impact our operating results and cash flows.

We maintain significant pension and postretirement plans in the U.S. The recognition of costs and liabilities associated with these plans for financial reporting purposes is affected by assumptions made by management and used by actuaries engaged by us to calculate the benefit obligations and the expenses recognized for these plans.

The inputs used in developing the required estimates are calculated using a number of assumptions, which represent management’s best estimate of the future. The assumptions that have the most significant impact on reported results are the discount rate, the estimated long-term return on plan assets for the funded plans, retirement rates, and mortality rates and, for postretirement plans, the estimated inflation in health care costs. These assumptions are generally updated annually.

~~Our~~In the aggregate, our U.S. pension plans were overfunded by ~~$47.0~~$79.0 million as of December 31, ~~2019.~~2020. Our unfunded U.S. postretirement plan liabilities were ~~$77.5~~$81.4 million as of December 31, ~~2019.~~2020. If our cash flows and capital resources are insufficient to fund our pension and postretirement plans obligations, we could be forced to reduce or delay investments and capital expenditures, seek additional capital, or restructure or refinance our indebtedness.

~~Our intellectual property rights may not provide meaningful commercial protection for our products or brands, which could adversely impact our financial condition, liquidity or results of operations.~~

We rely on our proprietary intellectual property, including numerous patents and registered trademarks, as well as our licensed intellectual property to market, promote and sell our products. We monitor and protect against activities that might infringe, dilute, or otherwise harm our patents, trademarks and other intellectual property and rely on the patent, trademark and other laws of the U.S. and other countries. However, we may be unable to prevent third parties from using our intellectual property without our authorization. In addition, the laws of some non-U.S.jurisdictions, particularly those of certain emerging markets, provide less protection for our proprietary rights than the laws of the U.S. and present greater risks of counterfeiting and other infringement. To the extent we cannot protect our intellectual property, unauthorized use and misuse of our intellectual property could harm our competitive position and have a material adverse effect on our financial condition, liquidity or results of operations.

Increased focus by governmental and non-governmental organizations, customers, consumers and investors on sustainability issues, including those related to climate change, may have a material adverse effect on our business, financial condition and results of operations and damage our reputation. As climate change, land use, water use, deforestation, recyclability or recoverability of products, and other sustainability concerns become more prevalent, governmental and non-governmental organizations, customers, consumers and investors are increasingly focusing on these issues. This increased focus on environmental issues and sustainability may result in new or increased regulations and customer and investor demands that could cause us to incur additional costs or to make changes to our operations to comply with any such regulations and demands.

If the separation and distribution of Armstrong Flooring, Inc. (“AFI”) fails to qualify as a tax-free transaction for U.S. federal income tax purposes, then AFI, AWI and AWI’s shareholders could be subject to significant tax liability or tax indemnity obligations.

On April 1, 2016, we completed our previously announced separation of AFI by allocating the assets and liabilities related primarily to the Resilient Flooring and Wood Flooring segments to AFI and then distributing the common stock of AFI to our shareholders at a ratio of one share of AFI common stock for every two shares of AWI common stock. In connection with the distribution, we received an opinion from our special tax counsel, on the basis of certain facts, representations, covenants and assumptions set forth in such opinion, substantially to the effect that, for U.S. federal income tax purposes, the separation and distribution should qualify as a transaction that generally is tax-free to us and our shareholders under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code.

Notwithstanding the tax opinion, the Internal Revenue Service (“IRS”) could determine on audit that the distribution should be treated as a taxable transaction if it determines that any of the facts, assumptions, representations or covenants set forth in the tax opinion is not correct or has been violated, or that the distribution should be taxable for other reasons, including as a result of a significant change in stock or asset ownership after the distribution, or if the IRS were to disagree with the conclusions of the tax opinion. If the distribution is ultimately determined to be taxable, the distribution could be treated as a taxable dividend to each U.S. holder of our common shares who receives shares of AFI in connection with the spinoff for U.S. federal income tax purposes, and such shareholders could incur significant U.S. federal income tax liabilities. In addition, we and/or AFI could incur significant U.S. federal income tax

liabilities or tax indemnification obligations, whether under applicable law or the Tax Matters Agreement that we entered into with AFI, if it is ultimately determined that certain related transactions undertaken in anticipation of the distribution are taxable.

We may be subject to liability under, and may make substantial future expenditures to comply with, environmental laws and regulations, which could have an adverse effect on our financial condition, liquidity or results of operations.

We are actively involved in environmental investigation and remediation activities relating to two domestically owned locations allegedly resulting from past industrial activity, for which our ultimate liability may exceed the currently estimated and accrued amounts. See Note 27 to the Consolidated Financial Statements for further information related to our current environmental matters and the potential liabilities associated therewith. It is also possible that we could become subject to additional environmental matters and corresponding liabilities in the future.

The building materials industry has been subject to claims relating to raw materials such as silicates, polychlorinated biphenyl (“PCB”), polyvinyl chloride (“PVC”), formaldehyde, fire-retardants and claims relating to other issues such as mold and toxic fumes, as well as claims for incidents of catastrophic loss, such as building fires. We have not received any significant claims involving our raw materials or our product performance; however, product liability insurance coverage may not be available or adequate in all circumstances to cover claims that may arise in the future.

Adverse results caused by regulatory actions, product claims, environmental claims and other litigation could be costly. Insurance coverage may not be available or adequate in all circumstances.

We currently maintain insurance against some, but not all, of these potential claims. In the future, we may not be able to maintain insurance at commercially acceptable premium levels. In addition, the levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact. We cannot assure that the outcome of all current or future claims will not have a material adverse effect on our financial condition, liquidity or results of operations.

Our intellectual property rights may not provide meaningful commercial protection for our products or brands, which could adversely impact our financial condition, liquidity or results of operations.

We are subject to risks associated with our international operations in Canada and Latin America. Legislative, political, regulatory and economic volatility, as well as vulnerability to infrastructure and labor disruptions, could have ~~a material~~an adverse effect on our financial condition, liquidity or results of operations.

A portion of our products move in international trade. ~~See Note 3 to the Consolidated Financial Statements for further information.~~ Our international trade is subject to currency exchange fluctuations, trade regulations, import duties, logistics costs, delays and other related risks. Our international operations are also subject to various tax rates, credit risks in emerging markets, political risks, uncertain legal systems, and loss of sales to local competitors following currency devaluations in countries where we import products for sale. In addition, our international growth strategy depends, in part, on our ability to expand our operations in Canada and Latin America. However, some emerging markets have greater political and economic volatility and greater vulnerability to infrastructure and labor disruptions than established markets. Similarly, our efforts to enhance the profitability or accelerate the growth of our operations in certain markets depends largely on the economic and geopolitical conditions in those local or regional markets.

In addition, in many countries outside of the United States, particularly in those with developing economies, it may be common for others to engage in business practices prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act or similar local anti-corruption or anti-bribery laws. These laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials for the purpose of obtaining or retaining business. Failure to comply with these laws, as well as U.S. and foreign export and trading laws, could subject us to civil and criminal penalties. As we continue to expand our business, we may have difficulty anticipating and effectively managing these and other risks that our operations may face, which may adversely affect our business outside the United States and our financial condition, liquidity or results of operations.

~~From time~~Risks Related to ~~time, we engage~~General Economic and Other Factors

Unstable market and economic conditions could have an adverse impact on our financial condition, liquidity or results of operations.

Our business is influenced by market and economic conditions, including inflation, deflation, interest rates, availability and cost of capital, consumer spending rates, energy availability and the effects of governmental initiatives to manage economic conditions. Volatility in ~~cost-saving~~financial markets and ~~productivity initiatives. Any such initiatives may not achieve expected savings in our operating costs~~the continued softness or ~~improved operating results.~~

~~We aggressively look for ways to make our operations more efficient~~further deterioration of national and effective. We may reduce, move, modify and expand our plants and operations, as well as our sourcing and supply chain arrangements, as needed, to control costs and improve productivity. Such actions involve substantial planning, often require capital investments and may result in charges for fixed asset impairments or obsolescence and substantial severance costs. Our ability to achieve cost savings and other benefits within expected time frames is subject to many estimates and assumptions. These estimates and assumptions are subject to significantglobal economic ~~competitive and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, if we experience delays, or if other unforeseen events occur,~~conditions could have a material adverse effect on our financial condition, liquidity or results of operations, ~~could be materially~~including as follows:

Continued or sustained deterioration of economic conditions would likely exacerbate and ~~adversely affected.~~prolong these adverse effects.

~~Increased costs of labor, labor disputes, work stoppages or union organizing~~Our business is dependent on commercial construction activity in North America. Downturns in construction activity could ~~delay~~have an adverse effect on our financial condition, liquidity or ~~impede production~~results of operations.

Our business has greater sales opportunities when construction activity is strong and, conversely, have fewer opportunities when such activity declines. The cyclical nature of commercial and residential construction activity, including construction activity funded by the public sector, tends to be influenced by prevailing economic conditions, including the rate of growth in gross domestic product, prevailing interest rates, government spending patterns, business, investor and consumer confidence and other factors beyond our control. Prolonged downturns in construction activity could have a material adverse effect on our financial condition, liquidity or results of operations.

~~Increased costs~~Our markets are highly competitive. Competition could reduce demand for our products or negatively affect our sales mix or price realization. Failure to compete effectively by meeting consumer preferences, developing and marketing innovative solutions, maintaining strong customer service and distribution relationships, and expanding our solutions capabilities and reach could adversely affect our results.

Our customers consider product performance, product styling, customer service and price when deciding whether to purchase our products. Shifting consumer preference in our highly competitive markets, from acoustical solutions to other ceiling and wall products, for example, whether for performance or styling preferences or our inability to develop and offer new competitive performance features could have an adverse effect on our sales. Similarly, our ability to identify, protect and market new and innovative solutions is critical to our long-term growth strategy, namely to sell into more spaces and sell more solutions in every space. If our competitors offer discounts on certain products or provide new or alternative offerings that the marketplace perceives as more cost-effective, it could adversely affect our price realization. Any broad-based change to our price realization could materially impact our financial condition, liquidity or results of operations.

Customer consolidation, and competitive, economic and other pressures facing our customers, and our potential failure to attract new customers in our markets, may negatively impact our operating margins and profitability.

A number of our customers, including distributors and contractors, have consolidated in recent years and consolidation could continue. Further consolidation could impact margin growth and profitability as larger customers may realize certain operational and other benefits of scale. The economic and competitive landscape for our customers is constantly changing, and our customers' responses to those changes could impact our business. These factors could have a material adverse impact on our business, financial condition or results of operations.

The geographic concentration of our business could subject us to greater risk than our competitors and could have an adverse effect on our financial condition, liquidity or results of operations.

As a result of the divestiture of our Europe, Middle East and Africa (including Russia) and Pacific Rim businesses to Knauf International GmbH, we primarily operate in the United States, Canada and Latin America. Our concentrated operations in the Americas could subject us to a greater degree of risk relative to our global, diversified competitors. We are particularly vulnerable to adverse events (including acts of terrorism, natural disasters, weather conditions, labor ~~including~~market disruptions and government actions) and economic conditions in the ~~costs of employee benefits plans, labor disputes, work stoppages~~United States, Canada and Latin America. Adverse events or ~~union organizing activity~~conditions in these geographic areas could ~~delay or impede production and~~ have a material adverse effect on our financial condition, liquidity or results of operations. As

Our operating and information systems may experience a failure, a compromise of security, or a violation of data privacy laws or regulations, which could interrupt or damage our operations.

In the ~~majority~~conduct of our ~~manufacturing employees~~business, we collect, use, transmit and store data on information systems, which are ~~represented by unions~~vulnerable to disruption and ~~covered by collective bargaining~~an increasing threat of continually evolving cybersecurity risks. These information systems may be disrupted or ~~similar agreements,~~fail as a result of events that are wholly or partially beyond our control, including events such as natural disasters, power loss, software “bugs”, hardware defects, hacking, computer viruses, malware, ransomware or other cyber-attacks. All of these risks are also applicable where we ~~often incur costs attributable~~rely on outside vendors to ~~periodic renegotiation of those agreements,~~provide services, which may ~~be difficult to project.~~operate in a cloud environment. We are dependent on third-party vendors to operate secure and reliable systems which may include data transfers over the internet. Any events which deny us use of vital operating or information systems may seriously disrupt our normal business operations.

We also ~~subject~~compete through our use of information technology. We strive to provide customers with timely, accurate, easy-to-access information about product availability, orders and delivery status using state-of-the-art systems. While we have processes for short-term failures and disaster recovery capability, a prolonged disruption of systems or other failure to meet customers’ expectations regarding the capabilities and reliability of our systems may have a material adverse effect on our operating results.

We could also experience a disruption of service or a compromise of our information security due to technical system flaws, clerical, data input or record-keeping errors, migration to new systems, or tampering or manipulation of our systems by employees or unauthorized third parties. Information security risks also exist with respect to the ~~risk that strikes~~use of portable electronic devices, such as laptops and smartphones, which are particularly vulnerable to loss and theft. Any security breach or compromise of our information systems could significantly damage our reputation, cause the disclosure of confidential customer, employee, supplier or company information, including our intellectual property, and result in significant losses, litigation, fines and costs. The security measures we have implemented to protect against unauthorized access to our information systems and data may not be sufficient to prevent breaches. The regulatory environment related to information security, data collection and privacy is evolving, with new and constantly changing requirements applicable to our business, and compliance with those requirements could result in additional costs.

Additionally, our key partners, distributors or suppliers could experience a compromise of their information security due to technical system flaws, clerical, data input or record-keeping errors, or tampering or manipulation of their respective systems by employees or third parties, which may have an impact on our commercial sales, vendor, partner or other conflicts with organized personnel may arise or that we may become the subject of union organizing activity at our facilities that do not currently have union representation. Prolonged negotiations, conflicts or related activities could also lead to costly work stoppages and loss of productivity.relationships.

We cannot provide any guarantee of future cash dividend payments or that we will be able to repurchase our common stock pursuant to a share repurchase program.

Since December 2018, our Board of Directors has declared a quarterly dividend on our common stock. The payment of any future cash dividends to our shareholders is not guaranteed and will depend on decisions that will be made by our Board of Directors ~~and will be~~ based upon our financial condition, results of operations, business requirements and ~~our Board of Directors’ conclusion~~a determination that the declaration of cash dividends is in the best interest of our shareholders and is in compliance with all laws and agreements applicable to the payment of dividends.

Since July 2016, our Board of Directors has approved share repurchases up to a total of ~~$700.0~~$1,200.0 million. Repurchases under the program may be made through open market, block and privately-negotiated transactions, including Rule 10b5-1 plans, at times and in

amounts as management deems appropriate, subject to market and business conditions, regulatory requirements and other factors. The program does not obligate the company to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice. Furthermore, there can be no assurance that we will be able to repurchase our common stock and we may discontinue plans to repurchase common stock at any time.

Public health epidemics or pandemics, such as the COVID-19 outbreak, could have an adverse effect on our financial condition, liquidity or results of operations.

The COVID-19 outbreak has created significant volatility, uncertainty and economic disruption. The extent to which COVID-19, or other public health epidemics, impacts our employees, operations, customers, suppliers and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic (and whether there is a resurgence or multiple resurgences in the future); government actions taken in response to the pandemic; the availability and distribution of vaccinations; the impact on construction activity; the effect on our customers demand for our ceiling and wall systems; our ability to manufacture and sell our products; and the ability of our customers to pay for our products. For example, while many of our products support life sustaining activities and essential construction, we, and certain of our customers or suppliers, may be impacted by state actions, orders and policies regarding the COVID-19 pandemic, including temporary closures of non-life sustaining businesses, shelter-in-place orders, and travel, social distancing and quarantine policies, the implementation and enforcement of which vary by individual U.S. states and by individual countries in the Americas. Any of these events could have material adverse effect on our financial condition, liquidity or results of operations.

We own a 100-acre, multi-building campus in Lancaster, Pennsylvania comprising the site of our corporate headquarters and most of our non-manufacturing operations.

As of December 31, ~~2019,~~2020, we had 1416 manufacturing plants in ~~three~~two countries, with 1114 plants located throughout the U.S., which included our St. Helens, Oregon mineral fiber manufacturing facility, which closed in the second quarter of 2018. We have two plants in Canada. During ~~2019,~~2020, as part of our acquisition of Turf, we acquired a plant in Illinois and, as part of our acquisitions of ~~ACGI~~Moz and ~~MRK,~~Arktura, we acquired two additional plants ~~located~~ in ~~Missouri and Illinois, respectively. We have two plants in Canada and one idle mineral fiber plant in China. The idle~~California. During 2020, we sold our idled plant in China, ~~is reported as a component of our Unallocated Corporate segment and is~~which had been classified as an asset held for ~~sale as of December 31, 2019, as we entered into a sale agreement for the property during the third quarter of 2019 with closing expected in the second quarter of 2020.~~sale.

WAVE operates ~~five~~six additional plants in the U.S. to produce suspension system (grid) products, which we use and sell in our ceiling systems.

~~Five~~Eight of our plants are leased and the remaining ~~nine~~eight are owned.

Sales and administrative offices are leased and/or owned, ~~worldwide,~~ and leased facilities are utilized to supplement our owned warehousing facilities.

Production capacity and the extent of utilization of our facilities are difficult to quantify with certainty. In any one facility, utilization of our capacity varies periodically depending upon demand for the product that is being manufactured. We believe our facilities are adequate and suitable to support the business. Additional incremental investments in plant facilities are made as appropriate to balance capacity with anticipated demand, improve quality and service, and reduce costs.

See the “Specific Material Events” section of the “Environmental Matters” section of Note 27 to the Consolidated Financial Statements, which is incorporated herein by reference, for a description of our significant legal proceedings.

AWI’s common shares trade on the New York Stock Exchange under the ticker symbol “AWI.” As of February ~~18, 2020,~~17, 2021, there were ~~approximately 230~~217 holders of record of AWI’s common stock.

Dividends are payable when declared by our Board of Directors and in accordance with restrictions set forth in our debt agreements. In general, our debt agreements allow us to make “restricted payments,” which include dividends and stock repurchases, subject to certain limitations and other restrictions and provided that we are in compliance with the financial and other covenants of our debt agreements and meet certain liquidity requirements after giving effect to the restricted payment. We declared dividends on a quarterly basis, totaling ~~$0.725~~$0.81 per share in ~~2019.~~2020. On February ~~19, 2020,~~17, 2021, our Board of Directors declared a dividend of ~~$0.20~~$0.21 per common share outstanding. The dividend will be paid on March ~~20, 2020,~~18, 2021, to shareholders of record as of the close of business on March ~~5, 2020.~~4, 2021. For further discussion of the debt agreements, see the Financial Condition and Liquidity section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 and Risk Factors in Item 1A in this Form 10-K.

OnSince July 29, 2016, ~~we announced that~~ our Board of Directors ~~had~~has approved aour share repurchase program pursuant to which we ~~were~~are currently authorized to repurchase up to ~~$150.0~~$1,200.0 million of our outstanding shares of common stock through ~~July~~December 31, ~~2018~~2023 (the “Program”). ~~On October 30, 2017, we announced that our Board of Directors had approved an additional $250.0 million authorization to repurchase shares under the Program.~~ The Program was ~~also extended through~~temporarily suspended in the first quarter of 2020 in response to uncertainties surrounding COVID-19. On October ~~31, 2020. On July 31, 2018,~~21, 2020, we ~~announced that our Board of Directors~~elected to restart the Program and had ~~approved an additional $300.0~~$593.8 million ~~authorization to repurchase shares, increasing the total authorized amount~~remaining under the ~~Program to $700.0 million, excluding commissions.~~Board’s repurchase authorization as of December 31, 2020.

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 requirements and other factors. 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.

On August 2, 2018, we entered into an accelerated share repurchase (“ASR”) agreement with Deutsche Bank AG under the Program. The ASR included a pre-payment of $150.0 million to Deutsche Bank AG, at which time we received 1,766,004 shares. The ASR terminated on October 8, 2018, with an additional 389,825 shares returned on that day to complete the ASR.

During ~~2019,~~2020, we repurchased ~~1.5~~0.5 million shares under the Program for a cost of ~~$131.2~~$44.4 million, excluding commissions, or an average price of ~~$86.02~~$87.27 per share. Since inception, ~~including the ASR,~~ we have repurchased ~~9.2~~9.7 million shares under the Program for a cost of ~~$561.8~~$606.2 million, excluding commissions, or an average price of ~~$60.98~~$62.35 per share.

~~The following~~In January 2021, the SEC adopted rule amendments to Item 302(a) of Regulation S-K which eliminates the requirement for registrants to furnish selected ~~historical consolidated~~ financial data ~~should be read~~ in ~~conjunction~~comparative tabular form for each of the last five fiscal years. The rule amendments became effective on February 10, 2021 and compliance is required beginning with ~~our audited consolidated financial statements,~~ the ~~accompanying notes~~fiscal year ending on or after August 9, 2021. Early adoption in filings made after February 10, 2021 is permitted and ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations included in~~we have elected to early adopt this ~~Form 10-K. The selected historical consolidated financial data for the periods presented have been derived from our audited consolidated financial statements.~~amendment.

Armstrong World Industries, Inc. (“AWI”) is a Pennsylvania corporation incorporated in 1891.

This discussion should be read in conjunction with the financial statements, the accompanying notes, the cautionary note regarding forward-looking statements and risk factors included in this Form 10-K.

We are a leading producer of ceiling systems for use in the construction and renovation of commercial and residential buildings. We design, manufacture and sell ceiling and wall systems (primarily mineral fiber, fiberglass wool, metal, wood, wood fiber, glass-reinforced-gypsum and felt) throughout the Americas.

The impact of the COVID-19 outbreak on our future consolidated results of operations is uncertain. We experienced a significant decrease in customer demand within both segments during the second through fourth quarters of 2020 due to COVID-19. Specifically, we noted delays in construction driven by temporary closures of non-life sustaining businesses, with the most significant impacts in major metropolitan areas impacted by COVID-19. We experienced less of a comparative decline in net sales during the third and fourth quarters of 2020 compared to the second quarter of 2020, as construction resumed across many parts of the U.S. In response to COVID-19, we reduced capital expenditures and discretionary spending including compensation, travel and marketing expenses.

As of December 31, 2020, all of our manufacturing facilities were operational, excluding the St. Helens, Oregon facility which was idled prior to the COVID-19 outbreak. In an effort to operate safely and responsibly, we continue to follow guidelines from governmental and local health authorities across all our facilities and have implemented preventative measures that include working remotely, providing personal protective equipment, limiting group meetings, enhancing cleaning and sanitizing procedures, and social distancing.

During the first quarter of 2020, we borrowed an additional $100.0 million from our revolving credit facility and $30.0 million from our accounts receivable securitization facility. During the second quarter of 2020, we repaid $65.0 million of the revolving credit facility borrowings and during the third quarter of 2020 we repaid $30.0 million in connection with the maturity of our accounts receivable securitization facility. Our share repurchase 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 had $593.8 million remaining under our Board of Director’s repurchase authorization as of December 31, 2020.We did not record any asset impairments, inventory charges or material bad debt reserves related to COVID-19 during 2020 but future events may require such charges. We will continue to evaluate the nature and extent of the COVID-19 outbreak’s impact on our financial condition, results of operations and cash flows.

The operations, ~~and its~~ assets and liabilities of these acquisitions are included ~~as a component of our Architectural Specialties segment.~~

~~In January 2017, we acquired the business and assets of Tectum, Inc. (“Tectum”), based~~ in Newark, Ohio. Tectum is a manufacturer of acoustical ceiling, wall and structural solutions for commercial building applications with two manufacturing facilities. Tectum’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.

On September 30, 2019, we completed the ~~previously announced~~ sale of certain subsidiaries comprising our businesses and operations in Europe, the Middle East and Africa (including Russia) (“EMEA”) and the Pacific Rim, including the corresponding businesses and operations conducted by Worthington Armstrong Venture (“WAVE”), our joint venture with Worthington Industries, Inc. (“Worthington”) in which AWI holds a 50% interest (collectively, the “Sale”), to Knauf International GmbH (“Knauf”). The purchase price of $330.0 million was previously paid by Knauf to us during ~~the third quarter of~~ 2018 and iswas subject to certain post-closing adjustments for cash and debt as provided in the ~~Share~~ 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.

On July 18, 2018, we entered into an amendment to the Purchase Agreement, pursuant to which Knauf irrevocably and unconditionally paid AWI (i) $250.0 million of the purchase price on August 1, 2018, and (ii) $80.0 million of the purchase price on September 15, 2018, which payments were credited against the aggregate consideration payable at closing. The amendment also provided for the reduction (from a maximum of $35.0 million to a maximum of $20.0 million) of potential adjustments to the purchase price consideration for the transaction based on the impact of remedies required to satisfy competition conditions. Following receipt of these payments, During 2020, we remitted $70.0 million to WAVE in partial consideration of the purchase price payable in respect of the businesses and operations of WAVE under the transaction. WAVE subsequently paid each of AWI and Worthington a dividend of $35.0 million. We have recorded a $25.9 million, ~~payable~~respectively, to WAVE for their remaining portion of the proceeds from Knauf. Also during 2020, WAVE paid each of AWI and Worthington dividends of $13.0 million relating to these payments. During the third quarter of 2020, we remitted $6.4 million to Knauf for working capital and other adjustments. In January 2021, we finalized the post-closing adjustments to purchase price related to certain pension liabilities assumed by Knauf in the Sale. During the fourth quarter of 2020, we recorded a $12.0 million loss primarily related to this purchase price adjustment, which is reflected within ~~Accounts~~accounts payable and accrued expenses ~~in the Consolidated Balance Sheets~~ as of December 31, ~~2019. The transaction and final gain or loss amounts are subject to finalization of customary working capital and other adjustments, as provided in the Purchase Agreement.~~ ~~For the year ended~~December 31, 2019, payments to Knauf included $61.0 million of adjustments to cash consideration, estimated working capital adjustments and remedies, offset by $13.1 million of additional cash in international WAVE entities.2020.

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

On December 7, 2018, the European Commission granted conditional clearance of the transaction, subject to certain commitments intended to address concerns regarding the overlap between the activities of AWI and Knauf, including the divestment by Knauf to a third party of certain mineral fiber and grid businesses and operations in Austria, Estonia, Germany, Ireland, Italy, Latvia, Lithuania, Portugal, Spain, Turkey and the United Kingdom (“UK”). This included our sales operations in each of the relevant countries, as well as our production facilities, and those of WAVE, located in Team Valley, UK.

~~On May 23,~~In 2019, we entered into a Transition Services Agreement with Knauf for its benefit and the benefit of ~~the~~a buyer of ~~the divestment business,~~certain businesses divested by Knauf, pursuant to which we ~~are providing~~provided certain transition technology, finance and information technology support ~~services during the period between March 18, 2019 and September 30,~~services. The Transition Services Agreement expired in 2020.

~~On September 23, 2019, the European Commission approved the Sale, as well as the terms of the sale of the divestment business by Knauf and the identity of the purchaser.~~

See Notes 5 and 6 to the Consolidated Financial Statements for additional information related to our acquisitions and discontinued operations.

As of December 31, ~~2019,~~2020, we had 1416 manufacturing plants in ~~three~~two countries, with 1114 plants located within the ~~U.S,~~U.S., which included our St. Helens, Oregon mineral fiber manufacturing facility, which closed in the second quarter of 2018. We have two plants in Canada. During ~~2019,~~2020, as part of our acquisition of Turf, we acquired a plant in Illinois and, as part of acquisitions of ~~ACGI~~Moz and ~~MRK,~~Arktura, we acquired two additional plants ~~located~~ in ~~Missouri and Illinois, respectively. We have two plants in Canada and one idle mineral fiber plant in China. The idle~~California. During 2020, we sold our idled plant in China, ~~is reported as a component of our Unallocated Corporate segment and is~~which had been classified as an asset held for ~~sale as of December 31, 2019, as we entered into a sale agreement for the property during the third quarter of 2019 with closing expected in the second quarter of 2020.~~sale.

WAVE operates ~~five~~six additional plants in the U.S. to produce suspension system (grid) products, which we use and sell in our ceiling systems.

Our operating segments are as follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate.

primarily to wholesalers and retailers (including large home centers). The Mineral Fiber segment also includes the results of WAVE, which manufactures and sells suspension system (grid) products and ceiling component products that are invoiced by both AWI and WAVE. Segment results relating to WAVE consist primarily of equity earnings and reflect our 50% equity interest in the joint venture. Ceiling component products consist of ceiling perimeters and trim, in addition to grid products that support drywall ceiling systems. To a lesser extent, however, in some geographies and for some customers, WAVE sells its suspension systems products to AWI for resale to customers. Mineral Fiber segment results reflect those sales transactions. The Mineral Fiber segment also includes all assets and liabilities not specifically allocated to our Architectural Specialties or Unallocated Corporate segment, including all property and related depreciation associated with our Lancaster, PA headquarters. Operating results for the Mineral Fiber segment include a significant majority of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations.

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

such as acoustical control, rated fire protection and aesthetic appeal. We sell standard and customized products, ~~with the majority~~and a portion of our Architectural Specialties revenues are derived from sourced products. Architectural Specialties products are sold primarily to resale distributors and ceiling systems contractors. The majority of revenues are project driven, which can lead to more volatile sales patterns due to project scheduling uncertainty. Operating results for the Architectural Specialties segment include a ~~minor~~ portion of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations.

Unallocated Corporate – - includes assets, liabilities, income and expenses that have not been allocated to our other business segments and ~~consist~~consists of: cash and cash equivalents, the net funded status of our U.S. Retirement Income Plan (“RIP”), the estimated fair value of interest rate swap contracts, outstanding borrowings under our senior credit facility and income tax balances. Our Unallocated Corporate segment also includes all assets, liabilities, income and expenses formerly reported in our EMEA and Pacific Rim segments that were not included in the Sale.

For information on our segments’ ~~2019~~2020 net sales by geography, see Note 3 to the Consolidated Financial Statements included in this Form 10-K. For information on our segments’ 2020 net sales disaggregated by major customer groups, see Note 4 to the Consolidated Financial Statements included in this Form 10-K.

Markets. We compete in the commercial and residential construction markets. We closely monitor publicly available macroeconomic trends that provide insight into commercial and residential market activity, including GDP, office vacancy rates, the Architecture Billings Index, new commercial construction starts, state and local government spending, corporate profits and retail sales.

We noted several factors and trends within our markets that directly affected our business performance during 2020, most importantly the aforementioned decrease in demand within both segments as a result of COVID-19. During 2020, we experienced an $87 million reduction in volumes compared to 2019. ~~In our Mineral Fiber segment, softer demand~~Revenues for ~~lower end products exceeded increased demand for high end products. In~~ our Architectural Specialties segment ~~we experienced strong growth due to the impact of the 2018 acquisitions of Plasterform and Steel Ceilings (collectively, the “2018 Acquisitions”) and the~~were also positively impacted by our 2019 acquisitions of ACGI and MRK (collectively, the “2019 Acquisitions”) and our 2020 acquisitions of Turf, Moz and Arktura (collectively, the “2020 Acquisitions”). ~~Our Architectural Specialties segment also experienced increased market penetration as a result of an expanded range of product offerings, and new construction activity.~~

The following table presents the impact of the ~~2018~~2019 Acquisitions and the ~~2019~~2020 Acquisitions on our Architectural Specialties ~~segment~~segment’s net sales (dollar amounts in millions):

	Net sales
	2019		2018		2020		2019
2018 Acquisitions	$	21.4	$	8.6
2019 Acquisitions		24.3		-	$	29.6	$	25.0
2020 Acquisitions						18.2		-
Total	$	45.7	$	8.6	$	47.8	$	25.0

Average Unit Value. We periodically modify sales prices of our products due to changes in costs for raw materials and energy, market conditions and the competitive environment. In certain cases, realized price increases are less than the announced price increases because of project pricing, competitive reactions and changing market conditions. We also offer a wide assortment of products that are differentiated by style, design and performance attributes. Pricing and margins for products within the assortment vary. In addition, changes in the relative quantity of products purchased at different price points can impact year-to-year comparisons of net sales and operating income. Within our Mineral Fiber segment, we focus on improving sales dollars per unit sold, or average unit value (“AUV”), as a measure that accounts for the varying assortment of products impacting our revenues. We estimate that ~~favorable~~unfavorable AUV ~~increased~~decreased our ~~Mineral Fiber and~~ total consolidated net sales for ~~2019~~2020 by approximately ~~$44~~$14 million compared to ~~2018.~~2019. See Results of Operations for further information. Our Architectural Specialties segment generates revenues that are generally earned based on individual contracts that include a mix of products, both manufactured by us and sourced from third parties that vary by project. As such, we do not track AUV performance for this segment, but rather attribute ~~all~~most changes in sales to volume.

