SCHEDULE 14A
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ARMSTRONG WORLD INDUSTRIES, INC.
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ARMSTRONG WORLD INDUSTRIES, INC. 2500 COLUMBIA AVE., LANCASTER, PA 17603 P.O. BOX 3001, LANCASTER, PA 17604
www.armstrongceilings.com
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20192021 ANNUAL MEETING OF SHAREHOLDERS
ARMSTRONG WORLD INDUSTRIES, INC.
Dear Fellow Shareholders:
We look forward to your attendance virtually via the Internet in person, or by proxy at the 20192021 Armstrong World Industries, Inc. Annual Shareholders’ Meeting. We will hold the meeting at 8:00 a.m. Eastern Time on Thursday, July 11, 2019.June 24, 2021. To provide a consistent and convenient experience for all shareholders regardless of location, we are holding this Annual Shareholders’ Meeting in an entirely virtual format.
In 2018, we continued to execute on our strategy as an Americas-focused ceiling, wall and suspension system solutions provider, driving significant consolidated2020, despite a challenging operating environment resulting from the COVID-19 global pandemic:
Our business produced net sales, growthAdjusted EBITDA and delivering strong earnings performance. Through our architectural specialties offeringsAdjusted Free Cash Flow of $937 million, $330 million and our innovative core ceilings portfolio,$212 million, respectively;
In addition to implementing preventive health measures, including our Total Acoustics solutions, our Sustain family of productsremote work, enhanced personal protective equipment and our DesignFlex capabilities,enhanced cleaning and sanitizing procedures, we are expanding our capabilities to sell into more spaces and sell more into every space. We advanced the sale of our European, Middle East, African, and Pacific Rim businesses to Knauf International GmbH, which we expect to completeimplemented an Emergency Paid Leave program early in the first halfpandemic that granted additional paid time off for any employee impacted by COVID-19 during 2020, and a COVID Leave Program that continues to provide similar paid leave benefits for employees impacted by COVID-19 during 2021;
We expanded our industry-leading portfolio through the acquisition of 2019,three design-focused companies (Turf Design, Moz Designs, and executed onArktura), each with custom metal and/or felt design and fabrication capabilities;
• | We advanced our digitalization initiatives through both optimization projects that enhance our customer service and support capabilities, as well as the launch of Kanopi™, our direct-to-customer branch sales channel; |
We launched 35 new products, including offerings under our business development strategies, which resultedHealthy Spaces initiative in response to COVID-19, such as our “24/7 Defend” portfolio of solutions designed to contain, clean and protect the acquisitions of PlasterFormspaces where people live, work, learn, heal and Steel Ceilings in 2018. play; and
We also maintainedenhanced our balanced approach to capital deployment and initiated a regular quarterly dividend.
This is an exciting time fordividend program by 5% and restarted our company and I am honoredshare repurchase program in October 2020 (after temporarily suspending it during the first quarter of 2020 due to serve as Chairman. ICOVID-19-based uncertainty).
As we look forward to working with2021 and beyond, we believe there are many reasons to be excited for the future of our business and our industry, particularly in view of the significant and central role that ceilings and walls play in the design and performance of spaces. With a dedicated focus on innovation in support of healthy spaces, an enterprise-wide focus on sustainability, and strategies and initiatives designed for long-term growth and value creation, our company is well-positioned for the challenges and opportunities of today and tomorrow.
Our Board of Directors and our management team as welooks forward to continuing our work to advance our strategic priorities, serve our customers, create value for our shareholders, cultivate and maintain an inclusive environment and culture, and, through our products and solutions, make a difference in the spaces where people live, work, learn, heal and play.
The first proposal to be voted on at this year’s Annual Shareholders’ Meeting will beAt the election of directors. This year, in addition to incumbent directors, the Board has nominated Barbara L. Loughran and Wayne R. Shurts for election to the Board of Directors. The nomination of Barbara and Wayne is the result of our Board evaluation and succession planning processes and, when elected by shareholders, I look forward to welcoming them to the Board.
At the2021 Annual Shareholders’ Meeting, we will alsovote on the election of directors, vote to ratify the selection of KPMG LLP as our independent registered public accounting firm, and vote on anon-binding advisory basis on the compensation of our named executive officers. Please refer to the proxy statement for detailed information on each of the matters to be acted on at the meeting.meeting virtually via the Internet.
Your vote is important, and we strongly urge you to cast your vote. For most items, including the election of directors, your shares will not be voted if you do not provide voting instructions via the Internet, by telephone, or by returning a proxy or voting instruction card. We encourage you to vote promptly, even if you plan to attend the meeting.meeting virtually via the internet.
On behalf of your Board of Directors, thank you for your continued support.
Very truly yours,
Larry S. McWilliams
Chairman of the Board
NOTICE OF 20192021 ANNUAL MEETING OF SHAREHOLDERS
Time and Date | 8:00 a.m. Eastern Time on Thursday, |
Attendance | Online atwww.virtualshareholdermeeting.com/ |
RecordDate | April |
Agenda | Items of Business | Board Recommendation | ||
1. Elect as directors the | FOR EACH DIRECTOR NOMINEE | |||
2. Ratify the selection of KPMG LLP as our independent registered public accounting firm for | FOR | |||
3. Approve, on an advisory basis, our executive compensation program | FOR |
How To Vote | • | Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting via the |
• | Your broker willnot be able to vote your shares with respect to the election of directors unless you have given your broker specific instructions to do so. We strongly encourage you to vote. |
• | You may vote via the Internet, by telephone, or, if you have received a printed version of these proxy materials, by mail. |
• | See “ADDITIONAL MEETING INFORMATION” on page |
Attending the Meeting | via the Internet: | Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/awi2021. Shareholders may vote and submit questions while attending the meeting on the Internet. |
Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted atwww.virtualshareholdermeeting.com/awi2019.
Shareholders may vote and submit questions while attending the meeting on the Internet.
in person:
Proof of Armstrong World Industries, Inc. stock ownership and photo identification will be required to attend the annual meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING
TO BE HELD ON JULY 11, 2019:JUNE 24, 2021:
The Notice of Annual Meeting, this Proxy Statement and
the Company’s 20182020 Annual Report are available at www.proxyvote.com.
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PROXY STATEMENT
This proxy statement was prepared under the direction of our Board of Directors (“Board”) to solicit your proxy for use at the 20192021 Armstrong World Industries, Inc. annual meeting of shareholders (the “Annual Meeting”). When we refer to “we,” “our,” “us,” “Armstrong” and the “Company” in this proxy statement, we are referring to Armstrong World Industries, Inc. This proxy statement and the related materials are first being distributed to shareholders on or about May 23, 2019.
Following the sale of our European, Middle East, African, and Pacific Rim businesses (the “International Business”) to Knauf International GmbH, which we currently expect to close in the first half of 2019, Armstrong will be an Americas-focused ceilings and wall buildings products company, and the leader in the design, innovation and manufacturer of commercial and residential ceiling, wall and suspension solutions.7, 2021.
At the 20182020 Annual Meeting of Shareholders (the “2018“2020 Annual Meeting”), which was held on July 12, 2018,June 25, 2020, our shareholders reelectedre-elected Stan A. Askren, Victor D. Grizzle, Tao Huang, Barbara L. Loughran, Larry S. McWilliams, James C. Melville, John J. Roberts, Gregory P. Spivy,Wayne R. Shurts, Roy W. Templin and Cherryl T. Thomas to the Board.
On the recommendation of the Nominating, Governance and GovernanceSocial Responsibility Committee (“Governance Committee”), our Board has nominated the tennine persons listed below for election at the Annual Meeting. EightMeeting, all of the nomineeswhom are currently directors of the Company. Additionally,The size of the Board has also nominated Barbara L. Loughran and Wayne R. Shurts for election to the Board at the Annual Meeting.is nine members. All nominees, with the exception of our President and Chief Executive Officer (“CEO”), Victor D. Grizzle, have been determined by the Board to be independent under the guidelines of the listing standards of the New York Stock Exchange (“NYSE”) and our Corporate Governance Principles. Each nominee’s term would, if elected, run from the date of his or her election until our next annual shareholders’ meeting and until the election at such annual meeting and qualification of his or her successor, or until his or her successor, if any, is electedearlier disqualification, resignation, removal, death or appointed.incapacity. We have no reason to believe that any of the nominees will be unwilling or unable to serve if elected.
The Governance Committee believes that aligning director qualifications, experience and skill sets with our business, strategy, risks and opportunities in addition to the functional responsibilities of the Board is necessary to maintaining a Board of Directors that remains capable of effectively performing its oversight and decision making responsibilities on behalf of the Company and its shareholders.
As part of its annual Board evaluation process, the Governance Committee solicits the view of the entire Board and of senior management regarding Board composition and factors the responses received into its Board succession planning and refreshment process. The recruitment of Ms. Loughran and Mr. Shurts as nominees for election to the
Our Board at the Annual Meeting is a result of those processes.
While our Board does not have a formal diversity policy with respect to director nominations, it believes that a board of directors composed of individuals with diverse attributes and backgrounds enhances the quality of our Board’s deliberations and decisions. Our Board has an expansive view of diversity, going beyond the traditional concepts of race, gender and national origin, and emphasizing a diversity of viewpoints, educational backgrounds and professional experiences. Our Board believesrecognizes that this diversity, coupled with strong personal and professional ethics, integrity and values, results in a board of directors that is well-qualified to guide the Company with good business judgment.
