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 Flooring, Inc. ("AFI" or the "Company") is a Delaware corporation incorporated in 2015. When we refer to "we," "our," and "us" in this report, we are referring to Armstrong Flooring, Inc. and its consolidated subsidiaries.

We are a leading global producer of resilient flooring products for use primarily in the construction and renovation of commercial, residential and institutional buildings. We design, manufacture, source and sell flooring products primarily in North America and the Pacific Rim. As of December 31, 2021, we operated seven manufacturing plants in three countries, including five manufacturing plants located throughout the U.S. (Illinois, Mississippi, Oklahoma and two in Pennsylvania) and one plant each in China and Australia.

On April 1, 2016, we became an independent company as a result of the separation by Armstrong World Industries, Inc. ("AWI"), a Pennsylvania corporation, of its Resilient Flooring and Wood Flooring segments from its Building Products segment (the "Separation"). The Separation which was effected 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 AWI’s shareholders (the "Distribution").Distribution. The Separation and Distribution (together, the "Spin-off")Spin-off resulted in AFI and AWI becoming two independent, publicly traded companies, with AFI owning and operating the Resilient Flooring and Wood Flooring segments and AWI continuing to own and operate a ceilings business.

In NovemberOn December 31, 2018, we entered into a definitive agreement to sellsold our North American wood flooringWood Flooring business to Tarzan Holdco, Inc., a Delaware corporation and an affiliate of American Industrial Partners. The sale was completed on December 31, 2018. The historical financial results of the North American wood flooring business have been reflected in our Consolidated Financial Statements as a discontinued operation for all periods presented. Subsequent to the sale of the North American wood flooring business, the Company's results are part of a single reportable segment.AIP.

During early 2020, the Companywe established a multi-year strategic roadmap to transform and modernize itsour operations to become a leaner, faster-growing and more profitable business. The transformation encompasses three critical objectives: (i) expanding customer reach; (ii) simplifying product offerings and operations; and (iii) strengthening core capabilities. In addition, the Company haswe have implemented a new operating model tothat we believe will more effectively accomplish these objectives by: (i) placing customers first by aligning services and products through a more seamless value chain; (ii) leadingaiming to lead the industry in product innovation; (iii) simplifying processes and operating complexity to become more competitive and efficient; (iv) realigning the go-to-market model to reach all relevant channels and customers; (v) implementing system changes to improve operations, reduce costs and reignite organic growth; and (vi) investing thoughtfully with a return-focused mindset. The goal of this focused strategy is to transform and modernize AFI, resulting in a company that is more agile, faster-growing and more profitable.

We hold leadership or significant market share positions in the majority of the product categories and markets in which we operate. We compete exclusively in the resilient flooring product category in North America and the Pacific Rim. The majority of our sales are in North America, where we serve both commercial and residential markets. In the Pacific Rim, we are principally focused on commercial markets. Our business operates in a competitive environment across all our product categories and excess capacity exists in much of the industry.  We continue to see efforts by various competitors to price aggressively as a means to gain market share. The major markets in which we compete are:

Our products are used in new home construction and existing home renovation work. Industry analysts estimate that existing home renovation (also known as replacement/remodel) work represents a majority of the total North American residential market opportunity. We monitor key U.S. statistics including existing home sales (a key indicator for renovation opportunity), housing starts, housing completions, home prices, interest rates and consumer confidence. We believe there is some longer-term correlation between these statistics and our revenue after reflecting a lag period of several months between a change in these indicators and our operating results. However, we believe that consumers’ preferences for product type, style, color, availability, performance attributes and affordability also significantly affect our revenue. Further, changes in inventory levels and/or product focus at national home centers and independent wholesale flooring distributors can significantly affect our revenue.

Demand for our products is influenced by economic conditions. We closely monitor publicly available macroeconomic trend data that provides insight to commercial and residential market activity; this includes GDP growth indices, the Architecture Billings Index and the Consumer Confidence Index, as well as housing starts and existing home sales. In addition, our channel partners raise or lower their inventory levels according to their expectations of market demand and consumer preferences, which directly affects our sales.

We use our reputation, capabilities, service and brand recognition to develop long-standing relationships with our customers. We sell products through both independent wholesale flooring distributors, who re-sell our products to retailers, builders, contractors, installers and others as well as direct to specialty retailers. In the commercial sector, we also have important relationships with subcontractors’ alliances, large architectural firms, large design firms and major facility owners in our focus segments. In the North American retail channel, which sells to end-users in the residential and light commercial segments, we have important relationships with several national home centers and flooring retailers. Additionally, we also have important relationships with major home builders and retail buying groups in the North American residential sector.

Approximately 69% of our consolidated net sales in 2021 were to distributors. Sales to large home centers accounted for approximately 11% of our consolidated sales in 2021. Our remaining sales were primarily to other retailers, end-use customers and contractors. One customer accounted for 10% or more of our total consolidated net sales in 2021.