In the first and third quarters of 2019, we implemented price increases on certain Mineral Fiber ceiling tile and Architectural Specialties products. In the fourth quarter of 2019, we announced a price increase on Mineral Fiber ceiling tile and grid products to be effective in the first quarter of 2020. We may implement future pricing actions based on numerous factors.

Seasonality. ~~Generally,~~Historically, our sales tend to be stronger in the second and the third quarters of our fiscal year due to more favorable weather conditions, customer business cycles and the timing of renovation and new construction.

~~Management’s Discussion and Analysis~~ In comparison to the prior year, sales were weaker in the second through fourth quarters of ~~Financial Condition and Results of Operations~~2020 due to reduced demand related to COVID-19.

Operating Expenses. Our operating expenses are comprised of direct production costs (principally raw materials, labor and energy), manufacturing overhead costs, freight, costs to purchase sourced products and selling, general, and administrative (“SG&A”) expenses.

Our largest ~~individual~~ raw material expenditures are for aluminum, clays, felt, fiberglass, perlite, pigment, recycled paper, starch, ~~waste paper,~~steel, wood and wood fiber ~~aluminum, steel, pigments and clays.~~. We manufacture most of the production needs for mineral wool at one of our manufacturing facilities. Natural gas and packaging materials are also significant input costs. Fluctuations in the prices of these inputs are generally beyond our control and have a direct impact on our financial results. In ~~2019,~~2020, lower costs for raw materials and energy ~~negatively~~positively impacted operating income by $1$3 million, compared to ~~2018.~~2019.

In connection with the 2020 Acquisitions, we incurred certain acquisition-related expenses in 2020, summarized as follows (dollar amounts in millions):

The deferred revenue, backlog and inventory amounts reflect the post-acquisition expense associated with recording these liabilities and assets at fair value as part of purchase accounting. The estimated fair value of contingent consideration for Moz and Turf is remeasured at each reporting period. Expenses related to the deferred cash and restricted stock awards for Arktura’s former owners and employees will be recorded over their respective service and vesting periods, as such payments are subject to the awardees’ continued employment with AWI. Purchase accounting expenses related to depreciation of fixed asset fair value adjustments and certain intangible asset amortization expenses have been excluded from the table above. See Note 5 to the Consolidated Financial Statements for further information.

This section of this Form 10-K generally discusses 2020 and 2019 items and year-to-year comparisons between 2020 and 2019. Discussions of year-to-year comparisons between 2019 and 2018 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2019.

Unless otherwise indicated, net sales in these results of operations are reported based upon the AWI location where the sale was made. Please refer to Notes 3 and 6 to the Consolidated Financial Statements for a reconciliation of segment operating income to consolidated earnings from continuing operations before income taxes and additional financial information related to discontinued operations.

Consolidated net sales decreased 9.7% due to lower volumes of $87 million and unfavorable AUV of $14 million. Mineral Fiber net sales decreased by $100 million and Architectural Specialties net sales decreased by $1 million. As previously noted, decreases in volumes for both our Mineral Fiber and Architectural Specialties segments were a result of lower market demand due to COVID-19, partially offset by the impact of our 2020 Acquisitions and 2019 Acquisitions in the Architectural Specialties segment. We experienced less of a comparative decline in net sales during the third and fourth quarters of 2020 compared to the second quarter of 2020, with sequential improvement in each quarter.

Cost of goods sold was 64.4% of net sales in 2020, compared to 61.9% in 2019. The increase in cost of goods sold as a percent of net sales in comparison to 2019 was primarily due to unfavorable AUV and the impact of the 2020 Acquisitions and 2019 Acquisitions, partially offset by improved manufacturing productivity and cost reduction actions. The unfavorable AUV was partially driven by lower mix due to regional weakness in major metropolitan areas and due to changes in sales by customer group, both of which were impacted by COVID-19.

SG&A expenses in 2020 were $163.3 million, or 17.4% of net sales, compared to $174.3 million, or 16.8% of net sales, in 2019. The decrease in SG&A expenses was due to a $20 million decrease in legal and professional fees, driven by expenses and attorney’s fees incurred in the first quarter of 2019 under a settlement agreement with Roxul, USA, Inc. (“Rockfon”), a $7 million reduction related to higher environmental insurance settlements, net of charges, a $6 million reduction in incentive-based compensation expenses and a $5 million reduction in travel expense. These decreases in SG&A expenses were partially offset by a $10 million charitable endowment level funding to the Armstrong Foundation, a $9 million increase in SG&A expenses due to the impact of the 2020 Acquisitions and 2019 Acquisitions, including intangible asset amortization, and a $9 million increase in business development costs and investments in digitally enabled systems and tools.

The gain related to the sale of fixed and intangible assets was due to the sale of our idled mineral fiber plant in China, which was reported with our Unallocated Corporate segment.

Equity earnings from our WAVE joint venture were $64.0 million in 2020, compared to $96.6 million in 2019. Consistent with our results, demand for WAVE’s products were significantly impacted by COVID-19. The decrease in WAVE earnings was primarily related to lower volumes and unfavorable AUV and an increase in selling and administrative charges from AWI and Worthington Industries, Inc., partially offset by lower steel costs. Also contributing to the decrease in equity earnings was a $21 million increase in WAVE equity earnings in the third quarter of 2019, representing our 50% share of WAVE’s gain on sale of its discontinued European and Pacific Rim businesses, net of a $4 million write-off related to our WAVE fresh-start reporting for customer relationships and developed technology intangible assets. See Note 11 to the Consolidated Financial Statements for further information.

Interest expense was $24.1 million in 2020, compared to $38.4 million in 2019. The decrease in interest expense was primarily due to lower borrowings and decreases in LIBOR. Also impacting the decrease in interest expense was a lower spread on our borrowings and the write-off of unamortized debt financing cost in 2019, both of which were a result of the refinancing of our credit facility on September 30, 2019.

Other non-operating expense, net, was $357.4 million in 2020, compared to $20.4 million of income in 2019. The increase in expense was primarily related to the $374.4 million settlement loss and the $2.0 million special termination benefit charge, both related to our RIP. See Note 18 to the Consolidated Financial Statements for further information.

Income tax benefit was $42.6 million in 2020, compared to $57.1 million of income tax expense in 2019, primarily driven by the effects of our first quarter 2020 pension settlement. The effective tax rate for 2020 was 33.6% as compared to a rate of 19.1% for 2019. In comparison to the statutory rate, the effective tax rate for 2020 was most significantly increased by the pre-tax benefits recognized on the sale of our mineral fiber plant in China. In comparison to the statutory rate, the effective tax rate for 2019 was most significantly impacted by the benefits related to WAVE’s gain on sale of its EMEA and Pacific Rim businesses and statute closures.

Total other comprehensive income (“OCI”) was $266.8 million in 2020, compared to $83.4 million in 2019. The change in OCI was primarily driven by pension and postretirement adjustments, primarily a $278.6 million settlement loss, net of taxes, related to our

RIP, partially offset by $6.9 million of foreign currency translation adjustments that were reclassified out of accumulated other comprehensive income (“AOCI”) upon the sale of our idled mineral fiber plant in China and the absence of $80.2 million of foreign currency translation adjustments that were reclassified out of AOCI concurrent with the Sale in third quarter of 2019. Pension and postretirement adjustments represent the amortization of actuarial gains and losses related to our defined benefit pension and postretirement plans. Foreign currency translation adjustments represent the change in the U.S. dollar value of assets and liabilities denominated in foreign currencies. Also impacting the change in OCI in both periods were derivative gains/losses. Derivative gain/loss represents the mark-to-market value adjustments of our derivative assets and liabilities and the recognition of gains and losses previously deferred in OCI.

Net sales decreased due to lower volumes of $89 million and unfavorable AUV of $12 million. The decreases in volumes were driven by a significant decrease in demand due to COVID-19. The unfavorable AUV was partially driven by lower mix due to regional weakness in major metropolitan areas and due to changes in sales by customer group, both of which were impacted by COVID-19.

Operating income decreased primarily due to a $63 million negative impact due to lower volumes, a $33 million reduction in WAVE equity earnings, a $22 million impact from lower AUV, a $10 million charitable endowment level funding to the Armstrong Foundation and a $9 million increase in business development costs and investments in digitally enabled systems and tools. Partially offsetting these decreases to operating income was a $29 million reduction in manufacturing costs, a $20 million decrease in legal and professional fees incurred in 2019 under a settlement agreement with Rockfon, a $7 million reduction related to higher environmental insurance settlements, net of charges, a $6 million reduction in incentive-based compensation expenses and a $4 million reduction in travel expense.

Net sales decreased $1 million and were negatively impacted by a reduction in demand across almost all product categories and geographies as a result of COVID-19. Net sales in 2020 increased by $23 million due to the impact of the 2020 Acquisitions and 2019 Acquisitions.

Operating income decreased due to the impact of lower sales, excluding the impact of the 2020 Acquisitions and 2019 Acquisitions. Also contributing to the decrease in operating income was an additional $2 million of amortization expense related to the 2020 Acquisitions and the 2019 Acquisitions.

Unallocated Corporate operating income was $14 million in 2020 compared to $8 million of operating loss in 2019. The increase in operating income was primarily due to the $21 million gain related to the sale of our idled mineral fiber plant in China. See Note 3 to the Consolidated Financial Statements for further information.

The discussion that follows includes cash flows related to discontinued operations in 2019, primarily operations sold in the Sale.

Operating activities for 2020 provided $218.8 million of cash, compared to $182.7 million in 2019. The increase was primarily due to lower tax payments and positive working capital changes, primarily receivables and accounts payable, partially offset by lower cash earnings.

Net cash used for investing activities was $141.1 million for 2020, compared to $89.1 million in 2019. The increase was primarily due to higher cash paid for acquisitions and the remittance of the remaining portion of Knauf proceeds to WAVE in 2020, partially offset by lower payments to Knauf, proceeds from the sale of our idled mineral fiber plant in China in 2020 and lower purchases of property, plant and equipment.

Net cash provided by financing activities was $13.5 million in 2020, compared to $384.9 million of cash used in 2019. The favorable change of cash was primarily due to decreased debt payments as a result of our September 2019 debt refinancing and lower repurchases of outstanding common stock.

Our liquidity needs for operations vary throughout the year. We retain lines of credit to facilitate our seasonal cash flow needs, since cash flow is generally lower during the first and fourth quarters of our fiscal year.

We have a $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. The revolving credit facility and Term Loan A are currently priced at 1.50% over LIBOR. The senior credit facility also has a $25.0 million letter of credit facility, also known as our bi-lateral facility. The revolving credit facility and Term Loan A mature in September 2024. The $1,000.0 million senior credit facility is secured by the capital stock of material U.S. subsidiaries and a pledge of 65% of the stock of our material first-tier foreign subsidiary in Canada. The unpaid balances of the revolving credit facility and Term Loan A may be prepaid without penalty at the maturity of their respective interest reset periods. Any principal amounts paid on the Term Loan A may not be re-borrowed.

As of December 31, 2020, total borrowings outstanding under our senior credit facility were $225.0 million under the revolving credit facility and $493.7 million under Term Loan A.

The senior credit facility includes two financial covenants that require the ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to consolidated cash interest expense minus cash consolidated interest income to be greater than or equal to 3.0 to 1.0 and requires the ratio of consolidated funded indebtedness, minus AWI and domestic subsidiary unrestricted cash and cash equivalents up to $100 million, to EBITDA to be less than or equal to 3.75 to 1.0. As of December 31, 2020, we were in compliance with all covenants of the senior credit facility.

The Term Loan A is currently priced on a variable interest rate basis. The following table summarizes our interest rate swaps (dollar amounts in millions):

Under the terms of the November 2016 swap maturing in 2021, we receive 3-month LIBOR and pay a fixed rate over the hedged period, in addition to a basis rate swap to convert the floating rate risk under our November 2016 swap from 3-month LIBOR to 1-month LIBOR. As a result, we receive 1-month LIBOR and pay a fixed rate over the hedged period.

Under the terms of the November 2018 swap maturing in 2023, we pay a fixed rate over the hedged amount and receive a 1-month LIBOR. This is inclusive of a 0% floor.

Under the terms of the forward starting November 2018 swap maturing in 2025, we will pay a fixed rate monthly and receive 1-month LIBOR. This is inclusive of a 0% floor.

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. This is inclusive of a 0% floor.

Under the terms of the forward starting March 2020 swaps maturing in 2024, we will pay a fixed rate monthly and receive 1-month LIBOR. These are inclusive of a 0% floor.

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

As of December 31, 2020, we had $136.9 million of cash and cash equivalents, $123.7 million in the U.S and $13.2 million in various foreign jurisdictions, primarily Canada.

During 2020, we borrowed and subsequently 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 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 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.

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 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 (dollar amounts in millions):

The table below reflects future payments of long-term debt, excluding $3.2 million of unamortized debt financing costs, and the related interest payments, which are projected based on market-based interest rate swap curves (dollar amounts in millions):

As of December 31, 2020, we had $136.9 million of cash and cash equivalents and $275.0 million available under our revolving credit facility. We believe cash on hand and cash generated from operations, together with borrowing capacity under our credit facility, will be adequate to address our near-term liquidity needs based on current expectations of our business operations, capital expenditures and scheduled payment of debt obligations. In 2021, we expect to spend approximately $75.0 million to $80.0 million on capital expenditures and approximately $40.0 million on dividends. The impacts of COVID-19 could create volatility in financial markets which may impact the terms under which we access capital. We continue to evaluate reductions in discretionary spending, capital expenditures and other costs.

In preparing our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), we are required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an on-going basis, using relevant internal and external information. We believe that our estimates and assumptions are reasonable. However, actual results may differ from what was estimated and could have a significant impact on the financial statements.

We have identified the following as our critical accounting estimates. We have discussed these critical accounting estimates with our Audit Committee.

U.S. Pension Credit and Postretirement Benefit Costs – We maintain significant pension and postretirement plans in the U.S. Our defined benefit pension and postretirement benefit costs are developed from actuarial valuations. These valuations are calculated using a number of assumptions, which represent management’s best estimate of the future. The assumptions that have the most significant impact on reported results are the discount rate, the estimated long-term return on plan assets and the estimated inflation in health care costs. These assumptions are generally updated annually.

Management utilizes the Aon Hewitt AA only above median yield curve, which is a hypothetical AA yield curve comprised of a series of annualized individual discount rates, as the primary basis for determining discount rates. As of December 31, ~~2019~~2020 and ~~2018,~~2019, we assumed discount rates of ~~3.16%~~2.68% and ~~4.30%~~3.16%, respectively, for the U.S. defined benefit pension plans. As of December 31, ~~2019~~2020 and ~~2018,~~2019, we assumed a discount rates of ~~3.14%~~2.37% and ~~4.31%~~3.14%, respectively, for the U.S. postretirement plan. The effects of the change in discount rate will be amortized into earnings as described below. Absent any other changes, a one-quarter percentage point increase or decrease in the discount rates for the U.S. pension and postretirement plans would not have a material impact on ~~2020~~2021 operating or non-operating income.

We manage two U.S. defined benefit pension plans, our RIP, which is a qualified funded plan, and a nonqualified unfunded plan. For the RIP, the expected long-term return on plan assets represents a long-term view of the future estimated investment return on plan assets. This estimate is determined based on the target allocation of plan assets among asset classes and input from investment professionals on the expected performance of the asset classes over 10 to 30 years. Historical asset returns are monitored and considered when we develop our expected long-term return on plan assets. An incremental component is added for the expected return from active management based on historical information obtained from the plan’s investment consultants. These forecasted gross returns are reduced by estimated management fees and expenses. Over the 10-year period ended December 31, ~~2019,~~2020, the historical annualized return was approximately ~~7.9%~~7.6% compared to an average expected return of ~~6.5%~~6.1%. The actual gain on plan assets incurred for ~~2019~~2020 was ~~16.6%~~9.6%, net of fees. The difference between the actual and expected rate of return on plan assets will be amortized into earnings as described below.

The expected long-term return on plan assets used in determining our ~~2019~~2020 U.S. pension cost was ~~5.75%~~5.25%. We have assumed a return on plan assets for ~~2020~~2021 of ~~5.25%.~~3.25% as a result of a more conservative asset allocation. The ~~2020~~2021 expected return on assets was calculated in a manner consistent with ~~2019.~~2020. A one-quarter percentage point increase or decrease in this assumption would ~~increase or decrease 2020~~not have a material impact on 2021 non-operating ~~income by approximately $3.7 million.~~income.

Contributions to the unfunded pension plan were ~~$4.0~~$3.1 million in ~~2019~~2020 and were made on a monthly basis to fund benefit payments. We estimate the ~~2020~~2021 contributions will be approximately ~~$3.9~~$2.9 million. See Note 18 to the Consolidated Financial Statements for more information.

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

The estimated inflation in health care costs represents a 5-10 year view of the expected inflation in our postretirement health care costs. We separately estimate expected health care cost increases for pre-65 retirees and post-65 retirees due to the influence of Medicare coverage at age 65, as illustrated below:

	Assumptions						Actual						Assumptions						Actual
	Post-65			Pre-65			Post-65			Pre-65			Post-65			Pre-65			Post-65			Pre-65
2018		9.2	%		8.0	%		9.0	%		2.5	%
2019		8.7	%		7.6	%		(9.7	)%		24.8	%		8.7	%		7.6	%		(9.7	)%		24.8	%
2020		8.2	%		7.2	%								8.2	%		7.2	%		3.3	%		0.7	%
2021														7.6	%		6.7	%

The difference between the actual and expected health care costs is amortized into earnings as described below. As of December 31, ~~2019,~~2020, health care cost increases are estimated to decrease ratably until ~~2026,~~2027, after which they are estimated to be constant at 4.50%. ~~A one percentage point increase or decrease in the assumed health care cost trend rate would not have a material impact on 2020 operating or non-operating income.~~ See Note 18 to the Consolidated Financial Statements for more information.

Actual results that differ from our various pension and postretirement plan estimates are captured as actuarial gains/losses. When certain thresholds are met, the gains and losses are amortized into future earnings over the remaining life expectancy of participants. Changes in assumptions could have significant effects on earnings in future years.

Total net actuarial losses related to our U.S. pension benefit plans as of December 31, 2020 decreased by ~~$36.6~~$398.1 million in ~~2019~~2020 primarily due to a $374.4 million settlement loss related to the transfer of certain benefit obligations of our RIP, better than expected return on assets, an annuity premium gain in the RIP and an experience gain in the RBEP, partially offset by ~~changes in actuarial assumptions (most significantly~~ a ~~114 basis~~48-basis point decrease in the discount ~~rate).~~rate. The ~~$36.6~~$398.1 million actuarial gain impacting our U.S. pension plans is reflected as a component of other comprehensive income in our Consolidated ~~Statement~~Statements of ~~Earnings~~Operations and Comprehensive Income along with actuarial gains and losses from our foreign pension plan and our U.S. postretirement benefit plan.

On February 20, 2020, we entered into a commitment agreement with a third-party insurance company to partially settle approximately $1.0 billion of retiree benefit obligations under our RIP. See Note 18 to the Consolidated Financial Statements for further information.

Income Taxes – Our effective tax rate is primarily determined based on our pre-tax income, statutory income tax rates in the jurisdictions in which we operate, and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Some of these differences are permanent, such as expenses that are not deductible in our tax returns, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred income tax assets and liabilities. Deferred income tax assets are also recorded for net operating losses (“NOL”), capital loss carryforwards, and foreign tax credit (“FTC”) carryforwards.

Deferred income tax assets and liabilities are recognized by applying enacted tax rates to temporary differences that exist as of the balance sheet date. We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more likely than not standard, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, capital gain income, and foreign source income (“FSI”), the duration of statutory carryforward periods, and our experience with operating loss and tax credit carryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses is incurred for a tax jurisdiction, forecasts of future profitability are not used as positive evidence related to the realization of the deferred tax assets in the assessment.

As of December 31, ~~2019,~~2020, we have recorded valuation allowances totaling ~~$75.5~~$79.4 million for various federal and state deferred tax assets. While we have considered future taxable income in assessing the need for the valuation allowances based on our best available projections, if these estimates and assumptions change in the future or if actual results differ from our projections, we may be required to adjust our valuation allowances accordingly. Such adjustments could be material to our Consolidated Financial Statements.

As further described in Note 16 to the Consolidated Financial Statements, our Consolidated Balance Sheet as of December 31, ~~2019~~2020 includes deferred income tax assets of ~~$155.8~~$163.8 million. Included in this amount are deferred federal income tax assets for FTC carryforwards of ~~$13.1~~$17.7 million, federal and state capital loss carryforwards of ~~$16.0~~$19.3 million, and state NOL deferred income tax assets of ~~$54.8~~$48.7 million. We have established valuation allowances in the amount of ~~$75.5~~$79.4 million consisting of ~~$13.1~~$17.7 million for federal deferred tax assets related to FTC carryovers, ~~$46.4~~$42.4 million for state deferred tax assets, primarily operating loss carryovers, and ~~$16.0~~$19.3 million for federal and state deferred tax assets related to capital loss carryovers. Inherent in determining our effective tax rate are

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

judgments regarding business plans and expectations about future operations. These judgments include the amount and geographic mix of future taxable income, the amount of ~~FSI,~~foreign source income, limitations on usage of NOL carryforwards, the impact of ongoing or potential tax audits, and other future tax consequences.

We estimate we will need to generate future U.S. taxable income of approximately ~~$681.6~~$612.3 million for state income tax purposes during the respective realization periods (ranging from ~~2020~~2021 to ~~2039) in order~~2040) to be able to fully realize the net state NOL deferred income tax assets.

Our ability to utilize deferred tax assets may be impacted by certain future events, such as changes in tax legislation and insufficient future taxable income prior to expiration of certain deferred tax assets.

We recognize the tax benefits of an uncertain tax position if those benefits are more likely than not to be sustained based on existing tax law. Additionally, we establish a reserve for tax positions that are more likely than not to be sustained based on existing tax law, but uncertain in the ultimate benefit to be sustained upon examination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more likely than not recognition threshold is met, the tax matter is effectively settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, whichever is earlier.

Impairments of Long-Lived Tangible, Intangible Assets and Goodwill – Our indefinite-lived assets include goodwill and other intangibles, primarily trademarks and brand names. ~~Trademarks~~Those trademarks and brand names are integral to our corporate identity and expected to contribute indefinitely to our corporate cash flows. Accordingly, they have been assigned an indefinite life. We conduct our annual impairment tests for these indefinite-lived intangible assets and goodwill during the fourth quarter. These assets undergo more frequent tests if an indication of possible impairment exists. We conduct impairment tests for tangible assets and definite-lived intangible assets when indicators of impairment exist for the asset group, such as operating losses and/or negative cash flows.

In connection with the performance of an impairment test for tangible assets and definite-lived intangible assets, we compare the carrying amount of the asset group to the estimated undiscounted future cash flows expected to be generated by the assets. If the undiscounted cash flows of the asset group/reporting unit are less than the carrying value, an estimate of an asset group’s/reporting unit’s fair value is based on discounted future cash flows expected to be generated by the asset group/reporting unit, or based on management’s estimated exit price assuming the assets could be sold in an orderly transaction between market participants or estimated salvage value if no sale is assumed. If the fair value is less than the carrying value of the asset group/reporting unit, we record an impairment charge equal to the difference between the fair value and carrying value of the asset group/reporting unit.

In connection with the performance of an impairment test for indefinite-lived intangible assets and goodwill, we compare the carrying amount of the asset (when testing indefinite-lived intangible assets) and reporting unit (when testing goodwill) to the estimated fair value. For indefinite-lived intangible assets, the estimated fair value is based on discounted future cash flows using the relief from royalty method. For goodwill, the estimated fair value is based on discounted future cash flows expected to be generated by the reporting unit. If the fair value is less than the carrying value of the asset/reporting unit, we record an impairment charge equal to the difference between the fair value and carrying value of the asset/reporting unit.

The principal assumptions used in our impairment tests for definite-lived intangible assets is operating profit adjusted for depreciation and amortization and, if required to estimate the fair value, the discount rate. The principal assumptions used in our impairment tests for indefinite-lived intangible assets include revenue growth ~~rate,~~rates, discount rate and royalty rate. The principal assumptions utilized in our impairment tests for goodwill include after-tax cash flows growth rates and discount rate. Revenue growth rates, after-tax cash flows growth rates and operating profit assumptions are derived from those used in our operating plan and strategic planning processes. The discount rate assumption is calculated based upon an estimated weighted average cost of capital which reflects the overall level of inherent risk and the rate of return a market participant would expect to achieve. The royalty rate assumption represents the estimated contribution of the intangible assets to the overall profits of the related businesses. Methodologies used for valuing our intangible assets did not change from prior periods.

In ~~2019,~~2020, indefinite-lived intangibles and goodwill were tested for impairment based on the identified asset (for indefinite-lived intangibles) or on our identified ~~asset groups/~~reporting ~~units.~~units (for goodwill). There were no ~~material~~ impairment charges recorded in 2020, 2019 ~~2018~~ or ~~2017~~2018 related to intangible assets. We did not test tangible assets within our continuing operations for impairment in 2020, 2019 ~~2018~~ or ~~2017~~2018 as no indicators of impairment existed.

The revenue and cash flow estimates used in applying our impairment tests are based on management’s analysis of information available at the time of the impairment ~~test.~~test and represent a market participant view. Actual cash flows lower than the estimate could lead to significant future impairments. If subsequent testing indicates that fair values have declined, the carrying values would be reduced and our future statements of ~~income~~operations would be affected.

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

We cannot predict the occurrence of certain events that might lead to material impairment charges in the future. Such events may include, but are not limited to, the impact of economic environments, particularly related to the commercial and residential

construction industries, material adverse changes in relationships with significant customers, or strategic decisions made in response to economic and competitive conditions. See Notes 3 and 13 to the Consolidated Financial Statements for further information.

Environmental Liabilities – 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 ~~type~~ environmental laws at ~~several~~two domestically owned ~~formerly owned and non-owned~~ locations allegedly resulting from past industrial activity. In a few cases, we are one of several potentially responsible parties and have agreed to jointly fund the required investigation, while preserving our defenses to the liability. We may also have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies.

We provide for environmental remediation costs and penalties when the responsibility to remediate is probable and the amount of associated costs is reasonably determinable. Accruals are estimates based on the judgment of management related to ongoing proceedings. Estimates of our future liability at the environmental sites are based on evaluations of currently available facts regarding each individual site. In determining the probability of contribution, we consider the solvency of other parties, the site activities of other parties, whether liability is being disputed, the terms of any existing agreements and experience with similar matters, and the effect of our October 2006 Chapter 11 reorganization upon the validity of the claim.

We evaluate the measurement of recorded liabilities each reporting period based on current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution may materially differ from the estimated liability recorded. Changes in estimates are recorded in earnings in the period in which such changes occur.

We are unable to predict the extent to which any recoveries from other parties or coverage under insurance policies might cover our final share of costs for these sites. Our final share of investigation and remediation costs may exceed any such recoveries, and such amounts net of insurance recoveries may be material.However, we do not expect the total future costs to have a material adverse effect on our liquidity or financial condition as the cash payments may be made over many years.

Business Combinations and Contingent Consideration – Acquired businesses are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the assets acquired and liabilities assumed at their respective fair values. Adjustments to the fair value of assets acquired and/or liabilities assumed are amortized over the estimated useful life on a straight-line basis and recorded as a component of operating income (expense). Any excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recorded as goodwill. The estimated fair value of contingent consideration is recorded as a liability on the balance sheet at the date of acquisition. The purchase price allocation requires us to make significant estimates and assumptions, especially at the acquisition date, with respect to intangible assets and contingent consideration. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience and information obtained from the management of the acquired companies. We engage independent, third-party valuation specialists to assist in determining the fair values of acquired intangible assets and contingent consideration.

Both the Moz and Turf acquisitions in 2020 include the potential for contingent earn out payments based on the financial performance of the acquired companies. We estimated the fair value of these contingent consideration liabilities upon acquisition and are required to measure the liability at fair value each reporting period until the contingency is resolved, with changes in the fair value after the acquisition date affecting earnings in the period of the estimated fair value change. See Note 5 to the Consolidated Financial Statements for further information.

The principal assumptions used in valuing certain intangible assets and contingent consideration include future expected cash flows from sales and acquired developed technologies, the acquired company's trade names and customer relationships as well as assumptions about the period of time the acquired trade names and customer relationships will continue to be used in the combined company's portfolio, the probability of meeting the future revenue and EBITDA growth targets and discount rates used to determine the present value of estimated future cash flows.

These estimates are inherently uncertain and unpredictable, and if different estimates were used the total consideration, including the estimated fair value of the contingent consideration, could be allocated to the acquired assets and liabilities differently from the allocation that we have made. In addition, unanticipated events and circumstances may occur, which may affect the accuracy or validity of such estimates, and if such events occur we may be required to record a charge against the value assigned to an acquired asset or an increase in the amounts recorded for assumed liabilities.

This section of this Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018.

Consolidated net sales increased due to favorable AUV of $44 million and higher volumes of $19 million. Mineral Fiber net sales increased by $25 million and Architectural Specialties net sales increased by $38 million.

Cost of goods sold was 61.9% of net sales in 2019, compared to 65.8% in 2018. The decrease in cost of goods sold as a percent of net sales in comparison to 2018 was driven primarily by a $27 million reduction in cost of goods sold due to savings from the closure of

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

our St. Helens manufacturing plant during the second quarter of 2018, combined with the absence of accelerated depreciation and related costs attributable to the closed facility, and increased price realization in excess of inflation.

SG&A expenses in 2019 were $174.3 million, or 16.8% of net sales, compared to $159.0 million, or 16.3% of net sales, in 2018. The increase in SG&A expenses was primarily due to a $13 million increase in legal and professional fees, including expenses and attorney’s fees paid under our litigation settlement agreement with Roxul USA, Inc. (“Rockfon”). Also contributing to the increase in SG&A expenses was the impact of the 2018 Acquisitions and the 2019 Acquisitions. Partially offsetting the impact of these increases in SG&A expenses was $5 million of cost reimbursements, net of expenses, earned in 2019 under our Transition Services Agreement with Knauf and a $4 million reduction in share-based compensation expense.

Equity earnings from our WAVE joint venture were $96.6 million in 2019, compared to $74.9 million in 2018. During 2019 and as a result of the Sale, we recorded a $21 million increase in WAVE equity earnings, representing our share of WAVE’s gain on sale of its discontinued European and Pacific Rim businesses, net of a $4 million write-off related to our WAVE fresh-start reporting for customer relationship and developed technology intangible assets. Excluding the impact of our portion of WAVE’s gain on the Sale and the write-off, WAVE equity earnings increased as a result of increases in AUV, partially offset by investments in manufacturing and lower volumes. Negatively impacting WAVE equity earnings for 2019 was a $1 million partial pension settlement charge. See Note 11 to the Consolidated Financial Statements for further information.

Interest expense was $38.4 million in 2019, compared to $39.2 million in 2018. The decrease in interest expense in 2019 was driven primarily by lower interest rates and the refinancing of our credit facility on September 30, 2019. In connection with the refinancing~~, we wrote off $2.7 million of unamortized debt financing costs, included as a component of interest expense, related to our previous credit facility.~~

Other non-operating income was $20.4 million in 2019, compared to $32.5 million in 2018. The decrease was primarily related to lower credits from non-service cost components associated with our RIP. See Note 18 to the Consolidated Financial Statements for further information.

Income tax expense was $57.1 million in 2019, compared to $53.1 million in 2018. The effective tax rate for 2019 was 19.1% as compared to a rate of 21.9% for 2018. The effective tax rate was lower in 2019 as a result of our share of WAVE’s gain on sale of its EMEA and Pacific Rim businesses having no related income tax expense, in addition to a favorable impact of state deferred tax asset adjustments.

Total other comprehensive income (loss) (“OCI”) was $83.4 million of income in 2019, compared to a $59.4 million loss for 2018. The change was driven by $83.8 million of Accumulated Other Comprehensive Income (“AOCI”) adjustments related primarily to foreign currency translation adjustments that were reclassified out of AOCI concurrent with the Sale. Foreign currency translation adjustments represent the change in the U.S. dollar value of assets and liabilities denominated in foreign currencies. Also impacting the change in OCI in both periods was pension and postretirement adjustments and derivative losses. Pension and postretirement adjustments represent the amortization of actuarial gains and losses related to our defined benefit pension and postretirement plans. Derivative gain/loss represents the mark-to-market value adjustments of our derivative assets and liabilities and the recognition of gains and losses previously deferred in OCI.