AWI 2021 Proxy Statement | 1 |
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
The Governance Committee expects each of the Company’s directors to have proven leadership, sound judgment, integrity and a commitment to the success of the Company. In evaluating director
ITEM 1 – ELECTION OF DIRECTORS(CONTINUED)
candidates and considering incumbent directors for nomination to the Board, the Governance Committee considers a variety of factors. These include each nominee’s independence, financial
literacy, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent
directors, the factors also include past performance on our Board and contributions to their respective committees. Our Board is also particularly interested in maintaining a mix of skills and qualifications that include the following:
Public Company CEO or COO within past 5 years |
Senior Executive Leadership |
Manufacturing & Distribution Operations |
Financial Literacy |
Significant International Experience |
Finance and Capital Markets Transactions |
Technology |
M&A |
Risk Management |
Corporate Governance/Law |
Each director nominee’s biography in the pages that follow includes notable skills and qualifications that contributed to his or her selection as a nominee. Director skills and qualifications are also featured in the chart immediately following the biographies.
Composition of Board Nominees:
89% Independent
22% Women
11% Black
11% Asian
7 years average tenure
62.6 years average age
OUR BOARD RECOMMENDS THAT YOU VOTEFOR THE ELECTION OF THE FOLLOWING NOMINEES:
Name | Age* | Director Since | Committee(s)† | Independent^ | Age* | Director Since | Committee(s)† | Independent^ | ||||||||||||||||
Stan A. Askren | 58 | 2008 | MDCC‡, AC | ✓ | 60 | 2008 | AC, FC, MDCC‡ | ✓ | ||||||||||||||||
Victor D. Grizzle | 57 | 2016 | — | 59 | 2016 | — |
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Tao Huang | 56 | 2010 | AC, FC | ✓ | 58 | 2010 | FC, NGSRC | ✓ | ||||||||||||||||
Barbara L. Loughran | 55 | — | — | ✓ | 57 | 2019 | AC, FC, MDCC | ✓ | ||||||||||||||||
Larry S. McWilliams | 63 | 2010 | — | ✓ | 65 | 2010 | FC | ✓ | ||||||||||||||||
James C. Melville | 67 | 2012 | FC, MDCC, NGC‡ | ✓ | 69 | 2012 | FC, MDCC, NGSRC‡ | ✓ | ||||||||||||||||
John J. Roberts | 74 | 2006 | AC‡, NGC | ✓ | ||||||||||||||||||||
Wayne R. Shurts | 59 | — | — | ✓ | 61 | 2019 | AC, FC, MDCC | ✓ | ||||||||||||||||
Roy W. Templin | 58 | 2016 | AC, FC‡, NGC | ✓ | 60 | 2016 | AC‡, FC‡, NGSRC | ✓ | ||||||||||||||||
Cherryl T. Thomas | 72 | 2016 | AC, MDCC | ✓ | 74 | 2016 | FC, MDCC, NGSRC | ✓ |
* | As of March 31, |
† | Committees: AC (Audit); FC (Finance); MDCC (Management Development & Compensation); |
^ | As defined in NYSE listing standards and our Corporate Governance Principles |
‡ | Denotes Chair of the Committee |
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ITEM 1 – ELECTION OF DIRECTORS(CONTINUED)
AWI 2021 Proxy Statement | 3 |
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
All nominees except for Ms. Loughran and Mr. Shurts currently serve as directors. Information concerning the nominees is provided below:
STAN A. ASKREN Director since: 2008 Age:
Independent |
Mr. Askren is currently CEO and Founder of Quiet Trail Advisors, a private, senior level strategy and lean business advisory practice. He also serves as an advisor and lean business consultant for Lean Focus, LLC. Mr. Askren served as the chairman of HNI Corporation (“HNI”) from 2004 until December 31, 2018 and as CEO of HNI from 2004 until July 2018.2018, when he retired from HNI. Previously, he was the president of HNI from 2003 to April 2018, and executive vice president from 2001 to 2003. Mr. Askren had worked at HNI for 27 years, including as vice president of marketing, vice president of human resources, and as an executive vice president and president of its hearth business segment. Mr. Askren previously held multiple executive management and general management positions with Emerson Electric and Thomson S.A. Mr. Askren also serves on the board of directors of Allison Transmission Holdings, Inc., a commercial duty automatic transmission and hybrid propulsion systems manufacturer (since 2016). Mr. Askren formerly served on the board of directors of the Iowa Heritage Foundation, the Business and Institutional Furniture Manufacturer’s Association (past chair), the Iowa Business Council (past chair) and Arctic Cat Corporation. Mr. Askren brings to our Board extensive operating, senior executive leadership, manufacturing, sales and distribution and, lean business expertise, as well as valuable insights from his experience as a public company chief executive officer.
VICTOR D. GRIZZLE Director since: 2016 Age:
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Mr. Grizzle was appointed as our President and Chief Executive Officer on March 30, 2016. Previously, Mr. Grizzle served as Executive Vice President and Chief Executive Officer of Armstrong Building Products, a business unit of Armstrong, since January 2011. Prior to joining Armstrong, Mr. Grizzle served as Group President of Global Engineered Support Structures Coatings & Tubing and President of International Division for Omaha at Valmont Industries, Inc., an infrastructure and agricultural equipment manufacturer, since January 2006. Prior to Valmont, he served as President of the Commercial Power Division of EaglePicher Corporation, a manufacturing and resource extractive company. Before that, Mr. Grizzle spent 16 years at General Electric Corporation, where he served as an American business leader for General Electric’s Silicones Division. Mr. Grizzle also serves on the board of directors of Franklin Electric, a global leader in the production and marketing of systems and components for water and automotive fuels. As President and Chief Executive Officer of AWI, Mr. Grizzle provides our Board with significant insight regarding our operations, strategic planning and operational design. In addition, Mr. Grizzle brings to our Board broad leadership and business expertise, as well as comprehensive experience in global operations and manufacturing matters.
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ITEM 1 – ELECTION OF DIRECTORS(CONTINUED)
TAO HUANG Director since: 2010 Age:
Independent |
Mr. Huang is the CEO of Supernova Companies, a financial technology company based in Chicago. He was previously the chief operating officer of Morningstar, Inc., a leading independent provider of investment research, until his retirement in December 2010. Mr. Huang spent almost 20 years with Morningstar, taking on increasing levels of responsibility from his start as an entry level technical programmer. He was named director of technology in 1992 and chief technology officer in 1996; he started Morningstar’s International Operation in 1998, held the position of president of International Division until 2000; he was promoted as the Company’s chief operating officer in October 2000 and served in this position until his retirement. Mr. Huang led Morningstar initiatives enabling significant growth, both organically and through acquisition, and oversaw continuous improvements in the operations of the firm’s core businesses. Mr. Huang is a founder and managing partner of Range Light, LLC, an investment firm (since 2012). Mr. Huang also serves on the board of directors of Equity Lifestyle Properties, Inc., a publicly-traded real estate investment trust (since 2015) and Principal Mutual Funds, an asset management firm (since 2013). Mr. Huang brings to our Board expertise developed from his experience in a data-intense and technology-driven organization managing growth and integration of acquisitions, as well as experience in international operations.
BARBARA L. LOUGHRAN Director since: 2019 Age: 57
Independent
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Ms. Loughran served as a partner with PricewaterhouseCoopers LLP (PwC) from 1998 until her retirement in June 2018. Ms. Loughran has held various positions at PricewaterhouseCoopers LLP,PwC, including serving in its National Office from 2016 to 2018 and from 2000 to 2003, as Industrial Products Business Unit Leader of PricewaterhouseCoopers LLP’sPwC’s New York Metro market from 2013 to 2015, and as Retail & Consumer Business Development Leader of PricewaterhouseCoopers LLP’sPwC’s New York Metro market from 2010 to 2012. As a client service partner, Ms. Loughran led the global relationship and audit of numerous large, publicly-traded companies across a broad range of industries, and led the National Office effort on leveraging new and innovative technologies. Ms. Loughran also serves on the board of directors of Jacobs Engineering Group Inc., a publicly-traded engineering company, where she serves as chair of the Audit Committee. Ms. Loughran brings to our Board an extensive public accounting background, financial and capital markets expertise, and experience in mergers and acquisitions, risk management, and financial oversight and reporting.
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ITEM 1 – ELECTION OF DIRECTORS(CONTINUED)
LARRY S. Director since: 2010 Age:
Independent
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Mr. McWilliams has been theCo-Chief Executive Officer of Compass Marketing, Inc. since 2012 and was previously the president and chief executive officer of Keystone Foods, a producer of proteins, from May 2011 to May 2012. From May 2005 to October 2010, he served as a senior vice president at Campbell Soup Company and subsequently became the president of Campbell International, responsible for all of Campbell Soup’s business in Europe, Latin America and Asia Pacific. Mr. McWilliams joined Campbell Soup in March 2001 as senior vice president – sales and chief customer officer, overseeing the company’s relationships with its global retail partners. In April 2003, he assumed the position of president – North America Soup. Mr. McWilliams was named senior vice president and president – Campbell USA in March 2004. Prior to Campbell Soup, Mr. McWilliams held positions at Coca-Cola from 1995 to 2001 and the Pillsbury Company from 1993 to 1995. Mr. McWilliams has also served on the board of directors of Armstrong Flooring, Inc. (“AFI”) since April 1, 2016, and was recently appointed to serveformerly served as its interim chief executive officer. Mr. McWilliams formerly served on the Boards of Directors of Godiva Chocolatiers International, a privately held company, and Bob Evans Farms, a full-service restaurant company, and the Board of Governors of St. Joseph’s University Food Marketing Council and the Grocery Manufacturers’ Association’s Industry Affairs Council. Mr. McWilliams offers our Board senior executive leadership capabilities and experience, as well as extensive knowledge of sales, marketing, customer service relationships, international markets and distribution channels.