Approximately 75% of our consolidated net sales in 2020 were to distributors. Sales to large home centers accounted for approximately 16% of our consolidated sales in 2020. Our remaining sales were primarily to other retailers, end-use customers and contractors. One customer accounted for 10% or more of our total consolidated net sales in 2020.

We purchase raw materials from numerous suppliers worldwide in the ordinary course of business. The principal raw materials include: PVC resins and films, plasticizers, fiberglass and felt backings, limestone, pigments, inks, stabilizers and coatings.

In general, adequate supplies of raw materials are available. 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. If these suppliers were unable to satisfy our requirements, we believe alternative supply arrangements would be available.

Some of our products are sourced from third parties. Our primary sourced products include LVT, vinyl sheet, installation and maintenance materials and accessories. We purchase most of our sourced products from suppliers that are located outside of the U.S., primarily from Asia. Sales of sourced products represented approximately 30%43% of our total consolidated revenue in 2020.2021.

In general, adequate supplies of sourced products are available. However, availability can change for a number of reasons, including environmental conditions, laws and regulations including tariffs, production and transportation disruptions and/or business decisions made by, or events that affect, our suppliers. If these suppliers were unable to satisfy our requirements, we believe alternative supply arrangements would be available.

Recent trends in shipping have extendedcontinue to extend delivery times for certain products and materials, primarily from China and Vietnam. While we expect this to be temporary in nature, we cannot reasonably predict when the imbalance of global shipping capacity and demand will end. These global logistics and shipping challenges delayed a substantial number of anticipated order deliveries from the second and third quarter of 2021 until the fourth quarter of 2021 and the first quarter of 2022.

Tariffs impact the cost of products we import from China. The U.S. government announced a tariff of 10% on certain flooring products imported to the U.S. from China, effective on September 24, 2018 with an additional 15% effective on May 10, 2019. In order to partially offset the impact, we implemented price increases that went into effect in the fourth quarter of 2018, and additional price increases that went into effect in the second quarter of 2019 on select impacted products. On November 8, 2019, an exclusion on tariffs of certain flooring products was announced. The exclusion applied retroactively to September 24, 2018. Additional products were added to the exclusion in the second quarter of 2020, also retroactive to September 24, 2018. The exclusions expired in August 2020. We filed for tariff refunds on these products in 2020 and recorded refunds as a reduction of previously recorded expense once formal approval was received. Upon expiration of the exclusion in 2020, we implemented a price increase on select impacted products to offset the expense of the tariffs.

Generally, our sales in North America tend to be stronger in the second and third quarters of our fiscal year due to more favorable weather conditions, customer business cycles and education renovations typical during the summer months. We see similar patterns with respect to our sales in the Pacific Rim, though the timing of the Chinese New Year can affect buying behaviors in the first fiscal quarter.

Patent protection is important to our business. Our competitive position has been enhanced by U.S. and foreign patents on products and processes developed or perfected within AFI, including those before and after the Spin-off, 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 regard any of our businesses as being materially dependent upon any single patent or trade secret or any group of related patents or trade secrets.

Armstrong FlooringWe had 1,5521,568 employees globally as of December 31, 2020.2021. Our workforce spans 1,2671,172 employees in the U.S. and 285 employeesthe remainder in Canada, Australia, China, the Philippines, Singapore and Vietnam combined.Vietnam.

We are evolving our culture and our human capital strategies to best serve all these employees and align with our growth strategies and the changing social environments. Fostering a culture that is values-based, responsible, ethical and inclusive motivates and empowers our employees. This culture enables us to attract and retain the most talented people, engage them in meaningful and inspiring work;work and, as a result, fulfill our business goals and objectives. Our human capital philosophy is simple: Invest in people and they will return your investment in dividends. We grow together, encouraging one another to develop our own unique skills and celebrating each individual’s uniqueness, to find fulfillment, success and advancement.

A key focus of our shared community is on the health, safety and well-being of our employees. We engage in continuous physical safety programs throughout our manufacturing facilities and provide mental and physical well-being programs to all employees. We quickly implementedhave continued measures duringto reduce the impact of the COVID-19 pandemic to ensure employee health, safety and well-being. In addition to encouraging all employees whose jobs permitted to work remotely, we closed our manufacturing facilities for two weeks to implement new safety protocols. We relied on the best science at the time to create new protocols such as:

We recognize that in order to drive innovation and operational excellence, we must attract, develop, motivate and retain diverse, world-class talent. Through the execution of our people strategy and management succession plan, we are working to expand our talent pipeline and build a workforce with the skills necessary to thrive in the workplace of the future. Our workforce development efforts are focused on ensuring that we will maintain our leadership position in the industry and continue to provide our customers with innovative flooring solutions. We utilize digital recruiting tools to remove roadblocks typically faced by diverse candidates in applying to positions so that we can obtain a strong diverse candidate pool.