Net sales increased due to favorable AUV of $44 million, partially offset by lower volumes of $19 million. The favorable AUV was due to favorable price and improved mix from the sale of higher end ceiling tile products.

Operating income increased due primarily to a $21 million increase in WAVE equity earnings relating to the Sale. Also contributing to the increase was $31 million of favorable AUV and a $27 million increase in operating income due to savings from the closure of our St. Helens manufacturing plant during the second quarter of 2018, combined with the absence of accelerated depreciation and related costs attributable to the closed facility. Partially offsetting the operating income increase was a $13 million increase in costs

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

associated with the Rockfon litigation settlement, a $12 million negative impact from lower volumes, $5 million of cost reimbursements, net of related expenses, earned in 2019 under our Transition Services Agreement with Knauf, and a $4 million reduction in share-based compensation expense.

Net sales increased due to the full year impact of the 2018 Acquisitions, and the 2019 Acquisitions (see table in Factors Affecting Revenue), in addition to higher volumes from increased market penetration as a result of an expanded range of product offerings, and new construction activity.

Operating income increased due to the positive impact of higher sales volume, partially offset by additional investments in selling and design capacities and intangible asset amortization expense related to the 2018 Acquisitions and the 2019 Acquisitions.

~~Unallocated Corporate expense of $8 million decreased from $9 million in the prior year primarily due to lower service cost associated with our RIP.~~

~~The discussion that follows includes cash flows related to discontinued operations, primarily operations sold in the Sale.~~

Operating activities for 2019 provided $182.7 million of cash, compared to $203.2 million of cash provided in 2018. The decrease was primarily due to an increase in working capital, most notably a decrease in receipts of environmental insurance settlements, partially offset by higher cash earnings.

Net cash used for investing activities was $89.1 million for 2019, compared to $309.6 million of cash provided in 2018. The decrease resulted primarily from $47.9 million of payments to Knauf as a result of the Sale combined with the absence of $330.0 million of proceeds received from Knauf in 2018 related to the sale of our EMEA and Pacific Rim businesses, partially offset by $70.0 million of payments to WAVE. Also contributing to the decrease was the cash paid for the acquisitions of ACGI and MRK, and a decrease in dividends from our WAVE joint venture.

Net cash used for financing activities was $384.9 million in 2019, compared to $329.3 million in 2018. The unfavorable change in use of cash was primarily due to higher net debt payments as a result of our September 2019 debt refinancing, higher share tax withholdings from employee stock awards and the payment of dividends, partially offset by a lower repurchases of outstanding common stock.

As of June 30, 2019, total debt outstanding under our $1,050.0 million variable rate senior credit facility was $525.0 million under Term Loan A and $241.9 million under Term Loan B, with no borrowings outstanding under the revolving credit facility. On July 3, 2019, we used cash on hand to make a voluntary prepayment of $100.0 million of the debt outstanding under Term Loan B. Term Loan B was priced at 2.75% over the London Interbank Offered Rate (“LIBOR”). On September 30, 2019, we refinanced our $1,050.0 million variable rate senior credit facility, using cash on hand to pay down a portion of the debt outstanding, including the debt outstanding under Term Loan B. The $1,000.0 million amended senior credit facility 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. The terms of the amended credit facility resulted in a lower interest rate spread for both the revolving credit facility (2.00% to 1.50% over LIBOR) and Term Loan A (1.75% to 1.50% over LIBOR). We also extended the maturity of both the revolving credit facility and Term Loan A from April 2021

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

~~to September 2024.~~ ~~The $1,000.0 million senior~~ credit facility is secured by the capital stock of material U.S. subsidiaries and a pledge of 65% of the stock of our material first-tier foreign subsidiaries, primarily Canada. The unpaid balances of the revolving credit facility and Term Loan A may be prepaid without penalty at the maturity of their respective interest reset periods. Any principal amounts paid on the Term Loan A may not be re-borrowed.

~~As of December 31, 2019, total borrowings outstanding under our senior credit facility were $115.0 million under the revolving credit facility and $500.0 million under Term Loan A.~~

The refinanced senior credit facility includes two financial covenants that require the ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to consolidated cash interest expense minus cash consolidated interest income to be greater than or equal to 3.0 to 1.0 and requires the ratio of consolidated funded indebtedness, minus AWI and domestic subsidiary unrestricted cash and cash equivalents up to $100 million, to EBITDA to be less than or equal to 3.75 to 1.0. As of December 31, 2019, we were in compliance with all covenants of the senior credit facility.

~~The Term Loan A is fully drawn and is currently priced on a variable interest rate basis. The following table summarizes our interest rate swaps (dollar amounts in millions):~~

~~Under the terms of the November 2018 swap maturing in 2023, we pay a fixed rate over the hedged amount and receive a 1-month LIBOR. This is inclusive of a 0% floor.~~

~~Under the terms of the forward starting November 2018 swap maturing in 2025, we will pay a fixed rate monthly and receive 1-month LIBOR. This is inclusive of a 0% floor.~~

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

During the fourth quarter of 2019, we used proceeds from our revolving credit facility to pay off a $35.0 million variable rate, tax exempt industrial development bond that financed the construction of a plant in prior years. The bond was remarketed by an agent on a regular basis at a market-clearing interest rate.

~~As of December 31, 2019, we had $45.3 million of cash and cash equivalents, $29.8 million in the U.S and $15.5 million in various foreign jurisdictions, primarily Canada.~~

As of December 31, 2019, we had a $36.2 million Accounts Receivable Securitization Facility with the Bank of Nova Scotia (the “funding entity”) that matures in March 2020. Under this facility, we sell 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 limited liability company special purpose entity created specifically for this transaction; therefore, any receivables sold to ARC are not available to the general creditors of AWI. ARC then sells an undivided interest in the purchased accounts receivables to the funding entity. This undivided interest acts as collateral for drawings on the facility. 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. During the first quarter of 2020, we expect to amend the facility to reduce the purchase limit from $36.2 million to $30.0 million and to extend its maturity to March 2021.

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

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 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 (dollar amounts in millions):

As of December 31, 2019, there was no restricted cash under our accounts receivable securitization facility for letters of credit issued in excess of our maximum limit. As of December 31, 2018, $6.0 million of letters of credit issued under our accounts receivable securitization facility in excess of our maximum limit was classified as restricted cash and reported as a component of Cash and cash equivalents on our Consolidated Balance Sheets.

We believe that cash on hand and cash generated from operations, together with lines of credit, availability under our revolving credit facility, will be adequate to address our foreseeable liquidity needs based on current expectations of our business operations, capital expenditures and scheduled payments of debt obligations.

As part of our normal operations, we enter into numerous contractual obligations that require specific payments during the term of the various agreements. The following table includes amounts ongoing under contractual obligations existing as of December 31, 2019. Only known payments that are dependent solely on the passage of time are included. Obligations under contracts that contain minimum payment amounts are shown at the minimum payment amount. Contracts that contain variable payment structures without minimum payments are excluded. Purchase orders that are entered into in the normal course of business are also excluded because they are generally cancelable and not legally binding. Amounts are presented below based upon the currently scheduled payment terms. Actual future payments may differ from the amounts presented below due to changes in payment terms or events affecting the payments.

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

~~The table above excludes $34.7 million of unrecognized tax benefit liabilities under ASC 740~~ ~~“Income Taxes.”~~ Due to the uncertainty relating to these positions, we are unable to reasonably estimate the ultimate amount or timing of the settlement of these issues. See Note 16 to the Consolidated Financial Statements for more information.

This table excludes obligations related to postretirement benefits (retiree health care and life insurance) since we voluntarily provide these benefits. The amount of benefit payments we made in 2019 was $9.4 million. See Note 18 to the Consolidated Financial Statements for additional information regarding future expected cash payments for postretirement benefits.

Letters of credit are currently arranged through 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 summarizes the commitments we have available for use as of December 31, 2019.

In connection with our disposition of certain assets through a variety of unrelated transactions, we have entered into contracts that included various indemnity provisions, some of which are customary for such transactions, while others hold the acquirer of the assets harmless with respect to liabilities relating to such matters as taxes, environmental and other litigation. Some of these provisions include exposure limits, but many do not. Due to the nature of the indemnities, it is not possible to estimate the potential maximum exposure under these contractual provisions. As of December 31, 2019, we had no liabilities recorded for which an indemnity claim had been received.

Our primary exposure to market risk is from changes in interest rates that could impact our results of operations, cash flows and financial condition. We use forward swap contracts to hedge these exposures. The Company utilizes derivative financial instruments as risk management tools and not for speculative trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage our exposure to potential nonperformance on such instruments. We regularly monitor developments in the capital markets.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to replace LIBOR rates with the Secured Overnight Financing Rate ("SOFR") effective in late 2021. The Alternative Reference Rates Committee ("ARRC") has proposed that the SOFR rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. ~~The Company will~~We continue to monitor the new SOFR rates and regulation related to our debt, interest rate hedging instruments and other contracts that are indexed to USD-LIBOR. We have adopted the optional expedients and exceptions issued in March 2020 under ASU 2020-04. See Note 2 to the Consolidated Financial Statements for further information.

We only enter into derivative transactions with established financial institution counterparties having an investment-grade credit rating. We monitor counterparty credit default swap levels and credit ratings on a regular basis. All of our derivative transactions with counterparties are governed by master International Swap and Derivatives Association agreements (“ISDAs”) with netting arrangements. These agreements can limit our exposure in situations where we have gain and loss positions outstanding with a single counterparty. We do not post nor do we receive cash collateral with any counterparty for our derivative transactions. These ISDAs do not have any credit contingent features; however, a default under our bank credit facility would trigger a default under these agreements. Exposure to individual counterparties is controlled and we consider the risk of counterparty default to be negligible.

We are subject to interest rate variability on our Term Loan A and revolving credit facility. A hypothetical increase of one-quarter percentage point in LIBOR interest rates from December 31, ~~2019~~2020 levels would increase ~~2020~~2021 interest expense by approximately ~~$2.2~~$0.7 million. We ~~also~~ have ~~$400.0 million of~~ active interest rate swaps outstanding, which fix the interest rates for a portion of our debt. These active interest rate swaps are included in this calculation.

As of December 31, ~~2019,~~2020, we had interest rate swaps outstanding ~~on Term Loan A,~~ with notional amounts of ~~$500.0 million.~~$650.0 million, of which $450.0 million were active and $200.0 million were forward starting. We utilize interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility. Under the terms of ~~the Term Loan A~~these swaps, we receive 1-month LIBOR and pay a fixed rate over the hedged period. The following table summarizes our interest rate swaps as of December 31, ~~2019~~2020 (dollar amounts in millions):

Trade Date

Notional

Amount

Coverage Period

Risk Coverage

Notional

Amount

Coverage Period

Risk Coverage

November 13, 2016

200.0

November 2016 to March 2021

USD-LIBOR

November 14, 2016

200.0

December 2016 to March 2021

USD-LIBOR

November 28, 2018

200.0

November 2018 to November 2023

USD-LIBOR

200.0

November 2018 to November 2023

USD-LIBOR

November 28, 2018

100.0

March 2021 to March 2025

USD-LIBOR

100.0

March 2021 to March 2025

USD-LIBOR

March 6, 2020

50.0

March 2020 to March 2022

USD-LIBOR

March 10, 2020

50.0

March 2021 to March 2024

USD-LIBOR

March 11, 2020

50.0

March 2021 to March 2024

USD-LIBOR

These swaps are designated as cash flow hedges against changes in LIBOR for a portion of our variable rate debt. The net liability measured at fair value was ~~$14.3~~$28.9 million atas of December 31, ~~2019.~~2020.

The table below provides information about our long-term debt obligations as of December 31, ~~2019,~~2020, including payment requirements and related weighted-average interest rates by scheduled maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve and are exclusive of our interest rate swaps.

Scheduled maturity date

(dollar amounts in millions)

2020

2021

2022

2023

2024

After

2025

Total

2021

2022

2023

2024

2025

After

2025

Total

Variable rate principal

payments

6.3

25.0

533.7

615.0

25.0

643.7

718.7

Average interest rate

3.15

3.07

3.11

3.18

2.51

2.59

1.61

1.63

1.76

2.06

2.02

Variable rate ~~principle~~principal payments reflected in the preceding table exclude ~~$4.2~~$3.2 million of unamortized debt financing costs as of December 31, ~~2019.~~2020.

Quarterly Financial Information for the ~~Years~~Quarter Ended December 31, ~~2019 and 2018~~2020 (Unaudited)

The following consolidated financial statements are filed as part of this Annual Report on Form 10-K:

Consolidated Statements of ~~Earnings~~Operations and Comprehensive Income for the Years Ended December 31, 2020, 2019 ~~2018~~ and ~~2017.~~2018.

Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2020, 2019 ~~2018~~ and ~~2017.~~2018.

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 ~~2018~~ and ~~2017.~~2018.

Schedule II for the Years Ended December 31, 2020, 2019 ~~2018~~ and ~~2017.~~2018.

First

Second

Third

Fourth

2019

Net sales

$
242.1

$
272.0

$
277.1

$
246.9

Gross profit

91.4

103.4

111.7

88.6

Earnings from continuing operations

Per share of common stock:

Basic

$
0.75

$
1.30

$
1.86

$
1.06

Diluted

$
0.73

$
1.28

$
1.83

$
1.04

Price range of common stock - high

$
79.53

$
99.27

$
104.50

$
103.66

Price range of common stock - low

$
57.38

$
79.77

$
91.16

$
89.58

Cash dividend per common share

$
0.175

$
0.175

$
0.175

$
0.200

2018

Net sales

$
227.3

$
248.6

$
260.5

$
238.9

Gross profit

70.8

82.7

97.9

82.1

Earnings from continuing operations

41.2

47.6

64.2

36.6

Per share of common stock:

Basic

$
0.78

$
0.91

$
1.26

$
0.74

Diluted

$
0.76

$
0.90

$
1.23

$
0.73

Price range of common stock - high

$
64.60

$
65.00

$
73.45

$
71.50

Price range of common stock - low

$
55.65

$
54.45

$
62.15

$
54.34

Cash dividend per common share

$
-

$
-

$
-

$
0.175

Note: The net sales and gross profit amounts above are reported on a continuing operations basis. The sum of the quarterly earnings per share data may not equal the total year amounts due to changes in the average shares outstanding and, for diluted data, the exclusion of the anti-dilutive effect in certain quarters.

Fourth Quarter ~~2019~~2020 Compared With Fourth Quarter ~~2018~~2019 – Continuing Operations

Consolidated net sales of ~~$246.9~~$239 million in the fourth quarter of ~~2019 increased~~2020 decreased 3.3% due to ~~favorable~~unfavorable AUV of $9$7 million ~~partially offset by~~and lower volumes of $1 million. We experienced less of a comparative decline in the fourth quarter of 2020 compared to the third quarter of 2020.

Mineral Fiber net sales ~~increased 3.0%~~decreased 7.2% due to ~~favorable AUV of $9 million, partially offset by~~ lower volumes of $3$8 million and unfavorable AUV of $6 million. Architectural Specialties net sales increased ~~4.6%~~5.9% due to ~~higher volumes, primarily~~the impact of the 2020 Acquisitions, partially offset by lower volumes. Net sales in both segments were negatively impacted by a reduction in demand as a result of ~~the impact of the 2019 Acquisitions, partially offset by unfavorable project timing and extended lead times from a third party supplier.~~COVID-19.

For the fourth quarter of ~~2019,~~2020, cost of goods sold was ~~64.1%~~65.3% of net sales, compared to ~~65.6%~~64.1% in ~~2018.~~the fourth quarter of 2019. The ~~decrease~~increase in cost of goods sold as a percent of net sales in comparison to ~~2018~~ 2019 was ~~driven~~ primarily bydue to unfavorable AUV and the ~~absence~~impact of ~~$2 million of costs attributable to~~ the ~~closure of our St. Helens, Oregon facility in addition to increased price realization in excess of inflation,~~2020 Acquisitions, partially offset by ~~increases~~improved manufacturing productivity and cost reduction actions. The unfavorable AUV was primarily driven by lower mix due to changes in ~~cost of goods sold related~~sales by customer group, and to ~~the 2019 Acquisitions.~~a lesser extent, due to regional weakness in major metropolitan areas.

SG&A expenses for the fourth quarter of ~~2019~~2020 were ~~$40.0~~$54.5 million, or ~~16.2%~~22.8% of net sales compared to ~~$45.3~~$40.0 million, or ~~19.0%~~16.2% of net sales, for the fourth quarter of ~~2018.~~2019. The ~~decrease~~increase in SG&A expenses was driven primarily by a $10 million charitable endowment level funding to the Armstrong Foundation, a $5 million increase in SG&A expenses, including intangible asset amortization, due to the impact of the 2020 Acquisitions, a $4 million increase in business development costs and investments in digitally enabled systems and tools, and a $3 million decrease in ~~legal and professional fees, $3 million of~~ cost reimbursements, net of related expenses, earned ~~in 2019~~ under our ~~Transition~~Transaction Services Agreement with ~~Knauf and a $3 million reduction in share-based compensation expense.~~Knauf. These ~~decreases~~increases in SG&A expenses were partially offset by ~~higher~~an $8 million reduction in expenses related to ~~the impact~~higher environmental insurance settlements, net of ~~the 2019 Acquisitions.~~ charges and a $2 million reduction in travel expense.

Equity earnings in the fourth quarter of ~~2019~~2020 were ~~$13.6~~$15.8 million compared to ~~$15.7~~$13.6 million for the fourth quarter of ~~2018.~~2019. During the fourth quarter of 2019 and as a result of the Sale, we recorded a $5 million decrease in WAVE equity earnings, representing our share of WAVE’s fourth quarter of 2019 loss on sale of its discontinued European and Pacific Rim businesses. Excluding the impact of our portion of WAVE’s fourth quarter loss on the Sale, WAVE equity earnings ~~increased~~decreased due to ~~higher~~unfavorable AUV and lower sales volumes and an increase in selling and administrative charges from AWI and Worthington Industries, Inc. These decreases in WAVE equity earnings were partially offset by lower input costs, particularly steel. See Note 11 to the Consolidated Financial Statements for further information.

Operating income was $44.1 million in the fourth quarter of 2020 compared to $62.2 million in the fourth quarter of ~~2019 compared to $52.5 million in the fourth quarter of 2018.~~2019.

Interest expense in the fourth quarter of ~~2019~~2020 decreased to ~~$6.8~~$5.4 million compared to ~~$10.3~~$6.8 million in the fourth quarter of ~~2018~~2019 due primarily to ~~lower borrowings, a reduced cost of debt as a result of our September 30, 2019 refinancing and~~ a decrease in ~~LIBOR.~~LIBOR.

Fourth quarter income tax expense was $8.3 million on pre-tax earnings ~~from continuing operations~~of $43.1 million in 2020 compared to $8.3 million on pre-tax earnings of $59.8 million in ~~2019 compared to income tax expense of $10.8 million on a pre-tax earnings from continuing operations of $47.4 million in 2018.~~2019. The effective tax rate for the fourth quarter of ~~2019~~2020 was ~~lower~~higher than the same period in ~~2018~~2019 primarily due to the absence of discrete tax benefits related to stock compensation deductions and deferred tax benefits that were recorded in the fourth quarter of ~~2019 related~~2019.

Basic and diluted earnings per share were both $0.72 in the fourth quarter of 2020, compared to ~~federal stock compensation deductions~~basic earnings per share of $0.74 and ~~state deferred tax benefits~~.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation and the criteria in the COSO framework, our management concluded that our internal control over financial reporting was effective as of December 31, ~~2019.~~2020.

KPMG LLP, an independent registered public accounting firm, audited our internal control over financial reporting as of December 31, ~~2019,~~2020, as stated in their report included herein.

We have audited Armstrong World Industries, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, ~~2019,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2019,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, ~~2019~~2020 and ~~2018,~~2019, the related consolidated statements of ~~earnings~~operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, ~~2019,~~2020, and the related notes andfinancial statement schedule II (collectively, the consolidated financial statements), and our report dated February ~~25, 2020~~23, 2021 expressed an unqualified opinion on those consolidated financial statements.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We have audited the accompanying consolidated balance sheets of Armstrong World Industries, Inc. and subsidiaries (the Company) as of December 31, ~~2019~~2020 and ~~2018,~~2019, the related consolidated statements of ~~earnings~~operations and comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, ~~2019,~~2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2019~~2020 and ~~2018,~~2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2019,~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2019,~~2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February ~~25, 2020~~23, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial ~~reporting.~~reporting.

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue as of January 1, 2018 due to the adoption of Accounting Standards Codification Topic 606, ~~Revenue from Contracts with Customers, and the related amendments.~~

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases, and ~~the~~ related amendments.

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit ~~matter~~matters communicated below ~~is a matter~~are matters arising from the current period audit of the consolidatedfinancial statements that ~~was~~were communicated or required to be communicated to the audit committee and that: (1) ~~relates~~relate to accounts or disclosures that are material to the consolidatedfinancial statements and (2) involved our especially challenging, subjective, or complex ~~judgment.~~judgments. The communication of a critical audit ~~matter~~matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit ~~matter~~matters below, providing a separate ~~opinion~~opinions on the critical audit ~~matter~~matters or on the accounts or disclosures to which ~~it relates.~~they relate.

As discussed in Notes 2 and 18 to the consolidated financial statements, the Company’s pension projected benefit obligations and the fair value of plan assets for the U.S. plans were ~~$1,431.4~~$441.7 million and ~~$1,478.4~~$520.7 million, respectively, as of December 31, ~~2019,~~2020, resulting in a funded status of ~~$47.0~~$79.0 million. Additionally, the Company’s accumulated postretirement benefit obligation was ~~$76.6~~$80.6 million, which is an unfunded liability.

We identified the evaluation of the Company’s measurement of the benefit obligations to be a critical audit ~~matter because~~matter. Subjective auditor judgment was required to evaluate the discount rates, as minor changes in the rates could have a significant impact on the benefit obligations. Additionally, the assessment of the discount rates required specialized actuarial skills ~~required to understand the Company’s actuarial models~~ and ~~assumptions. In addition, the benefit obligations were sensitive to changes in key assumptions used, in particular the discount rate.~~knowledge.

The following are the primary procedures we performed to address this critical audit ~~matter included~~matter. We evaluated the ~~following. We~~design and tested the operating effectiveness of certain internal controls over the Company’s benefit obligations process, including controls related to the ~~development~~actuarial determination of the discount ~~rates. We~~rates used in the valuation of the benefit obligations. Additionally, we involved an actuarial professional with specialized skill and knowledge, who assisted ~~in:~~in the evaluation of the Company’s discount rates by:

As discussed in Note 5 to the consolidated financial statements, in July 2020, the Company acquired TURF Design Inc. (TURF) for $70.0 million of cash and potential for a contingent consideration payable in 2022 and 2023. The contingent consideration liability is recorded at fair value and re-measured each reporting period, with a maximum payout of $48.0 million upon achievement of certain revenue and earnings before interest, income taxes, depreciation and amortization (EBITDA) growth targets through 2022. A Monte Carlo model was used in the determination of the fair value of the contingent consideration and required the Company to derive assumptions such as forecasts of revenue, forecasts of EBITDA, volatility and discount rate. As of December 31, 2020, the fair value of the contingent consideration was $14.2 million.

We identified the evaluation of the fair value of the contingent consideration liability for the acquisition of TURF to be a critical audit matter. Subjective auditor judgment was required to evaluate key assumptions in the Monte Carlo model used to determine the fair value of the contingent consideration. Key assumptions included forecasts of revenue, forecasts of EBITDA, volatility and discount rates. Auditing the Company’s model involved complex and challenging auditor judgment as the assumptions used in the model did not have observable market inputs.

The following are the primary procedures we performed to address this critical audit matter. We performed sensitivity analyses over the forecasted revenue and EBITDA used to determine the fair value of the contingent consideration to assess the impact of changes in those assumptions on the Company’s determination of fair value. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s contingent consideration valuation process, including controls over the key assumptions listed above. In connection with our assessment of the revenue and EBITDA forecasts used in the valuation, we compared forecasted revenue and EBITDA as a percentage of revenue to historical actual results of the acquired company. We evaluated the forecasted revenue and EBITDA assumptions used in the Company’s model by comparing them to publicly available market data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:


	Years Ended December 31,									Years Ended December 31,
	2019			2018			2017			2020			2019			2018
Net sales	$	1,038.1		$	975.3		$	893.6		$	936.9		$	1,038.1		$	975.3
Cost of goods sold		643.0			641.8			578.2			603.8			643.0			641.8
Gross profit		395.1			333.5			315.4			333.1			395.1			333.5
Selling, general and administrative expenses		174.3			159.0			138.6			163.3			174.3			159.0
Gain related to sale of fixed and intangible assets											(21.0	)		-			-
Equity earnings from joint venture		(96.6	)		(74.9	)		(67.0	)		(64.0	)		(96.6	)		(74.9	)
Operating income		317.4			249.4			243.8			254.8			317.4			249.4
Interest expense		38.4			39.2			35.4			24.1			38.4			39.2
Other non-operating (income), net		(20.4	)		(32.5	)		(13.7	)
Earnings from continuing operations before income taxes		299.4			242.7			222.1
Income tax expense		57.1			53.1			1.5
Earnings from continuing operations		242.3			189.6			220.6
Net (loss) earnings from discontinued operations, net of tax expense of $12.0, $8.2 and $3.6		(1.8	)		9.6			4.2
(Loss) from disposal of discontinued businesses, net of tax (benefit) of ($5.2), ($6.0) and ($4.1)		(26.0	)		(13.3	)		(105.2	)
Other non-operating expense (income), net											357.4			(20.4	)		(32.5	)
(Loss) earnings from continuing operations before income taxes											(126.7	)		299.4			242.7
Income tax (benefit) expense											(42.6	)		57.1			53.1
(Loss) earnings from continuing operations											(84.1	)		242.3			189.6
Net (loss) earnings from discontinued operations, net of tax expense of $ -, $12.0 and $8.2											-			(1.8	)		9.6
(Loss) from disposal of discontinued businesses, net of tax (benefit) of ($1.4), ($5.2) and ($6.0)											(15.0	)		(26.0	)		(13.3	)
Net (loss) from discontinued operations		(27.8	)		(3.7	)		(101.0	)		(15.0	)		(27.8	)		(3.7	)
Net earnings	$	214.5		$	185.9		$	119.6
Net (loss) earnings										$	(99.1	)	$	214.5		$	185.9
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		84.1			(27.6	)		24.5			(7.1	)		84.1			(27.6	)
Derivative (loss) gain, net		(13.9	)		1.1			(0.3	)		(10.5	)		(13.9	)		1.1
Pension and postretirement adjustments		13.2			(32.9	)		33.7			284.4			13.2			(32.9	)
Total other comprehensive income (loss)		83.4			(59.4	)		57.9			266.8			83.4			(59.4	)
Total comprehensive income	$	297.9		$	126.5		$	177.5		$	167.7		$	297.9		$	126.5
Earnings per share of common stock, continuing operations:
(Loss) earnings per share of common stock, continuing operations:
Basic	$	4.97		$	3.68		$	4.12		$	(1.76	)	$	4.97		$	3.68
Diluted	$	4.88		$	3.63		$	4.08		$	(1.76	)	$	4.88		$	3.63
(Loss) per share of common stock, discontinued operations:
Basic	$	(0.57	)	$	(0.07	)	$	(1.89	)	$	(0.31	)	$	(0.57	)	$	(0.07	)
Diluted	$	(0.56	)	$	(0.07	)	$	(1.87	)	$	(0.31	)	$	(0.56	)	$	(0.07	)
Net earnings per share of common stock:
Net (loss) earnings per share of common stock:
Basic	$	4.40		$	3.61		$	2.23		$	(2.07	)	$	4.40		$	3.61
Diluted	$	4.32		$	3.56		$	2.21		$	(2.07	)	$	4.32		$	3.56
Average number of common shares outstanding:
Basic		48.7			51.3			53.3			47.9			48.7			51.3
Diluted		49.5			52.1			53.9			47.9			49.5			52.1

See accompanying notes to consolidated financial statements beginning on page ~~43.~~46.


	December 31, 2019			December 31, 2018			December 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	45.3		$	325.7		$	136.9		$	45.3
Accounts and notes receivable, net		85.1			79.9			78.3			85.1
Inventories, net		68.5			61.2			81.5			68.5
Assets of discontinued operations		-			244.3
Income taxes receivable		30.0			1.7			2.3			30.0
Other current assets		15.5			4.8			12.8			15.5
Total current assets		244.4			717.6			311.8			244.4
Property, plant, and equipment, less accumulated depreciation and amortization of $447.5 and $412.9, respectively		524.6			501.0
Lease right-of-use assets		35.3			-
Property, plant, and equipment, net								529.9			524.6
Operating lease assets								19.2			35.3
Finance lease assets								20.4			-
Prepaid pension costs		94.8			52.8			119.5			94.8
Investment in joint venture		58.5			40.8			41.2			58.5
Goodwill		53.0			19.2			160.7			53.0
Intangible assets, net		411.9			422.8			457.5			411.9
Deferred income taxes		10.4			14.8			-			10.4
Income taxes receivable		2.5			0.8			0.6			2.5
Other non-current assets		57.9			68.5			57.7			57.9
Total assets	$	1,493.3		$	1,838.3		$	1,718.5		$	1,493.3
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt	$	6.3		$	55.0		$	25.0		$	6.3
Accounts payable and accrued expenses		148.7			383.3			136.5			143.5
Liabilities of discontinued operations		-			110.3
Operating lease liabilities								4.8			5.2
Finance lease liabilities								2.0			-
Income taxes payable		0.2			0.9			4.0			0.2
Total current liabilities		155.2			549.5			172.3			155.2
Long-term debt, less current installments		604.5			764.8			690.5			604.5
Lease non-current liabilities		30.1			-
Operating lease liabilities								14.6			30.1
Finance lease liabilities								18.8			-
Postretirement benefit liabilities		71.0			58.8			74.9			71.0
Pension benefit liabilities		46.6			50.3			40.4			46.6
Other long-term liabilities		37.8			38.0			76.5			37.8
Income taxes payable		19.3			26.5			21.2			19.3
Deferred income taxes		163.9			124.4			158.4			163.9
Total non-current liabilities		973.2			1,062.8			1,095.3			973.2
Shareholders' equity:
Common stock, $0.01 par value per share, 200 million shares authorized, 62,263,395 shares issued and 47,992,348 shares outstanding as of December 31, 2019 and 61,553,724, shares issued and 48,808,239 shares outstanding as of December 31, 2018		0.6			0.6
Common stock, $0.01 par value per share, 200 million shares authorized, 62,599,331 shares issued and 47,913,821 shares outstanding as of December 31, 2020 and 62,263,395, shares issued and 47,992,348 shares outstanding as of December 31, 2019								0.6			0.6
Capital in excess of par value		555.7			547.4			553.7			555.7
Retained earnings		1,008.2			829.8			869.8			1,008.2
Treasury stock, at cost, 14,271,047 shares as of December 31, 2019 and 12,745,485 shares as of December 31, 2018		(823.5	)		(692.2	)
Treasury stock, at cost, 14,685,510 shares as of December 31, 2020 and 14,271,047 shares as of December 31, 2019								(863.9	)		(823.5	)
Accumulated other comprehensive (loss)		(376.1	)		(459.6	)		(109.3	)		(376.1	)
Total shareholders' equity		364.9			226.0			450.9			364.9
Total liabilities and shareholders' equity	$	1,493.3		$	1,838.3		$	1,718.5		$	1,493.3

See accompanying notes to consolidated financial statements beginning on page ~~43.~~46.