JAMES C. MELVILLE Director since: 2012 Age:
Independent
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Mr. Melville is a member of the Minneapolis-based law firm of Kaplan, Strangis and Kaplan, P.A., where he has practiced in the corporate governance, mergers and acquisitions, securities and financial areas since 1994. Prior to joining Kaplan, Strangis and Kaplan, P.A., Mr. Melville practiced with Dorsey and Whitney in their Minneapolis and London, England offices. Mr. Melville previously served as a member of our Board from September 2009 until July 2010 and now also serves on the board of directors of AFI (since April 1, 2016). Mr. Melville is active in numerous local and civic organizations and their boards. Mr. Melville is also a National Association of Corporate Directors Board Leadership Fellow. Mr. Melville brings to our Board extensive knowledge of thecorporate law, mergers and acquisitions, executive compensation, and corporate governance matters, as well as international experience and financial acumen. He has also gained intimate knowledge of the Company through his prior service on our Board.
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ITEM 1 – ELECTION OF DIRECTORS(CONTINUED)
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Mr. Roberts served as global managing partner for PricewaterhouseCoopers LLP from 1998 until his retirement in June 2002. Mr. Roberts held numerous positions at Coopers & Lybrand LLP from 1967 until its merger with Pricewaterhouse LLP in 1998. From 1994 to 1998, Mr. Roberts served as one of three members of the Office of the chairman of Coopers & Lybrand’s United States operations. Prior to that time, Mr. Roberts held other positions at Coopers & Lybrand, including deputy vice chairman, vice chairman and managing partner. While serving in various executive capacities at PricewaterhouseCoopers, Mr. Roberts performed and supervised audit, tax and business consultative services, and developed extensive expertise in public company audits and financial reporting matters. Mr. Roberts serves on the boards of directors and audit committees of the following companies: Safeguard Scientifics, Inc., a provider of capital as well as strategic, operational and management resources to growth-stage businesses (since 2003; also serves on the compensation committee and nomination and governance committee), the Pennsylvania Real Estate Investment Trust, a business trust with primary investment focus on retail shopping malls (since 2003; also serves on the compensation committee), and Vonage Holdings Corporation, a provider of communications services (since 2004; also serves as lead director). Mr. Roberts previously served on the board of directors of Sicor, Inc. (2002 to 2004) and served as a director of our former holding company, Armstrong Holdings, Inc. (2003 to 2006). Mr. Roberts brings to our Board an extensive public accounting background, financial expertise, experience as an accounting executive and as a board member of businesses in diverse industries, and risk management, strategic planning and corporate governance capabilities.
WAYNE R. SHURTS Director since: 2019 Age: 61
Independent |
Mr. Shurts served as the Executive Vice President and Chief Technology Officer at Sysco Corporation, a publicly-traded global leader in food service distribution, from 2012 until February 2019. Prior to this, Mr. Shurts served as Executive Vice President and Chief Information Officer at SUPERVALU, a publicly-tradedpublicly traded U.S. grocery retailer and wholesaler, from 2010 to 2012, and Chief Information Officer at Cadbury PLC, a British multinational confectionary company, from 2008 to 2010. Prior to this, Mr. Shurts has held various roles at Nabisco, including in finance, sales, supply chain, marketing, and technology. Mr. Shurts served on the board of directors ofCon-Way Inc.Incorporated in 2015 until its acquisition by XPO Logistics Inc., where he served as a technology expert and a member of its Audit Committee and Nominating and Governance Committee. Mr. Shurts brings to our Board extensive technology experience as a former Chief Information Officer, and in applying technology to improve and successfully transform business processes.
ITEM 1 – ELECTION OF DIRECTORS(CONTINUED)
ROY W. TEMPLIN Director since: 2016 Age:
Independent |
Mr. Templin served as Chairman of the Board of Directors ofCon-Way Incorporated, (NYSE:CNW), a multinational freight transportation and logistics company, from January 2014 until its acquisition by XPO Logistics Inc. in 2015. He previously served as Executive Vice President and Chief Financial Officer of Whirlpool Corporation, (NYSE:WHR), a multinational manufacturer and marketer of home appliances, from 2004 to 2012, and as Vice President and Controller of Whirlpool Corporation from 2003 to 2004. Prior, he served as Vice President, Finance and Chief Accounting Officer of Kimball International, Inc. He currently serves on the Board of Trustees of the Goldman Sachs Mutual Funds. Mr. Templin brings to our Board extensive experience as a senior executive, public company board member and executive of manufacturing and distribution industries, as well as experience in risk management, strategic planning, finance, and mergers and acquisitions.
AWI 2021 Proxy Statement | 7 |
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
CHERRYL T. THOMAS Director since: 2016 Age:
Independent |
Ms. Thomas is the Chief Strategy Officer and Vice President of Ardmore Roderick, a Chicago-based civil engineering firm and, prior to The Roderick Group’s merger with Ardmore Associates, LLC, previously served as President and Chief Executive Officer of Ardmore Associates, LLC, where she was responsible for all financial, operational and management activities since 2003. Prior to founding Ardmore Associates, Ms. Thomas served as chairman of the board of the United States Railroad Retirement Board from 1998 until 2003, and as commissioner of the department of buildings of the city of Chicago from 1989 until 1994. Ms. Thomas also serves on the board of directors of Wintrust Bank, a banking corporation, where she is a member of their credit and audit committees. Ms. Thomas serves on the boards of numerous local and civic organizations and foundations, including the Lyric Opera of Chicago (since 2007), the Chicago Zoological Society (since 2000), the Polk Bros Foundation (since 2009), the Brach Foundation (since 2015) and the Big Shoulders Foundation (since 2013). Ms. Thomas brings to our Board significant senior executive leadership experience, as well as relevant experience in manufacturing, distribution and risk management.
ITEM 1 – ELECTION OF DIRECTORS(CONTINUED)
Skills and Qualifications of Board of Directors
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ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
Skills and Qualifications of Board of Directors
AWI 2021 Proxy Statement | 9 |
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
10 | AWI 2021 Proxy Statement |
CORPORATE GOVERNANCE PRINCIPLES AND OTHER CORPORATE GOVERNANCE DOCUMENTS
Our Corporate Governance Principles include guidelines regarding the responsibilities, duties, service and qualifications of our Board, the determination of a director’s independence and any conflict of interests, Board access to management and independent advisors, director compensation and stock ownership requirements, Board committees and other matters relating to corporate governance. Our Corporate Governance Principles are available on our website under “About Us” and then “Governance” or at https://www.armstrongceilings.com/corporate/governance.html. Also available at the same location on our website are the charters of the Audit Committee, the Finance Committee, the Management Development and Compensation Committee (“Compensation Committee”), and the Governance Committee of the Board, the Armstrong Code of Business Conduct and the Armstrong Code of Ethics for Financial Professionals. Our website is not part of this proxy statement and references to our website address in this proxy statement are intended to be inactive textual references only.
It is the policy of the Company that our Board consist of a majority of directors who are not employees and are independent under all applicable legal and regulatory requirements, including the independence requirements of the NYSE. For purposes of evaluating the independence of directors, in accordance with our Corporate Governance Principles, our Board will consider all relevant facts and circumstances in making an independence determination, and not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. Consistent with our Corporate Governance Principles, to be considered “independent,” the Governance Committee has established qualifications to assist in the determination, which either meet or exceed the independence requirements of the NYSE.
Our Board has determined that all of our director-nominees, with the exception of Mr. Grizzle, our President and CEO, are independent under NYSE listing standards and our Corporate Governance
Principles. In addition, our Board has further determined that each of the members of the Audit Committee, the Compensation Committee, the
Finance Committee and the Governance Committee are independent within the meaning of the NYSE listing standards, any applicable minimum standards required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and enhanced standards required for membership on such committees by our Bylaws, namely that directors serving on such committees meet the independence criteria under both NYSE rules and Rule10A-3(b)(1) under the Exchange Act.
BOARD’S ROLE IN RISK MANAGEMENT OVERSIGHT
Our Board oversees the Company’s risk profile and management processes for assessing and managing risk, both as a full Board and through its committees, which meet regularly and report to the full Board. Management is charged with managing risk through robust internal policies and controls.
Enterprise Risk Management The Company has maintainedactively maintains an enterprise risk management program since 2005.program. Risk management is an integral part of the Company’s culture. Management’s role is to identify, mitigate, guide and review the efforts of our business units, consider whether the residual risks are acceptable, and approve plans to deal with serious risks. Our Board’s role in risk management is to review the performance and functioning of the Company’s overall risk management efforts and management’s establishment of appropriate systems for managing risk. Specifically, our Board reviews management’s:our:
processes to assess the likelihood and impact of such risks in order to prioritize them;
identification of major risks, and how we define “major;”
identification of primary risk mitigation owners;
and
mitigationmonitoring of major risks and our view of the resulting residual risk; and
monitoring of major risks.
Management provides its feedback on business segment risks during periodic business reviews and annual strategic planning discussions. Senior management periodically meets with designatedevolving risk mitigation owners and assesses control
AWI | |
CORPORATE GOVERNANCE(CONTINUED)
Pursuant to its charter, the Audit Committee has primary oversight responsibility with respect to the design of our enterprise risk management program, including for periodically reviewing the process, methodology, and tools used by management to identify, evaluate, organize, assess and mitigate significant risks.
Management regularly provides input and feedback on business segment risks during periodic business reviews and annual strategic planning discussions. Senior management regularly meets with designated risk mitigation owners to review and assess risk mitigation and control measures. In addition, senior management regularly reevaluatereevaluates the appropriateness of risk assessments and priorities. This process includes identifying risks that could prevent achievement of business goals orand strategic plans. Our internal audit groupteam uses the resulting information as a basis for developing its annual audit plan.
Cybersecurity RiskOur Board receives regular updates on cybersecurity risk and mitigation protocols from our Chief Information Officer. These updates include a review of our cybersecurity program and assessment framework, as well as periodic updates on our efforts regarding data loss prevention, regulatory compliance, data privacy measures, threat and vulnerability management, cyber-crisis management, employee training, and other related topics, as applicable.