Through regular employee engagement surveys, semi-annual talent reviews, real-time discussions, available employee communication channels and a focus on our Values; we monitor the needs and expectations of our employees and respond to meet these evolving employee needs. We provide employees with ongoing opportunities to grow and develop through many different programs, including professional and leadership development, continuous performance management internal mobility. These programs and activities increased our employee engagement ratings and led to a workforce dedicated to creating value.

We recognize diversity, equity and inclusion ("DE&I")&I as a business imperative. We believe that our business accomplishments are a result of the efforts of our employees around the world and that a diverse employee population will result in a better understanding of our customers’ needs. We respect the attributes that make each individual unique, including those that can be seen and those that are acquired or learned. Our DE&I purpose is to evolve the organization and our culture to reflect the customers and communities we serve, where employees can be their authentic selves and where differences in background, thought and experience are welcomed, valued and celebrated. We demonstrate purposeful actions and incorporate intentional practices to drive these inclusive behaviors in our daily work. One key example is through changes to our recruiting program, where we have digitally enabled our process to broaden the applicant pool to diverse groups that have traditionally had difficulty accessing job opportunities. This has increased the diversity of our candidate pool and our hires.

We are committed to continually reviewing our operational practices and aligning DE&I initiatives with business objectives. Our DE&I commitment is demonstrated by the establishment of our Diversity, Equity & InclusionDE&I Council which considers all parts of our employee experience to ensure that DE&I principles are incorporated into our talent acquisition strategies, development offerings and employee services. The Council is comprised of, and led by, our employees, with executive sponsorship up to and including our CEO.

We provide market-competitive compensation and benefits to our employees. Our pay programs are designed to be performance-based so that employees are paid based on performance that they can control. Our benefits programs are reviewed each year to ensure that we are meeting current practices in providing benefits that meet the health and safety needs of our employees. When special circumstances occur, such as the recent pandemic, we adjust our benefits to meet our employees’ needs.

AFI’sOur 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. These regulatory requirements continually change, therefore we cannot predict with certainty future expenditures associated with compliance with environmental requirements.

We are involved in various lawsuits, claims, investigations and other legal matters from time to time that arise in the ordinary course of conducting business, including matters involving our products, intellectual property, relationships with suppliers, distributors and competitors, employees and other matters. For example, we are currently a party to various litigation matters that involve product liability, tort liability and other claims under a wide range of 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. In some cases, these allegations involve multiple defendants and relate to legacy products that we and other defendants purportedly manufactured or sold. We believe these claims and allegations to be without merit and intend to defend them vigorously. While complete assurance cannot be given to the outcome of these proceedings, we do not believe that any ofFor these matters, individuallywe also may have rights of contribution or in the aggregate, will have a material adverse effect on our financial condition, results of operationsreimbursement from other parties or cash flows.

We have not experienced a material adverse effect upon our capital expenditures or competitive position as a result of environmental control, legislation and regulations. ThereIn addition, there were no material liabilities recorded at December 31, 20202021 for potential environmental liabilities on a global basis that we consider probable and for which a reasonable estimate of the probable liability could be made. See Note 19,11, Litigation and Related Matters, in Part II, Item 8, "Financial Statements" and Part I, Item 1A, "Risk Factors" for additional information.

We maintain a website at www.armstrongflooring.com. Information contained on our website is not incorporated into this document. Reference in this Annual Report on Form 10-K to our website is an inactive text reference only. Annual reports on Form 10-K,10-Ks, 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 U.S. Securities and Exchange Commission.SEC.

The 2021 ABL Amendments and the 2021 Term Loan Amendments contain provisions that require us and our subsidiaries to adhere to various operational and financial covenants, including meeting certain milestones relating to the process for performance, product content, styling preferences, the sale of the Company, and there can be no assurance that we will be able to comply with these covenants. The failure to comply with any of these covenants would constitute a default under the terms of the Amended ABL Credit Facility and/or our inability to develop and offer new competitive performance features,the Amended Term Loan Agreement, as applicable, which could have an adverse effect on our sales.Regulatory action or new product standards could also steer consumers awaythe Company, including affecting its access to liquidity. In such circumstance, absent additional accommodations from our products.

Our failure to comply with various operational and financial covenants included in the 2021 ABL Amendments and 2021 Term Loan Amendments could adversely affect our access to liquidity. In addition, 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 adversely affect our financial condition or results of operations.

Our credit agreements containThe failure to comply with any of these covenants would constitute 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.

Our consolidated financial statements as of December 31, 2021 and we cannot assure that2020, and for the three-year period ended December 31, 2021 appearing later in this report have been prepared assuming we will meet them. A breachcontinue as a going concern. The Report of anyIndependent Registered Public Accounting Firm on our consolidated financial statements includes an explanatory paragraph related to our recurring losses from operations and notes the ability of the restrictive covenantsCompany to continue as a going concern is dependent on the Company maintaining adequate capital and liquidity to fund operating losses until it returns to profitability or ratios would result inis sold. Accordingly, our ability to continue as a default undergoing concern is dependent upon our ability to complete a sale of the credit facilities. If any such default occurs,Company or to refinance our Credit Agreement no later than June 30, 2022. The failure to complete a sale of the lenders under the credit facilities may be ableCompany or to electobtain sufficient financing could adversely affect our ability to declare all outstanding borrowings underachieve our facilities, together with accrued interestbusiness objectives 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.continue as a going concern.