																Accumulated																							Accumulated
						Additional										Other											Additional												Other
	Common Stock					Paid-In		Retained			Treasury Stock					Comprehensive						Common Stock					Paid-In			Retained			Treasury Stock						Comprehensive
	Shares			Amount		Capital		Earnings			Shares		Amount			(Loss)			Total			Shares			Amount		Capital			Earnings			Shares			Amount			(Loss)			Total
December 31, 2016		54,428,233		$	0.6	$	504.9	$	469.9			6,168,907	$	(305.2	)	$	(403.8	)	$	266.4
Cumulative effect impact of ASU 2016-09 adoption		-			-		-		8.7											8.7
Stock issuance, net		185,596			-		-		-			-		-			-			-
Share-based employee compensation		-			-		11.4		-			-		-			-			11.4
Net earnings		-			-		-		119.6			-		-			-			119.6
Other comprehensive income		-			-		-		-			-		-			57.9			57.9
Separation of Armstrong Flooring, Inc.		-			-		0.5													0.5
Acquisition of treasury stock		(1,841,690	)		-		-		-			1,841,690		(80.4	)		-			(80.4	)
December 31, 2017		52,772,139		$	0.6	$	516.8	$	598.2			8,010,597	$	(385.6	)	$	(345.9	)	$	384.1			52,772,139		$	0.6	$	516.8		$	598.2			8,010,597		$	(385.6	)	$	(345.9	)	$	384.1

Cumulative effect impact of ASU 2018-02 adoption		-			-		-		54.3			-		-			(54.3	)		-			-			-		-			54.3			-			-			(54.3	)		-
Stock issuance, net		770,988			-		-		-			-		-			-			-			770,988			-		-			-			-			-			-			-
Cash dividends - $0.175 per common share		-			-		-		(8.6	)		-		-			-			(8.6	)		-			-		-			(8.6	)		-			-			-			(8.6	)
Share-based employee compensation		-			-		30.6		-			-		-			-			30.6			-			-		30.6			-			-			-			-			30.6
Net earnings		-			-		-		185.9			-		-			-			185.9			-			-		-			185.9			-			-			-			185.9
Other comprehensive (loss)		-			-		-		-			-		-			(59.4	)		(59.4	)		-			-		-			-			-			-			(59.4	)		(59.4	)
Acquisition of treasury stock		(4,734,888	)		-		-		-			4,734,888		(306.6	)		-			(306.6	)		(4,734,888	)		-		-			-			4,734,888			(306.6	)		-			(306.6	)
December 31, 2018		48,808,239		$	0.6	$	547.4	$	829.8			12,745,485	$	(692.2	)	$	(459.6	)	$	226.0			48,808,239		$	0.6	$	547.4		$	829.8			12,745,485		$	(692.2	)	$	(459.6	)	$	226.0

Cumulative effect impact of ASU 2017-12 adoption		-			-		-		(0.1	)		-		-			0.1			-			-			-		-			(0.1	)		-			-			0.1			-
Stock issuance, net		709,671			-		-		-			-		-			-			-			709,671			-		-			-			-			-			-			-
Cash dividends - $0.725 per common share		-			-		-		(36.0	)		-		-			-			(36.0	)		-			-		-			(36.0	)		-			-			-			(36.0	)
Share-based employee compensation		-			-		8.3		-			-		-			-			8.3			-			-		8.3			-			-			-			-			8.3
Net earnings		-			-		-		214.5			-		-			-			214.5			-			-		-			214.5			-			-			-			214.5
Other comprehensive income		-			-		-		-			-		-			83.4			83.4			-			-		-			-			-			-			83.4			83.4
Acquisition of treasury stock		(1,525,562	)		-		-		-			1,525,562		(131.3	)		-			(131.3	)		(1,525,562	)		-		-			-			1,525,562			(131.3	)		-			(131.3	)
December 31, 2019		47,992,348		$	0.6	$	555.7	$	1,008.2			14,271,047	$	(823.5	)	$	(376.1	)	$	364.9			47,992,348		$	0.6	$	555.7		$	1,008.2			14,271,047		$	(823.5	)	$	(376.1	)	$	364.9

Stock issuance, net																							335,936			-		-			-			-			-			-			-
Cash dividends - $0.810 per common share																							-			-		-			(39.3	)		-			-			-			(39.3	)
Share-based employee compensation																							-			-		2.0			-			-			-			-			2.0
Net (loss)																							-			-		-			(99.1	)		-			-			-			(99.1	)
Other comprehensive income																							-			-		-			-			-			-			266.8			266.8
Restricted stock issued to employees in connection with acquisition																							94,230			-		(4.0	)		-			(94,230	)		4.0			-			-
Acquisition of treasury stock																							(508,693	)		-		-			-			508,693			(44.4	)		-			(44.4	)
December 31, 2020																							47,913,821		$	0.6	$	553.7		$	869.8			14,685,510		$	(863.9	)	$	(109.3	)	$	450.9

See accompanying notes to consolidated financial statements beginning on page ~~43.~~46.

	Years Ended December 31,										Years Ended December 31,
	2019			2018			2017				2020			2019			2018
Cash flows from operating activities:
Net earnings	$	214.5		$	185.9		$	119.6
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net (loss) earnings											$	(99.1	)	$	214.5		$	185.9
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:										Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization		72.1			79.4			89.2				84.0			72.1			79.4
Loss on disposal of discontinued operations		31.2			19.3			109.3				16.4			31.2			19.3
Write-off debt refinancing fees		2.7			-			-
Write-off of debt refinancing fees												-			2.7			-
Gain related to sale of fixed and intangible assets												(21.0	)		-			-
Deferred income taxes		14.0			(3.8	)		(12.3	)			(89.3	)		14.0			(3.8	)
Share-based compensation		9.5			14.0			10.2				6.8			9.5			14.0
Equity earnings from joint venture		(96.6	)		(74.9	)		(67.0	)			(64.0	)		(96.6	)		(74.9	)
U.S. pension (credit)		(7.5	)		(26.3	)		(4.5	)
U.S. pension cost (credit)												367.7			(7.5	)		(26.3	)
Other non-cash adjustments, net		2.5			2.9			(0.4	)			0.9			2.5			2.9
Changes in operating assets and liabilities:
Receivables		(1.1	)		13.2			(37.1	)			12.7			(1.1	)		13.2
Inventories		(7.2	)		(8.9	)		3.6				(7.7	)		(7.2	)		(8.9	)
Other current assets		(6.9	)		9.4			2.2
Other non-current assets		2.1			(5.5	)		(1.6	)
Accounts payable and accrued expenses		(19.9	)		5.4			(20.0	)			(11.8	)		(19.9	)		5.4
Income taxes receivables and payables, net		(8.4	)		7.5			(18.8	)
Other long-term liabilities		(15.6	)		(14.4	)		(1.2	)
Other, net		(2.7	)		-			(0.8	)
Income taxes receivable and payable, net												35.2			(8.4	)		7.5
Other assets and liabilities												(12.0	)		(23.1	)		(10.5	)
Net cash provided by operating activities		182.7			203.2			170.4				218.8			182.7			203.2
Cash flows from investing activities:
Purchases of property, plant and equipment		(71.3	)		(71.9	)		(89.7	)			(55.4	)		(71.3	)		(71.9	)
Return of investment from joint venture		85.2			141.7			69.1				81.5			85.2			141.7
Cash paid for acquisitions		(56.4	)		(22.2	)		(31.2	)
Cash paid for acquisitions, net of cash acquired												(164.6	)		(56.4	)		(22.2	)
Proceeds from the sale of assets												21.7			-			-
Cash consideration received from Knauf		-			330.0			-				-			-			330.0
Payments of proceeds from Knauf to investment in joint venture		-			(70.0	)		-				(25.9	)		-			(70.0	)
Payments to Knauf upon disposal of discontinued operations		(47.9	)		-			-				(6.4	)		(47.9	)		-
Other investing activities		1.3			2.0			(2.4	)
Proceeds from company-owned life insurance, net												8.0			1.3			2.0
Net cash (used for) provided by investing activities		(89.1	)		309.6			(54.2	)			(141.1	)		(89.1	)		309.6
Cash flows from financing activities:
Proceeds from short-term debt												30.0			-			-
Payments of short-term debt												(30.0	)		-			-
Payments for finance leases												(1.8	)		-			-
Proceeds from revolving credit facility		185.0			-			103.0				290.0			185.0			-
Payments of revolving credit facility		(70.0	)		-			(103.0	)			(180.0	)		(70.0	)		-
Proceeds from long-term debt		500.0			-			-				-			500.0			-
Payments of long-term debt		(825.4	)		(32.5	)		(25.0	)			(6.3	)		(825.4	)		(32.5	)
Financing costs		(2.9	)		-			(0.6	)			-			(2.9	)		-
Dividend paid		(35.6	)		(8.6	)		-
Dividends paid												(39.2	)		(35.6	)		(8.6	)
(Payments) proceeds from share-based compensation plans, net of tax		(4.7	)		18.4			3.3				(4.8	)		(4.7	)		18.4
Payment for treasury stock acquired		(131.3	)		(306.6	)		(80.4	)
Net cash (used for) financing activities		(384.9	)		(329.3	)		(102.7	)
Payments for treasury stock acquired												(44.4	)		(131.3	)		(306.6	)
Net cash provided by (used for) financing activities												13.5			(384.9	)		(329.3	)
Effect of exchange rate changes on cash and cash equivalents		0.9			(7.4	)		4.2				0.4			0.9			(7.4	)
Net (decrease) increase in cash and cash equivalents		(290.4	)		176.1			17.7
Net increase (decrease) in cash and cash equivalents												91.6			(290.4	)		176.1
Cash and cash equivalents at beginning of year of discontinued operations		10.0			-			-				-			10.0			-
Cash and cash equivalents at beginning of year of continuing operations		325.7			159.6			141.9				45.3			325.7			159.6
Cash and cash equivalents at end of period		45.3			335.7			159.6				136.9			45.3			335.7
Cash and cash equivalents at end of period of discontinued operations		-			10.0			-				-			-			10.0
Cash and cash equivalents at end of period of continuing operations	$	45.3		$	325.7		$	159.6			$	136.9		$	45.3		$	325.7
Supplemental Cash Flow Disclosures:
Interest paid	$	33.1		$	29.9		$	30.7			$	24.1		$	33.1		$	29.9
Income tax payments, net		58.4			51.6			32.1				10.9			58.4			51.6
Amounts in accounts payable for capital expenditures		1.9			1.9			2.6				1.0			1.9			1.9

See accompanying notes to consolidated financial statements beginning on page ~~43.~~46.

Armstrong World Industries, Inc. (“AWI”) is a Pennsylvania corporation incorporated in 1891. When we refer to “AWI,” the “Company,” “we,” “our” and “us” in these notes, we are referring to AWI and its subsidiaries.

In December 2020, we acquired all of the issued and outstanding equity of Arktura LLC (“Arktura”) and certain subsidiaries with operations in the United States and Argentina. Arktura is a designer and fabricator of metal and felt ceilings, walls, partitions and facades with 1 manufacturing facility based in Los Angeles, California.

In July 2020, we acquired all of the issued and outstanding capital stock of TURF Design, Inc. (“Turf”), with 1 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.

In November 2019, we acquired the business and assets of MRK Industries, Inc. (“MRK”), based in Libertyville, Illinois. MRK is a manufacturer of specialty metal ceiling, wall and exterior solutions with 1 manufacturing facility. ~~MRK’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.~~

In March 2019, we acquired the business and assets of Architectural Components Group, Inc. (“ACGI”), based in Marshfield, Missouri. ACGI is a manufacturer of custom wood ceilings and walls with 1 manufacturing facility. ~~ACGI’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.~~

In August 2018, we acquired the business and assets of Steel Ceilings, Inc. (“Steel Ceilings”), based in Johnstown, Ohio. Steel Ceilings is a manufacturer of aluminum and stainless metal ceilings that include architectural, radiant and security solutions with 1 manufacturing facility. ~~Steel Ceilings’ operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.~~

The operations, ~~and its~~ assets and liabilities of these acquisitions are included ~~as a component of~~in our Architectural Specialties segment.

In January 2017, we acquired the business and assets of Tectum, Inc. (“Tectum”), based in Newark, Ohio. Tectum is a manufacturer of acoustical ceiling, wall and structural solutions for commercial building applications with2 manufacturing facilities. Tectum’s operations, and its assets and liabilities, are included as a component of our Architectural Specialties segment.

On July 18, 2018, we entered into an amendment to the Purchase Agreement, pursuant to which Knauf irrevocably and unconditionally paid AWI (i) $250.0 million of the purchase price on August 1, 2018, and (ii) $80.0 million of the purchase price on September 15, 2018, which payments were credited against the aggregate consideration payable at closing. The amendment also provided for the reduction (from a maximum of $35.0 million to a maximum of $20.0 million) of potential adjustments to the purchase price consideration for the transaction based on the impact of remedies required to satisfy competition conditions.~~Following receipt of these payments,~~ During 2020, we remitted $70.0 million to WAVE in partial consideration of the purchase price payable in respect of the businesses and operations of WAVE under the transaction. WAVE subsequently paid each of AWI and Worthington a dividend of $35.0 million. We have recorded a $25.9 million, ~~payable~~respectively, to WAVE for their remaining portion of the proceeds from Knauf. Also during 2020, WAVE paid each of AWI and Worthington dividends of $13.0 million relating to these payments. During the third quarter of 2020, we remitted $6.4 million to Knauf for working capital and other adjustments. In January 2021, we finalized the post-closing adjustments to purchase price related to certain pension liabilities assumed by Knauf in the Sale. During the fourth quarter of 2020, we recorded a $12.0 million loss primarily related to this purchase price adjustment, which is reflected within ~~Accounts~~accounts payable and accrued expenses ~~in the Consolidated Balance Sheets~~ as of December 31, ~~2019.~~2020.

In 2019, we entered into a Transition Services Agreement with Knauf for its benefit and the benefit of a buyer of certain businesses divested by Knauf, pursuant to which we provided certain transition technology, finance and information technology support services. The ~~transaction and final gain or loss amounts are subject to finalization of customary working capital and other adjustments, as provided~~Transition Services Agreement expired in 2020. In connection with the Purchase Agreement. For the year ended December 31, 2019, payments to Knauf included $61.0 million of adjustments to cash consideration, estimated working capital adjustments and remedies, offset by $13.1 million of additional cash in international WAVE entities.

~~On December 7, 2018, the European Commission granted conditional clearance~~closing of the ~~transaction, subject to~~Sale, we also entered into (i) a royalty-free intellectual property License Agreement with Knauf under which they, and the buyers of certain ~~commitments intended to address concerns regarding the overlap between the activities of AWI and Knauf, including the divestment~~businesses divested by Knauf, 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 purchase certain products from each other following the

On May 23, 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 during the period between March 18, 2019 and September 30, 2020.

~~On September 23, 2019, the European Commission approved the Sale, as well as the terms of the sale of the divestment business by Knauf and the identity of the purchaser.~~

In connection with the closing of the Sale, we also entered into (i) an intellectual property License Agreement with Knauf for its benefit (and, under sublicense, to the buyer of the divestment business) under which they license certain patents, trademarks and know-how from us for use in certain licensed territories, and (ii) a Supply Agreement with Knauf under which the parties may continue to purchase certain products from each other following the closing of the Sale. 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 COVID-19 outbreak has created significant volatility and economic disruption and the impact on our future consolidated results of operations is uncertain. The extent to which COVID-19 impacts our employees, operations, customers, suppliers and financial results depends on numerous evolving factors that we are not able to accurately predict, including: the duration and scope of the pandemic; government actions taken in response to the pandemic; the availability and distribution of vaccinations; the impact on construction activity; the effect on our customers demand for our ceiling and wall systems; our ability to manufacture and sell our products; and the ability of our customers to pay for our products. While many of our products support life sustaining activities and essential construction, we, and certain of our customers or suppliers, may be impacted by state actions, orders and policies regarding the COVID-19 pandemic, including temporary closures of non-life sustaining businesses, shelter-in-place orders, and travel, social distancing and quarantine policies, the implementation and enforcement of which vary by individual U.S. states and by individual countries in the Americas. We did not record any asset impairments, inventory charges or material bad debt reserves related to COVID-19 during 2020 but future events may require such charges, which could have a material adverse effect on our financial condition, liquidity or results of operations.

Consolidation Policy. The consolidated financial statements and accompanying data in this report include the accounts of AWI and its majority-owned subsidiaries. All significant intercompany transactions have been eliminated from the consolidated financial statements.

Use of Estimates. We prepare our financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. When preparing an estimate, management determines the amount based upon the consideration of relevant internal and external information. Actual results may differ from these estimates.

Reclassifications. Certain amounts in the prior year’s Consolidated Financial Statements and related notes have been recast to conform to the ~~2019~~2020 presentation.

~~Revision of Previously Issued Financial Statements~~. During the second quarter of 2019, we revised the Consolidated Financial Statements and related notes included herein to correct an immaterial error related to the previously reported estimated loss on sale of our EMEA and Pacific Rim businesses. The immaterial correction increased the estimated loss on sale and reduced the assets held for sale by $35.2 million as of December 31, 2017. Notes 1, 6 and 15 have been updated to reflect the restatement. The impacts of this error correction are as follows:

Revenue Recognition. On January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 - Revenue from Contracts with Customers and all the related amendments using the modified retrospective transition method. This adoption did not have a material impact on our financial condition, results of operations or cash flows as the amount and timing of substantially all of our revenues are recognized at a point in time.

We recognize revenue upon transfer of control of our products to the customer, which typically occurs upon shipment. Our main performance obligation to our customers is the delivery of products in accordance with purchase orders. Each purchase order confirms the transaction price for the products purchased under the arrangement. Direct sales to building materials distributors, home centers, direct customers and retailers represent the majority of our sales. Our standard sales terms are Free On Board (“FOB”) shipping point. We have some sales terms that are FOB destination. At the point of shipment, the customer is required to pay under normal sales terms. Our normal payment terms in most cases are 45 days or less and our sales arrangements do not have any material financing components. In addition, our customer arrangements do not produce contract assets or liabilities that are material to our consolidated financial statements. Within our Architectural Specialties segment, the majority of revenues are customer project driven, which includes a minority of revenues derived from the sale of customer specified customized products that have no alternative use to us. The manufacturing cycle for these custom products is typically short.

Incremental costs to fulfill our customer arrangements are expensed as incurred, as the amortization period is less than one year.

Our products are sold with normal and customary return provisions. We provide limited warranties for defects in materials or factory workmanship, sagging and warping, and certain other manufacturing defects. Warranties are not sold separately to customers. Our product warranties place certain requirements on the purchaser, including installation and maintenance in accordance with our written instructions. In addition to our warranty program, under certain limited circumstances, we will occasionally at our sole discretion provide a customer accommodation repair or replacement. Warranty repairs and replacements are most commonly made by professional installers employed by or affiliated with our independent distributors. Reimbursement for costs associated with warranty repairs are provided to our independent distributors through a credit against accounts receivable from the distributor to us. Sales returns and warranty claims have historically not been material and do not constitute separate performance obligations.

We often offer incentive programs to our customers, primarily volume rebates and promotions. The majority of our rebates are designated as a percentage of annual customer purchases. We estimate the amount of rebates based on actual sales for the period and accrue for the projected incentive programs costs. We record the costs of rebate accruals as a reduction to the transaction price. Other sales discounts, including early pay promotions, are deducted immediately from the sales invoice.

See Note 4 to the Consolidated Financial Statements for additional information related to our revenues.

Shipping and Handling Costs. We account for product shipping and handling costs as fulfillment activities and present the associated costs in costs of goods sold in the period in which we sell our product.

Research and Development Costs. We expense research and development costs as they are incurred.

Business Combinations.We account for acquisitions under the acquisition method and the results of acquired operations are included in the 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. Our definite-lived intangible assets, and adjustments to the fair value of assets acquired and/or liabilities assumed, are amortized over the estimated useful life on a straight-line basis and recorded as a component of operating income (expense). 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. Acquisition-related contingent consideration that is classified as a liability is measured at fair value at the acquisition date. Changes in the fair value of contingent consideration liabilities recorded in reporting periods after the acquisition date are recorded within selling, general and administrative (“SG&A”) expenses on our Consolidated Statements of Operations and Comprehensive Income.

Pension and Postretirement Benefits. We have benefit plans that provide for pension, medical and life insurance benefits to certain eligible employees when they retire from active service. See Note 18 to the Consolidated Financial Statements for disclosures on pension and postretirement benefits.

Taxes. The provision for income taxes has been determined using the asset and liability approach of accounting for income taxes to reflect the expected future tax consequences of events recognized in the financial statements. Deferred income tax assets and liabilities are recognized by applying enacted tax rates to temporary differences that exist as of the balance sheet date, which result from differences in the timing of reported taxable income between tax and financial reporting.

We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more likely than not standard, we give appropriate consideration to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability and foreign source income, the duration of statutory carryforward periods, and our experience with operating loss and tax credit carryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses is incurred for a tax jurisdiction, forecasts of future profitability are generally not used as positive evidence related to the realization of the deferred tax assets in the assessment.

Taxes collected from customers and remitted to governmental authorities are reported on a net basis.

Earnings per Share. Basic earnings per share is computed by dividing the earnings attributable to common shares by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflects the potential dilution of securities that could share in the ~~earnings.~~earnings and is calculated using the treasury stock method.

Cash and Cash Equivalents. Cash and cash equivalents include cash on hand and short-term investments that have maturities of three months or less when ~~purchased and restricted cash.~~purchased.

Concentration of Credit. We principally sell products to customers in building products ~~industries in various geographic regions.~~industries. Revenues from two commercial distributors, included within our Mineral Fiber and Architectural Specialties segments, individually exceeded 10% of our revenues in ~~2019.~~2020. Gross sales to these 2 customers totaled $370.3 million and $428.7 million in ~~2019.~~2020 and 2019, respectively. Revenues from 3three commercial distributors individually exceeded 10% of our revenues in ~~2018 and 2017.~~2018. Gross sales to these 3 customers totaled $459.3 million ~~and $426.1 million~~ in ~~2018 and 2017, respectively.~~2018. We monitor the creditworthiness of our customers and generally do not require collateral.

Receivables. On January 1, 2020, we adopted ASC 326 – Financial Instruments – Credit Losses. This adoption did not have a material impact on our financial condition, results of operations or cash flows.

We sell our products to select, pre-approved customers using customary trade terms that allow for payment in the future. Customer trade receivables, customer notes receivable and miscellaneous receivables (which include supply related rebates and other), net of allowances for doubtful accounts, customer credits and warranties are reported in accounts and notes receivable, net. Cash flows from the collection of receivables are classified as operating cash flows on the ~~consolidated statements~~Consolidated Statements of ~~cash flows.~~Cash Flows.

We establish ~~credit-worthiness~~creditworthiness prior to extending credit. We estimate the recoverability of receivables each period. This estimate is based upon new information in the period, which can include the review of any available financial statements and forecasts, as well as discussions with legal counsel and the management of the debtor company. As events occur, which impact the collectability of the receivable, all or a portion of the receivable is reserved. Account balances are charged off against the allowance when the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to our customers.

Inventories. Inventories are valued at the lower of cost and net realizable value. See Note 8 to the Consolidated Financial Statements for further information on our accounting for inventories.

Property Plant and Equipment. Property plant and equipment is recorded at cost reduced by accumulated ~~depreciation.~~depreciation and amortization. Depreciation and amortization expense is recognized on a straight-line basis over the assets’ estimated useful lives. Machinery and equipment includes manufacturing equipment (depreciated over 32 to 15 years), computer equipment (depreciated over 3 to 5 years) and office furniture and equipment (depreciated over 5 to 7 years). Within manufacturing equipment, assets that are subject to accelerated obsolescence or wear out quickly, such as dryer components, are generally depreciated over shorter periods ~~(3 to 7 years). Heavy~~while heavy production equipment, such as conveyors and production presses, are generally depreciated over longer ~~periods (13 to 15 years).~~periods. Buildings are depreciated over 15 to 30 years, depending on factors such as type of construction and use. Computer software is ~~depreciated~~amortized over 3 to 7 years.

Property, plant and equipment is tested for impairment by asset group when indicators of impairment are present, such as operating losses and/or negative cash ~~flows.~~flows for each identified asset group. If an indication of impairment exists, we compare the carrying amount of the asset group to the

estimated undiscounted future cash flows expected to be generated by the asset group. ~~The estimate of an asset group’s~~If the carrying value exceeds the undiscounted future cash flows, we determine the fair value isof the asset group based on discounted future cash flows expected to be generated by the asset group, or based on management’s estimated exit price assuming the assets could be sold in an orderly transaction between market participants, or estimated salvage value if no sale is assumed. If the fair value is less than the carrying value of the asset group, we record an impairment charge equal to the difference between the fair value and carrying value of the asset group. Impairments of assets related to our manufacturing operations are recorded in cost of goods sold. We did not test tangible assets within our continuing operations for impairment in 2020, 2019 or 2018 as no indicators of impairment existed.

When assets are disposed of or retired, their costs and related depreciation or amortization are removed from the financial statements, and any resulting gains or losses are normally ~~are~~ reflected in cost of goods sold or ~~selling, general and administrative (“~~SG~~&A”)~~&A expenses depending on the nature of the asset.

Leases.On January 1, 2019, we adopted ASC 842 - Leases and all the related amendments using the modified retrospective transition method. Upon adoption of this standard, we recognized right-of-use (“ROU”) assets and lease liabilities of $29.2 million based on the present value of the future minimum rental payments for our existing leases.

We enter into operating and finance leases for certain manufacturing plants, warehouses, equipment and automobiles. Our leases have remaining lease terms of up to 17 years. Several leases include options for us to purchase leased items at fair value or renew for up to 5 years, or multiple 5-year renewal periods. Some of our leases include early termination options. We consider all of these options in determining the lease term used to establish our ROU assets and lease liabilities when it is reasonably certain that we will exercise that option. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.

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.

Asset Retirement Obligations. We recognize the fair value of obligations associated with the retirement of tangible long-lived assets in the period in which they are incurred. Upon initial recognition of a liability, the discounted cost is capitalized as part of the related long-lived asset and depreciated over the corresponding asset’s useful life. Over time, accretion of the liability is recognized as an operating expense to reflect the change in the liability’s present value.

Goodwill and Intangible Assets. Our definite-lived intangible assets are primarily customer relationships (amortized over 31 to 20 years) ~~and~~, developed technology (amortized over 1513 to 19 years) and acquired internally-developed software (amortized over 7 years). We review ~~significant~~ definite-lived intangible assets for impairment by asset group when indicators of impairment ~~exist. We review our businesses for indicators of impairment~~are present, such as operating losses and/or negative cash ~~flows.~~flows for the respective asset group. If an indication of impairment exists, we compare the carrying amount of the asset group to the estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying value exceeds the undiscounted future cash flows, we determine the fair value of the asset group ~~is determined. The estimate of an asset group’s fair value is~~ based on discounted future cash flows expected to be generated by the asset group or based on management’s estimated exit price assuming the assets could be sold in an orderly transaction between market participants. If the fair value is less than the carrying value of the asset group, we record an impairment charge equal to the difference between the fair value and carrying value of the asset group. We did not test definite-lived intangible assets within our continuing operations for impairment in 2020, 2019 or 2018 as no indicators of impairment existed.

Our indefinite-lived assets include goodwill and other intangibles, primarily trademarks and brand names, with Armstrong representing our primary trademark. Trademarks and brand names are integral to our corporate identity and are expected to contribute indefinitely to our cash flows. Accordingly, they have been assigned an indefinite life. We conduct our annual impairment tests on these indefinite-lived intangible assets and goodwill during the fourth quarter. These assets undergo more frequent tests if an indication of possible impairment exists. When performing an impairment test for indefinite-lived intangible assets and goodwill, we compare the carrying amount of the asset (when testing indefinite-lived intangible assets) and reporting unit (when testing goodwill) to the estimated fair value. For indefinite-lived intangible assets, the estimated fair value is based on discounted future cash flows using the relief from royalty method. For goodwill, the estimated fair value is based on discounted future cash flows expected to be generated by the reporting unit. If the fair value is less than the carrying value of the asset/reporting unit, we record an impairment charge equal to the difference between the fair value and carrying value of the asset/reporting unit.

The principal assumptions used in our impairment tests for definite-lived intangible assets is operating profit adjusted for depreciation and amortization and, if required to estimate the fair value, the discount rate. The principal assumptions used in our impairment tests for We did not test indefinite-lived intangible assets ~~include revenue growth rate, discount rate~~within our continuing operations for impairment during any interim periods during 2020, as no indicators of impairment existed. We completed our annual impairment test in the fourth quarter of 2020 and ~~royalty rate. The principal assumptions utilized in our~~0 impairment tests for goodwill include after-tax cash flows growth rates and discount rate. Revenue growth rates, after-tax cash flows growth rates and operating profit assumptions are derived from those used in our operating plan and strategic planning processes. The discount rate assumption is calculated based upon an estimated weighted average cost of capital which reflects the overall level of inherent risk and the rate of return a market participant would expect to achieve. The royalty rate assumption represents the estimated contribution of the intangible assets to the overall profits of the related businesses. Methodologies used for valuing our intangible assets did not change from prior periods.charges were recorded.

See Note 13 to the Consolidated Financial Statements for disclosure on intangible assets.

Foreign Currency Transactions. Assets and liabilities of our subsidiaries operating outside the United States which are accounted in a functional currency other than U.S. dollars are translated using the period end exchange rate. Revenues and expenses are translated at exchange rates effective during each month. Foreign currency translation gains or losses are included as a component of accumulated other comprehensive (loss) within shareholders' equity. Gains or losses on foreign currency transactions are recognized through earnings.

Financial Instruments and Derivatives. From time to time, we use derivatives and other financial instruments to offset the effect of interest rate variability. Derivatives are recognized on the balance sheet at fair value. For derivatives that meet the criteria as designated cash flow hedges, the changes in the fair value of the derivative are recognized in other comprehensive income (loss) until the hedged item is recognized in operations. See Notes 19 and 20 to the Consolidated Financial Statements for further discussion.

Share-based Employee Compensation. We generally recognize share-based compensation expense on a straight-line basis over the vesting period for the entire award. Compensation expense for performance-based awards with non-market-based conditions are also recognized over the vesting period for the entire award, however, compensation expense may vary based on the expectations for actual performance relative to defined performance measures. We estimate forfeitures based on actual historical forfeitures. See Note 22 to the Consolidated Financial Statements for additional information on share-based employee compensation.

Treasury Stock. Common shares repurchased by AWI are recorded on the settlement date at cost as treasury shares and result in a reduction of equity. We may reissue these treasury shares. When treasury shares are reissued, we determine the cost using the First-in, first-out cost method (“FIFO”). The difference between the cost of the treasury shares and reissuance price is included in additional paid-in capital or retained earnings.

Subsequent Events. On February ~~19, 2020,~~17, 2021, our Board of Directors declared a dividend of ~~$0.20~~$0.21 per common share outstanding. The dividend will be paid on March ~~20, 2020,~~18, 2021, to shareholders of record as of the close of business on March ~~5, 2020.~~

On February 20, 2020, we entered into a commitment agreement with a third-party insurance company to partially settle approximately $1.0 billion of retiree benefit obligations under our Retirement Income Plan (“RIP”). See Note 18 to the Consolidated Financial Statements for further information.4, 2021.

~~In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,~~ ~~“Leases,”~~ which amends accounting for leases, most notably by requiring a lessee to recognize the assets and liabilities that arise from a lease agreement. Specifically, this new guidance requires lessees to recognize a liability to make lease payments and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term, with limited exceptions.

~~In January 2018, the FASB issued ASU 2018-01,~~ ~~“Land Easement Practical Expedient for Transition to Topic 842,”~~ which permits an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that exist at transition or expired before the adoption of Topic 842 and that were not previously accounted for as leases under Topic 840. In July 2018, the FASB issued ASU 2018-10, ~~“Codification Improvements to Topic 842, Leases,”~~ ~~which affects narrow aspects of the guidance issued in the amendments in Update 2016-02. In July 2018, the FASB also issued ASU 2018-11,~~ ~~“Targeted Improvements,”~~ which allows companies to adopt ASC Topic 842 without revising comparative period reporting or disclosures and provides an optional practical expedient for lessors to not separate lease and non-lease components of a contract when certain criteria are met.

Effective January 1, 2019, we adopted these standards using the modified retrospective transition method and have applied all practical expedients related to leases existing at the date of initial application. Upon adoption, the most significant change was to the Consolidated Balance Sheet related to the recognition of new ROU assets and lease liabilities on a continuing operations basis. Upon adoption we recognized ROU assets and lease liabilities of $29.2 million, based on the present value of the future minimum rental payments for existing operating leases. We have 0 leases that classify as financing arrangements. As required by the lease ASC updates, we expanded our disclosure of leases. See Note 12 for additional information.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,”~~ which amends the financial reporting of hedging relationships in order to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the guidance simplifies the application of current hedge accounting guidance. Effective January 1, 2019, we adopted the guidance, which had no material impact on our financial condition, results of operations or cash flows.