Responsibilities of our Board and its Committees In addition to audit and assurance reports provided by our internal audit team, our Board periodically reviews summary reports from senior management that assess the strategic, operational, infrastructure and external risks facing the Company. These reports generally utilize our Enterprise Risk Management framework to identify the likelihood and impact of such risks, and identify appropriate mitigation strategies and efforts. Each Board committee, consistent with its charter, reviews and evaluates risks associated with their respective areas of oversight responsibility, reports on those oversight activities to our Board, and assists our Board in overseeing theits ongoing monitoring and review of certainthose risks, that are particularly within its purview, including as described in “BOARD MEETINGS AND COMMITTEES” below.
BOARD’S ROLE IN STRATEGIC PLANNING
Our Board oversees and advises on the Company’s overall strategy, and annually reviews the strategic priorities and initiatives of each business segment. In evaluating significant investments or capital allocation decisions, the Board generally considers the Company’s strategic plan and the potential impact on long-term shareholder value creation.
BOARD’S ROLE IN SUCCESSION PLANNING
Our Board is actively engaged and involved in talent management. Our Board reviews the Company’s “Organization Vitality” initiatives in support of its business strategy at least annually. This includes a detailed discussion of the Company’s global leadership bench and succession plans with a focus on key positions at the senior officer level, including CEO. During 2018,2020, our Board and the Compensation Committee met on several occasions in furtherance of these initiatives. In addition, the committeeseach committee of the Board regularly discussdiscusses the talent pipeline for specific critical roles. High potential leaders are given exposure and visibility to Board members through formal presentations and informal events. More broadly, our Compensation Committee and our Board isare regularly updated on key talent indicators for the overall workforce, including diversity, recruiting and development programs.
Our Bylaws and Corporate Governance Principles provide our Board with the flexibility to determine what leadership structure works best for us, including whether the same individual should serve as both our Chairman and our CEO. Since 2010, our Board has determined to split the positions of Chairman and CEO. The split of these positions allows Mr. Grizzle, our President and CEO, to focus on managing the business, while Mr. McWilliams, as Chairman, oversees our Board’s functions. Our Board will continue to evaluate its leadership and governance structure within the context of the specific needs of the business, current Board composition, and the best interests of the Company and our shareholders.
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CORPORATE GOVERNANCE (CONTINUED)
Responsibilities of the Chairman include recruiting new Board members, overseeing the evaluation and compensation of the CEO, ensuring an appropriate succession plan, overseeing independent evaluation of risk, coordinating Board meeting schedules and agenda, chairing and leading the discussions at the meetings, and overseeing the annual performance evaluations of the Board, its committees and its individual members. The Chairman ensures information provided by management to the Board is sufficient for the Board to fulfill its duties and communicates with other directors on key issues and concerns outside of regularly scheduled meetings. The Chairman is also responsible for ensuring the effective functioning of theBoard committees through appropriate delegation to, and membership of, the committees. Finally, the Chairman facilitates the independent oversight required by our Bylaws and Corporate Governance Principles, including by ensuring that:
a majority of our directors are independent;
all of the members of the Audit Committee, the Compensation Committee, the Finance Committee and the Governance Committee are independent directors; and
the Board meets at regularly scheduled executive sessions, outside of the presence of management. Mr. McWilliams, our Chairman, presides at these sessions.
In addition, each of the Board’s four standing committees regularly meet at similar executive sessions, at which the respective committee chairs preside.
Any person who wishes to communicate with the Board, nonemployee directors as a group, or individual directors, including the Chairman, may direct a written communication to the attention of the Corporate Secretary at the Company’s
corporate offices at 2500 Columbia Avenue, Lancaster, Pennsylvania 17603. The Corporate Secretary will forward these communications to the intended recipient director(s), as appropriate. You may also send general messages to directors by email to directors@armstrongceilings.com. If you wish to send an email message to the Governance Committee, including a recommendation regarding a prospective director, please send the message to CorpGovernance@armstrongceilings.com. The Corporate Secretary will forward these messages, as appropriate.
CORPORATE GOVERNANCE(CONTINUED)
The Company’s relationships with its shareholders and other stakeholders are a critical part of our corporate governance profile, and the Board recognizes the value of taking their views into account. Among other things, this engagement with the Company’s shareholders and other stakeholders helps the Board and management to understand the larger context and impact of the Company’s operations, learn about expectations for our performance, assess emerging issues that may affect our business or other aspects of our operations, and shape policy.
In 2016, we initiated a formal shareholder outreach program to obtain investor perspectives on key topics of interest, including corporate governance, our executive compensation, program, sustainability and other matters. On an annual basis, we intend to continue to solicit feedback from institutional investors, including asset managers, pension funds and social responsibility investors.
Shareholder communications and inquiries are shared with Company management, and with the Chairs of the Board and its Committee, as appropriate. In 2020, in response to certain communications or inquiries, members of Company management and our Board engaged in discussions with shareholders to discuss topics relating to corporate governance and executive compensation.
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CORPORATE GOVERNANCE (CONTINUED)
The Board met fiveten times during 2018.2020, five of which were special meetings.
There are four standing committees of the Board: the Audit Committee, the Compensation Committee, the Finance Committee and the Governance Committee, each described below.
Each standing committee has a charter and consists solely of ‘independent’ or ‘outside’ directors who meet applicable independence standards required by the NYSE, the SEC,U.S. Securities and Exchange Commission (the “SEC”), and the Internal Revenue Service, and under our Articles of Incorporation and Bylaws. Each committee reports to the Board regularly and evaluates the
effectiveness of its performance annually. The membership of each committee is determined by the Board on the recommendation of the Governance Committee. The Company’s Corporate Governance Principles provide that (i) directors who are currently fully employed should not serve on more than two other corporate boards, and (ii) other directors should not serve on more than four other corporate boards. The Board, after considering the circumstances of Mr. Roberts’ service on three other public company audit committees, determined that such service does not impact his ability to effectively serve on the Audit Committee.
All director nominees who served on the Board during 20182020 participated in over 75% of the meetings of the Board and meetings of the Committees on which they served. Board members are expected to attend annual meetings in person or virtually, via the Internet. All Board members attended the annual meeting in 2018.2020.
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CORPORATE GOVERNANCE (CONTINUED)
AuditAudit Committee The Audit Committee met fivesix times during 2018.2020, one of which was a special meeting. The members of the Audit Committee are John J. RobertsRoy W. Templin (Chair), Stan A. Askren, Barbara L. Loughran and Wayne R. Shurts. During 2020, Tao Huang Roy W. Templin and Cherryl T. Thomas. During 2018, Larry S. McWilliamsJohn J. Roberts also served as a membermembers of the Audit Committee until hisMr. Huang’s appointment as Chairman ofto the Governance Committee and Mr. Robert’s retirement from the Board, following the 20182020 Annual Meeting. Under its charter, the Audit Committee:
oversees (i) auditing and accounting matters, including the selection, supervision and compensation of the Company’s independent registered public accounting firm and other independent auditors, (ii) the scope of the annual audits,non-audit services performed by the Company’s independent registered public accounting firm, and (iii) the Company’s accounting practices and internal accounting controls;
has sole authority to engage, retain and dismiss the independent registered public accounting firm;
reviews and discusses with management and our independent registered public accounting firm the annual audited financial statements and quarterly financial statements included in our SEC filings;
assists the Board in monitoring the integrity of the Company’s financial statements and the independent registered public accounting firm’s qualifications, independence and performance;
considers the integrity of and risks associated with overall financial reporting, legal compliance and disclosure processes; and
supervises and reviews the effectiveness of the Company’s internal audit and compliance functions, and compliance by the Company with applicable legal and regulatory requirements.
Each member of the Audit Committee meets the NYSE and SEC financial literacy requirements. The Board has determined that each of Mr. RobertsMs. Loughran and Mr. Templin qualifies as an “Audit Committee Financial Expert” as defined pursuant to the
CORPORATE GOVERNANCE(CONTINUED)
Exchange Act. The Audit Committee regularly meets independently with the Company’s internal and independent auditors, with the leaders of the Company’s compliance function, and with management.
Finance Committee The Finance Committee met five times during 2018,2020, three of which were special meetings. The members of the Finance Committee are Roy W. Templin (Chair), Gregory P. Spivy,Stan A. Askren, Tao Huang, Barbara L. Loughran, Larry S. McWilliams, James C. Melville, Wayne R. Shurts and Tao Huang.Cherryl T. Thomas. During 2020, Larry S. McWilliams, Wayne R. Shurts and Cherryl T. Thomas were appointed to the Finance Committee following the 2020 Annual Meeting. Under its charter, the Finance Committee:
assists the Board in its oversight of the financial management of the Company, including material and strategic financial matters;
reviews the Company’s capital structure, including with respect to its debt and equity securities, financing arrangements and credit facilities;
reviews and considers the Company’s capital expenditures, dividend policy and other forms of distributions on the Company’s stock, and capital deployment strategies; and
reviews financial terms of certain proposed mergers, acquisitions, divestitures, strategic investments and joint ventures.
Management Development and Compensation Committee The Compensation Committee met sixseven times during 2018, one2020, two of which was awere special meeting.meetings. The members of the Compensation Committee are Stan A. Askren (Chair), Barbara L. Loughran, James C. Melville, Gregory P. SpivyWayne R. Shurts and Cherryl T. Thomas. During 2018, Larry S. McWilliams and2020, Roy W. Templin also served as membersa member of the Compensation Committee until theirhis appointment as ChairmanChair of the Board andAudit Committee following the 2020 Annual Meeting. During 2020, Barbara L. Loughran was appointed to the GovernanceCompensation Committee respectively, following the 20182020 Annual Meeting. Under its charter, the Compensation Committee:
oversees the design of our executive compensation and benefit programs and employment practices;
administers and makes recommendations regarding our incentive and equity compensation plans;
reviews and approves corporate goals and individual objectives relevant to the compensation of the CEO and evaluates the CEO’s performance relative to those goals and objectives, and recommends CEO compensation to the independent directors based on the evaluation;
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CORPORATE GOVERNANCE (CONTINUED)
reviews incentive compensation to confirm that such compensation does not encourage unnecessary risk-taking; and
monitors senior management succession planning.