Our level of indebtedness and degree of leverage could:

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 materially adversely affect our financial condition, liquidity or results of operations.

We could be negatively impacted by the widespread outbreak of an illness or any other communicable disease, or any other public health crisis that results in economic and trade disruptions, including the disruption of global supply chains. In December 2019, there was an outbreak of a new strain of COVID-19. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation due to “shelter-in-place” restrictions by various governments worldwide and created significant volatility and disruption of financial markets. This adversely impacted our results of operations during the fiscal yearyears 2021 and 2020. The extent of the impact of the COVID-19 pandemic on our future operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transports; the effect on our customers and demand for our products and services; our ability to sell and provide our products and services, including as a result of travel restrictions and people working remotely; the ability of our customers to pay for our products and services; the overall health of our production employees and our ability to maintain adequate staffing of our facilities to satisfy marketplace demand for our products; and any closures of our or our customers’ offices and facilities all of which are uncertain and cannot be predicted. An extended period of global supply chain and economic disruption could materially affect our business, our results of operations, our access to sources of liquidity, the carrying value of our tangible and intangible assets, our financial condition and our stock price.

Our business is influenced by conditions in domestic and foreign economies, 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.

A portion of our products move in international trade, with approximately 20% of our revenues from operations outside the U.S. and Canada in 2020.2021. Our international trade is subject to currency exchange fluctuations, trade regulations, tariffs, import duties, logistics costs, delays and other related risks, including, for example, the COVID-19 outbreak. 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 certain emerging markets. However, some emerging markets have greater political and economic volatility and greater vulnerability to infrastructure and labor disruptions than established markets. In many countries outside of the U.S., 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, which 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 globally, including in emerging markets, we may have difficulty anticipating and effectively managing these and other risks that our international operations may face, which may adversely affect our business outside the U.S. and our financial condition, liquidity or results of operations.

We are involved with environmental investigation and remediation activities for which our ultimate liability may exceed the currently estimated and accrued amounts. It is possible that we could become subject to additional environmental matters and corresponding liabilities in the future. See Note 19,11, Litigation and Related Matters, in Part II, Item 8, "Financial Statements," for further information related to environmental matters.

Our industry has been subject to claims relating to raw materials. 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 domestic and foreign 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 materially adversely affect our financial condition, liquidity or results of operations.

We rely heavily on our information systems to operate our business activities, including, among other things, purchasing, distribution, inventory management, processing, shipping and receiving, billing and collection, financial reporting and record keeping. We also rely on our computer hardware, software and network for the storage, delivery and transmission of data to our sales systems, distribution systems and certain of our production processes are managed and conducted by computer. Any interruption, whether caused by human error, natural disasters, power loss, computer viruses, system conversion, intentional acts of vandalism, or various forms of cybercrimescybercrime including and not limited to hacking, intrusions, malware or otherwise, could disrupt our normal operations. There can be no assurance that we can effectively carry out our disaster recovery plan to handle the failure of our information systems, or that we will be able to restore our operational capacity within sufficient time to avoid material disruption to our business. The occurrence of any of these events could cause unanticipated disruptions in service, decreased customer service and customer satisfaction, harm to our reputation and loss or misappropriation of sensitive information, which could result in loss of customers, increased operating expenses and financial losses. Any such events could in turn have a material adverse effect on our financial condition, liquidity or results of operations.

We must attract, develop and retain qualified and talented personnel in senior management, sales, marketing, product design and operations. We compete with numerous companies for these employees and invest resources in recruiting, developing, motivating and retaining them. The failure to attract, develop, motivate and retain key employees could negatively affect our competitive position, execution on strategic priorities and operating results.

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 will 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, will 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.

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 will 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, or were improperly installed 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, data privacy and other compliance and regulatory matters, including anti-corruption and anti-bribery matters. For example, we are currently a party to various litigation matters that involve product liability, tort liability and other claims under a wide range of 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. In some cases, these allegations involve multiple defendants and relate to legacy products that we and other defendants purportedly manufactured or sold. While we have processes and policies designed to mitigate these risks and to investigate and address such claims as they arise, we will not be able to 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.

In an effort to make our information technology (“IT”)IT functions more efficient, increase related capabilities, as well as generate cost savings, we outsource a significant portion of our IT infrastructure to a third party service provider. As a result, we rely on the third party to ensure that our related needs are sufficiently met. This reliance subjects us to risks arising from the loss of control over certain processes, changes in pricing that may affect our operating results and potentially, termination of provisions of these services by our supplier. A failure of our service provider to perform may have a material adverse effect on our financial condition, liquidity or results of operations.

Our stock price has experienced price volatility in the past and may continue to do so in the future. We, the flooring industry and the stock market have experienced stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to operating performance.