~~In June 2018, the FASB issued ASU 2018-07,~~ ~~“Improvements to Nonemployee Share-Based Payment Accounting,”~~ which simplifies the aspects of accounting for nonemployee share-based payment transactions resulting from expanding the scope of ASC Topic 718 – Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from non-employees. Effective January 1, 2019, we adopted this standard using the modified retrospective transition method. Our adoption of this standard ~~had no material impact on our financial condition, results of operations or cash flows.~~

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," which requires immediate recognition of estimated credit losses that are expected to occur over the remaining life of many financial assets. This standard applies to all financial assets, including trade receivables. Our current accounts receivable policy uses historical and current information to

estimate the amount of probable credit losses in our existing accounts receivable balances. ~~This new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2019. The adoption of~~Effective January 1, 2020, we adopted this standard, ~~will not have a~~which had no material impact on our financial condition, results of operations or cash flows.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other,” which simplifies the subsequent measurement of goodwill by eliminating the second step from the current goodwill impairment test. Under this standard, an entity ~~would recognize~~recognizes an impairment charge for the amount by which the carrying value of the reporting unit goodwill exceeds the fair value. ~~This new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2019. The~~Effective January 1, 2020, we adopted this standard prospectively. Our adoption of this standard ~~will not have a material~~had no impact on our financial condition or results of operations.

In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This standard eliminates the ~~current~~ requirement to disclose the amount or reason for transfers between level 1 and level 2 of the fair value hierarchy and the requirement to disclose the valuation methodology for level 3 fair value measurements. 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. ~~This new guidance is effective for annual and interim periods beginning after December 15, 2019~~. ~~The adoption of~~Effective January 1, 2020, we adopted this standard, ~~will not have a material impact on our disclosures.~~which resulted in additional disclosures for level 3 fair value measurements.

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 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. The new disclosure requirements include the interest crediting rates for cash balance plans, and an explanation of significant gains and losses related to changes in benefit obligations. ~~This guidance is effective for fiscal years ending after December 15, 2020. We are evaluating~~Effective the ~~impact the adoption~~fourth quarter of 2020, we adopted this standard ~~will have on~~which resulted in changes to our disclosures.

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. The

ASU requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if these costs were capitalized by the customer in a software licensing arrangement. ~~This guidance is effective for fiscal years beginning after December 15, 2019.~~ ~~The~~Effective January 1, 2020, we adopted this standard prospectively. Our adoption of this standard ~~will not have a~~ had no material impact on our financial condition, results of operations or cash flows.

In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates. This guidance is effective through December 31, 2022. Effective the second quarter of 2020 we adopted this standard, which had no impact on our financial condition, results of operations and cash flows.

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 losses that exceed projected losses. This guidance is effective for fiscal years beginning after December 15, 2020. We are evaluating the impact the adoption of this standard will have on our financial condition and results of operations.

Our operating segments are as follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate.

Mineral Fiber – produces suspended mineral fiber and soft fiber ceiling systems for use in commercial and residential settings. Products offer various performance attributes such as acoustical control, rated fire protection, aesthetic appeal and ~~aesthetic appeal.~~health attributes. Commercial ceiling products are sold to resale distributors and to ceiling systems contractors. Residential ceiling products are sold primarily to wholesalers and retailers (including large home centers). The Mineral Fiber segment also includes the results of WAVE, which manufactures and sells suspension system (grid) products and ceiling component products that are invoiced by both AWI and WAVE. Segment results relating to WAVE consist primarily of equity earnings and reflect our 50% equity interest in the joint venture. Ceiling component products consist of ceiling perimeters and trim, in addition to grid products that support drywall ceiling systems. To a lesser extent, however, in some geographies and for some customers, WAVE sells its suspension systems products to AWI for resale to customers. Mineral Fiber segment results reflect those sales transactions. The Mineral Fiber segment also includes all assets and liabilities not specifically allocated to our Architectural Specialties or Unallocated Corporate segment, including all property and related depreciation associated with our Lancaster, PA headquarters. Operating results for the Mineral Fiber segment include a

significant majority of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations.

Architectural Specialties – produces and sources ceilings and walls for use in commercial settings. Products are available in numerous materials, such as metal and wood, in addition to various colors, shapes and designs. Products offer various performance attributes such as acoustical control, rated fire protection and aesthetic appeal. We sell standard and customized products, ~~with the majority~~and a portion of our Architectural Specialties revenues are derived from sourced products. Architectural Specialties products are sold primarily to resale distributors and ceiling systems contractors. The majority of revenues are project driven, which can lead to more volatile sales patterns due to project scheduling uncertainty. Operating results for the Architectural Specialties segment include a ~~minor~~ portion of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support its operations.

Unallocated Corporate – includes assets, liabilities, income and expenses that have not been allocated to our other business segments and ~~consist of:~~consists of cash and cash equivalents, the net funded status of our U.S. Retirement Income Plan (“RIP”), the estimated fair value of interest rate swap contracts, outstanding borrowings under our senior credit facility and income tax balances. Our Unallocated Corporate segment also includes all assets, liabilities, income and expenses formerly reported in our EMEA and Pacific Rim segments that were not included in the Sale.

For the year ended 2019

Mineral Fiber

Architectural Specialties

Unallocated
Corporate

Total

Net sales to external customers

$
826.6

$
211.5

$
-

$
1,038.1

Equity (earnings) from joint venture

(96.6
)

-

-

(96.6
)
Segment operating income (loss)

289.6

35.9

(8.1
)

317.4

Segment assets

1,139.9

161.8

191.6

1,493.3

Depreciation and amortization

62.9

8.8

0.4

72.1

Investment in joint venture

58.5

-

-

58.5

Purchases of property, plant and equipment ⁽¹⁾

59.5

8.8

-

68.3

For the year ended 2018

Mineral Fiber

Architectural Specialties

Unallocated
Corporate

Total

Net sales to external customers

$
801.6

$
173.7

$
-

$
975.3

Equity (earnings) from joint venture

(74.9
)

-

-

(74.9
)
Segment operating income (loss)

223.8

34.3

(8.7
)

249.4

Segment assets

1,096.1

84.7

413.2

1,594.0

Depreciation and amortization

75.3

3.5

0.6

79.4

Investment in joint venture

40.8

-

-

40.8

Purchases of property, plant and equipment ⁽¹⁾

60.5

4.1

-

64.6

For the year ended 2017

Mineral Fiber

Architectural Specialties

Unallocated
Corporate

Total

Net sales to external customers

$
756.4

$
137.2

$
-

$
893.6

Equity (earnings) from joint venture

(67.0
)

-

-

(67.0
)
Segment operating income (loss)

233.5

27.7

(17.4
)

243.8

Segment assets

1,193.5

53.2

320.7

1,567.4

Depreciation and amortization⁽¹⁾

59.2

1.8

6.0

67.0

Investment in joint venture

107.3

-

-

107.3

Purchases of property, plant and equipment ⁽¹⁾

76.1

1.6

-

77.7

For the year ended 2020	Mineral Fiber			Architectural Specialties		Unallocated Corporate			Total
Net sales to external customers	$	726.0		$	210.9	$	-		$	936.9
Equity (earnings) from joint venture		(64.0	)		-		-			(64.0	)
Segment operating income		218.7			22.3		13.8			254.8
Segment assets		1,101.1			357.7		259.7			1,718.5
Depreciation and amortization		71.8			12.2		-			84.0
Investment in joint venture		41.2			-		-			41.2
Purchases of property, plant and equipment		45.5			9.9		-			55.4

For the year ended 2019	Mineral Fiber			Architectural Specialties		Unallocated Corporate			Total
Net sales to external customers	$	826.6		$	211.5	$	-		$	1,038.1
Equity (earnings) from joint venture		(96.6	)		-		-			(96.6	)
Segment operating income (loss)		289.6			35.9		(8.1	)		317.4
Segment assets		1,139.9			161.8		191.6			1,493.3
Depreciation and amortization		62.9			8.8		0.4			72.1
Investment in joint venture		58.5			-		-			58.5
Purchases of property, plant and equipment ⁽¹⁾		59.5			8.8		-			68.3

For the year ended 2018	Mineral Fiber			Architectural Specialties		Unallocated Corporate			Total
Net sales to external customers	$	801.6		$	173.7	$	-		$	975.3
Equity (earnings) from joint venture		(74.9	)		-		-			(74.9	)
Segment operating income (loss)		223.8			34.3		(8.7	)		249.4
Segment assets		1,096.1			84.7		413.2			1,594.0
Depreciation and amortization		75.3			3.5		0.6			79.4
Investment in joint venture		40.8			-		-			40.8
Purchases of property, plant and equipment ⁽¹⁾		60.5			4.1		-			64.6

Segment operating income (loss) is the measure of segment profit or loss reviewed by the chief operating decision maker. The sum of the segments’ operating income (loss) equals the total consolidated operating income as reported on our Consolidated Statements of ~~Earnings~~Operations and Comprehensive Income. The following reconciles our total consolidated operating income to (loss) earnings from continuing operations before income taxes. These items are only measured and managed on a consolidated basis:

	2019			2018			2017			2020			2019			2018
Total consolidated operating income	$	317.4		$	249.4		$	243.8		$	254.8		$	317.4		$	249.4
Interest expense		38.4			39.2			35.4			24.1			38.4			39.2
Other non-operating (income), net		(20.4	)		(32.5	)		(13.7	)
Earnings from continuing operations before income taxes	$	299.4		$	242.7		$	222.1
Other non-operating expense (income), net											357.4			(20.4	)		(32.5	)
(Loss) earnings from continuing operations before income taxes										$	(126.7	)	$	299.4		$	242.7

Accounting policies of the segments are the same as those described in the summary of significant accounting policies.

~~The sales in the table below are allocated to geographic areas based on the location of our selling entities.~~

~~Impairment testing of our tangible assets occurs whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable.~~

The sales in the table below are allocated to geographic areas based on the location of our selling entities.

During 2020, we recorded a $21.0 million gain related to the sale of our idled mineral fiber plant in China, inclusive of accumulated foreign currency translation gains.

In connection with the 2018 closing of our St. Helens, Oregon Mineral Fiber manufacturing facility we recorded $14.1 million in 2018 in cost of goods sold related to accelerated depreciation of property, plant and equipment. ~~In 2017, we recorded $4.0 million in cost of goods sold related to accelerated depreciation of property, plant and equipment within our Mineral Fiber segment.~~

In September 2017, we made the decision to permanently close a previously idled plant in China. As a result, during 2017 we recorded $5.6 million in cost of goods sold for accelerated depreciation of machinery and equipment.

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. We disaggregate revenue based on our product-based segments and major customer channels, as they represent the most appropriate depiction of how the nature, amount and timing of revenues and cash flows are affected by economic factors. Net sales by major customer channel are as follows:

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. Geographically, this category includes sales throughout the U.S., Canada, and Latin America.

Home centers – represents net sales to home centers, such as Lowe’s Companies, Inc. and The Home Depot, Inc. This category includes sales primarily to U.S. customers.

Direct customers – represents net sales to contractors, subcontractors, and large architect and design firms. This category includes sales primarily to U.S. customers.

Retailers and other – represents net sales to independent retailers and certain national account customers, including wholesalers who re-sell our products to dealers who service builders, contractors and consumers, online customers, major facility owners, group purchasing organizations and maintenance, repair and operating ~~(MRO)~~(“MRO”) entities. Geographically, this category includes sales throughout the U.S. and Canada.

The following tables provide net sales by major customer group within the Mineral Fiber and Architectural Specialties segments for the years ended December 31, 2020, 2019 ~~2018~~ and ~~2017:~~2018:



Mineral Fiber	2019		2018		2017		2020		2019		2018
Distributors	$	622.9	$	601.4	$	563.3	$	525.2	$	622.9	$	601.4
Home centers		85.2		84.0		82.2		96.1		85.2		84.0
Direct customers		61.2		60.3		62.1		54.3		61.2		60.3
Retailers and other		57.3		55.9		48.8		50.4		57.3		55.9
Total	$	826.6	$	801.6	$	756.4	$	726.0	$	826.6	$	801.6



Architectural Specialties	2019		2018		2017		2020		2019		2018
Distributors	$	138.3	$	129.8	$	111.5	$	135.5	$	138.3	$	129.8
Direct customers		68.0		36.7		22.3		73.3		68.0		36.7
Retailers and other		5.2		7.2		3.4		2.1		5.2		7.2
Total	$	211.5	$	173.7	$	137.2	$	210.9	$	211.5	$	173.7

On December 16, 2020, we acquired all the issued and outstanding equity of Arktura LLC (“Arktura”) and its subsidiaries with operations in the United States and Argentina for $90.6 million of cash paid at closing, net of $0.8 million of cash acquired, subject to customary post-closing adjustments for working capital. A portion of the cash consideration paid at closing is being held in escrow to secure potential claims for indemnification under the agreement. Under the terms of the agreement, and contingent upon continued employment with AWI over the next five years, we are obligated to pay the sellersan additional $24.0 million in cash payments over a period of five years and issued an additional $6.0 million of restricted stock which will vest over a period of five years. Contingent upon employment with AWI over the next three years, we also issued an additional $1.4 million of restricted stock to key Arktura employees which will vest over a period of three years. Compensation expense associated with these cash payments and restricted stock awards will be recorded over the required service and vesting periods.

The total fair value of tangible assets acquired, less liabilities assumed, was $4.1 million. The total fair value of identifiable intangible assets acquired was $36.2 million, resulting in $51.1 million of goodwill. We identified non-amortizable tradenames of $14.5 million. We also identified amortizable intangible assets comprised of software of $9.1 million, backlog of $5.9 million, customer relationships of $3.3 million, a non-compete agreement of $2.8 million and patents of $0.6 million that are being amortized on a straight-line basis over a weighted average life of 7, 1, 1, 5, and 17 years, respectively. The weighted average amortization period for acquired intangible assets as of the date of acquisition was 4.3 years. Goodwill from the Arktura acquisition relates to many factors, including the technical competencies and capabilities of the acquired workforce in the fields of architecture, design, materials science, technology and software, and our strategic intent to integrate and leverage those competencies and capabilities to advance and expand our portfolio of solutions and offerings. All of the acquired goodwill is deductible for tax purposes.

Valuations for assets acquired and liabilities assumed are based on provisional estimates. We will continue to evaluate the fair value of assets acquired and liabilities assumed related to the acquisition. Additional information, which existed as of the acquisition date, but was at that time unknown to us, may become known during the remainder of the measurement period. Changes to amounts recorded may result in a corresponding adjustment to these assets and liabilities, including goodwill. The determination of the estimated fair values of all assets acquired and liabilities assumed is expected to be completed within one year from the date of acquisition.

~~NOTE 5. ACQUISITIONS~~In connection with the Arktura acquisition, we formed Arktura Ventures LLC, an incubator entity for the development and commercialization of new products and solutions in the architecture, engineering and construction space. As of December 31, 2020, the venture entity had no funding or operations.

On August 24, 2020, we acquired the business and assets of Moz for $4.2 million of cash paid at closing and the potential for a contingent earn out payable in 2022 not to exceed $4.7 million. We, with the assistance of an independent, third-party valuation specialist, utilized a Monte Carlo simulation to determine the estimated fair value of the contingent consideration of $2.7 million, resulting in total acquisition consideration of $6.9 million. The total fair value of liabilities assumed, less tangible assets acquired, was $0.4 million. The total fair value of identifiable intangible assets acquired was $2.7 million, comprised of non-amortizable tradenames of $1.5 million, amortizable customer relationships of $0.6 million and backlog of $0.6 million, resulting in $4.6 million of goodwill. All of the acquired goodwill is deductible for tax purposes. The contingent consideration is payable upon achievement of certain future performance objectives through December 31, 2021. See Note 19 for changes in fair value of contingent consideration.

On July 27, 2020, we acquired all the issued and outstanding capital stock of Turf for a purchase price of $70.0 million of cash paid at closing and the potential for a contingent earn out payable in 2022 and 2023 not to exceed $48.0 million. We, with the assistance of an independent, third-party valuation specialist, utilized a Monte Carlo simulation to determine the estimated fair value of the contingent consideration of $14.1 million, resulting in total acquisition consideration of $84.1 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, resulting in $51.4 million of goodwill. We identified non-amortizable tradenames of $9.6 million. We also identified amortizable intangible assets comprised of customer relationships of $7.7 million, patents of $5.8 million and a non-compete agreement of $3.3 million that are being amortized on a straight-line basis over a weighted average life of 2, 20, and 5 years, respectively. The weighted average amortization period for acquired intangible assets as of the date of acquisition was 8.3 years. Goodwill from the Turf acquisition relates to many factors, including the design talents of the acquired workforce, fabrication capabilities and capacity, broad-based go-to-market channels and relationships, established leadership in a growing product category, and our strategic intent to leverage its position and attributes to grow and expand our portfolio of solutions. All of the acquired goodwill is deductible for tax purposes.

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 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 December 31, 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 December 31, 2022. See Note 19 for changes in fair value of contingent consideration.

On November 25, 2019, we acquired the business and assets of MRK. The ~~$13.5~~$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 ~~$2.8~~$2.9 million, resulting in ~~$10.7~~$10.4 million of goodwill. All of the acquired goodwill is deductible for tax purposes.~~These amounts are subject to adjustment in connection with our ongoing purchase accounting analysis.~~

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 ~~$8.3~~$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 ~~$22.6~~$23.6 million of goodwill. All of the acquired goodwill is deductible for tax purposes. ~~These~~

(dollar amounts ~~are subject to adjustment~~ in ~~connection with our ongoing purchase accounting analysis.~~millions, except share data)

On August 16, 2018, we acquired the business and assets of Steel Ceilings. The $12.3 million purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values, with the remaining amount recorded as goodwill. In October 2018, we sold certain assets related to an acquired product line to WAVE for $2.0 million. The total fair value of tangible assets acquired, less liabilities assumed, was $4.4 million. The total fair value of identifiable intangible assets acquired was mostly comprised of amortizable customer relationships of $1.4 million and tradenames of $1.3 million, resulting in $3.2 million of goodwill. All of the acquired goodwill is deductible for tax purposes.

On May 31, 2018, we acquired the business and assets of Plasterform. The $11.9 million purchase price was allocated to the assets acquired and the liabilities assumed based on their estimated fair values, with the remaining amount recorded as goodwill. The total fair value of tangible assets acquired, less liabilities assumed, was $2.2 million. The total fair value of identifiable intangible assets acquired, comprised of amortizable customer relationships, was $4.8 million, resulting in $4.9 million of goodwill. All of the acquired goodwill is deductible for tax purposes.

OnThe following table summarizes aggregate audited as reported information and aggregate unaudited pro forma information assuming the acquisitions of Arktura, Moz and Turf had occurred on January ~~13, 2017, in connection~~1, 2018. The unaudited pro forma results include the depreciation and amortization associated with the ~~acquisition of Tectum, the $31.2 million purchase price was allocated~~acquired assets, compensation expense related to ~~the tangible~~cash payments and intangible 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, in connection with the Tectum acquisition was $4.4 million. The total fair value of intangible assets acquired, comprised of amortizable customer relationships and non-amortizing brand names, was $16.0 million, resulting in $10.8 million of goodwill. Allequity awards granted to employees of the acquired ~~goodwill is deductible~~companies and adjustments to revenue for ~~tax purposes.~~the purchase accounting effects of recording deferred revenue at fair value. In addition, the unaudited pro forma results do not include any expected benefits of the acquisitions. Accordingly, the unaudited pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of January 1, 2018.

For the year ended December 31, 2020, net sales of $18.2 million and net earnings of $0.4 million from Arktura, Moz and Turf were included in our Consolidated Statements of Operations and Comprehensive Income since the acquisition dates.

The ~~2017,~~2019 and 2018 ~~and 2019~~ acquisitions, both individually and in the aggregate, did not have a material impact on reported net sales or ~~operating income~~net earnings for the years ended December 31, 2019 ~~2018~~ and ~~2017.~~2018.

On November 17, 2017, we agreed to sell certain subsidiaries comprising our businesses in EMEA and the Pacific Rim to Knauf. The Sale was completed on September 30, 2019.

Prior to completion of the Sale, each quarter, we compared the anticipated sales proceeds from Knauf to the carrying value of EMEA and Pacific Rim net assets. We recorded an estimated loss when the carrying value exceeded the anticipated sales proceeds. Net gains were only recorded to the extent of previous estimated losses. ~~Upon completion~~

We recorded an estimated loss on sale of $31.2 million and $19.3 million in 2019 and 2018, respectively. In 2020, we recorded a loss of $17.2 million, primarily related to an $11.4 million purchase price adjustment related to certain pension liabilities included in the Sale in addition to working capital and other adjustments.

See Note 1 for further discussion of the ~~Sale, we compared the actual proceeds we received from Knauf to the carrying value of EMEA and Pacific Rim net assets, and recorded an additional loss. In 2017, we recorded~~Sale.

an estimated loss of $74.0 million, which included $51.4 million of unfavorable Accumulated Other Comprehensive Income (“AOCI”) adjustments. In 2018, we recorded an estimated loss of $19.3 million, which included $25.5 million of unfavorable AOCI adjustments. During the second quarter of 2019, we recorded an immaterial correction related to the previously reported estimated loss on sale of our EMEA and Pacific Rim businesses. The correction increased the estimated loss on sale and reduced the assets held for sale by $35.2 million as of December 31, 2017. In 2019, we recorded a net loss of $31.2 million, which included $6.8 million of unfavorable AOCI adjustments. The AOCI adjustments related primarily to accumulated foreign currency translation amounts that were reclassified from AOCI as of September 30, 2019. The transaction and final gain or loss amount are subject to finalization of customary working capital and other adjustments, as provided in the Purchase Agreement.

On April 1, 2016, we completed our separation of Armstrong Flooring, Inc. (“AFI”) by allocating the assets and liabilities related primarily to our Resilient and Wood Flooring segments to AFI and then distributing the common stock of AFI to our shareholders at a ratio of one share of AFI common stock for every two shares of AWI common stock. ~~The income tax benefit presented~~

During 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 ~~table below for the year ended December 31, 2019 relates primarily~~second quarter of 2020. The AOCI adjustments related to ~~the release of a reserve for the 2015 tax year.~~

In connection with the separation and distribution of AFI, we entered into several agreements with AFI that, together with a plan of division, provide for the separation and allocation between AWI and AFI of the flooring assets, employees, liabilities and obligations of AWI and its subsidiaries attributable to periods prior to, at and after AFI’s separation from AWI, and governed the relationship between AWI and AFI subsequent to the completion of the separation and distribution. These agreements included a Tax Matters Agreement, an Employee Matters Agreement, a Trademark License Agreement, a Transition Trademark License Agreement and a Campus Lease Agreement.accumulated foreign currency translation amounts.

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

The following is a summary of the carrying amount of the major classes of assets and liabilities classified as assets and liabilities of discontinued operations as of December 31, 2018 related to our former EMEA and Pacific Rim businesses.

The following is a summary of total ~~depreciation~~gains and ~~amortization, estimated~~ losses, capital expenditures and operating lease information related to our former EMEA and Pacific Rim businesses through the date of disposal, 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 Consolidated Statements of Cash Flows:

	December 31, 2019			December 31, 2018			December 31, 2020			December 31, 2019
Customer receivables	$	82.4		$	70.4		$	77.9		$	82.4
Miscellaneous receivables		5.0			11.5			4.0			5.0
Less allowance for warranties, discounts and losses		(2.3	)		(2.0	)		(3.6	)		(2.3	)
Accounts and notes receivable, net	$	85.1		$	79.9		$	78.3		$	85.1

We sell our products to select, pre-approved customers whose businesses are affected by changes in economic and market conditions. We consider these factors and the financial condition of each customer when establishing our allowance for losses from doubtful accounts.

Miscellaneous receivables included proceeds from company-owned life insurance policies of $3.2 million and $0.8 million as of December 31, 2020 and 2019, respectively. Miscellaneous receivables as of December 31, ~~2018~~2019 also included ~~$6.5~~$2.5 million of ~~insurance recoveries~~amounts due from Knauf related to ~~environmental matters, which~~our Transaction Services Agreement that were collected during ~~the first quarter of 2019. See Note 27 for additional information.~~ 2020.

	December 31, 2019			December 31, 2018			December 31, 2020			December 31, 2019
Finished goods	$	40.2		$	38.8		$	44.6		$	40.2
Goods in process		4.0			4.4			5.5			4.0
Raw materials and supplies		35.0			27.8			42.3			35.0
Less LIFO reserves		(10.7	)		(9.8	)		(10.9	)		(10.7	)
Total inventories, net	$	68.5		$	61.2		$	81.5		$	68.5

Approximately ~~73%~~69% and ~~76%~~73% of our total inventory in ~~2019~~2020 and ~~2018,~~2019, respectively, were valued on a Last-in, first-out (“LIFO”) basis.

The distinction between the use of different methods of inventory valuation is primarily based on type of inventory, legal entities and/or geographical locations. The following table summarizes the amount of inventory that is not accounted for under the LIFO method.

	December 31, 2019		December 31, 2018		December 31, 2020		December 31, 2019
U.S. locations	$	15.3	$	11.8	$	22.5	$	15.3
Canada locations		3.2		2.9		3.0		3.2
Total	$	18.5	$	14.7	$	25.5	$	18.5

U.S. locations above generally use the weighted average cost method of inventory valuation and primarily represent certain finished goods sourced from third party suppliers and certain entities within our Architectural Specialties segment, most notably recent acquisitions, that also use the weighted average cost method given the nature of the inventory.

Our Canadian locations use the ~~First-in, first-out (“FIFO”)~~FIFO method of inventory valuation (or other methods which closely approximate the FIFO method) primarily because the LIFO method is not permitted for local tax and/or statutory reporting purposes. In these situations, a conversion to LIFO would be highly complex and involve excessive cost and effort to achieve under local tax and/or statutory reporting requirements. ~~U.S. locations that use the FIFO method of inventory valuation primarily represent certain finished goods sourced from third party suppliers and recent acquisitions.~~

	December 31, 2019		December 31, 2018		December 31, 2020		December 31, 2019
Prepaid expenses	$	7.5	$	4.1	$	12.0	$	7.5
Assets held for sale		6.6		-		-		6.6
Other		1.4		0.7		0.8		1.4
Total other current assets	$	15.5	$	4.8	$	12.8	$	15.5

58As of December 31, 2019, assets held for sale included the property, plant and equipment of our idle mineral fiber plant in China, which was sold in 2020.

As of December 31, 2019, assets held for sale include the property, plant and equipment of our idle mineral fiber plant in China, as we entered into a sale agreement during the third quarter of 2019 with closing expected in the second quarter of 2020.

	December 31, 2019			December 31, 2018			December 31, 2020			December 31, 2019
Land	$	32.6		$	32.4		$	33.3		$	32.6
Buildings		239.5			232.5			255.5			239.5
Machinery and equipment		624.8			575.4			645.7			624.8
Computer software		33.4			23.8			41.6			33.4
Construction in progress		41.8			49.8			40.9			41.8
Less accumulated depreciation and amortization		(447.5	)		(412.9	)		(487.1	)		(447.5	)
Net property, plant and equipment	$	524.6		$	501.0		$	529.9		$	524.6

Investment in joint venture as of December 31, 2020 and 2019 reflected the equity interest in our 50% investment in our WAVE joint venture. The WAVE joint venture is reflected within the Mineral Fiber segment in our consolidated financial statements using the equity method of accounting.

We use the cumulative earnings approach to determine the appropriate classification of distributions from WAVE within our cash flow statement. During 2020, 2019 ~~2018~~ and ~~2017,~~2018, WAVE distributed amounts in excess of our capital contributions and proportionate share of retained earnings. Accordingly, the distributions in these years were reflected as a return of investment in cash flows from investing activity in our Consolidated Statement of Cash Flows. Distributions from WAVE in 2020, 2019 and 2018, ~~and 2017,~~ were $81.5 million, $85.2 million, ~~$141.7 million,~~ and ~~$69.1~~$141.7 million, respectively.

In certain markets, we sell WAVE products directly to customers pursuant to specific terms of sale. In those circumstances, we record the sales and associated costs within our consolidated financial statements. The total sales associated with these transactions were $35.2 million, $33.5 million ~~$32.8 million~~ and ~~$31.2~~$32.8 million for the years ended 2020, 2019 ~~2018~~ and ~~2017,~~2018, respectively.

The European and Pacific Rim businesses of WAVE were included in the Sale to Knauf on September 30, 2019. 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. Our equity earnings in joint venture reflected as a component of earnings from continuing operations included $3.0 million ~~$1.5 million~~ and ~~$1.7~~$1.5 million of equity earnings representing WAVE’s net earnings from operations of its discontinued European and Pacific Rim businesses in 2019 ~~2018~~ and ~~2017,~~2018, respectively. Condensed financial data for WAVE is summarized below on a continuing operations basis.

	2019		2018		2017		2020		2019		2018
Net sales	$	393.2	$	375.0	$	344.5	$	343.3	$	393.2	$	375.0
Gross profit		219.6		205.8		192.7		194.7		219.6		205.8
Net earnings		166.0		156.6		144.3		137.8		166.0		156.6

In connection with the sale of WAVE’s European and Pacific Rim businesses and operations to Knauf on September 30, 2019, WAVE recorded a $46.2 million gain on sale during 2019, which included $10.2 million of unfavorable AOCI adjustments. As such, during 2019, we recorded our share of WAVE’s gain on sale of discontinued operations of $20.6 million, which was included as a component of Equity earnings from joint venture in our Consolidated Statements of ~~Earnings~~Operations and Comprehensive Income. ~~The transaction~~

Armstrong World Industries, Inc., and ~~final gain amount is subject~~Subsidiaries

Notes to ~~finalization of customary working capital and other adjustments, as provided~~Consolidated Financial Statements

Our recorded investment in WAVE was higher than our 50% share of the carrying values reported in WAVE’s consolidated financial statements by $141.1 million as of December 31, 2020 and $145.8 million as of December 31, ~~2019 and $155.5 million as of December 31, 2018.~~2019. These differences are due to our adoption of fresh-start reporting upon emergence from Chapter 11 in October 2006, while WAVE’s consolidated financial statements do not reflect fresh-start reporting. The differences are composed of the following fair value adjustments to assets:

	December 31, 2019		December 31, 2018		December 31, 2020		December 31, 2019
Property, plant and equipment	$	0.4	$	0.4	$	0.4	$	0.4
Other intangibles		115.0		124.7		110.3		115.0
Goodwill		30.4		30.4		30.4		30.4
Total	$	145.8	$	155.5	$	141.1	$	145.8

Other intangibles include customer relationships, trademarks and developed technology. Customer relationships are amortized over 20 years and developed technology is amortized over 15 years. Trademarks have an indefinite life. During the third quarter of 2019, we wrote off $4.4 million of customer relationships and developed technology intangible assets attributed to WAVE’s European and Pacific Rim businesses included in the Sale. This write-off was included as a reduction to Equity earnings from joint venture in our Consolidated Statements of ~~Earnings~~Operations and Comprehensive Income.

Management regularly evaluates its investment in WAVE for impairment, including performing an evaluation as a result of the sale of WAVE’s European and Pacific Rim businesses to Knauf. Based on ~~that evaluation,~~those evaluations, management concluded that its investment in WAVE was not impaired.

See discussion in Note 26 to the Consolidated Financial Statements for additional information on this related party.

~~We enter into operating leases for certain manufacturing plants, warehouses, equipment and automobiles. Our leases have remaining~~

The following table presents our lease terms of 1 to 14 years. Several leases include options for us to purchase leased items at fair value or renew for up to 5 years, or multiple 5-year renewal periods. Some of our leases include early termination options. We consider all of these options in determining the lease term used to establish our ROU assets and lease liabilities when it is reasonably certain that we will exercise that option. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.costs:

We have lease agreements with lease and non-lease components, which are accounted for separately. 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~~and variable lease cost were 0t material for the ~~year~~years ended December 31, 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 Rent expense was $6.1 million 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.~~2018. As of December 31, ~~2019,~~2020, we ~~do 0t~~did not have any ~~finance leases and we have no additional operating~~material leases that have not yet commenced.

As noted in Note 2, effective January 1, 2019, we adopted ASC Topic 842 – Leases using the modified retrospective transition method. As such, we did not restate financial statement and lease disclosure data for all periods priorThe following table presents supplemental cash flow information related to ~~January 1, 2019, which was prepared in accordance with ASC Topic 840 – Leases.~~ our leases:

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

~~We do not believe the amount of cash paid for amounts included in the measurement of lease liabilities to be materially different from our operating lease cost for the year ended~~ ~~December 31, 2019~~.