Nominating, Governance and GovernanceSocial Responsibility Committee The Governance Committee met fiveseven times during 2018.2020, two of which were special meetings. The members of the Governance Committee are James C. Melville (Chair), Tao Huang, Roy W. Templin and Cherryl T. Thomas. During 2020, John J. Roberts and Roy W. Templin. During 2018, James J. O’Connor also served as a member of the Governance Committee until his retirement from the Board in connection with the 2020 Annual Meeting. During 2020, Tao Huang was appointed to the Governance Committee following the 20182020 Annual Meeting. Under its charter, the Governance Committee:
monitors the independence of nonemployee directors;
reviews and evaluates director candidates and makes recommendations to the Board concerning nominees for election as Board members;
establishesassists our Board in defining and assessing criteria and qualifications for the selection of candidates to serve on the Board;
recommends directors for appointment to Board committees;
makes recommendations to the Board regarding corporate governance matters;
reviews and makes recommendations to the Board regarding the compensation of nonemployee directors;
coordinates an annual self-evaluation of the performance of the Board and each committee through assistance from an independent, third-party advisor.
Other Committees In addition to the four standing committees described above, members of the Board may meet on an ad hoc basis to discuss, review and, as appropriate, approve matters through other committees established by the Board. These ad hoc committees report to the Board and may review subjects such as environmental matters, succession planning and crisis response.
CORPORATE GOVERNANCE(CONTINUED)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee has ever been an officer or employee of the Company or its subsidiaries, or had any relationship with the Company that requires disclosure under applicable SEC regulations.
CERTAIN RELATIONSHIPS ANDREVIEW OF RELATED PARTYPERSON TRANSACTIONS
There are no transactions with related persons, as defined in Item 404 of the SEC’s Regulation S-K (“Item 404”), to report for the fiscal year ended December 31, 2020.
We have written policies pertaining to related person transactions. Any related partyperson transaction that may arise is required to be reviewed and approved by the Governance Committee, who must have no connection with the transaction. Related partyperson transactions would include transactions by the Company or any subsidiary with any director, director nominee, executive officer, shareholders owning more than 5% of the Company’s outstanding shares of common stock, per share par value $0.01 (“Common Stock”), or immediate family member of any of the foregoing, and transactions with businesses affiliated with any director or director nominee that meet the specifications in Item 404 of RegulationS-K under the Exchange Act.404. The Chair of the Governance Committee has authority to approve transactions involving sums less than the disclosure threshold set in Item 404. The material details of any such matters are required to be disclosed to the Governance Committee at its next regular meeting.
POLICY ON MAJORITY VOTING IN THE ELECTION OF DIRECTORS
In February 2017, our Board adopted a Policy on Majority Voting as one of our Corporate Governance Principles. The Policy provides that in
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ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
an uncontested election of directors, any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election will, within 10 business days following the certification of the shareholder vote, tender his or her written resignation to the Board. Such tendered resignation will be considered by the Governance Committee taking into account any factors or other information it considers appropriate and relevant and, within 60 days following the date of the shareholders’ meeting at which the election occurred, will make a recommendation to the Board concerning the acceptance or rejection of such resignation. The Board will take formal action on the Governance Committee’s recommendation no later
than 90 days following the date of the shareholders’ meeting at which the election occurred. The Board will consider the information, factors and alternatives considered by the Governance Committee and such additional factors, information and alternatives as the Board deems relevant.
Following the Board’s decision on the Governance Committee’s recommendation, the Company, within four business days after such decision is made, will publicly disclose, in a current report on Form8-K filed with the SEC, the Board’s decision, and, if applicable, the Board’s reasons for rejecting the tendered resignation. A director whose resignation is accepted by the Board may not bere-appointed to fill the vacancy created by his or her resignation.
No director who is required to tender his or her resignation shall participate in the Governance Committee’s deliberations or recommendation, or in the Board’s deliberations or determination, with respect to accepting or rejecting his or her resignation as a director. If a majority of the members of the Governance Committee are required to tender their resignations, then the independent directors who are not required to tender their resignations will appoint an ad hoc Board committee from amongst themselves, consisting of such number of directors as they may determine to be appropriate, solely for the purpose of considering and making a recommendation to
the Board with respect to the tendered resignations. If such ad hoc committee would have been created but fewer than three directors would be eligible to serve on it, then the entire Board (other than the director whose resignation is being considered) will make the determination to accept or reject the tendered resignation without any recommendation from the Committee and without the creation of an ad hoc committee.
CORPORATE ENVIRONMENTAL AND SOCIAL RESPONSIBILITYMANDATORY RETIREMENT AGE
AsIn October 2018, our Board, upon the recommendation of the Governance Committee, adopted a leading building products manufacturer, we are committedmandatory retirement age policy for directors within our Corporate Governance Principles such that a director may not stand for election, or be nominated to operatingserve, as a strong corporate citizen across all areasmember of our business. This commitment is reflected in our ongoing initiatives to design and develop sustainable ceiling and wall products and solutionsBoard after reaching the age of 75. At the time that a director reaches the age of 75, the director may complete his or her then current term but may not stand for every space.
Environmental Sustainability We are committed to environmental sustainability and products that promote and enable better buildings and spaces.
CORPORATE GOVERNANCE(CONTINUED)
We were the first to develop a ceiling recycling program and, since 1999, we have diverted more than 200 million square feet of reclaimed ceiling tiles from landfills. In 2017, we launched SUSTAIN™, the industry’s first collection of high performance ceiling systems that are free of red list chemicals per the Living Building ChallengeSM 3.0; have product transparency disclosures like Environmental Product Declarations, Health Product Declarations and DeclareSM labels, contribute to LEED®re-election v4 and WELL Building StandardTM, meeting the most stringent sustainability compliance standards. In 2018, our Tectum® acoustical ceiling and wall panels were recognized as the first and only acoustical solution to receive Living Product Challenge certification from the International Living Future Institute.
Our effort to reduce our own environmental footprint includes:
upcycling industry waste streams into our products so that we use more waste than we generate; several of our facilities arezero-waste;
energy reduction improvements that seek to contribute to greenhouse gas reduction;
water recycling and infrastructure improvements;
the first LEED EB Platinum-certified building outside California, Energy Star rated buildings; and
service as a founding member of the U.S Green Building Council.
Material Transparency We are actively involved in developing tools and certifications our customers need to be able to fully assess our products including environmental product declarations and product certifications and declarations, such as Cradle to Cradle, Declare and Global GreenTagCert™.
Safety Safety is a core value at Armstrong; our goal is to have an injury free workplace. As a result
of our safety programs, which are integrated into our business from top management to our workers in manufacturing plants, our OSHA recordable rate has exceeded the manufacturing sector’s standards for over a decade.
Social Impact We created the Armstrong World Industries Foundation as our philanthropic arm in 1985. Since its inception, the foundation has awarded in excess of $50 million to 501(c)(3) organizations in communities where employees live and work with the goal of reaching under-served young people and elevating the power and impact that design and buildings can have on people’s lives.
More information about our corporate and social responsibility efforts is available in the “Sustainability” section of our website at http://www.armstrongceilings.com.thereafter.
SHAREHOLDER-RECOMMENDED DIRECTOR CANDIDATES
The Governance Committee will consider director candidates nominated by shareholders. The procedures for recommending candidates are posted at https://www.armstrongceilings.com/corporate/nominating-governance-committee.html.en-us/about-us/board-committees.html. Shareholders who wish to suggest individuals for service on the Board are requested to review Article II, Section 4 of our Bylaws and supply the information required in (a) through (k) of that Section in a written request to the Corporate Secretary at the Company’s corporate offices at 2500 Columbia Avenue, Lancaster, Pennsylvania 17603.
When evaluating the candidacy of nominees proposed by shareholders, the Governance Committee may request additional information as it may consider reasonable to determine the proposed nominee’s qualifications to serve as a member of the Board.
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ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
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Our sustainability program complements our company purpose, namely to make a difference by contributing to healthier, safer spaces where people live, work, learn, heal and play. As a leader in the building products industry, we aim to transform the design and building of spaces so that businesses and communities can thrive, both today and into the future.
Our program is organized around three functional “pillars”: People, Planet and Product. Each pillar has adopted specific 2030 goals and key performance targets, and is led by a cross-functional steering committee responsible for assessing, selecting and prioritizing goals, establishing targets and developing roadmaps to achieve them, and monitoring progress against science-based metrics.
Our program pillars are focused on these key priorities and objectives:
Healthy and Circular Products We are committed to responsible sourcing and providing transparency in our products. In addition, we will design our products to minimize waste and pollution, support recycling, repurposing or reuse; and contribute to the regeneration of natural systems.
Healthy Planet All of our electricity sources will be renewable, and we will dramatically reduce the carbon and water impacts of our products and operations.
Thriving People and Communities Our workforce will be safe, diverse, inclusive and fulfilled, and we will actively contribute to our local communities.
UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
The United Nations Sustainable Development Goals (UN SDGs) are a collection of 17 interlinked global goals that aim to achieve a better and more sustainable future for all by 2030. We have conducted an analysis to understand how our activities align with the UN SDGs.
In 2021, we became a signatory to the United Nations Global Compact (UNGC) to demonstrate our commitment to collective action toward its
principles. We will include our first Communication on Progress with the release of our sustainability report later this year.