A stockholder's percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including, without limitation, equity awards that we may grant to our directors, officers and employees. Such issuances may have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.

In addition, our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock with respect to dividends and distributions, as our Board of Directors (the "Board") generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our Board rather than to attempt a hostile takeover. These provisions include, among others:

In addition, because we are subject to Section 203 of the General Corporation Law of the State of Delaware, (the “DGCL”), this provision could also delay or prevent a change in control that stockholders may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.

We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and the provisions could delay or prevent an acquisition that our Board determines is not in the best interests of AFI and its stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

AWI received an opinion of AWI’s tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP, 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 AWI and AWI’s shareholders, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code.

Notwithstanding the tax opinion, the Internal Revenue Service (“IRS”)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 shareholders for U.S. federal income tax purposes and shareholders could incur significant U.S. federal income tax liability. In addition, AWI and/or we 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 AWI, if it is ultimately determined that certain related transactions undertaken in anticipation of the Distribution are taxable.

Under the terms of the Separation and Distribution, we will indemnify AWI from and after the Separation and Distribution with respect to (i) all debts, liabilities and obligations allocated or transferred to us in connection with the Separation and Distribution (including our failure to pay, perform or otherwise promptly discharge any such debts, liabilities or obligations after the Separation and Distribution); (ii) any misstatement or omission of a material fact in our Information Statement, dated March 24, 2016, resulting in a misleading statement; (iii) any breach by us of the Separation and Distribution Agreement, the Employee Matters Agreement, the Tax Matters Agreement, the Campus Lease Agreement or the Trademark License Agreements; and (iv) our ownership and operation of our business. We are not aware of any existing indemnification obligations at this time, but any such indemnification obligations that may arise could be significant. Under the terms of the Separation and Distribution Agreement, AWI will indemnify us from and after the Separation and Distribution with respect to (i) all debts, liabilities and obligations allocated to AWI after the Separation and Distribution (including its failure to pay, perform or otherwise promptly discharge any such debts, liabilities or obligations after the Separation and Distribution); (ii) any breach by AWI of the Separation and Distribution Agreement, the Employee Matters Agreement, the Tax Matters Agreement, the Campus Lease Agreement or the Trademark License Agreements; and (iii) AWI’s ownership and operation of its business. Our and AWI’s ability to satisfy these indemnities, if called upon to do so, will depend upon our and AWI’s future financial strength. If we are required to indemnify AWI, or if we are not able to collect on indemnification rights from AWI, our financial condition, liquidity or results of operations could be materially and adversely affected. We cannot determine whether we will have to indemnify AWI, or if AWI will have to indemnify us, for any substantial obligations after the Distribution.

Our worldwide corporate headquarters is located in Lancaster, Pennsylvania and is leased.

The following table details the location and principal use of the Company's most significant properties:

In addition to the above, the Companywe also operatesoperate from a number of other smaller sales and administrative offices (leased or owned) and warehousing facilities (leased or owned). The Company considersWe consider all of itsour properties at which operations are currently performed to be in satisfactory condition and suitable for their intended use.

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. AdditionalWe make additional incremental investments in plant facilities are made as appropriate to balance capacity with anticipated demand, improve quality, improve service and reduce costs.

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of our management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows. See Note 19,11, Litigation and Related Matters, in Part II, Item 8, "Financial Statements" for additional information related to legal proceedings.

We did not declare any dividends during 20202021 or 2019.2020.

Not applicable.

Armstrong Flooring, Inc. ("AFI" or the "Company") isWe are a leading global producer of flooring products for use primarily in the construction and renovation of commercial, residential and institutional buildings. We design, manufacture, source and sell resilient flooring products primarily in North America and the Pacific Rim. As of December 31, 2020,2021, we operated 8seven manufacturing plants in three countries, including 6five manufacturing plants located throughout the U.S. (California, Illinois,(Illinois, Mississippi, Oklahoma and two in Pennsylvania) and one plant each in China and Australia. When we refer to "we," "our," and "us" in this report, we are referring to Armstrong Flooring, Inc. and its consolidated subsidiaries.

Despite this momentum, our transformation has been delayed due to COVID-19 and impacted by supply chain issues and inflationary pressures related to raw materials, transportation and labor. We instituted multiple price increases during 2021, the realization of which have lagged the increased input costs and have not been adequate to cover inflationary pressures. Accordingly, effective November 1, 2021, we instituted an additional price increase, resulting in both planta complete price re-positioning on commercial tile, select residential sheet, commercial/residential manufactured and asset performance; (ix) startedsourced products, and installation materials. In addition, we implemented an ocean freight surcharge.

Net sales by percentage point change are shown in the tables below:

Net sales for the year ended December 31, 2020 decreased $41.5 million and 6.6% compared to the year ended  December 31, 2019 primarily due to lower sales volume due to COVID-19 pandemic related business disruptions, including the postponement of certain commercial projects and slower activity at many independent customer retail locations.