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

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

Undiscounted future minimum lease payments as of December 31, ~~2019,~~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
2020	$	6.6
Maturity of lease liabilities
2021		5.8		$	5.5		$	2.7
2022		5.1			4.1			2.8
2023		4.4			3.0			2.7
2024		3.6			2.1			2.5
2025					1.7			2.4
Thereafter		17.5			6.0			12.5
Total lease payments		43.0			22.4			25.6
Less interest		(7.7	)		(3.0	)		(4.8	)
Present value of lease liabilities	$	35.3		$	19.4		$	20.8

~~Future minimum lease payments as of December 31, 2018, by year and in the aggregate, having non-cancelable lease terms in excess of one year were expected to be as follows:~~

We conduct our annual impairment testing of goodwill and non-amortizing intangible assets during the fourth quarter. The 2020, 2019 ~~2018~~ and ~~2017~~2018 reviews concluded that 0 impairment charges were necessary. See Note 2 to the Consolidated Financial Statements for a discussion of our accounting policy for goodwill and intangible assets.

The following table details amounts related to our goodwill and intangible assets as of December 31, ~~2019~~2020 and ~~2018:~~2019:

		December 31, 2019				December 31, 2018					December 31, 2020				December 31, 2019
	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizing intangible assets
Customer relationships	3-20 years	$	188.9	$	114.9	$	181.4	$	103.0	1-20 years	$	200.6	$	128.9	$	188.9	$	114.9
Developed technology	15 years		85.0		72.1		84.3		66.5	13-19 years		92.1		77.9		85.0		72.1
Software										7 years		9.1		-		-		-
Trademarks and brand names	5-20 years		3.9		0.6		1.1		0.2	5-10 years		4.0		1.3		3.9		0.6
Non-compete agreements										3-5 years		6.3		0.4		0.2		-
Other	Various		0.3		0.1		5.6		1.2	Various		6.9		0.2		0.1		0.1
Total		$	278.1	$	187.7	$	272.4	$	170.9		$	319.0	$	208.7	$	278.1	$	187.7
Non-amortizing intangible assets
Trademarks and brand names	Indefinite		321.5				321.3			Indefinite		347.2				321.5
Total intangible assets		$	599.6			$	593.7				$	666.2			$	599.6

Goodwill	Indefinite	$	53.0			$	19.2			Indefinite	$	160.7			$	53.0

The increase in goodwill as of December 31, ~~2019~~2020 resulted from the acquisitions of ~~ACGI~~Arktura, Moz and ~~MRK, net of~~Turf and foreign exchange movements. See Note 5 to the Consolidated Financial Statements for additional details.

The expected annual amortization expense for the years ~~2020~~2021 through ~~2024~~2025 are as follows:

2020	$	18.6
2021		17.2	$	34.0
2022		11.1		16.4
2023		10.7		13.7
2024		10.3		13.2
2025				12.6

	December 31, 2019		December 31, 2018		December 31, 2020		December 31, 2019
Cash surrender value of Company owned life insurance policies	$	53.5	$	54.3
Cash surrender value of company-owned life insurance policies					$	47.8	$	53.5
Investment in employee deferred compensation plans						9.6		2.8
Fair value of derivative assets		1.3		9.6		-		1.3
Other		3.1		4.6		0.3		0.3
Total other non-current assets	$	57.9	$	68.5	$	57.7	$	57.9

	December 31, 2019		December 31, 2018		December 31, 2020		December 31, 2019
Payables, trade and other	$	79.4	$	82.2	$	81.3	$	79.4
Current portion of lease liabilities		5.2		-
Employment costs		16.5		18.6		17.6		16.5
Current portion of pension and postretirement liabilities		10.5		10.9		9.5		10.5
Advance receipt of Knauf proceeds		-		202.4
Payable to Knauf for purchase price adjustments		1.2		-		11.4		1.2
Contingent liability payable to Knauf for adjustments to cash consideration		-		35.2
Payable to WAVE for receipt of Knauf proceeds		25.9		22.4		-		25.9
Other		10.0		11.6		16.7		10.0
Total accounts payable and accrued expenses	$	148.7	$	383.3	$	136.5	$	143.5

The tax effects of principal temporary differences between the carrying amounts of assets and liabilities and their tax basis are summarized below. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income in the appropriate jurisdiction to realize deferred tax assets, net of valuation allowances. In arriving at this conclusion, we considered the profit before tax, excluding the impact of the pension settlement, generated for the years ~~2017~~2018 through ~~2019,~~2020, future reversals of existing taxable temporary differences, and projections of future profit before tax.

We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, a valuation allowance in accordance with the more likely than not standard for all periods, we ~~give appropriate consideration to~~consider all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, and our experience with operating loss and tax credit carryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses is incurred for a tax jurisdiction, forecasts of future profitability are not used as positive evidence related to the realization of the deferred tax assets in the assessment.

As of December 31, ~~2019~~2020 and ~~2018,~~2019, we had ~~$897.3~~$806.9 million and ~~$954.5~~$897.3 million, respectively, of gross state net operating loss (“NOL”) carryforwards expiring between ~~2020~~2021 and ~~2039.~~2040. As of December 31, ~~2019,~~2020, we ~~also~~ had foreign tax credits (“FTC”) carryforwards of ~~$13.1~~$17.7 million that expire between ~~2020~~2021 and ~~2028.~~2022. U.S. FTC carryforwards as of December 31, ~~2018~~2019 were ~~$19.1~~$13.1 million. As of December 31, ~~2019,~~2020, we ~~also~~ had capital loss carryforwards of ~~$16.0~~$19.3 million that expire between 2024 and ~~2034.~~2035. Capital loss carryforwards as of December 31, 2019 were $16.0 million.

As of December 31, ~~2019~~2020 and ~~2018,~~2019, we had valuation allowances of ~~$75.5~~$79.4 million and ~~$79.6~~$75.5 million, respectively. As of December 31, ~~2019,~~2020, our valuation allowance consisted of ~~$13.1~~$17.7 million for federal deferred tax assets related to FTC carryforwards, ~~$46.4~~$42.4 million for state deferred tax assets related to operating loss carryforwards, and ~~$16.0~~$19.3 million for federal and state deferred tax assets related to capital loss carryovers.

We estimate we will need to generate future federal taxable foreign source income of ~~$62.4~~$84.4 million to fully realize FTC carryforwards before they expire in ~~2028.~~2022. We estimate we will need to generate future taxable income of approximately ~~$681.6~~$612.3 million for state income tax purposes during the respective realization periods (ranging from ~~2020~~2021 to ~~2039) in order~~2040) to be able to fully realize the net deferred income tax assets discussed above. We estimate we will need to generate capital gain income of ~~$56.2~~$67.4 million to fully realize our federal capital loss carryforwards before they expire in ~~2034.~~2024 and 2025. We estimate we will need to generate capital gain income of $191.6 million to fully realize our state capital loss carryforwards before they expire between 2024 and 2035. Our ability to utilize deferred tax assets may be impacted by certain future events, such as changes in tax legislation or insufficient future taxable income prior to expiration of certain deferred tax assets.

	2019			2018			2017			2020			2019			2018
Details of taxes
Earnings (loss) from continuing operations before income taxes:
(Loss) earnings from continuing operations before income taxes
Domestic	$	299.7		$	234.0		$	224.1		$	(130.0	)	$	299.7		$	234.0
Foreign		(0.3	)		8.7			(2.0	)		3.3			(0.3	)		8.7
Total	$	299.4		$	242.7		$	222.1		$	(126.7	)	$	299.4		$	242.7

Income tax expense (benefit):
Current:
Federal	$	31.4		$	45.7		$	26.2		$	40.8		$	31.4		$	45.7
Foreign		0.8			2.1			1.4			1.0			0.8			2.1
State		6.3			8.0			4.7			5.6			6.3			8.0
Total current		38.5			55.8			32.3			47.4			38.5			55.8

Deferred:
Federal		15.1			(3.7	)		(36.6	)		(75.5	)		15.1			(3.7	)
Foreign		(0.3	)		-			(0.1	)		-			(0.3	)		-
State		3.8			1.0			5.9			(14.5	)		3.8			1.0
Total deferred		18.6			(2.7	)		(30.8	)		(90.0	)		18.6			(2.7	)

Total income tax expense	$	57.1		$	53.1		$	1.5
Total income tax (benefit) expense										$	(42.6	)	$	57.1		$	53.1

We reviewed our position with regards to foreign unremitted earnings and determined that unremitted earnings will not be permanently reinvested as a result of the Sale. Accordingly, in 2020, we recorded foreign withholding taxes of $0.9 million on approximately $17.9 million of net undistributed earnings of foreign subsidiaries. In 2019, we ~~had~~ recorded foreign withholding taxes of $0.8 million on approximately $14.0 million of net undistributed earnings of foreign subsidiaries. ~~In 2018, we had foreign withholding taxes accrued of $2.2 million on approximately $208.0 million of net undistributed earnings of foreign subsidiaries.~~

	2019			2018			2017			2020			2019			2018
Reconciliation to U.S. statutory tax rate
Continuing operations tax at statutory rate	$	62.9		$	51.0		$	77.7
Continuing operations tax (benefit) expense at statutory rate										$	(26.6	)	$	62.9		$	51.0
Increase in valuation allowances on deferred domestic income tax assets		0.1			10.0			9.1			(0.1	)		0.1			10.0
State income tax expense, net of federal benefit		12.4			9.2			7.9
Domestic production activities		-			-			(5.8	)
State income tax (benefit) expense, net of federal impact											(7.3	)		12.4			9.2
Capital loss on sale of investment											(4.6	)		-			-
Statute closures		(3.8	)		(9.6	)		(2.3	)		(1.3	)		(3.8	)		(9.6	)
State deferred tax adjustments		(1.9	)		-			-			(1.5	)		(1.9	)		-
Capital loss utilization on WAVE earnings		(4.4	)		-			-			-			(4.4	)		-
2017 Tax Act ⁽¹⁾		-			(1.2	)		(82.5	)		-			-			(1.2	)
Excess tax benefits on share-based compensation		(3.2	)		(3.8	)		-			(0.9	)		(3.2	)		(3.8	)
Tax on foreign and foreign-source income		(1.9	)		(4.4	)		-
Tax on foreign and foreign source income											-			(1.9	)		(4.4	)
U.S. permanent differences											(2.2	)		(1.8	)		(1.6	)
Other		(3.1	)		1.9			(2.6	)		1.9			(1.3	)		3.5
Tax expense at effective rate	$	57.1		$	53.1		$	1.5
Tax (benefit) expense at effective rate										$	(42.6	)	$	57.1		$	53.1

We recognize the tax benefits of an uncertain tax position only if those benefits are more likely than not to be sustained based on existing tax law. Additionally, we establish a reserve for tax positions that are more likely than not to be sustained based on existing tax law, but uncertain in the ultimate benefit to be sustained upon examination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more likely than not recognition threshold is met, the tax matter is effectively ~~settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, whichever is earlier.~~

settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired, whichever is earlier.

We have ~~$34.7~~$41.7 million of Unrecognized Tax Benefits (“UTB”) as of December 31, ~~2019, $17.2~~2020, $18.4 million ($~~16.1~~17.4 million, net of federal benefit) of this amount, if recognized in future periods, would impact the reported effective tax rate.

It is reasonably possible that certain UTB’s may increase or decrease within the next twelve months due to tax examination changes, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities. Over the next twelve months we estimate that UTB’s may decrease by ~~$0.6~~$0.2 million related to state statutes expiring and increase by ~~$1.8~~$1.5 million due to uncertain tax positions expected to be taken on domestic tax returns.

We account for all interest and penalties on uncertain income tax positions as income tax expense. We have ~~$2.2~~$2.9 million of interest and penalties accrued in ~~noncurrent~~non-current income tax payable in the Consolidated Balance Sheet as of December 31, ~~2019.~~2020.

We had the following activity for UTB’s for the years ended December 31, 2020, 2019 ~~2018~~ and ~~2017:~~2018:

	2019			2018			2017			2020			2019			2018
Unrecognized tax benefits balance at January 1,	$	42.6		$	53.4		$	86.9		$	34.7		$	42.6		$	53.4
Gross change for current year positions		2.2			3.6			(2.2	)		2.3			2.2			3.6
Increases for prior period positions		-			1.1			2.9			8.7			-			1.1
Decrease for prior period positions		(2.1	)		(2.0	)		(0.1	)		-			(2.1	)		(2.0	)
Decrease due to statute expirations		(8.0	)		(13.5	)		(34.1	)		(4.0	)		(8.0	)		(13.5	)
Unrecognized tax benefits balance at December 31,	$	34.7		$	42.6		$	53.4		$	41.7		$	34.7		$	42.6

We file income tax returns in the U.S., and various states and international jurisdictions. In the normal course of business, we are subject to examination by taxing authorities in Canada and the United States. Generally, we have open tax years subject to tax audit on average of between three years and six years. The statute of limitations is no longer open for U.S. federal returns before 2016. With few exceptions, the statute of limitations is no longer open for state or non-U.S. income tax examinations for the years before 2014. WeWith the exception of extending the 2016 statute of limitations to May 31, 2022 as a result of an ongoing Federal audit, we have not significantly extended any open statutes of limitation for any major jurisdiction and have reviewed and accrued for, where necessary, tax liabilities for open periods.

	2019		2018		2017		2020		2019		2018
Other taxes
Payroll taxes	$	16.0	$	15.6	$	14.2	$	15.6	$	16.0	$	15.6
Property, franchise and capital stock taxes		3.8		3.7		4.0		4.2		3.8		3.7

	December 31, 2019			December 31, 2018			December 31, 2020			December 31, 2019
Revolving credit facility due 2024	$	115.0		$	-		$	225.0		$	115.0
Term loan A due 2021		-			547.5
Term loan A due 2024		500.0			-			493.7			500.0
Term loan B due 2023		-			243.1
Tax exempt bonds due 2041		-			35.0
Principal debt outstanding		615.0			825.6			718.7			615.0
Unamortized debt financing costs		(4.2	)		(5.8	)		(3.2	)		(4.2	)
Long-term debt		610.8			819.8			715.5			610.8
Less current portion and short-term debt		6.3			55.0
Less current portion								25.0			6.3
Total long-term debt, less current portion	$	604.5		$	764.8		$	690.5		$	604.5

~~As of June 30, 2019, total principal debt outstanding under our $1,050.0~~We have a $1,000.0 million variable rate senior credit facility, ~~was $525.0 million under Term Loan A and $241.9 million under Term Loan B, with 0 borrowings outstanding under the revolving credit facility.~~ On July 3, 2019, we used cash on hand to make a voluntary prepayment of $100.0 million of the debt outstanding under Term Loan B. Term Loan B was priced at 2.75% over the London Interbank Offered Rate (“LIBOR”). On September 30, 2019, we refinanced our $1,050.0 million variable rate senior credit facility, using cash on hand to pay down a portion of the debt outstanding, including the debt outstanding under Term Loan B. The $1,000.0 million amended senior credit facilitywhich is ~~composed~~comprised 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. The revolving credit facility and Term Loan A are currently priced at 1.50% over LIBOR. The senior credit facility also has a $25.0 million letter of credit facility, also known as our bi-lateral facility. The revolving credit facility and Term Loan A mature in September 2024.

On September 30, 2019, we refinanced our senior credit ~~facility (with a $150.0 million sublimit for letters of credit) and a $500.0 million Term Loan A.~~ The terms of the amended credit facility resulted in a lower interest rate spread for both the revolving credit facility (2.00% to 1.50% over LIBOR) and Term Loan A (1.75% to 1.50% over LIBOR). We also extended the maturity of both the revolving credit facility and Term Loan A from ~~April 2021~~ to ~~September 2024~~.facility. In connection with the refinancing, we paid $3.0 million of bank, legal and other fees, of which $2.9 million were capitalized. These fees are reflected as a component of long-term debt and amortized into interest expense over the ~~lives~~terms of the underlying debt. Additionally, ~~during the third quarter of 2019,~~ we wrote off $2.7 million of unamortized debt financing costs, included as a component of interest expense, related to our previous credit facility. Finally, in connection with the refinancing, we settled a $100.0 million notional interest rate swap as of September 30, 2019. See Note 20 for additional details.

The ~~refinanced~~ senior credit facility includes two financial covenants that require the ratio of consolidated ~~earnings before interest, taxes, depreciation and amortization (“EBITDA”)~~EBITDA to consolidated cash interest expense minus cash consolidated interest income to be greater than or equal to 3.0 to 1.0 and requires the ratio of consolidated funded indebtedness, minus AWI and domestic subsidiary unrestricted cash and cash equivalents up to $100 million, to EBITDA to be less than or equal to 3.75 to 1.0. As of December 31, ~~2019,~~2020, we were in compliance with all covenants of the senior credit facility.

Our debt agreements include other restrictions, including restrictions pertaining to the ~~acquisition~~incurrence of additional debt, the redemption, repurchase or retirement of our capital stock, payment of dividends, and certain financial transactions as it relates to specified assets. We currently believe that default under these covenants is unlikely.

During ~~the fourth quarter of 2019,~~2020, we ~~used proceeds from~~borrowed and subsequently repaid $30.0 million under our revolving credit facility to pay off a $35.0 million variable rate, tax exempt industrial development bond that financed the construction of a plant in prior years. The bond was remarketed by an agent on a regular basis at a market-clearing interest rate.

~~As of December 31, 2019,~~ ~~we had a $25.0million letter of credit facility, also known as our bi-lateral facility,~~ ~~and a $36.2 million~~ Accounts Receivable Securitization Facility with the Bank of Nova Scotia (the “funding entity”) ~~that matures~~which matured in ~~March~~September 2020. Interest on borrowings under this amended facility was calculated at a 90-day commercial paper rate. Under this facility, we ~~sell~~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~~wholly owned single member ~~limited liability company~~LLC special purpose entity created specifically for this transaction; therefore, any receivables sold to ARC ~~are~~were not available to the general creditors of AWI. ARC ~~then sells~~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. ~~This undivided~~We had the unilateral right to repurchase the funding entity’s purchased interest ~~acts~~in the accounts receivables and, as ~~collateral for drawings on the facility. Any~~a result, borrowings under this facility ~~are~~were reported as debt in the Consolidated Balance Sheets. Borrowings under this facility were obligations of ARC and not AWI. ARC ~~contracts~~contracted with and ~~pays~~paid a servicing fee to AWI to manage, collect and service the purchased accounts receivables. All new receivables under the program ~~are~~were continuously purchased by ARC with the proceeds from collections of receivables previously purchased. ~~During the first quarter of 2020, we expect to amend the facility to reduce the purchase limit from $36.2 million to $30.0 million and to extend its maturity to~~ ~~March 2021~~.

None of our remaining outstanding debt as of December 31, ~~2019~~2020 was secured with buildings and other assets. The credit lines under our revolving credit facility are subject to immaterial annual commitment fees.

2020	$	6.3
2021		25.0	$	25.0
2022		25.0		25.0
2023		25.0		25.0
2024		533.7		643.7
2025 and later		-
2025				-
2026 and later				-

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~~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:

The maximum limit for letters of credit availability under our accounts receivable securitization facility is subject to securitized accounts receivable balances and other collateral adjustments. As of December 31, 2019 we had 0 letters of credit issued under our accounts receivable securitization facility. As of December 31, 2018, $6.0 million of letters of credit issued under our accounts receivable securitization facility in excess of our maximum limit was classified as restricted cash and reported as a component of Cash and cash equivalents on our Consolidated Balance Sheets.

We sponsor several defined contribution plans, which cover substantially all U.S. and non-U.S. employees. Eligible employees may defer a portion of their pre-tax covered compensation on an annual basis. We match employee contributions up to pre-defined percentages. Employee contributions are 100% vested. Employer contributions are vested based on pre-defined requirements. Costs for defined contribution benefit plans were $8.1 million in 2020, $7.7 million in 2019 and $6.3 million in ~~2018 and $6.2 million in 2017.~~2018.

Benefits from defined benefit pension plans are based primarily on an employee's compensation and years of service. We fund our pension plans when appropriate.

Our U.S. defined benefit pension plans include both the qualified, funded RIP and the Retirement Benefit Equity Plan (“RBEP”), which is a nonqualified, unfunded plan designed to provide pension benefits in excess of the limits defined under Sections 415 and 401(a)(17) of the Internal Revenue Code.

~~Our RIP was amended~~During February 2020, we entered into agreements with Athene Annuity and Life Company (“AAIA”) and Athene Annuity & Life Assurance Company of New York (“AANY”) to ~~freeze accruals for salaried non-production employees, effective December 31, 2017.~~transfer certain benefit obligations and assets of our U.S. Retirement Income Plan (“RIP”) to AAIA and AANY. 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. The Agreement did not impact our benefit obligations under the RBEP.

As a result of ~~this amendment resulted~~the transaction, we recorded a $374.4 million settlement loss in the first quarter of 2020, which represented the release of amounts previously recorded in AOCI to other non-operating expense. The RIP’s assets and liabilities were remeasured as of the settlement date, resulting in a ~~reduction to our December 31, 2016~~remaining projected benefit obligation ~~with a corresponding increase to unrecognized loss, resulting in no curtailment gain or loss. The impact~~ of ~~this amendment was reflected in the net periodic pension credit for 2017.~~

~~In 2017, certain RIP participants with~~$387.5 million, which covered approximately 3,000 deferred vested ~~benefits were~~and active participants, and fair value of plan assets of $499.6 million. The discount rate used to determine the projected benefit obligation at the settlement date was 3.07%, compared to 3.16% used as of December 31, 2019. 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 ~~opportunity~~early retirement incentive benefit to ~~elect~~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 ~~lump sum distribution~~charge of $2.0 million within other non-operating expense, which increased the projected benefit obligation of the ~~participant’s entire accrued benefit. These distributions resulted~~RIP. The enhanced retirement benefits did not result in a partial plan settlement necessitating a plan remeasurement as of August 31, 2017. Settlement losses of $20.8 million were recorded as components of other non-operating (income) expense, net during 2017.

Effective December 31, 2017, AWI merged the Tectum, Inc. Pension Plan (the “Tectum Plan”) with and into the RIP. Tectum sponsored the Tectum Plan for the benefit of its eligible employees, which are limited to certain union employees at Tectum’s Newark, Ohio plant.curtailment.

We have a defined benefit pension plan in Germany which was not acquired by Knauf in connection with the Sale. This plan uses assumptions which are consistent with, but not identical to, those of the U.S. plans. The accumulated benefit obligation for the non-U.S. defined benefit pension plan was ~~$2.8~~$2.9 million and ~~$2.5~~$2.8 million as of December 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

The following tables summarize the balance sheet impact of our U.S. defined benefit pension plans, as well as the related benefit obligations, assets, funded status and rate assumptions. We use a December 31 measurement date for all our defined benefit pension plans.

Long-term asset class return assumptions for the RIP are determined based on input from investment professionals on the expected performance of the asset classes over 10 to 30 years. The forecasts were averaged to come up with consensus passive return forecasts for each asset class. Incremental components were added for the expected return from active management and asset class rebalancing based on historical information obtained from investment consultants. These forecasted gross returns were reduced by estimated management fees and expenses, yielding a long-term return forecast of ~~5.75%~~5.25% and ~~6.50%~~5.75% for the years ended December 31, 2020 and 2019, ~~and 2018.~~respectively.

The accumulated benefit obligation for the U.S. defined benefit pension plans was ~~$1,429.5~~$439.6 million and ~~$1,356.8~~$1,429.5 million as of December 31, 2020 and 2019, respectively. The largest contributor to the net actuarial losses affecting the benefit obligations for the defined benefit pension plans was a decrease in the discount rates, partially offset by the annuity premium gain in the RIP, an experience gain in the RBEP and other changes in assumptions.

The components of the pension cost (credit) for the U.S. defined benefit pension plans are as follows:

actuarial gains and losses were amortized over the remaining life expectancy of plan participants, which was approximately 28 years for 2020, 17 years for 2019 and 18 years for 2018 for our U.S. defined benefit pension plans.

~~The components of the pension (credit) cost for the U.S. defined benefit pension plans are as follows:~~

For 2019, 2018 and 2017, actuarial gains and losses were amortized over the remaining life expectancy of plan participants, which was approximately 17 years for 2019, 18 years for 2018 and 19 years for 2017 for our U.S. defined benefit pension plans.

The RIP’s primary investment objective is to maintain the funded status of the plan such that the likelihood that we will be required to make significant contributions to the plan is limited. This objective is expected to be achieved by (a) investing a substantial portion of the plan assets in high quality corporate bonds whose duration is at least equal to that of the plan’s liabilities, (b) investing in publicly traded equities in order to increase the ratio of plan assets to liabilities over time, (c) limiting investment return volatility by diversifying among additional asset classes with differing expected rates of return and return correlations, and (d) using derivatives to either implement investment positions efficiently or to hedge risk but not to create investment leverage.

Each asset class utilized by the RIP has defined asset allocation targets and allowable ranges. The table below shows the asset allocation targets and the December 31, ~~2019~~2020 and ~~2018~~2019 positions for each asset class:

	Target									Target
	Weight at									Weight at
	December 31,			Position at December 31,						December 31,			Position at December 31,
Asset Class	2019			2019 ⁽¹⁾			2018 ⁽¹⁾			2020			2020 ⁽¹⁾			2019 ⁽¹⁾
Long duration bonds		70.0	%		69.0	%		62.0	%		90.0	%		89.0	%		69.0	%
Equities, real estate and private equity		30.0	%		30.0	%		30.0	%		10.0	%		11.0	%		30.0	%
High yield bonds and real assets		-			-			2.0	%
Other		-			1.0	%		6.0	%								1.0	%

Pension plan assets are required to be reported and disclosed at fair value. 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 on the measurement date. Three levels of inputs may be used to measure fair value:

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table sets forth by level within the fair value hierarchy a summary of the RIP plan assets measured at fair value on a recurring basis:

		Value at December 31, 2019									Value at December 31, 2020
Description		Level 1		Level 2		Level 3		Total			Level 1			Level 2		Level 3		Total
Bonds		$	-	$	1,017.7	$	-	$	1,017.7		$	-		$	460.9	$	-	$	460.9
Collective trust fund			-		434.6		-		434.6			-			51.4		-		51.4
Other investments			-		-		2.5		2.5
Cash, other short-term investments and payables, net			0.3		12.6		-		12.9			(0.3	)		0.9		-		0.6
Net assets measured at fair value		$	0.3	$	1,464.9	$	2.5	$	1,467.7		$	(0.3	)	$	513.2	$	-	$	512.9
Investments measured at net asset value	Investments measured at net asset value								10.7	Investments measured at net asset value									7.8
Net assets								$	1,478.4									$	520.7

		Value at December 31, 2018										Value at December 31, 2019
Description		Level 1			Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Bonds		$	-		$	832.2	$	-	$	832.2		$	-	$	1,017.7	$	-	$	1,017.7
Collective trust fund			-			460.1		-		460.1			-		434.6		-		434.6
Other investments			-			-		2.6		2.6			-		-		2.5		2.5
Cash, other short-term investments and payables, net			(22.7	)		24.2		-		1.5			0.3		12.6		-		12.9
Net assets measured at fair value		$	(22.7	)	$	1,316.5	$	2.6	$	1,296.4		$	0.3	$	1,464.9	$	2.5	$	1,467.7
Investments measured at net asset value	Investments measured at net asset value									64.0	Investments measured at net asset value								10.7
Net assets									$	1,360.4								$	1,478.4

~~RIP Level 3 assets remained relatively unchanged from December 31, 2018 to December 31, 2019, with the change in Level 3 assets during 2019 due primarily to fees, expenses and benefits paid.~~

The RIP has investments in alternative investment funds as of December 31, ~~2019~~2020 and ~~2018~~2019 which are reported at fair value. These investments that are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets. We have concluded that the NAV reported by the underlying fund approximates the fair value of the investment. These investments are redeemable at NAV under agreements with the underlying funds. However, it is possible that these redemption rights may be restricted or eliminated by the funds in the future in accordance with the underlying fund agreements. Due to the nature of the investments held by the funds, changes in market conditions and the economic environment may significantly impact the NAV of the funds and, consequently, the fair value of the U.S. defined benefit pension plan asset’s interest in the funds. Furthermore, changes to the liquidity provisions of the funds may significantly impact the fair value of the U.S. defined benefit pension plan asset’s interest in the funds. As of December 31, ~~2019,~~2020, there were no restrictions on redemption of these investments.

The following table sets forth a summary of the RIP’s investments measured at NAV:

	Value at December 31, 2019						Value at December 31, 2020
Description	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Real estate	$	10.7	$	2.2	Quarterly	60 days	$	7.8	$	2.2	Quarterly	60 days
Investments measured at net asset value	$	10.7	$	2.2

	Value at December 31, 2018						Value at December 31, 2019
Description	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Real estate	$	60.1	$	2.2	Quarterly	45-90 Days	$	10.7	$	2.2	Quarterly	60 days
Other investments		3.9		0.8	None	None
Investments measured at net asset value	$	64.0	$	3.0

Following is a description of the valuation methodologies used for assets measured at fair value and at NAV.

Bonds: Consists of registered investment funds and common and collective trust funds investing in fixed income securities tailored to institutional investors. There are no readily available market quotations for registered investment company funds. The fair value of investment funds and common and collective trust funds have been classified as Level 2 assets above as their values were derived based on the underlying securities in the fund’s portfolio which is typically the amount which the fund might reasonably expect to receive for the security upon a current sale. Investments ~~in individual bonds were measured at fair value based on the closing price reported in the active market in which the bond is traded and investments~~ in pooled funds traded in a non-active market were valued at bid price and classified as Level 2 assets above.

Collective trust fund: Represents collective trust and funds holding equity investments, fixed income securities, commodity futures contracts, cash and other short-term securities. The fair value of collective trust funds have been classified as Level 2 assets above as their values were derived based on the underlying securities in the fund’s portfolio which is typically the amount which the fund might reasonably expect to receive for the security upon a current sale.

Real estate: Consists of both open-end and closed-end funds. There are no readily available market quotations for these real estate funds. These investments were measured at fair value using the NAV practical expedient.

Other investments: ~~Consists~~Consisted of investments in a group insurance annuity ~~contract and a limited partnership.~~contract. Investments in the group insurance annuity contract were classified as Level 3 assets and measured at fair value by discounting the related cash flows based on current yields of similar instruments with comparable durations while considering the ~~credit-worthiness~~creditworthiness of the issuer. ~~The investments in the limited partnership were measured at fair value using the NAV practical expedient.~~

Cash, other short-term investments and payables: ~~Consist~~Consists primarily of cash and cash equivalents, and plan receivables/payables. The carrying amounts of cash and cash equivalents and receivables/payables approximate fair value due to the short-term nature of these instruments. Other payables and receivables consist primarily of ~~margin on an account for a fund,~~ accrued fees and receivables related to investment positions liquidated for which proceeds had not been received as of December 31.

On February 20, 2020, we entered into a commitment agreement (“the Agreement”), by and among AWI, Athene Annuity and Life Company (“AAIA”), Athene Annuity & Life Assurance Company of New York (“AANY”) and State Street Global Advisors Trust Company (“State Street”), acting solely in its capacity as independent fiduciary of the RIP in connection with the transfer of pension obligations and administration to AAIA and AANY. Under the Agreement, the RIP will use RIP assets to purchase a single premium group annuity contract from each of AAIA and AANY. The annuity contracts will irrevocably transfer approximately$1.0 billion of retiree defined benefit pension obligations related to approximately 10,000 retirees and beneficiaries (“the Transferred Participants”) to AAIA and AANY, which will guarantee the pension benefits of the Transferred Participants.

Under the Agreement, each of AAIA and AANY is required to pay and administer the retirement benefits owed to the Transferred Participants covered by the applicable contract. The Agreement has no impact on the amount or timing of the monthly retirement benefit payments received by the Transferred Participants. We will not have to make any cash contributions to the RIP as a result of the Agreement.

The Agreement is subject to customary closing conditions for a transaction of this nature. Under the Agreement, all Transferred Participants will receive their first annuity payment from either AAIA or AANY on May 1, 2020.

As a result of the transaction, we expect to record a non-cash expense in the range of $350 million and $400 million in the first quarter of 2020 as a component of non-operating expense to reflect a partial plan settlement charge.

After the transaction is complete, we anticipate the RIP will have projected benefit obligations of approximately $370 million covering approximately 3,000 deferred vested and active participants. Benefits payable to participants who will remain in the RIP after the transaction are not being reduced as a result of the transaction.

We fund postretirement benefits on a pay-as-you-go basis, with the retiree paying a portion of the cost for health care benefits by means of deductibles and contributions.

The following tables summarize the balance sheet impact of the U.S. postretirement benefit pension plan, as well as the related benefit obligations, funded status and rate assumptions. We use a December 31 measurement date for all our defined benefit postretirement benefit plans.