GOVERNANCE, CORPORATE LEADERSHIP AND MANAGEMENT
The Governance Committee has responsibility for overseeing our corporate responsibility and sustainability programs and practices.
In 2019, we appointed a dedicated sustainability leader, Ms. Helen Sahi, as our Director of Sustainability. Reporting to Mark Hershey, our Senior Vice President, General Counsel and Chief Compliance Officer, Ms. Sahi leads our program and is responsible for designing and implementing action plans towards our enterprise-wide goals. Ms. Sahi is an experienced sustainability leader, and has led similar initiatives for other publicly-traded manufacturers, integrating sustainability into the everyday fabric of company business and shaping sustainability vision and strategy.
OUR PLANET PILLAR
We recognize our responsibility to protect our shared planet: In order to create healthy buildings and spaces, we need a functioning and stable environment.
We continue to strengthen our sustainable practices, with a focus on sourcing responsibly and building circular manufacturing processes. We aim to minimize our environmental impact by reducing greenhouse gas (GHG) emissions and integrating more renewable energy sources. We are also limiting waste through innovative manufacturing processes and circular economy systems that bring new life to used products. Finally, we are thinking deliberately about how to optimize our water use and contribute positively to water management and restoration efforts where we operate.
Carbon The threats we all face from climate change have never been more urgent. As world leaders struggle to coordinate a response to the crisis, companies have an opportunity to lead the way. We are committed to transparent action on the climate crisis, and in April 2021, we joined the Science Based Targets initiative (SBTi) to set goals in line with the Paris Agreement under the United Nations Framework Convention on Climate
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SUSTAINABILITY (CONTINUED)
Change. Working with the SBTi, we set an internal goal to meet a well below 2°C target and have committed to reducing Scope 1 and Scope 2 GHG emissions by 30% from a 2019 baseline. This would offset all of our electricity usage and a portion of our natural gas usage. We are continuing to work with the SBTi to set a Scope 3 emissions goal that would help limit global warming to well below 2°C above pre-industrial levels.
Water While we do not operate in any areas considered “high water stress,” we are mindful of our opportunity to limit our resource consumption. As we upgrade our facilities, we are able to achieve greater efficiency of water and energy use. In 2014, we installed a new water filtration plant at our Marietta, Pennsylvania facility.
OUR PRODUCT PILLAR
We recognize that our products are an important component of helping our customers achieve their own key sustainability goals, and are committed to continuing to invest in solutions that meet our customers’ changing demand for building products, including seeking products free of chemicals of concern while continuing to meet high-performance standards.
SUSTAIN™ Armstrong SUSTAIN® is the largest portfolio of high-performance ceiling solutions available today. All SUSTAIN products are free of chemicals of concern, meet low emission standards for indoor air quality, and offer material ingredient disclosures and environmental product declarations (EPDs). All SUSTAIN products contribute to meeting industry green building standards.
Product Transparency We are committed to being transparent about the materials we use in our products. We collaborate with industry organizations to help develop leading sustainability standards, and we regularly engage third parties to test, assess, and certify our products to ensure we continue to meet the industry’s most stringent sustainability standards.
Our product transparency page provides all documentation required for a range of health and environmental certifications, standards and claims, including Health Product Declarations, EPDs, and Declare Labels. We also offer customer-focused tools to assist users in finding sustainable building options that meet their needs.
Circular Products In nature, there is no waste. We have worked to integrate that principle into our product lifecycle for over two decades. We are committed to creating circular products and services that reduce or eliminate waste and pollution, keep products and materials in use longer and help to regenerate natural systems.
Since 1999, we have operated our Armstrong World Industries Ceiling Recycling Program. This program gives our customers and us an opportunity to recycle ceiling tiles at their end of life so that they can be remanufactured into new ceiling tiles. This has significantly reduced the need for virgin raw materials – by over a million tons to date – and diverts waste from landfills. This program also helps our customers meet their own waste reduction goals, and we provide calculators to help our customers measure the environmental impact and savings as a result of our program.
OUR PEOPLE PILLAR
We have long considered our employees to be an important stakeholder group. We strive to cultivate and maintain an environment that supports safe, healthy and fulfilled employees. We continue to work to further develop an inclusive culture and diverse workforce at all levels of the organization.
Safety Safety has been a focus of ours since our founding, and it is paramount in everything we do. Guided by our Safety Policy, we have built a robust safety management system that regularly monitors our safety metrics so that we can quickly report and investigate any incidents, including near misses. This approach allows us to make timely changes to procedures and processes and identify best practices to be adopted company-wide.
One of our key priorities as we grow through acquisitions and integrate new companies is to embed our long-standing safety management systems and culture within each acquired organization.
COVID-19 In 2020, the COVID-19 pandemic caused significant disruption on many fronts. All of our manufacturing facilities remained operational, while following governmental and local health authorities’ guidance. We implemented measures to minimize our employees’ exposure to the virus. These included encouraging remote work when possible, providing personal protective equipment
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SUSTAINABILITY (CONTINUED)
(including masks), limiting group meetings, restricting business travel, implementing enhanced cleaning and sanitizing procedures, and ensuring social distancing. Early in the pandemic, we implemented an Emergency Paid Leave program that granted additional paid time off for any employee impacted by COVID-19 during 2020. We subsequently implemented a COVID Leave Program effective January 1, 2021 that continues to provide similar paid leave benefits for employees impacted by COVID-19. Additional information regarding our COVID-19 response can be found on page 34 of this Proxy Statement.
Diversity In order to achieve our mission, and to ensure that our design and building of spaces are fit for today and tomorrow, it is imperative that our employees reflect the society we serve across the dimensions of race, sex, ethnicity, age, gender or gender identity, sexual orientation, religion, disability, and veteran status. We believe that a workforce that brings diversity of thought and experiences produces the best and most innovative outcomes.
We have had robust affirmative action programs in place for decades, including self-reviews of our talent processes and outcomes to identify and action opportunities for improvement. We aim to integrate diversity and inclusion into our talent processes, from talent acquisition to employee engagement and development. We have made several commitments on diversity and inclusion in our sustainability goals and have embedded diversity and inclusion into our overall corporate strategy and community outreach. These commitments are supported by employee training and regular surveys, affinity groups, performance management and succession planning.
We equip our entire workforce with annual, mandatory antiharassment training, and provide a confidential toll-free ethics hotline to encourage and facilitate reporting of compliance issues.
THE ARMSTRONG WORLD INDUSTRIES FOUNDATION
We created the Armstrong World Industries Foundation as our philanthropic arm in 1985. Today, the Foundation’s strategy is primarily focused on making a positive difference in the lives of people where they live, work, learn, heal and play, through awarding grants to qualified charitable
organizations that meet at least two of the following criteria:
Today, the Foundation’s mission is to support: (a) current and future employees and retirees through gift matching programs, hardship support, and emergency/disaster relief support; (b) communities in which we operate; and (c) the qualified charitable efforts of architects, designers, contractors and others in the building and construction community who are dedicated to elevating the importance of healthy and sustainable spaces for people’s lives.
Since its inception, the Foundation has awarded in excess of $50 million to qualifying 501(c)(3) organizations.
In December 2020, we made a charitable gift of $10 million dollars to the Foundation in support of its mission.
MORE INFORMATION
More information about our corporate and social responsibility programs is available in the “Sustainability” section of our website at http://www.armstrongceilings.com. Our website is not part of this proxy statement and references to our website address in this proxy statement are intended to be inactive textual references only.
Our Sustainability goals, key performance indicators, projects, plans, targets and expectations are aspirational and forward-looking. Statements of aspiration, future events or conditions are sometimes identified by the words “will,” “should,”
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SUSTAINABILITY (CONTINUED)
“intend,” “expect,” “estimate,” “believe,” “could,” “project,” “target” or other similar words or expressions. By their nature, they are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. As such, no guarantees or assurances are made that they will be achieved or successfully executed. Additionally, the Sustainability data, statistics and metrics included herein, unless otherwise specifically indicated, are non-audited estimates,
were not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have not been externally assured, continue to evolve and may be based on assumptions believed to be reasonable at the time of preparation, but should not be considered guarantees. Except to the extent required by applicable law, we undertake no obligation to publicly update or revise any forward-looking Sustainability statement, whether as a result of new information, future events or otherwise.
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DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding individuals who serve as our executive officers as of April 1, 2019.2021.
Name | Age | Present Position and Business Experience During the Last Five Years* | ||||
Victor D. Grizzle | Armstrong World Industries, Inc. President & CEO; Director since April 2016 Executive Vice President & CEO, Armstrong Building Products (2011 to March 2016)
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Brian L. MacNeal | Armstrong World Industries, Inc. Chief Financial Officer since April 2016 Vice President, Global Finance and CFO, Armstrong Building Products (2014 to April 2016)
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Charles M. | Armstrong World Industries, Inc. Senior Vice President, Ceilings and Wall Solutions since April 2018 Senior Vice President, Ceilings Solutions (March 2016 to April 2018) Vice President of Global Marketing & Commercial Excellence, Armstrong Building Products (January 2012 to March 2016)
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Mark A. Hershey | Armstrong World Industries, Inc. Senior Vice President, 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; since April 2016)
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Stephen F. McNamara | Armstrong World Industries, Inc. Vice President, Controller since July 2008 | |||||
Ellen R. Romano | Armstrong World Industries, Inc. Senior Vice President, Human Resources since May 2013
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* | Information in parentheses regarding previously held positions indicates either the duration the Executive Officer held the position or the year in which service in the position began. |
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All executive officers are elected by the Board to serve in their respective capacities until their successors are elected or until their earlier resignation or removal by the Board.