Cost of goods sold for the year ended December 31, 20202021 was 85.7%88.5% of net sales compared to 86.4%85.6% of net sales for the year-ending December 31, 2020. The increase in percentage was primarily due to inflation related to the critical input costs and supply interruptions which have caused manufacturing inefficiencies. In addition, the first quarter of 2021 was impacted by manufacturing inefficiencies caused by winter storms which affected multiple manufacturing plants and the second quarter of 2021 was impacted by a $4.5 million charge, which included $3.3 million of accelerated depreciation expense for property, plant and equipment for which no alternative use was identified and a $1.2 million inventory rationalization charge related to the Company's business transformation initiatives.

Cost of goods sold for the year ended December 31, 2020 was 85.6% of net sales compared to 86.1% of net sales for year-ending December 31, 2019. The decrease in percentpercentage was primarily due to a $13.6 million inventory write-down related to an inventory optimization initiative that occurred during 2019 and did not repeat during 2020, partially offset by inefficiencies caused by decreases in volume and non-recurring costs associated with the consolidation of our manufacturing activities as part of the Company's business transformation initiatives during 2020.

Selling, generalSG&A expenses for the year-ended December 31, 2021 increased $15.7 million and administrative10.8% compared to the year-ended December 31, 2020. The increase in 2021 is driven by increased headcount in our sales organization to support changes in our go-to-market strategy, higher incentive compensation accruals compared to prior year, increased advertising and promotion costs compared to prior year and cost reduction measures implemented during 2020, in response to the impact of COVID-19, which did not repeat during the current year. In addition, there were incremental expenses of $1.0 million related to the relocation of the Company's headquarters and $0.6 million of professional services related to the sale of the Company during the 2021. Excluding the headquarter relocation and sale related costs, we expect current year costs to be more indicative of our future cost structure.

SG&A expenses for the year-ended December 31, 2020 decreased $1.2 million and 0.8% compared to the year-ended December 31, 2019. The decrease in 2020 is driven by a reduction in core selling, general and administrativeSG&A resulting from business transformation initiatives as well as $14.2 million of expenses incurred during 2019 related to a samples inventory write-down, strategic initiative costs and employee termination costs that did not repeat during 2020, partially offset by $19.0 million of non-recurring transition services income from TZI that did not repeat in 2020.

For the year-ended December 31, 2020, interest expense increased $3.1 million and 70.5% compared to year-ended December 31, 2019 due to higher interest rates on debt outstanding resulting from our June 2020 refinancing.

Other (income) expense, net of $(8.9) million, $(4.8) million $1.8 million and $2.9$1.8 million for the years ended December 31, 2021, 2020 2019 and 2018,2019, respectively, primarily reflected benefitthe positive impact from changes to or costsin actuarial assumptions related to defined-benefit pension and postretirement plans. Changes in actuarial assumptions relating to current year expense andAdditionally, the results for 2020 included a non-recurring postretirement gain resulting from a plan change totaling $1.8 million, resulted in income during 2020.million.

For the year ended December 31, 2020 we recorded an income tax benefit of $0.8 million compared to an income tax expense of $1.6 million for the year ended December 31, 2019. The effective tax rates were a benefit of 1.2% and an expense of 2.4% for the years ended December 31, 2020 and 2019, respectively.

For the yearyears ended December 31, 2021 and 2020 there waswere no discontinued operations activity. For the year ended December 31, 2019, a $10.4 million gain on disposal of discontinued operations was realized primarily due to the resolution of our antidumping case. For the year ended December 31, 2018, loss on disposal of discontinued operations of $153.8 millionanti-dumping case related to our sale of the North American wood flooring business. This loss was partially offset by $9.9 million of earnings from discontinued operations while reflecting the operating results of the North American wood flooring business prior to the sale. See Note 7, Discontinued Operations,which was sold in Part II, Item 8, "Financial Statements" of the consolidated financial statements.

During the fourth quarter of real estate, equity2021, the Company entered into multiple amendments to its Credit Agreements, which further amended the ABL Credit Facility and debt issuances and extraordinary events to prepay outstanding loans under the Term Loan Agreement. These amendments are described in more detail below. As part of these transactions, the Company recorded a charge of $9.6 million related to the write-off of unamortized debt issuance costs and debt amendment fees and capitalized $3.7 million in incremental debt issuance costs in accordance with U.S. GAAP.

On November 1, 2021, the Company entered into the Fourth Amendment to the ABL Credit Facility subjectand on December 31, 2021, the Company entered into the Fifth Amendment to specified exceptions, including the prepayment requirements with respectABL Credit Facility. These 2021 ABL Amendments amended the interest rates applicable to the Amended ABL Credit Facility. PrepaymentsFacility, modified certain financial maintenance and other covenants as well as included the consent of loansthe lenders to incur incremental borrowings under the Amended Term Loan Facility prior to the third anniversary of the closing date are subject to certain premiums. The sale of our South Gate, California facility is anticipated during the first half of 2021 and would result in an estimated mandatory repayment of approximately $20 million. Agreement.