	2019			2018			2020			2019
Change in benefit obligation:
Change in benefit obligations:
Benefit obligation as of beginning of period	$	65.4		$	86.6		$	77.5		$	65.4
Service cost		0.1			0.2			-			0.1
Interest cost		2.4			2.6			1.9			2.4
Plan participants' contributions		2.0			2.9			1.9			2.0
Plan amendments		(1.1	)		-			-			(1.1	)
Actuarial loss (gain)		18.1			(15.7	)
Actuarial loss								8.2			18.1
Benefits paid		(9.4	)		(11.2	)		(8.1	)		(9.4	)
Benefit obligation as of end of period	$	77.5		$	65.4
Benefit obligations as of end of period							$	81.4		$	77.5

	2019			2018			2020			2019
Change in plan assets:
Fair value of plan assets as of beginning of period	$	-		$	-		$	0		$	0
Employer contributions		7.4			8.3			6.2			7.4
Plan participants' contributions		2.0			2.9			1.9			2.0
Benefits paid		(9.4	)		(11.2	)		(8.1	)		(9.4	)
Fair value of plan assets as of end of period	$	-		$	-		$	0		$	0
Funded status	$	(77.5	)	$	(65.4	)	$	(81.4	)	$	(77.5	)

2019

2018

2020

2019

Weighted-average discount rate used to determine benefit obligations at end of period

3.14

4.31

2.37

3.14

Weighted-average discount rate used to determine net periodic benefit cost for the

period

4.31

3.60

3.14

4.31

The largest contributors to the actuarial losses affecting the benefit obligations for the postretirement plans were the decreases in the discount rates and the updates to the per capita claims assumptions.

	2019			2018			2017			2020			2019			2018
Service cost of benefits earned during the period	$	0.1		$	0.2		$	0.4		$	-		$	0.1		$	0.2
Interest cost on accumulated postretirement benefit obligation		2.4			2.6			3.0			1.9			2.4			2.6
Amortization of prior service (credit)		(0.2	)		(0.1	)		-			(0.3	)		(0.2	)		(0.1	)
Amortization of net actuarial gain		(8.5	)		(5.7	)		(3.6	)		(6.6	)		(8.5	)		(5.7	)
Net periodic postretirement benefit (credit)	$	(6.2	)	$	(3.0	)	$	(0.2	)	$	(5.0	)	$	(6.2	)	$	(3.0	)

For measurement purposes, an average rate of annual increase in the per capita cost of covered health care benefits of ~~7.2%~~6.7% for pre-65 retirees and ~~8.1% to 8.2%~~7.6% for post-65 retirees ~~(depending on plan type)~~ was assumed for ~~2019,~~2020, decreasing ratably to an ultimate rate of 4.5% in 2026. Assumed health care cost trend rates can have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would have the following effects:2027.

Amounts recognized in assets (liabilities) on the consolidated balance sheets at year end consist of:

	U.S. Pension Plans						Non-U.S. Pension Plan						Retiree Health and Life Insurance Benefits						U.S. Pension Plans						Non-U.S. Pension Plan						Retiree Health and Life Insurance Benefits
	2019			2018			2019			2018			2019			2018			2020			2019			2020			2019			2020			2019
Prepaid pension costs	$	94.8		$	52.8		$	-		$	-		$	-		$	-		$	119.5		$	94.8		$	-		$	-		$	-		$	-
Accounts payable and accrued expenses		(3.9	)		(4.3	)		(0.1	)		-			(6.5	)		(6.6	)		(2.9	)		(3.9	)		(0.1	)		(0.1	)		(6.5	)		(6.5	)
Postretirement benefit liabilities		-			-			-			-			(71.0	)		(58.8	)		-			-			-			-			(74.9	)		(71.0	)
Pension benefit liabilities		(43.9	)		(47.8	)		(2.7	)		(2.5	)		-			-			(37.6	)		(43.9	)		(2.8	)		(2.7	)		-			-
Net amount recognized	$	47.0		$	0.7		$	(2.8	)	$	(2.5	)	$	(77.5	)	$	(65.4	)	$	79.0		$	47.0		$	(2.9	)	$	(2.8	)	$	(81.4	)	$	(77.5	)

Pre-tax amounts recognized in accumulated other comprehensive (loss) income at year end consist of:

	U.S. Pension Plans						Retiree Health and Life Insurance Benefits				U.S. Pension Plans						Retiree Health and Life Insurance Benefits
	2019			2018			2019		2018		2020			2019			2020		2019
Net actuarial (loss) gain	$	(540.7	)	$	(577.3	)	$	32.8	$	59.3	$	(142.6	)	$	(540.7	)	$	17.9	$	32.8
Prior service (cost) credit		-			-			2.0		1.1
Prior service credit												-			-			1.7		2.0
Accumulated other comprehensive (loss) income	$	(540.7	)	$	(577.3	)	$	34.8	$	60.4	$	(142.6	)	$	(540.7	)	$	19.6	$	34.8

~~For U.S. pension plans, we expect to amortize $20.5 million of previously unrecognized net actuarial losses into pension cost in 2020 and expect to contribute $3.9 million in 2020.~~

For our U.S. postretirement benefit plans, we expect to amortize $5.9 million of previously unrecognized net actuarial gains and prior service credits into postretirement benefit cost in 2020 and expect to contribute $6.5 million in 2020.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years for our U.S. plans:

	U.S. Pension Benefits⁽¹⁾		Retiree Health and Life Insurance Benefits, Net		U.S. Pension Benefits⁽¹⁾		Retiree Health and Life Insurance Benefits, Net
2020	$	103.6	$	6.5
2021		101.5		6.3	$	12.0	$	6.5
2022		100.5		6.2		15.0		6.4
2023		99.4		5.8		17.0		6.2
2024		97.8		5.6		19.0		5.8
2025 - 2029		450.7		24.2
2025						20.2		5.6
2026 - 2030						114.0		23.6

We do not hold or issue financial instruments for trading purposes. The estimated fair values of our financial instruments are as follows:

	December 31, 2019						December 31, 2018						December 31, 2020						December 31, 2019
	Carrying amount			Estimated fair value			Carrying amount			Estimated fair value			Carrying amount			Estimated fair value			Carrying amount			Estimated fair value
Assets/(liabilities), net:
(Liabilities), net:
Total long-term debt, including current portion	$	(610.8	)	$	(610.8	)	$	(819.8	)	$	(811.3	)	$	(715.5	)	$	(715.5	)	$	(610.8	)	$	(610.8	)
Interest rate swap contracts		(14.3	)		(14.3	)		3.5			3.5			(28.9	)		(28.9	)		(14.3	)		(14.3	)
Acquisition-related contingent consideration														(16.9	)		(16.9	)		-			-

The carrying amounts of cash and cash equivalents, receivables, accounts payable, and accrued expenses approximate fair value because of the short-term maturity of these instruments. The fair value estimates of long-term debt ~~were primarily~~are based on ~~current market conditions.~~quotes from a major financial institution of recently observed trading levels of our Term Loan A debt. The fair value estimates for interest rate swap contracts are estimated by obtaining quotes from major financial institutions with verification by internal valuation models. We engage independent, third-party valuation specialists to determine the fair value estimates for contingent consideration, which are based on a Monte Carlo simulation.

The fair value measurement of ~~interest rate swap contracts~~liabilities measured at fair value on a recurring basis and reported on the Consolidated Balance Sheets ~~were valued using Level 2 (other observable)~~is summarized below:

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 December 31, ~~2019~~2020:

Unobservable inputs were weighted based on the relative fair value of the components of contingent consideration. See Note 5 for further information.

Armstrong World Industries, Inc., and ~~2018. We do not have any financial assets or liabilities that are valued using Level 1 (quoted, active market) or Level 3 (unobservable) inputs as~~Subsidiaries

The changes in fair value of the acquisition-related contingent consideration liability for the year ended December 31, ~~2019 and 2018.~~2020 were as follows:

We are exposed to market risk from changes in foreign exchange rates, interest rates and commodity prices that could impact our results of operations, cash flows and financial condition. We use swaps to hedge interest rate exposures. At inception, interest rate swap derivatives that we designate as hedging instruments are formally documented as a hedge of a forecasted transaction or “cash flow” hedge. We also formally assess, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of the hedged item. If it is determined that a derivative ceases to be a highly effective hedge, or if the anticipated transaction is no longer probable of occurring, we discontinue hedge accounting and any future mark-to-market adjustments are recognized in earnings. We use derivative financial instruments as risk management tools and not for speculative trading purposes.

We purchase natural gas and other various commodities for use in the manufacturing process. Although we are exposed to fluctuations in commodity pricing, we currently have 0 outstanding positions and do not expect to enter into any commodity derivative ~~hedge positions.~~products.

As of December 31, 2020, our only major foreign currency exposure is to the Canadian dollar. We currently have no outstanding positions and do 0t expect to enter into any foreign exchange derivative products.

As of December 31, 2019, our only major foreign currency exposure is to the Canadian dollar. We manage our Canadian cash flow exposures on a net basis. We currently have no outstanding positions and do 0t expect to enter into any foreign exchange derivative products.

We utilize interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility. These swaps are designated as cash flow hedges against changes in LIBOR for a portion of our variable rate debt. On November 28 2018, we entered into 2 swaps related to our Term Loan A: (1) a $200.0 million notional swap where we receive a 1-month LIBOR and pay a fixed rate interest beginning in 2018 and running through 2023 and (2) a $100.0 million notional forward starting swap, where we receive 1-month LIBOR and pay a fixed rate beginning in 2021 and running through 2025. As of December 31, 2018, these hedges were designated as cash flow hedges against changes in LIBOR for a portion of our existing and future variable rate debt. We recorded a $4.6 million loss in other non-operating (income) expense during the fourth quarter of 2018, representing the change in fair value of these two swaps between the date these swaps were entered into and the date the swaps were designated as cash flow hedges.

The following table summarizes our interest rate swaps as of December 31, ~~2019:~~2020:

Trade Date

Notional

Amount

Coverage Period

Risk Coverage

Notional

Amount

Coverage Period

Risk Coverage

November 13, 2016

200.0

November 2016 to March 2021

USD-LIBOR

November 14, 2016

200.0

December 2016 to March 2021

USD-LIBOR

November 28, 2018

200.0

November 2018 to November 2023

USD-LIBOR

200.0

November 2018 to November 2023

USD-LIBOR

November 28, 2018

100.0

March 2021 to March 2025

USD-LIBOR

100.0

March 2021 to March 2025

USD-LIBOR

March 6, 2020

50.0

March 2020 to March 2022

USD-LIBOR

March 10, 2020

50.0

March 2021 to March 2024

USD-LIBOR

March 11, 2020

50.0

March 2021 to March 2024

USD-LIBOR

Under the terms of the November 2018 swap maturing in 2023, we pay a fixed rate over the hedged amount and receive 1-month LIBOR. This is inclusive of a 0% floor.

Under the terms of the forward starting November 2018 swap maturing in 2025, we will pay a fixed rate monthly and receive 1-month LIBOR. This is inclusive of a 0% floor.

~~On September 30, 2019,~~ 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. This is inclusive of a 0% floor.

Under the terms of the forward starting March 2020 swaps maturing in 2024, we will pay a fixed rate monthly and receive 1-month LIBOR. These are inclusive of a 0% floor.

Inin connection with the refinancing of our credit facility in September 2019, we settled a $100.0 million notional interest rate swap.~~See Note 17 for additional details related to our credit facility refinancing.~~

The following tables detail amounts related to our derivatives as of December 31, ~~2019~~2020 and ~~2018.~~2019. We did 0t have any derivative assets or liabilities not designated as hedging instruments for the years ended December 31, ~~2019~~2020 and ~~2018.~~2019. The derivative asset and liability amounts below are shown in gross ~~amounts; we~~amounts and have not ~~netted assets with liabilities.~~been netted.

	Amount of Gain (Loss) Recognized in AOCI									Location of Gain (Loss) Reclassified from AOCI into Income	Gain (Loss) Reclassified from AOCI into Income									Amount of Gain (Loss) Recognized in AOCI									Location of Gain (Loss) Reclassified from AOCI into Net Earnings (Loss)	Gain (Loss) Reclassified from AOCI into Net Earnings (Loss)
	2019			2018			2017				2019			2018			2017			2020			2019			2018				2020		2019			2018
Derivatives in cash flow hedging relationships
Natural gas commodity contracts	$	-		$	0.7		$	(1.3	)	Cost of goods sold	$	-		$	0.1		$	0.3		$	-		$	-		$	0.7		Cost of goods sold	$	-	$	-		$	0.1
Foreign exchange contracts – purchases		-			0.1			(0.5	)	Cost of goods sold		-			-			-			-			-			0.1		Cost of goods sold		-		-			-
Foreign exchange contracts – sales		-			0.7			(1.8	)	Net sales		-			-			0.1			-			-			0.7		Net sales		-		-			-
Interest rate swap contracts		(20.0	)		(2.0	)		2.2		Interest expense		(1.4	)		(1.6	)		(0.9	)		(8.6	)		(20.0	)		(2.0	)	Interest expense		5.6		(1.4	)		(1.6	)
Total	$	(20.0	)	$	(0.5	)	$	(1.4	)	Total (loss) from continuing operations	$	(1.4	)	$	(1.5	)	$	(0.5	)	$	(8.6	)	$	(20.0	)	$	(0.5	)	Total gain (loss)	$	5.6	$	(1.4	)	$	(1.5	)
										Total (loss) from discontinued operations		-			-			(0.1	)
										Total (loss)	$	(1.4	)	$	(1.5	)	$	(0.6	)

As of December 31, ~~2019,~~2020, the amount of existing losses in AOCI expected to be recognized in earnings over the next twelve months is ~~$2.6~~$8.4 million.

	December 31, 2019		December 31, 2018		December 31, 2020		December 31, 2019
Fair value of derivative liabilities					$	28.4	$	15.6
Acquisition-related contingent consideration						16.9		-
Long-term deferred compensation arrangements	$	14.0	$	14.0		14.8		14.0
Environmental liabilities		1.5		11.7
Fair value of derivative liabilities		15.6		6.1
Environmental insurance recoveries received in excess of cumulative expenses incurred						5.0		-
Other		6.7		6.2		11.4		8.2
Total other long-term liabilities	$	37.8	$	38.0	$	76.5	$	37.8

The 2016 Long-Term Incentive Plan (“2016 LTIP”) authorizes us to issue stock options, stock appreciation rights, restricted stock awards, stock units, performance-based awards and cash awards to officers and key employees and expires on July 8, 2026, after which time no further awards may be made. The 2016 LTIP authorizes us to issue up to ~~8,949,000~~2,803,242 shares of common stock, which includes all shares that have been issued under the 2016 LTIP. As of December 31, ~~2019, 3,456,997~~2020, 2,183,904 shares were available for future grants under the 2016 LTIP, excluding any future adjustments to shares for performance-based awards that have been previously granted.

The 2016 Directors Stock Unit Plan (“2016 Director’s Plan”) authorizes us to issue stock units to non-employee directors until July 2026. The 2016 Director’s Plan authorizes us to issue up to ~~550,000~~250,000 shares of common stock, which includes all shares that have been issued under the 2016 Director’s Plan. As of December 31, ~~2019, 179,496~~2020, 167,218 shares were available for future grants under the 2016 Director’s Plan.

The 2020 Inducement Award Plan (“2020 Inducement Plan”) authorizes us to issue stock options, stock appreciation rights, restricted stock awards and stock units to key employees and expires on December 14, 2030, after which time no further awards may be made. The 2020 Inducement Plan authorizes us to issue up to 19,000 shares of common stock. As of December 31, 2020, 513 shares were available for future grants under the 2020 Inducement Plan.

The following table presents stock option activity for the year ended December 31, ~~2019:~~2020:

	Number of shares (thousands)			Weighted-average exercise price		Weighted-average remaining contractual term (years)		Aggregate intrinsic value (millions)		Number of shares (thousands)			Weighted-average exercise price			Weighted-average remaining contractual term (years)		Aggregate intrinsic value (millions)
Option shares outstanding, December 31, 2018		602.5		$	41.71
Option shares outstanding, December 31, 2019											261.1		$	40.84
Option shares exercised		(341.4	)		42.38						(121.5	)	$	(39.02	)
Option shares outstanding, December 31, 2019		261.1		$	40.84		2.6	$	13.9
Option shares exercisable, vested and expected to vest, December 31, 2019		261.1		$	40.84		2.6	$	13.9
Option shares outstanding, December 31, 2020											139.6		$	42.41			1.9	$	4.5
Option shares exercisable, vested and expected to vest, December 31, 2020											139.6		$	42.41			1.9	$	4.5

We have reserved sufficient authorized shares to allow us to issue new shares upon exercise of all outstanding options. Options generally become exercisable in three years and expire 10 years from the date of grant. When options are exercised, we may issue new shares, use treasury shares (if available), acquire shares held by investors, or a combination of these alternatives in order to satisfy the option exercises.

	2019		2018		2017			2020		2019		2018
Total intrinsic value of stock options exercised	$	15.9	$	23.7	$	0.9		$	5.6	$	15.9	$	23.7
Cash proceeds received from stock options exercised	$	14.5	$	18.4	$	3.3			4.7		14.5		18.4
Tax deduction (expense) realized from stock options exercised	$	3.3	$	6.1	$	(0.2	)
Tax deduction realized from stock options exercised									1.2		3.3		6.1

The fair value of option grants was estimated on the date of grant using the Black-Scholes option pricing model. There have been no option grants since 2014.

We also grant non-vested stock awards in the form of Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”). A summary of the ~~2019~~2020 activity related to the RSUs and PSUs is as follows:

	Non-Vested Stock Awards													Non-Vested Stock Awards
	RSUs						PSUs							RSUs						PSUs
	Number of shares (thousands)			Weighted- average fair value at grant date			Number of shares (thousands)			Weighted- average fair value at grant date				Number of shares (thousands)			Weighted- average fair value at grant date			Number of shares (thousands)			Weighted- average fair value at grant date
December 31, 2018		100.3		$	48.69			503.2		$	45.14
December 31, 2019													December 31, 2019		65.4		$	66.49			357.7		$	58.27
Granted		34.9			82.99			118.6			76.05				38.6			86.16			99.3			99.57
Performance adjustments		-			-			273.8			38.66				-			-			158.3			43.74
Vested		(62.0	)		(46.32	)		(513.8	)		(38.89	)			(34.0	)		(54.69	)		(280.5	)		(44.08	)
Forfeited		(7.8	)		(64.18	)		(24.1	)		(63.48	)			(3.2	)		(81.83	)		(4.5	)		(73.95	)
December 31, 2019		65.4		$	66.49			357.7		$	58.27
December 31, 2020													December 31, 2020		66.8		$	83.14			330.3		$	75.49

RSUs entitle the recipient to a specified number of shares of AWI’s common stock provided the prescribed service period is fulfilled. PSUs entitle the recipient to a specified number of shares of AWI’s common stock provided the defined financial targets are achieved at the end of the performance period. Upon vesting, final adjustments based upon financial achievements are reflected as performance adjustments in the table above. RSUs and PSUs generally ~~had~~have vesting periods of three years at the grant date. RSUs and PSUs earn dividends during the vesting period that are ~~forfeitable~~subject to forfeiture if the awards do not vest.

The table above contains 5,680 RSUs as of December 31, 2018 which were accounted for as liability awards as they were able to be settled in cash. There are 0 outstanding RSUs accounted for as liability awards as of December 31, 2019. There wereincludes 895 ~~and 1,742~~ PSUs as of December 31, ~~2019~~2020 and ~~2018, respectively,~~2019, which are accounted for as liability awards as they are able to be settled in cash. Employee liability awards outstanding for all periods represent awards to certain employees of our former EMEA and Pacific Rim businesses, which vest when the appropriate performance period ends.

~~(dollar amounts~~ These awards will be distributed in ~~millions, except share data)~~the second quarter of 2021.

RSUs and PSUs with non-market based performance conditions are measured at fair value based on the closing price of our stock on the date of grant. In ~~2019~~2020 and ~~2018,~~2019, we granted ~~58,430~~42,698 and ~~69,669~~58,430 PSUs, respectively, with market-based performance conditions that are valued through the use of a Monte Carlo simulation. The weighted average assumptions for PSUs measured at fair value through the use of a Monte Carlo simulation are presented in the table below.

	2019			2018			2020			2019
Weighted-average grant date fair value of market-based PSUs granted (dollars per award)	$	77.80		$	53.01		$	97.75		$	77.80
Assumptions
Risk-free rate of return		2.4	%		2.4	%		1.2	%		2.4	%
Expected volatility		25.9	%		26.3	%		23.8	%		25.9	%
Expected term (in years)		3.1			3.1			3.1			3.1
Expected dividend yield		0.0	%		0.0	%		0.0	%		0.0	%

The risk-free rate of return was determined based on the implied yield available on zero coupon U.S. Treasury bills at the time of grant with a remaining term equal to the expected term of the PSUs. ~~The~~In 2019, the expected volatility was based on an average of the actual historical volatilities of the stock prices of AWI and a peer group of companies. We elected to not rely solely on AWI’s actual historical stock price volatility due to the separation of AFI in 2016. In 2020, the expected volatility was based on the actual historical volatilities of the stock prices of AWI. The expected term represented the performance period on the underlying award. The expected dividend yield was assumed to be zero under the assumption that dividends distributed during the performance period are reinvested in AWI’s common stock.

In connection with our recent acquisition of Arktura, we issued 75,743 shares of restricted stock to the sellers as of the acquisition date, which are not reflected in the non-vested stock awards table above. These awards to sellers were not issued under the 2020 Inducement Plan and have a vesting period of five years from the grant date and earn dividends during the vesting period, which are subject to forfeiture if the awards do not vest. We also issued 18,487 Restricted Stock Awards (“RSAs”) under the 2020 Inducement Plan to key employees as of the acquisition date, which are not reflected in the non-vested stock awards table above. These key employee awards have a vesting period of three years from the grant date and earn dividends during the vesting period, which are subject to forfeiture if the awards do not vest. If forfeited, the key employee awards will transfer to the Arktura sellers. We reissued treasury shares to grant all of the restricted stock and RSAs associated with the Arktura acquisition.

In addition to the equity awards described above, as of December 31, ~~2019~~2020 we had 11,773 fully-vested phantom shares outstanding for non-employee directors under the 2006 Phantom Stock Unit Plan not reflected in the non-vested stock awards table above. These awards are settled in cash and had vesting periods of one to three years. The awards are generally payable six months following the director’s separation from service on the Board of Directors. The total liability recorded for these shares as of December 31, ~~2019~~2020 was ~~$1.0~~$1.2 million which includes associated non-forfeitable dividends. This liability was settled on January 5, 2021. The 2006 Phantom Stock Unit Plan is still in place; however, 0 additional shares will be granted under the plan.

As of December 31, ~~2019~~2020 and ~~2018,~~2019, there were ~~140,417~~126,474 and ~~163,564~~140,417 RSUs, respectively, outstanding under the 2016 Directors Stock Unit Plan not reflected in the non-vested stock awards table above. In ~~2019~~2020 and ~~2018,~~2019, we granted ~~9,981~~12,278 and ~~13,058~~9,981 restricted stock units, respectively, to non-employee directors. These awards generally have a vesting period of one year, and as of December 31, 2020 and 2019, 114,196 and ~~2018,~~ 130,436 ~~and 150,506~~ shares, respectively, were vested but not yet delivered. The awards are generally payable upon vesting or the director’s deferral election. These awards earn dividends during the vesting period that are ~~non-forfeitable.~~subject to forfeiture if the underlying award does not vest.

We recognize share-based compensation expense on a straight-line basis over the vesting period. Share-based compensation cost was $6.9 million ($5.1 million net of tax benefit) in 2020, $8.4 million ($6.3 million net of tax benefit) in 2019, and $12.9 million ($9.6 million net of tax benefit) in ~~2018, and $9.8 million ($5.9 million net of tax benefit) in 2017.~~2018.

As of December 31, ~~2019,~~2020, there was ~~$12.5~~$17.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of ~~1.8~~3.1 years.

~~As a result of our adoption of~~ ~~ASU 2017-07~~, defined contribution and defined benefit pension plan expense, net, included above includes non-service cost components of net periodic pension costs that are reflected as a component of other non-operating income on the Consolidated Statements of Earnings and Comprehensive Income for all years presented. See Note 18 for details related to our components of net periodic pension costs.

During ~~2019,~~2020, we repurchased ~~1.5~~0.5 million shares under the Program for a total cost of ~~$131.2~~$44.4 million, excluding commissions, or an average price of ~~$86.02~~$87.27 per share. Since inception, ~~including the ASR,~~ we have repurchased ~~9.2~~9.7 million shares under the Program for a total cost of ~~$561.8~~$606.2 million, excluding commissions, or an average price of ~~$60.98~~$62.35 per share.

In February, April and July ~~2019,~~2020, our Board of Directors declared ~~$0.175~~$0.20 per share quarterly dividends, which were paid to shareholders in March, May and August ~~2019,~~2020, respectively. In October ~~2019,~~2020, our Board of Directors declared a ~~$0.20~~$0.21 per share quarterly dividend, which was paid to shareholders in November ~~2019.~~2020. On February ~~19, 2020,~~17, 2021, our Board of Directors declared a ~~$0.20~~$0.21 per share quarterly dividend to be paid in March ~~2020.~~2021.

The balance of each component of accumulated other comprehensive (loss), net of tax is presented in the table below.

	December 31, 2019			December 31, 2018			December 31, 2020			December 31, 2019
Foreign currency translation adjustments	$	9.4		$	(74.7	)	$	2.3		$	9.4
Derivative (loss) gain, net		(8.5	)		5.3
Derivative (loss), net								(19.0	)		(8.5	)
Pension and postretirement adjustments		(377.0	)		(390.2	)		(92.6	)		(377.0	)
Accumulated other comprehensive (loss)	$	(376.1	)	$	(459.6	)	$	(109.3	)	$	(376.1	)

~~The amounts and related tax effects allocated to each component of other comprehensive income for 2019, 2018, and 2017 are presented in the tables below.~~

~~The following table summarizes the activity, by component, related to the change in AOCI for December 31, 2019 and 2018:~~

The amounts and related tax effects allocated to each component of other comprehensive income for 2020, 2019, and 2018 are presented in the tables below.

The following table summarizes the activity, by component, related to the change in AOCI for December 31, 2020 and 2019:

The amounts reclassified from AOCI and the affected line item of the Consolidated Statement of ~~Earnings~~Operations and Comprehensive Income are presented in the table below.

	Amounts Reclassified from Accumulated Other Comprehensive (Loss)						Affected Line Item in the Condensed Consolidated Statement of Earnings and Comprehensive Income	Amounts Reclassified from Accumulated Other Comprehensive (Loss)						Affected Line Item in the Consolidated Statement of Operations and Comprehensive Income
	2019			2018				2020			2019
Derivative Adjustments:
Natural gas commodity contracts	$	-		$	(0.1	)	Cost of goods sold
Foreign exchange contracts - purchases		-			-		Cost of goods sold
Foreign exchange contracts - sales		-			-		Net sales
Interest rate swap contracts		1.4			1.6		Interest expense	$	(5.6	)	$	1.4		Interest expense
Tax impact									1.2			(0.3	)	Income tax expense
Total (income) loss, net of tax									(4.4	)		1.1

Pension and Postretirement Adjustments:
Prior service credit amortization									(0.3	)		(0.2	)	Other non-operating expense (income), net
Amortization of net actuarial loss									(0.3	)		10.7		Other non-operating expense (income), net
Settlement									374.4			-		Other non-operating expense (income), net
Total loss, before tax		1.4			1.5				373.8			10.5
Tax impact		(0.3	)		(0.4	)	Income tax expense		(95.5	)		(2.2	)	Income tax expense
Total loss from continuing operations, net of tax									278.3			8.3
Adjustments related to Sale to Knauf ⁽¹⁾									-			3.5
Total loss, net of tax		1.1			1.1				278.3			11.8

Pension and Postretirement Adjustments:
Prior service cost amortization		(0.2	)		(0.1	)	Other non-operating (income), net
Amortization of net actuarial loss		10.7			14.4		Other non-operating (income), net
Total expense, before tax		10.5			14.3
Tax impact		(2.2	)		(3.0	)	Income tax expense
Total expense from continuing operations, net of tax		8.3			11.3
Total expense from discontinued operations, net of tax expense of $- and $-		-			0.5
Adjustments related to Sale to Knauf ⁽¹⁾		3.5			-
Total expense, net of tax		11.8			11.8

Foreign currency translation adjustments related to Sale to Knauf ⁽¹⁾		80.2			-
Foreign Currency Translation Adjustments:
Sale to Knauf ⁽¹⁾									-			80.2
Sale of idled plant in China									(6.9	)		-
Total (income) loss, net of tax									(6.9	)		80.2
Total reclassifications for the period	$	93.1		$	12.9			$	267.0		$	93.1

	2019			2018			2017			2020			2019			2018
Selected operating expense
Maintenance and repair costs	$	41.4		$	41.6		$	42.5		$	38.1		$	41.4		$	41.6
Research and development costs		14.8			16.3			17.4			14.7			14.8			16.3
Advertising costs		7.0			6.5			6.0			6.8			7.0			6.5

Other non-operating (income)/expense
Other non-operating expense (income), net
Interest income	$	(3.2	)	$	(4.3	)	$	(1.8	)	$	(0.3	)	$	(3.2	)	$	(4.3	)
Pension and postretirement benefit (credits)		(16.9	)		(33.0	)		(11.3	)
Pension and postretirement cost (credits)											358.7			(16.9	)		(33.0	)
Other		(0.3	)		4.8			(0.6	)		(1.0	)		(0.3	)		4.8
Total	$	(20.4	)	$	(32.5	)	$	(13.7	)	$	357.4		$	(20.4	)	$	(32.5	)

In some geographies and for some customers, we purchase grid products from WAVE, our 50%-owned joint venture with Worthington, ~~Industries,~~ for resale to customers. The total amount of these purchases was $21.5 million in 2020, $22.5 million in 2019 and $22.5 million in ~~2018 and $18.2 million in 2017.~~2018. We also provide certain selling, promotional and administrative processing services to WAVE for which we receive reimbursement. Those services amounted to $20.7 million in 2020, $15.7 million in 2019, and $15.8 million in ~~2018, and $14.9 million in 2017.~~2018. The net amount due to WAVE from us for all of our relationships was $4.9 million as of December 31, 2020 and $3.3 million as of December 31, ~~2019 and $3.0 million as of December 31, 2018.~~2019. As of December 31, 2019, ~~and 2018,~~ we also recorded a $25.9 million ~~and $22.4 million, respectively,~~ payable to WAVE for their remaining portion of the proceeds from the Sale, which iswas reflected within Accounts payable and accrued expenses in the December 31, 2019 Consolidated Balance ~~Sheets.~~Sheet and paid to WAVE during 2020. See Note 11 to the Consolidated Financial Statements for additional information.

Our manufacturing and research facilities are affected by various federal, state and local requirements relating to the discharge of materials and the protection of the environment. We make expenditures necessary for compliance with applicable environmental requirements at each of our operating facilities. 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.

We are actively involved in the investigation ~~closure and/or~~and 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~~two domestically owned locations allegedly resulting from past industrial activity.

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. We may also have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies. We are currently pursuing coverage and recoveries under those policies with respect to certain of the sites, including the Macon, GA site and the Elizabeth City, NC site, each of which is summarized below. These efforts have included 2 active and independent litigation matters against legacy primary and excess policy insurance carriers for recovery of fees and costs incurred by us in connection with our investigation and remediation activities for such sites. As described below, the litigation matter in Oregon relating to the St. Helens, OR site was dismissed in the second quarter of 2019 in connection with our settlement with the State of Oregon. Other than disclosed below, we are unable to predict the outcome of these matters or the timing of any recoveries, whether through settlement or otherwise. We are also unable to predict the extent to which any recoveries might cover our final share of investigation and remediation costs for these sites. Our final share of investigation and remediation costs may exceed any such recoveries, and such amounts net of insurance recoveries may be material.

InBetween 2017 and ~~2018,~~2019, we entered settlement agreements totaling ~~$37.5~~$39.8 million with certain legacy insurance carriers to resolve ongoing litigation and recover fees and costs previously incurred by us in connection with certain environmental sites. These settlements were recorded as a $9.2 million reduction to cost of goods sold and a ~~$28.3~~$30.6 million reduction to SG&A expenses reflecting the same income statement categories where environmental expenditures were historically recorded. ~~All of these cash settlements have been released to us from escrow, including $6.5 million received in 2019.~~ In ~~2019,~~2020, we entered into ~~two new~~ settlement agreements totaling ~~$1.9~~$12.7 million, ~~and received an additional $0.4~~$7.7 million ~~in payments related to a previous settlement. These settlements were~~of which was recorded as a ~~$2.3 million~~ reduction to SG&A expenses. During the fourth quarter of 2020, cumulative insurance recoveries exceeded cumulative expenses to date related to the respective environmental sites and the excess $5.0 million was recorded within our long-term liabilities as of December 31,2020. The excess recoveries will be released to offset any future expenses incurred on the respective environmental sites. We anticipate that we may enter into additional settlement agreements in the future, which may or may not be material, with other legacy insurers to obtain reimbursement or contribution for environmental site expenses.