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In establishing compensation for our nonemployee directors, including the overall value of compensation and the mix of cash and equity, the Board analyzes competitive market data and any underlying director compensation trends generally, and compares our program to those of similarly sized companies in comparable industries. The Board is compensated through a combination of annual retainerscash and equity grantsannual retainers. Nonemployee directors receive more than half of their annual retainer in equity in order to align their compensation with the forminterests of stock units.shareholders. Directors do not receive meeting fees or perquisites. The Board believes that this level of compensation supports the Company’s ability to attract directors with suitable backgrounds and experiences. A director who is an officer or employee of the Company or its subsidiaries is not compensated for service on the Board or on any committee of the Board.
On an annual basis, the Governance Committee reviews the compensation program for nonemployee directors, including the 2008 Directors’ Stock Unit Plan, as amended (the “2008 Directors Stock Unit Plan”) and the 2016 Directors’ Stock Unit Plan, as amended (the “2016 Directors Stock Unit Plan”). The review includes an analysis of competitive market data and any underlying director compensation trends with assistance from an independent compensation consultant, as required. Following thata review in 20182020, in response to the COVID-19 pandemic and based upon a recommendation by the Governance Committee, the Board approved a decreasereduction of $40,00010% for the annual retainer fee (cash) for theAnnual Retainer (Cash) and Committee Chair and a decrease of $40,000 for the annual retainer fee (equity) for the Chair,Fees, each effective as of the 2018 Annual Meeting.June 1, 2020 through December 31, 2020.
The following table describes the elements of the compensation program for nonemployee directors in 2018:2020:
Director Compensation Program
Element | Amount | Terms | ||
Annual Retainer (Cash) | $ $ | paid in quarterly installments, in arrears | ||
Annual Retainer (Equity) | $105,000 $ | annual (orpro-rated) grant of Director • 2016 Directors Stock Unit Plan • vest at one year anniversary or earlier change in control if serving on such date • pre-2011 grants deliverable six months following end of service (except removal for cause) • 2011 and later grants deliverable on date of end of service (except removal for cause) • one share per one unit upon delivery • no voting power until delivered • dividend equivalent rights | ||
Committee Chair Fees** | $ $ | paid in quarterly installments, in arrears | ||
Special Assignment Fees | $2,500 per diem ($1,250 for less than four hours) | may be paid in connection with: • one-on-one meetings with the CEO • plant visits • othernon-scheduled significant activities approved by the Chair |
* | Reduced by 10% effective June 1, 2020 through December 31, 2020 |
** | Committees: AC (Audit); FC (Finance); MDCC (Management Development & Development); |
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COMPENSATION OF DIRECTORS(CONTINUED)
Annual grants for the equity portion of the retainer are effective as of the first business day following the date of the Annual Meeting, and the amount of
each grant is determined by the NYSE closing price of our shares of Common Stock on that date.
Director Compensation Table – 20182020
Name (a) | Fees Earned or Paid in Cash ($) (b) | Stock Awards ($)(1) (c) | Option Awards ($)(2) (d) | Non-Equity Incentive Plan Compensation ($) (e) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3)(f) | All Other Compensation ($) (g)(4) | Total ($) (h) | Fees Earned or Paid in Cash ($) (1)(b) | Stock Awards ($)(2) (c) | Option Awards ($)(3) (d) | Non-Equity Incentive Plan Compensation ($) (e) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4)(f) | All Other Compensation ($) (g)(5) | Total ($) (h) | |||||||||||||||||||||||||||||||||||||||||||||||||
S. Askren | 110,000 | 105,000 | — | — | — | 5,043 | 220,043 | 104,500 | 105,000 | — | — | — | 24,768 | 234,268 | |||||||||||||||||||||||||||||||||||||||||||||||||
T. Huang | 90,000 | 105,000 | — | — | — | 4,567 | 199,567 | 85,500 | 105,000 | — | — | — | 24,262 | 214,762 | |||||||||||||||||||||||||||||||||||||||||||||||||
L. McWilliams(5) | 115,000 | 145,000 | — | — | — | 4,567 | 264,567 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. Loughran | 85,500 | 105,000 | — | — | — | 1,862 | 192,362 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
L. McWilliams | 133,000 | 145,000 | — | — | — | 25,451 | 303,451 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Melville | 100,000 | 105,000 | — | — | — | 2,632 | 207,632 | 99,750 | 105,000 | — | — | — | 15,307 | 220,057 | |||||||||||||||||||||||||||||||||||||||||||||||||
J. O’Connor(6) | 90,000 | — | — | — | — | 889 | 90,889 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Roberts | 110,000 | 105,000 | — | — | — | 3,844 | 218,844 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
G. Spivy(7) | 90,000 | 105,000 | — | — | — | 602 | 195,602 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J. Roberts(6) | 45,000 | — | — | — | — | 18,748 | 63,748 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
W. Shurts | 85,500 | 105,000 | — | — | — | 1,426 | 191,926 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. Templin | 100,000 | 105,000 | — | — | — | — | 205,000 | 102,000 | 105,000 | — | — | — | 1,426 | 208,426 | |||||||||||||||||||||||||||||||||||||||||||||||||
C. Thomas | 90,000 | 105,000 | — | — | — | 979 | 195,979 | 85,500 | 105,000 | — | — | — | 7,653 | 198,153 |
(1) | Excludes amounts earned in fourth quarter of 2019 and paid in first quarter of 2020. |
(2) | Represents amounts that are in units of our shares of Common Stock. The amounts reported represent the aggregate grant date fair value for Director RSUs granted during the fiscal year, as calculated under the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing market price of our shares of Common Stock on the date of the grant. For the number of Director RSUs credited to each director’s account as of March 31, |
Directors do not receive stock options as part of their compensation for service on our Board. |
Under the 2016 Directors Stock Unit Plan, directors may elect to defer the equity compensation that they receive as part of their compensation for services on our Board. |
Represents cash dividend equivalent on vested |
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(6) | Elected not to stand for reelection as of the |
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The following table sets forth information regarding persons or groups known to us to be beneficial owners of more than 5% of our outstanding shares of Common Stock as of March 31, 20192021 or the date of any applicable reports filed by such persons or groups prior to that date. Beneficial ownership is determined in accordance with applicable rules of the SEC.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class Outstanding(1) | ||||||||
Lazard Asset Management LLC 30 Rockefeller Plaza New York, NY 10112 | 5,835,856 | (2) | 12.0 | % | ||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 4,963,165 | (3) | 10.2 | % | ||||||
T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 | 3,636,592 | (4) | 7.5 | % |
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class Outstanding(1) | ||
T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 | 6,834,039(2) | 14.3% | ||
Capital International Investors 333 South Hope Street, 55th Fl Lost Angeles, CA 90071 | 5,862,693(3) | 12.3% | ||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | 4,231,848(4) | 8.8% | ||
Lazard Asset Management LLC 30 Rockefeller Plaza New York, NY 10112 | 3,712,200(5) | 7.8% | ||
The London Company 1800 Bayberry Court, Suite 301 Richmond, VA 23226 | 2,741,512(6) | 5.7% |
(1) | Based on |
(2) | On a Schedule 13G Amendment No. 4 filed on with the SEC on February |
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(3) | On a Schedule 13G Amendment No. 2 filed on with the SEC on February 16, 2021, Capital International Investors reported, as of December 31, 2020, that it had sole voting power and sole dispositive power with respect to 5,862,693 shares of Common Stock of the Company. |
(4) | On a Schedule 13G Amendment No. 6 filed on with the SEC on February 10, 2021, the Vanguard Group—23-1945930 reported, as of December 31, 2020, that it had shared voting power with respect to 33,468 shares of Common Stock of the Company, sole dispositive power with respect to 4,159,329 shares of Common Stock of the Company and shared dispositive power with respect to 72,519 shares of Common Stock of the Company. |
(5) | On a Schedule 13G Amendment filed with the SEC on February 10, 2021, Lazard Asset Management LLC reported that, as of December 31, 2020, it had sole voting power with respect to 2,551,657 shares of Common Stock of the Company and sole dispositive power with respect to 3,712,200 shares of Common Stock of the Company. |
(6) | On a Schedule 13G Amendment No. 1 filed on with the SEC on February 16, 2021, The London Company reported, as of December 31, 2020, that it had sole voting power and sole dispositive power with respect to 2,448,525 shares of Common Stock of the Company, respectively, and shared dispositive power with respect to 292,987 shares of Common Stock of the Company. |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS(CONTINUED)
The following table sets forth, as of March 31, 2019,2021, the amount of shares of Common Stock beneficially owned by all directors, the Company’s named executive officers (“NEOs”) as identified in the “COMPENSATION DISCUSSION AND ANALYSIS” section on page 2628 and all directors and executive officers as a group in accordance with applicable SEC rules.