On February 25,November 1, 2021, the Company entered into a definitive agreementthe First Amendment to sell its South Gate, California facility. See Note 20, Subsequent Events, in Part II, Item 8 “Financial Statements” for additional information.

In addition,The Company is required to refinance the Term Loan Agreement requires usCredit Agreements no later than June 30, 2022, even if a sale of the Company or other strategic transaction has not been consummated prior to comply withsuch date. The Company will pay a sale process fee to its lenders under the Amended ABL Credit Facility financial covenants. The Term Loan Agreement also contains customary affirmative covenants and eventsupon the consummation of default, including a cross-default provision in respect of certain material indebtedness and a change of control provision. If an event of default occurs, the lenders may choose to accelerate the maturitysale of the Term Loan Facility and require repayment of all obligations thereunder.

See Note 14,8, Debt, in Part II, Item 8, "Financial Statements" to the Consolidated Financial Statements for additional information related to the Amended ABL Credit Facility and Amended Term Loan Facility.Agreement.

Net cash used for operating activities for 2020 was $28.2 million, an increase in use of $22.2 compared to 2019. The primary drivers of this increase were lower net cash income and net increases in working capital, primarily inventory, other assets and liabilities and receivables, partially offset by accounts payable and accrued expenses.

Net cash used for investing activities for 2020 was $21.1 million, a decrease of $8.3 million compared to 2019. The primary drivers for this decrease were lower purchases of property, plant and equipment and a cash payment related to discontinued operation in 2019 that did not repeat in 2020.

Net cash used for investingprovided by financing activities for 20192021 was $29.4$21.5 million, a decrease of $90.0$13.5 million from cash provided by investingfinancing activities in 2018.2020. The primary driver for this decrease was proceeds fromis due to lower incremental borrowings under the Amended Term Loan Agreement year-over-year and mandatory prepayments on the Term Loan Agreement during 2021 after the sale of our South Gate Facility, partially offset by higher net borrowings under the wood flooring business in 2018 which did not repeatAmended ABL Credit Facility year-over-year as well as lower payments for deferred financing costs during 2019.2021.

Net cash provided by financing activities for 2020 was $35.0 million, an increase of $146.1 million from cash used by financing activities in 2019. The primary driver of this change was the net impact of the Company's debt refinancing during the second quarter of 2020.

Our primary sourcesThe 2021 ABL Amendments and the 2021 Term Loan Amendments contain provisions that require the Company to adhere to various covenants, including meeting certain milestones relating to the sale of the Company and there can be no assurance that the Company will be able to comply with these covenants. The Company is required to refinance the Credit Agreements no later than June 30, 2022, even if a sale of the Company or other strategic transaction has not been consummated prior to such date. The failure to comply with any of these covenants would constitute a default under the terms of the Credit Agreements which could have an adverse effect on the Company, including affecting its access to liquidity. The Company continues to face certain risks and uncertainties that have been affecting its business and operations. While the Company has implemented substantial pricing actions and evaluates other initiatives that could enhance its liquidity, including the potential sale of the Company, there can be no assurances that these actions will be successful. Substantial doubt about the Company's ability to continue as a going concern exists because the sale of the Company being completed or the Credit Agreements being extended beyond the June 30, 2022 refinancing requirement cannot be considered probable as they are and we anticipate that they will continue to be, cash generated from operations, proceeds from asset sales and borrowingsnot under our credit facilities. We believe these sourcessole control. Additionally, based on current projections, as a result of continuing supply chain disruptions and continued inflationary pressures related to transportation, labor and raw materials which are sufficientexpected to continue through 2022, the forecasts do not provide the Company with reasonable certainty it will have the necessary liquidity to fund our capital needs, including the costs of our business transformation initiatives, planned capital expenditures and to meet our interest and other contractual obligations in the near term. Our liquidity needs for operations vary throughout the year with the majority of our cash flows generated in the second and third quarters.beyond June 30, 2022.

We are required to pay a commitment fee, payable quarterly in arrears, on the average daily unused amount of the revolving Amended ABL Credit Facility, which varies according to the net leverage ratio and was 0.50% as of December 31, 2020.2021. Outstanding letters of credit issued under the Amended ABL Credit Facility are subject to fees which will be due quarterly in arrears based on the applicable margin described above plus a fronting fee. The total rate for letters of credit was 4.125% as of December 31, 2020.2021.

Our foreign subsidiaries had available lines of credit totaling $9.2$9.4 million and there were $4.5$4.6 million borrowings under these lines of credit as of December 31, 2020.2021. Total availability under these foreign lines of credit as of December 31, 20202021 was $4.7$4.8 million.

In addition, the Company had $13.7$9.7 million of Cash and cash equivalents at December 31, 2020.2021.

Based on the foregoing, the Company had total liquidity (including Cash and cash equivalents) of $34.4 million at December 31, 2021 compared to $52.7 million at December 31, 2020 compared to $89.6 million at December 31, 2019.2020.