Estimates of our future liability at the environmental sites are based on evaluations of currently available facts regarding each individual site. We consider factors such as our activities associated with the site, existing technology, presently enacted laws and regulations and prior company experience in remediating contaminated sites. Although current law imposes joint and several liability on all parties at Superfund sites, our contribution to the remediation of these sites is expected to be limited by the number of other companies potentially liable for site remediation. As a result, our estimated liability reflects only our expected share. In determining ~~the probability of contribution, we consider the solvency of other parties, the site activities of other parties, whether liability is being~~

the probability of contribution, we consider the solvency of other parties, the site activities of other parties, whether liability is being disputed, the terms of any existing agreements and experience with similar matters, and the effect of our October 2006 Chapter 11 reorganization upon the validity of the claim, if any.

In August 2010, we entered into a Consent Order (the “Consent Order”) with the Oregon Department of Environmental Quality (“ODEQ”), along with Kaiser Gypsum Company, Inc. (“Kaiser”), and Owens Corning Sales LLC (“OC”), with respect to our St. Helens, Oregon facility, which was previously owned by Kaiser and then OC. The Consent Order required the parties to complete a remedial investigation and feasibility study on the upland, lowland and in-water portions of the site.

Through voluntary mediation in November 2017 with ODEQ, OC and Kaiser, we reached settlement with ~~ODEQ;~~ODEQ documented in a Public Notice and proposed consent judgment (“Consent Judgment”); in exchange for a release from ODEQ for all contamination claims against us, we would pay $8.6 million to the State of Oregon and perform a previously scoped remedial action for the upland area. We submitted the settlement payment to ODEQ and completed the remedial action for the upland area in 2019.

~~On November 26, 2018, Kaiser filed~~ODEQ approved a complaint against AWI seeking monetary damages and declaratory relief including cost recovery and/or contributions from AWI in connection with the environmental costs incurred by Kaiser at St. Helens. On March 1, 2019, we entered into a $1.0 settlement agreement with Kaiser resolving all claims between us, which was paid during the second quarter of 2019.

~~ODEQ has approved a~~final Upland Operable Unit Remedial Action Construction Completion and Final Closeout Report ~~for the Upland area~~ and issued a Conditional No Further Action Determination, including the Easement and Equitable Servitude, which was recorded in Columbia County, Oregon. On February 24, 2020, ODEQ filed the Certification of Completion for the satisfactory completion of the work conducted by us pursuant to the Consent Judgment. 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.

The U.S. Environmental Protection Agency (the “EPA”) has listed 2 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 1 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 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. The EPA approved the final report on November 28, 2016, and a Post-Removal Control Plan (the “Plan”) was submitted to the EPA on March 28, 2017. That Plan will monitor the effectiveness of the WWTP Landfill response action over a five-year period and our estimate of future liabilities includes these tasks.

It is probable that we will incur field investigation, engineering and oversight costs associated with a remedial investigation and feasibility study (“RI/FS”) with respect to the remainder of the Superfund site, which includes the other landfill on our property, as well as areas on and adjacent to our property and Rocky Creek (the “Remaining Site,” also known as “Operable Unit 2”). On September 25, 2015, AWI and other Potential Responsible Parties (“PRPs”) received a Special Notice Letter from the EPA under CERCLA inviting AWI and the PRPs to enter into the negotiation of an agreement to conduct an RI/FS of Operable Unit 2. We and the other PRPs entered into a settlement agreement with the EPA effective September 18, 2018, in response to the Special Notice Letter to conduct the RI/FS. 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~~2019. Ecological field work and werisk evaluation 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. The current estimate of future liability at this site includes only our estimated share of the costs of the investigative work that, at this time, we anticipate the EPA will require the PRPs to perform. We are unable to reasonably estimate our final share of the total costs associated with the investigation work or any resulting remediation therefrom, although such amounts may be material to any one quarter's or year's results of operations in the future. However, we do not expect the total future costs to have a material adverse effect on our liquidity or financial condition as the cash payments may be made over many years.

This site is a former cabinet manufacturing facility that was operated by Triangle Pacific Corporation, now known as Armstrong Wood Products, Inc. (“Triangle Pacific” or “AWP”), from 1977 until 1996. The site was formerly owned by the U.S. Navy (“Navy”) and Westinghouse, now CBS Corporation (“CBS”). We assumed ownership of the site when we acquired the stock of Triangle Pacific in 1998. Prior to our acquisition, the NCNorth Carolina Department of Environment and Natural Resources listed the site as a hazardous waste site. In 1997, Triangle Pacific entered into a cost sharing agreement with Westinghouse whereby the parties agreed to share equally in costs associated with investigation and potential remediation. In 2000, Triangle Pacific and CBS entered into an Administrative Order on Consent to conduct an RI/FS with the EPA for the site. In 2007, we and CBS entered into an agreement with the Navy whereby the Navy agreed to pay one third of defined past and future investigative costs up to a certain amount, which has now been exhausted. The EPA approved the RI/FS work plan in August 2011. In January 2014, we submitted the draft Remedial Investigation and Risk Assessment reports and conducted supplemental investigative work based upon agency comments to those reports. In connection with the separation of AFI in 2016, we agreed to retain any legacy environmental liabilities associated with the AWP site. 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. 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.~~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. We are unable to reasonably estimate our final share of the total costs associated with the final remediation or any resulting remediation therefrom, although such amounts may be material to any one quarter's or year's results of operations in the future. However, we do not expect the total future costs to have a material adverse effect on our liquidity or financial condition as the cash payments may be made over many years.

Total liabilities of $1.2 million as of December 31, 2020 and $1.6 million as of December 31, 2019 ~~and $12.4 million as of December 31, 2018~~ were recorded for environmental liabilities that we consider probable and for which a reasonable estimate of the probable liability could be made. As of December 31, 2020 and 2019, ~~and 2018, $0.1~~$0.3 million and ~~$0.7~~$0.1 million, respectively, were reflected within ~~Accounts~~accounts payable and accrued ~~expenses with respect to environmental liabilities.~~expenses. During ~~2019,~~2020, we ~~recorded $1.0 million of~~did not record any additional reserves for potential environmental liabilities. During ~~2018,~~2019, we recorded reserves for potential environmental liabilities of ~~$0.5~~$1.0 million. 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. These liabilities are ~~undiscounted~~undiscounted.

The estimated environmental liabilities above do not take into account any claims for additional recoveries from insurance or third parties. It is our policy to record insurance recoveries as assets in the Consolidated Balance Sheets when probable. ~~For~~We incur costs to pursue environmental insurance recoveries, ~~that are reimbursements of prior environmental expenditures, the income statement impact is recorded within cost of goods sold and SG&A expenses,~~ which are the same income statement categories within which environmental expenditures were historically recorded. Insurance recoveries in excess of historical environmental spending are recorded on the balance sheetexpensed as ~~a part of other long-term liabilities and released as future environmental spending occurs or the liability is settled.~~incurred.

Actual costs to be incurred at identified sites may vary from our estimates. Based on our knowledge of the identified sites, it is not possible to reasonably estimate future costs in excess of amounts already recognized.

claims or allegations contained in Rockfon’s complaint or otherwise alleged in the litigation; (b) all AWI exclusive distribution locations (i.e., any location where a reseller has agreed to sell only AWI ceiling system products) will remain exclusive to AWI under their respective distribution agreements, and (c) in all other non-exclusive or “open” distribution locations, resellers are free to purchase and resell ceiling systems products of any manufacturer at their discretion. During the first six months of 2019, we incurred $19.7 million of expenses in connection with the matter, primarily relating to legal and professional fees incurred by us in connection with the litigation, including expenses and attorney’s fees paid under the settlement agreement. As a result of the settlement and Dismissal, we do not expect to incur additional future costs or expenses relating to the ~~matter.~~matter.

From time to time, we are involved in other various lawsuits, claims, investigations and other legal matters ~~from time to time~~ that arise in the ordinary course of business, including matters involving our products, intellectual property, relationships with suppliers, relationships with distributors, relationships with competitors, employees and other matters. From time to time, for example, we may be a party to litigation matters that involve product liability, tort liability and other claims under various allegations, including illness due to exposure to certain chemicals used in the workplace; or medical conditions arising from exposure to product ingredients or the presence of trace contaminants. Such allegations may involve multiple defendants and relate to legacy products that we and other defendants purportedly manufactured or sold. We believe that any current claims are without merit and intend to defend them vigorously. For theseIn connection with those matters, we ~~also~~ may have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies. When applicable and appropriate, we will pursue coverage and recoveries under those policies, but are unable to predict the outcome of those demands. While complete assurance cannot be given to the outcome of any proceedings relating to these ~~proceedings,~~matters, 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.

The following table is a reconciliation of ~~net~~(loss) earnings to ~~net~~(loss) earnings attributable to common shares used in our basic and diluted ~~EPS~~(Loss) Earnings Per Share (“EPS”) calculations for the years ended December 31, 2020, 2019 ~~2018~~ and ~~2017:~~2018. EPS components may not add due to rounding.

The following table is a reconciliation of basic shares outstanding to diluted shares outstanding for the years ended December 31, 2020, 2019 and 2018 (shares in millions):

Due to the net loss for the year ended December 31, 2020, all common stock equivalents were considered anti-dilutive. Anti-dilutive options excluded from the computation of dilutive EPS for 2020 and 2019 were ~~7,580.~~313,003 and 7,580, respectively. There were 0 anti-dilutive stock options excluded from the computation of diluted EPS in 2018. ~~Anti-dilutive options excluded from the computation of dilutive EPS for 2017 were 319,836.~~

Our management, with the participation of our chief executive officer and our chief financial officer, performed an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31, ~~2019.~~2020. Our chief executive officer and our chief financial officer have concluded that our disclosure controls and procedures were effective insofar as they are designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, ~~2019~~2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are incorporated by reference to Item 8 to this Annual Report on Form 10-K.

Information about our Executive Officers (as of February ~~25, 2020)~~23, 2021):

All executive officers are elected by the Board of Directors to serve in their respective capacities until their successors are elected and qualified or until their earlier resignation or removal.

We have adopted a Code of Business Conduct that applies to all employees, executives and directors, specifically including our Chief Executive Officer, our Chief Financial Officer and our Controller. We have also adopted a Code of Ethics for Financial Professionals (together with the Code of Business Conduct, the “Codes of Ethics”) that applies to all professionals in our finance and accounting functions worldwide, including our Chief Financial Officer and our Controller.

The Codes of Ethics are available at http://www.armstrongceilings.com/corporate/codes-policies.html and in print free of charge. Any waiver of the Company’s Code of Business Conduct, particularly its conflicts-of-interest provisions, which may be proposed to apply to any director or executive officer, must be reviewed in advance by the Nominating, Governance and ~~Governance~~Social Responsibility Committee of the Board of Directors, which would be responsible for making a recommendation to the Board of Directors for approval or disapproval. The Board of Directors’ decision on any such matter would be disclosed publicly in compliance with applicable legal standards and the rules of the New York Stock Exchange. We intend to satisfy these requirements by making disclosures concerning such matters available on the “For Investors” page of our website. There were no waivers or exemptions from the Code of Business Conduct in ~~2019~~2020 applicable to any director or executive officer.

Other information required by Item 10 is incorporated by reference to the sections entitled “Election of Directors,” “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s proxy statement for its ~~2020~~2021 annual meeting of shareholders to be filed no later than April ~~29, 2020.~~30, 2021.

The information required by Item 11 is incorporated by reference to the sections entitled “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Summary Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and Stock Vested,” “Pension Benefits,” “Nonqualified Deferred Compensation,” “Potential Payments Upon Termination or Change in Control,” “Board of Directors – Board’s Role in Risk Management Oversight,” “Compensation Committee Interlocks and Insider Participation” and “Compensation of Directors” in the Company’s proxy statement for its ~~2020~~2021 annual meeting of shareholders to be filed no later than April ~~29, 2020.~~30, 2021.

The information required by Item 12 is incorporated by reference to the sections entitled “Security Ownership of Certain Beneficial Owners,” “Security Ownership of Management,” and “Equity Compensation Plan Information” in the Company’s proxy statement for its ~~2020~~2021 annual meeting of shareholders to be filed no later than April ~~29, 2020.~~30, 2021.

The information required by Item 13 is incorporated by reference to the sections entitled “Certain Relationships and Related Transactions” and “Director Independence” in the Company’s proxy statement for its ~~2020~~2021 annual meeting of shareholders to be filed no later than April ~~29, 2020.~~30, 2021.

The information required by Item 14 is incorporated by reference to the sections entitled “Audit Committee Report” and “Relationship with Independent Auditors” in the Company’s proxy statement for its ~~2020~~2021 annual meeting of shareholders to be filed no later than April ~~29, 2020.~~30, 2021.

Worthington Armstrong Venture consolidated financial statements for the years ended December 31, 2020, 2019, ~~2018,~~ and ~~2017~~2018 (filed herewith as Exhibit 99.1).

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Balance at beginning of year		Additions charged to earnings		Deductions			Balance at end of year
2017
Provision for bad debts	$	0.4	$	-	$	(0.1	)	$	0.3
Provision for discounts		1.3		17.6		(17.4	)		1.5
Provision for warranties		0.2		3.2		(3.3	)		0.1
										Balance at beginning of year		Additions charged to earnings		Deductions			Balance at end of year
2018
Provision for bad debts	$	0.3	$	0.1	$	(0.1	)	$	0.3	$	0.3	$	0.1	$	(0.1	)	$	0.3
Provision for discounts		1.5		19.2		(19.4	)		1.3		1.5		19.2		(19.4	)		1.3
Provision for warranties		0.1		4.2		(3.9	)		0.4		0.1		4.2		(3.9	)		0.4

2019
Provision for bad debts	$	0.3	$	0.7	$	(0.3	)	$	0.7	$	0.3	$	0.7	$	(0.3	)	$	0.7
Provision for discounts		1.3		21.0		(20.9	)		1.4		1.3		21.0		(20.9	)		1.4
Provision for warranties		0.4		3.0		(3.2	)		0.2		0.4		3.0		(3.2	)		0.2
Provision for inventory obsolescence		-		0.6		(0.1	)		0.5		-		0.6		(0.1	)		0.5

2020
Provision for bad debts										$	0.7	$	0.9	$	(0.2	)	$	1.4
Provision for discounts											1.4		19.4		(19.5	)		1.3
Provision for warranties											0.2		5.5		(4.8	)		0.9
Provision for inventory obsolescence											0.5		0.1		(0.6	)		-

2500 Columbia Avenue, Lancaster, Pennsylvania		17603
(Address of principal executive offices)		(Zip Code)

		PAGE

	Cautionary Note Regarding Forward-Looking Statements	3

	PART I
Item 1.	Business	45
Item 1A.	Risk Factors	911
Item 1B.	Unresolved Staff Comments	1618
Item 2.	Properties	1618
Item 3.	Legal Proceedings	1618
Item 4.	Mine Safety Disclosures	1619

	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1720
Item 6.	Selected Financial Data	1821
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1922
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	3133
Item 8.	Financial Statements and Supplementary Data	3235
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	8788
Item 9A.	Controls and Procedures	8788
Item 9B.	Other Information	8788

	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	8889
Item 11.	Executive Compensation	8990
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	8990
Item 13.	Certain Relationships and Related Transactions, and Director Independence	8990
Item 14.	Principal Accountant Fees and Services	8990

	PART IV
Item 15.	Exhibits and Financial Statement Schedules	9091
Item 16.	Form 10-K Summary	94

Signatures		95

Operating Segment	Number of Plants	Location of Principal Facilities

Mineral Fiber	6	U.S. (Florida, Georgia, Ohio, Oregon, Pennsylvania and West Virginia)
Architectural Specialties	710	U.S. ~~(Illinois, Ohio~~(California, Illinois, Missouri and ~~Missouri)~~Ohio), Canada (Quebec and Ontario)
~~Unallocated Corporate~~	1	~~China~~

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Value of Shares that may yet be Purchased under the Plans or Programs
October 1 – 31, 2019		35,684	$	94.65		34,179	$	185,003,673
November 1 – 30, 2019		299,194	$	94.12		298,872	$	156,874,100
December 1 – 31, 2019		197,864	$	94.69		197,516	$	138,171,417
Total		532,742				530,567

Period	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Value of Shares that may yet be Purchased under the Plans or Programs
October 1 – 31, 2020		645	$	60.51		-	$	603,779,225
November 1 – 30, 2020		30,000	$	78.57		30,000	$	601,422,060
December 1 – 31, 2020		96,907	$	79.18		96,523	$	593,779,245
Total		127,552				126,523

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

	2020		Acquisition	Affected Line Item in the Consolidated Statement of Operations and Comprehensive Income
Deferred revenue	$	0.7	Moz and Turf	Net sales
Change in fair value of contingent consideration		0.1	Moz and Turf	SG&A expenses
Deferred cash and restricted stock expenses		0.5	Arktura	SG&A expenses
Backlog		1.4	Moz and Turf	SG&A expenses
Inventory		0.1	Turf	Cost of goods sold
	$	2.8

	2020		2019		Change is Unfavorable
Total consolidated net sales	$	936.9	$	1,038.1		(9.7	)%
Operating income	$	254.8	$	317.4		(19.7	)%

Trade Date	Notional Amount		Coverage Period	Risk Coverage
November 14, 2016	$	200.0	December 2016 to March 2021	USD-LIBOR
November 28, 2018	$	200.0	November 2018 to November 2023	USD-LIBOR
November 28, 2018	$	100.0	March 2021 to March 2025	USD-LIBOR
March 6, 2020	$	50.0	March 2020 to March 2022	USD-LIBOR
March 10, 2020	$	50.0	March 2021 to March 2024	USD-LIBOR
March 11, 2020	$	50.0	March 2021 to March 2024	USD-LIBOR

	December 31, 2020
Financing Arrangements	Limit		Used		Available
Bi-lateral facility		25.0		10.9		14.1
Revolving credit facility		150.0		-		150.0
Total	$	175.0	$	10.9	$	164.1

	2019		2018		Change is Favorable
Total consolidated net sales	$	1,038.1	$	975.3		6.4	%
Operating income	$	317.4	$	249.4		27.3	%

	First		Second		Third		Fourth
2019
Net sales	$	242.1	$	272.0	$	277.1	$	246.9
Gross profit		91.4		103.4		111.7		88.6

Earnings from continuing operations
Per share of common stock:
Basic	$	0.75	$	1.30	$	1.86	$	1.06
Diluted	$	0.73	$	1.28	$	1.83	$	1.04

Price range of common stock - high	$	79.53	$	99.27	$	104.50	$	103.66
Price range of common stock - low	$	57.38	$	79.77	$	91.16	$	89.58

Cash dividend per common share	$	0.175	$	0.175	$	0.175	$	0.200

2018
Net sales	$	227.3	$	248.6	$	260.5	$	238.9
Gross profit		70.8		82.7		97.9		82.1

Earnings from continuing operations		41.2		47.6		64.2		36.6
Per share of common stock:
Basic	$	0.78	$	0.91	$	1.26	$	0.74
Diluted	$	0.76	$	0.90	$	1.23	$	0.73

Price range of common stock - high	$	64.60	$	65.00	$	73.45	$	71.50
Price range of common stock - low	$	55.65	$	54.45	$	62.15	$	54.34

Cash dividend per common share	$	-	$	-	$	-	$	0.175

	Year Ended
	December 31, 2017
	As Reported			As Adjusted
Loss on disposal of discontinued businesses, net of tax (benefit) of ($4.1)	$	(70.0	)	$	(105.2	)
Net loss from operations		(65.8	)		(101.0	)
Net earnings		154.8			119.6
Total comprehensive income		212.7			177.5
(Loss) per share of common stock, discontinued operations:
Basic	$	(1.23	)	$	(1.89	)
Diluted	$	(1.22	)	$	(1.87	)
Net earnings per share of common stock:
Basic	$	2.89		$	2.23
Diluted	$	2.86		$	2.21

	2019		2018
Property, plant and equipment, net at December 31,
Mineral Fiber:
United States	$	496.6	$	487.5
Total Mineral Fiber		496.6		487.5

Architectural Specialties:
United States	$	22.2	$	5.9
Canada		5.8		4.5
Total Architectural Specialties		28.0		10.4

Unallocated Corporate ⁽¹⁾		-		3.1
Total property, plant and equipment, net	$	524.6	$	501.0

	EMEA and Pacific Rim Businesses			Flooring Businesses		Total
2020
(Loss) gain from disposal of discontinued businesses, before income tax	$	(17.2	)	$	0.8	$	(16.4	)
Income tax (benefit)		(1.4	)		-		(1.4	)
(Loss) gain from disposal of discontinued businesses, net of tax	$	(15.8	)	$	0.8	$	(15.0	)

Net (loss) earnings from discontinued operations	$	(15.8	)	$	0.8	$	(15.0	)

	December 31, 2019		December 31, 2018
Current assets	$	99.2	$	112.9
Current assets of discontinued operations		-		33.8
Noncurrent assets		37.0		34.9
Current liabilities		24.4		113.6
Current liabilities of discontinued operations		-		6.9
Other noncurrent liabilities		287.4		293.6

	2019
Operating lease cost	$	6.8
ROU assets obtained in exchange for lease obligations ⁽¹⁾	$	41.6

	Balance Sheet Classification	December 31, 2019
ROU assets	Lease right-of-use assets	$	35.3
Current lease liabilities	Accounts payable and accrued expenses		5.2
Non-current lease liabilities	Lease non-current liabilities		30.1

	~~December 31, 2019~~
~~Weighted average remaining lease term (in years)~~	~~8.6~~
~~Weighted average discount rate~~		~~4.4~~	%

	December 31, 2020			December 31, 2019
Weighted average remaining lease term (in years)
Operating leases	6.5			8.6
Finance leases		10.7			-
Weighted average discount rate
Operating leases		4.0	%		4.4	%
Finance leases		3.6	%		-

	Total Minimum Lease Payments
2019	$	5.3
2020		4.7
2021		4.2
2022		3.7
2023		2.2
Thereafter		4.7
Total	$	24.8

	December 31, 2020			December 31, 2019
Deferred income tax assets (liabilities)
Net operating losses	$	48.7		$	54.8
Postretirement benefits		22.0			21.2
Pension benefit liabilities		12.0			12.9
Deferred compensation		9.0			10.5
Foreign tax credit carryforwards		17.7			13.1
State tax credit carryforwards		8.9			9.3
Capital loss carryforwards		19.3			16.0
Lease right-of-use liabilities		10.0			9.0
Other		16.2			9.0
Total deferred income tax assets		163.8			155.8
Valuation allowances		(79.4	)		(75.5	)
Net deferred income tax assets		84.4			80.3
Intangibles		(93.7	)		(96.6	)
Partnerships and investments		(28.1	)		(29.6	)
Accumulated depreciation		(75.5	)		(69.7	)
Prepaid pension costs		(30.7	)		(24.2	)
Inventories		(4.4	)		(4.5	)
Lease right-of-use assets		(10.2	)		(9.0	)
Other		(0.2	)		(0.2	)
Total deferred income tax liabilities		(242.8	)		(233.8	)
Net deferred income tax liabilities	$	(158.4	)	$	(153.5	)
Deferred income taxes have been classified in the Consolidated Balance Sheet as:
Deferred income tax assets - non-current	$	-		$	10.4
Deferred income tax liabilities - non-current		(158.4	)		(163.9	)
Net deferred income tax liabilities	$	(158.4	)	$	(153.5	)

	2020			2019
Weighted-average assumptions used to determine benefit obligations at end of period:
Discount rate		2.68	%		3.16	%
Rate of compensation increase		3.05	%		3.05	%
Weighted-average assumptions used to determine net periodic benefit cost for the period:
Discount rate		3.07	%		4.28	%
Expected return on plan assets		5.25	%		5.75	%
Rate of compensation increase		3.05	%		3.05	%

	2020		2019
Pension plans with benefit obligations in excess of assets
RBEP Projected benefit obligation, December 31	$	40.5	$	47.8
RBEP Accumulated benefit obligation, December 31		40.5		47.8

	One percentage point
	Increase		Decrease
Effect on total service and interest cost components	$	-	$	-
Effect on postretirement benefit obligation		0.1		(0.1	)

	December 31, 2020						December 31, 2019
	Fair value based on						Fair value based on
	Other observable inputs			Other unobservable inputs			Other observable inputs			Other unobservable inputs
	Level 2			Level 3			Level 2			Level 3
(Liabilities), net:
Interest rate swap contracts	$	(28.9	)	$	-		$	(14.3	)	$	-
Acquisition-related contingent consideration		-			(16.9	)		-			-

	Moz			Turf
Unobservable input
Volatility		25.8	%		26.2	%
Discount rates		2.8	%		2.8	%

	2020
Balance as of beginning of period	$	-
Acquisition date fair value of Moz contingent consideration		2.7
Acquisition date fair value of Turf contingent consideration		14.1
Adjustments to fair value measurements		0.1
Balance as of end of period	$	16.9

	Derivative Assets					Derivative Liabilities
		Fair Value					Fair Value
	Balance Sheet Location	December 31, 2020		December 31, 2019		Balance Sheet Location	December 31, 2020		December 31, 2019
Interest rate swap contracts	Other current assets	$	-	$	-	Accounts payable and accrued expenses	$	0.5	$	-
Interest rate swap contracts	Other non-current assets		-		1.3	Other long-term liabilities		28.4		15.6

	Pre-tax Amount			Tax (Expense) Benefit			After-tax Amount
2019
Foreign currency translation adjustments	$	84.1		$	-		$	84.1
Derivative (loss) gain, net		(18.8	)		4.9			(13.9	)
Pension and postretirement adjustments		16.8			(3.6	)		13.2
Total other comprehensive (loss)	$	82.1		$	1.3		$	83.4

	Pre-tax Amount			Tax Benefit		After-tax Amount
2018
Foreign currency translation adjustments	$	(27.6	)	$	-	$	(27.6	)
Derivative gain, net		0.9			0.2		1.1
Pension and postretirement adjustments		(41.6	)		8.7		(32.9	)
Total other comprehensive (loss)	$	(68.3	)	$	8.9	$	(59.4	)

	Foreign Currency Translation Adjustments			Derivative Gain (Loss) ⁽¹⁾			Pension and Postretirement Adjustments⁽¹⁾			Total Accumulated Other Comprehensive (Loss)⁽¹⁾
Balance, December 31, 2017	$	(47.1	)	$	3.5		$	(302.3	)	$	(345.9	)
Impact of ASU 2018-02 adoption		-			0.7			(55.0	)		(54.3	)
Other comprehensive (loss) before reclassifications, net of tax benefit of $ -, $0.6, $11.3 and $11.9		(27.6	)		-			(44.7	)		(72.3	)
Amounts reclassified from accumulated other comprehensive (loss)		-			1.1			11.8			12.9
Net current period other comprehensive (loss) income		(27.6	)		1.1			(32.9	)		(59.4	)
Balance, December 31, 2018		(74.7	)		5.3			(390.2	)		(459.6	)
Impact of ASU 2017-12 adoption		-			0.1			-			0.1
Other comprehensive income (loss) before reclassifications, net of tax benefit (expense) of $ -, $5.2, ($1.4) and $3.8		3.9			(15.0	)		1.4			(9.7	)
Amounts reclassified from accumulated other comprehensive (loss)		80.2			1.1			11.8			93.1
Net current period other comprehensive income (loss)		84.1			(13.9	)		13.2			83.4
Balance, December 31, 2019	$	9.4		$	(8.5	)	$	(377.0	)	$	(376.1	)

	Pre-tax Amount			Tax Benefit (Expense)			After-tax Amount
2020
Foreign currency translation adjustments	$	(7.1	)	$	-		$	(7.1	)
Derivative (loss), net		(14.2	)		3.7			(10.5	)
Pension and postretirement adjustments		382.9			(98.5	)		284.4
Total other comprehensive income (loss)	$	361.6		$	(94.8	)	$	266.8

Name	Age	Present Position and Business Experience During the Last Five Years*

Victor D. Grizzle	5859	Armstrong World Industries, Inc. President & CEO, Director since April 2016 Executive Vice President & CEO, Armstrong Building Products (2011 to April 2016)

Charles M. Chiappone	5758	Armstrong World Industries, Inc. Senior Vice President, Ceiling and Wall Solutions since April 2018 Senior Vice President, Ceiling Solutions (April 2016 to April 2018) Vice President of Global Marketing & Commercial Excellence, Armstrong Building Products (January 2012 to April 2016)


Mark A. Hershey	5051	Armstrong World Industries, Inc. Senior Vice President, General Counsel and Business Development since January 2020 Senior Vice President, General Counsel since July 2011 Chief Compliance Officer since February 2012 Secretary (July 2011 to June 2014 and since April 2016)

Brian L. MacNeal	5354	Armstrong World Industries, Inc. Senior Vice President, Chief Financial Officer since April 2016 Vice President, Global Finance and CFO, Armstrong Building Products (2014 to April 2016) Heartland Energy Solutions Interim Chief Financial Officer (2013 to 2014) Campbell Soup Company Vice President of Finance (2011 to 2013)

Stephen F. McNamara	5354	Armstrong World Industries, Inc. Vice President, Controller since July 2008

Ellen R. Romano	5859	Armstrong World Industries, Inc. Senior Vice President, Human Resources since July 2013 Vice President, Human Resources, Armstrong Building Products (2009 to 2013)

Exhibit No.		Description
2.1		Armstrong World Industries, Inc.’s Fourth Amended Plan of Reorganization dated May 23, 2003 (as modified by modifications filed with the Bankruptcy Court on October 17, 2003, November 10, 2003, December 3, 2004 and February 21, 2006) is incorporated by reference from the Annual Report on Form 10-K, filed on February 24, 2006, wherein it appeared as Exhibit 2.3.
2.2		Separation and Distribution Agreement, dated March 11, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc. is incorporated by reference from the Current Report on Form 8-K filed on March 15, 2016, wherein it appeared as Exhibit 2.1.
2.3		Plan of Division, adopted by Armstrong World Industries, Inc. on March 11, 2016 is incorporated by reference from the Current Report on Form 8-K filed on March 15, 2016, wherein it appeared as Exhibit 2.2.
3.1		Amended and Restated Articles of Incorporation of Armstrong World Industries, Inc. is incorporated by reference from the Current Report on Form 10-Q filed on May 1, 2017, wherein it appeared as Exhibit 3.1.
3.2		Amended and Restated Bylaws of Armstrong World Industries, Inc., are incorporated by reference from the Current Report on Form 8-K filed on ~~December 8, 2017,~~April 17, 2020, wherein it appeared as Exhibit 3.1.
4.1		Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934.†
10.1		Amended and Restated Credit Agreement, dated April 1, 2016, by and among Armstrong World Industries, Inc., as Borrower, certain subsidiaries of Armstrong World Industries, Inc. identified therein, as the Guarantors, Bank of America, N.A., as Administrative Agent and Collateral Agent, the other lenders party thereto, JPMorgan Chase Bank, N.A. and Citibank, N.A., as Co-Syndication Agents, Manufacturers and Traders Trust, The Bank of Nova Scotia, Fifth Third Bank, Citizens Bank of Pennsylvania, TD Bank National Association and Bank of Montreal, as Co-Documentation Agents, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Chase Bank, N.A. and Citibank, N.A., as joint lead arrangers and joint lead managers is incorporated by reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.8.
10.2		Amended and Restated Security Agreement, dated April 1, 2016, by and among Armstrong World Industries, Inc., the grantors named therein and Bank of America, N.A. is incorporated by reference from the Annual Report on Form 10-K, filed on February 26, 2018, wherein it appeared as Exhibit 10.2.
10.3		Amended and Restated Pledge Agreement dated, April 1, 2016, by and among Armstrong World Industries, Inc., the pledgors named therein and Bank of America, N.A. is incorporated by reference from the Annual Report on Form 10-K, filed on February 26, 2018, wherein it appeared as Exhibit 10.3.
10.4		Amended and Restated Canadian Pledge Agreement dated, April 1, 2016, by and among Armstrong World Industries, Inc. and Bank of America, N.A. is incorporated by reference from the Annual Report on Form 10-K, filed on February 26, 2018, wherein it appeared as Exhibit 10.4.