The Amended ABL Credit Facility requires, amongcontains certain financial covenants applicable to the Company and its subsidiaries. Among other things, the Amended ABL Credit Facility requires that wethe Company and its subsidiaries (i) maintain aminimum Availability (as defined in the Amended ABL Credit Facility) of $40 million during the months ending December 31, 2021 and January 31, 2022, $37.5 million during the month ending February 28, 2022, and $25 million thereafter, (ii) maintain minimum Consolidated Cash Flow (as defined in the Amendment)Amended ABL Credit Facility) for each month, commencing with the three-fiscal quarter periodmonth ending SeptemberDecember 31, 2021, and calculated on a cumulative basis, ranging from negative $21 million as of December 31, 2021, to negative $40 million as of June 30, 20202022 and for any four-fiscal quarter period ending thereafter and during(iii) maintain a Financial Covenant Trigger Periodminimum Formula Availability (as defined in the Amendment), maintainAmended ABL Credit Facility) in an amount ranging from $86.4 million during the month ending December 31, 2021 to $106.4 million during the month ending June 30, 2022. In addition, the Amended ABL Credit Facility includes certain milestones related to the Company’s consideration of a minimum Consolidated Fixed Charge Coverage Ratio (as defined insale of the Amendment) of at least 1.00Company or other strategic alternatives which is required to 1.00 (such covenants, the “Financial Covenants”).be completed no later than May 15, 2022.

The Term Loan Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to create liens,liens; to undertake fundamental changes,changes; to incur debt,debt; to sell or dispose of assets,assets; to make investments,investments; to make restricted payments such as dividends, distributions or equity repurchases,repurchases; to change the nature of our businesses,businesses; to enter into transactions with affiliates and to enter into certain burdensome agreements.

The Company has various cash management systems throughout the world that centralize cash in various bank accounts where it is economically justifiable and legally permissible to do so. These centralized cash balances are then redeployed to other operations to reduce short-term borrowings and to finance working capital needs or capital expenditures. Due to the transitory nature of cash balances, they are normally invested in bank deposits that can be withdrawn at will or in very liquid short-term bank time deposits. The Company's policy is to primarily use the banks that participate in our ABL credit facility located in the various countries in which the Company operates. The Company monitors the creditworthiness of banks and when appropriate will adjust banking operations to reduce or eliminate exposure to less creditworthy banks.

Unconditional purchase obligations include purchase contracts whereby we must make guaranteed minimum payments of a specified amount regardless of how little material is actually purchased and service agreements. Unconditional purchase obligations exclude contracts entered into during the normal course of business that are non-cancelable and have fixed per unit fees, but where the monthly commitment varies based on usage. Our unconditional purchase obligations are mainly comprised of utility contracts and information technologyIT service agreements. At December 31, 20202021 these obligations totaled $38.5$43.9 million, of which $16.8 million is due in 2021, $7.3$21.5 million is due in 2022, $7.3$11.2 million is due in 2023, and $7.1$11.2 million is due in 2024.

In addition, we had $5.8$6.5 million of inventory in transit at December 31, 2020,2021, where the title had not been passed to us; however, we are committed to make payment once these shipments reach the destination as required per the contract.

The Company's discussion and analysis of our financial condition and results of operations are based upon the Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate the estimates, including those related to inventories, impairments of tangible and intangible assets, U.S. pension and other postretirement benefit costs and sales-related accruals. The impact of changes in these estimates, as necessary, is reflected in the results of operations in the period of the change. We base estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different outcomes, assumptions or conditions.

We believe the following critical accounting policies are affected by our more significant judgments and estimates used in the preparation of the Consolidated Financial Statements. Management has discussed the development and selection of the critical account estimates described below with the Audit Committee of the Board of Directors and they have reviewed our disclosures relating to these estimates in this Management's Discussion and Analysis of Financial Condition. These items should be read in conjunction with Note 2, Summary of Significant Accounting Policies, in Part II, Item 8, "Financial Statements."

At December 31, 20202021 and 20192020 inventories of $122.9$146.3 million and $111.6 million, respectively, are net of reserves of $12.2 million and $11.3$128.1 million, respectively.

We estimate our reserves for inventory obsolescence by continuouslycontinually examining our inventories to determine if there are indicators that carrying values may exceed net realizable value or estimated market value. In assessing the realization of inventory balances, the Company is required to make significant judgements related to estimated future demand for products, estimated future selling prices and the amount of excess inventory on-hand. In addition, the Company takes into account other factors including the age of inventory on-hand and the ultimate sales prices recognized for previously dropped products. While we believe that adequate reservesadjustments for inventory obsolescence have been made in the Consolidated Financial Statements, consumer tastes and preferences as well as macroeconomic factors will continue to change and we could experience additional inventory write-downs in the future. It is estimated that a 10% change in our assumptions for excess or obsolete inventory would have affected net earnings by approximately $0.7$0.5 million for the year ended December 31, 2020.2021.