Name | Number of Common Shares Beneficially Owned | Number of Shares Subject to Options(1) Exercisable or Which Become Exercisable Within 60 Days | Total Number of Shares Beneficially Owned(2) | Restricted Stock Units(3)/ Unvested Options | Total Common Shares Beneficially Owned Plus Restricted Stock Units and Unvested Options | Number of Common Shares Beneficially Owned | Number of Shares Subject to Options(1) Exercisable or Which Become Exercisable Within 60 Days | Total Number of Shares Beneficially Owned(2) | Restricted Stock Units(3) / Unvested Options | Total Common Shares Beneficially Owned Plus Restricted Stock Units and Unvested Options | |||||||||||||||||||||||||||||||||||
Stan A. Askren | 4,910 | * | * | 4,910 | 30,376 | 35,286 | 7,532 | * | * | 7,532 | 30,283 | 37,815 | |||||||||||||||||||||||||||||||||
Charles M. Chiappone | 4,514 | 11,992 | 16,506 | 18,283 | 34,789 | 26,725 | — | 26,725 | 18,301 | 45,026 | |||||||||||||||||||||||||||||||||||
David S. Cookson(4) | 20,869 | 27,336 | 48,205 | — | 48,205 | ||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | 35,990 | 130,309 | 166,299 | 146,857 | 313,156 | 267,752 | 79,951 | 347,703 | 121,339 | 469,042 | |||||||||||||||||||||||||||||||||||
Mark A. Hershey | 18,914 | 33,723 | 52,637 | 35,650 | 88,287 | 44,103 | — | 44,103 | 19,949 | 64,052 | |||||||||||||||||||||||||||||||||||
Tao Huang | — | * | * | — | 27,655 | 27,655 | — | * | * | — | 30,184 | 30,184 | |||||||||||||||||||||||||||||||||
Barbara L. Loughran | — | * | * | — | 2,529 | 2,529 | |||||||||||||||||||||||||||||||||||||||
Brian L. MacNeal | 2,222 | 3,740 | 5,962 | 22,680 | 28,642 | 48,150 | 3,740 | 51,890 | 18,150 | 70,040 | |||||||||||||||||||||||||||||||||||
Larry S. McWilliams | — | * | * | — | 28,249 | 28,249 | — | * | * | — | 31,741 | 31,741 | |||||||||||||||||||||||||||||||||
James C. Melville | 4,229 | * | * | 4,229 | 16,599 | 20,828 | 4,229 | * | * | 4,229 | 19,128 | 23,357 | |||||||||||||||||||||||||||||||||
James J. O’Connor(5) | 62,484 | * | * | 62,484 | — | 62,484 | |||||||||||||||||||||||||||||||||||||||
John J. Roberts | 910 | * | * | 910 | 23,523 | 24,433 | |||||||||||||||||||||||||||||||||||||||
John J. Roberts(4) | 23,497 | * | * | 23,497 | — | 23,497 | |||||||||||||||||||||||||||||||||||||||
Ellen R. Romano | 8,654 | — | 8,654 | 22,223 | 30,877 | 15,680 | — | 15,680 | 11,254 | 26,934 | |||||||||||||||||||||||||||||||||||
Gregory P. Spivy(6) | — | * | * | — | 4,997 | 6,576 | |||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | 1,064 | * | * | 1,064 | 1,465 | 2,529 | |||||||||||||||||||||||||||||||||||||||
Roy W. Templin | 7,114 | * | * | 7,114 | 1,558 | 8,672 | 9,736 | * | * | 9,736 | 1,465 | 11,201 | |||||||||||||||||||||||||||||||||
Cherryl T. Thomas | — | * | * | — | 7,150 | 7,150 | — | * | * | — | 9,679 | 9,679 | |||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (16 persons)(7) | 176,755 | 245,268 | 422,023 | 398,122 | 820,145 | ||||||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (15 persons)(5) | 464,040 | 86,444 | 550,484 | 323,039 | �� | 873,523 |
(1) | Directors do not receive stock option grants under the 2008 Directors Stock Unit Plan, the 2016 Directors Stock Unit Plan or as part of the compensation program for directors. |
(2) | No individual director or executive officer beneficially owns 1% of the shares of Common Stock outstanding as of March 31, |
(3) | Represents, in the case of NEOs, unvested time-based restricted stock units (“NEO RSUs”) granted to them under the 2006, 2011 and 2016 Long-Term Incentive Plan, as applicable, and, in the case of nonemployee directors, vested and unvested stock units (Director RSUs) granted to them as part of their annual retainer for Board service that are not acquirable by the director within 60 days of March 31, |
(4) |
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Elected not to stand for |
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Includes amounts for Stephen F. McNamara, VP, Controller. |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS(CONTINUED)
Directors – Aggregate Ownership
The table below sets forth, as of March 31, 2019,2021, additional detail as to each nonemployee director’s ownership and rights to ownership in the Company’s equity.
Name | Common Shares | Vested Restricted Stock Units(1) | Unvested Restricted Stock Units(2) | Phantom Stock Units(3) | Total Equity(4) | Total Value(5) | ||||||||||||||||||||||||||||||||||||||||||
market | Common Shares | Vested Restricted Stock Units(1) | Unvested Restricted Stock Units(2) | Phantom Stock Units(3) | Total Equity(4) | Total Value(5) | ||||||||||||||||||||||||||||||||||||||||||
Stan A. Askren | 4,910 | 28,818 | 1,558 | — | 35,286 | $ | 2,802,414 | 7,532 | 28,818 | 1,465 | — | 37,815 | $ | 3,406,753 | ||||||||||||||||||||||||||||||||||
Tao Huang | — | 26,097 | 1,558 | — | 27,655 | $ | 2,196,360 | — | 28,719 | 1,465 | — | 30,184 | $ | 2,719,277 | ||||||||||||||||||||||||||||||||||
Larry S. McWilliams(7) | — | 26,097 | 2,152 | — | 28,249 | $ | 2,243,536 | |||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | — | 1,064 | 1,465 | — | 2,529 | $ | 227,838 | |||||||||||||||||||||||||||||||||||||||||
Larry S. McWilliams | — | 29,718 | 2,023 | — | 31,741 | $ | 2,859,547 | |||||||||||||||||||||||||||||||||||||||||
James C. Melville | 4,229 | 15,041 | 1,558 | — | 20,828 | $ | 1,654,160 | 4,229 | 17,663 | 1,465 | — | 23,357 | $ | 2,104,232 | ||||||||||||||||||||||||||||||||||
James J. O’Connor(8) | 62,484 | — | — | — | 62,484 | $ | 4,962,479 | |||||||||||||||||||||||||||||||||||||||||
John J. Roberts | 910 | 21,965 | 1,558 | 11,773 | 24,433 | $ | 2,875,481 | (6) | ||||||||||||||||||||||||||||||||||||||||
Gregory P. Spivy(9) | — | 3,439 | 1,558 | — | 4,997 | $ | 396,862 | |||||||||||||||||||||||||||||||||||||||||
John J. Roberts(6) | 23,497 | — | — | 11,773 | 23,497 | $ | 3,177,474 | (7) | ||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | 1,064 | — | 1,465 | — | 2,529 | $ | 227,838 | |||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | 7,114 | — | 1,558 | — | 8,672 | $ | 688,730 | 9,736 | — | 1,465 | — | 11,201 | $ | 1,009,098 | ||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | — | 5,592 | 1,558 | — | 7,150 | $ | 567,853 | — | 8,214 | 1,465 | — | 9,679 | $ | 871,981 | ||||||||||||||||||||||||||||||||||
Total | 79,647 | 127,049 | 13,058 | 11,773 | 219,754 | $ | 18,387,874 | 46,058 | 114,196 | 12,278 | 11,773 | 172,532 | $ | 16,604,037 |
(1) | Under the terms of the 2008 Directors Stock Unit Plan, the Director RSUs granted to each director as part of his retainer for Board service are not acquirable by the director until (i) for those Director RSUs granted prior to June 2011, the earlier of thesix-month anniversary of the director’s separation from the Board for any reason other than a removal for cause or the date of a Change in Control Event (as defined in the 2008 Directors Stock Unit Plan); or (ii) for those Director RSUs granted during and after June 2011, on the date of the director’s separation from the Board for any reason other than a removal for cause or the date of a Change in Control Event (as defined in the 2008 Directors Stock Unit Plan). Under the terms of the 2016 Directors Stock Unit Plan, the Director RSUs granted to each director as part of his retainer for Board Service shall vest (contingent upon the Director’s continued service as of such date) on the earlier of (i) theone-year anniversary of the grant; (ii) the death or total and permanent disability of the Director; or (iii) the date of any Change in Control Event (as defined in the Plan). |
(2) | Under the terms of the 2008 Directors Stock Unit Plan, Director RSUs vest on the first anniversary of the grant date. Under the terms of the 2016 Directors Stock Unit Plan, the vested units will be acquirable by the Director, at the election of the Director: (i) at the vesting of the units at theone-year anniversary of the grant or (ii) at the time of the Director’s termination of service. All of the director RSUs listed in this column will vest on |
(3) | Phantom Stock Units awarded under the Company’s 2006 Phantom Stock Unit Plan (“Phantom Stock Unit Plan”) become payable (“Phantom Units Payment Date”) in cash on the earlier of thesix-month anniversary of the director’s separation from the Board for any reason other than a removal for cause or the date of a Change in Control Event (as defined in the Phantom Stock Unit Plan). The cash payment amount will be equal to the number of units multiplied by the closing price of the shares of Common Stock on the stock exchange on which such shares are traded on the Phantom Units Payment Date. |
(4) | Excludes Phantom Stock Units |
(5) | Represents an amount equal to the sum of the number of shares of Common Stock beneficially owned, plus the number of vested and unvested Director RSUs, plus the number of Phantom Stock Units held, as applicable, multiplied by |
(6) |
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Elected not to stand forre-election at the |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS(CONTINUED)
In accordance with our Corporate Governance Principles, eachnon-employee nonemployee director must acquire and then hold until six months following the end of his or her service, phantom units and/or shares of Common Stock equal in value to three times the director’s annual retainer at the time he or
she joined the Board. Directors endeavor to reach that
level of ownership within five years of joining the Board. With the exception of Mr. Spivy and Ms. Thomas, allAll of the current directors who have served on the Board for at least five years have achieved thethis ownership requirement. For further details in stock ownership by nonemployee directors, see pages 27 and 28 of this proxy statement. As an officer of the Company, Mr. Grizzle is not subject to the stock ownership guidelines for nonemployee directors.
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The Audit Committee selected KPMG LLP to audit our consolidated financial statements and our internal control over financial reporting for 2019.2021. In accordance with past practice, this selection will be presented to the shareholders for ratification at the Annual Meeting; however, consistent with the requirements of the Sarbanes-Oxley Act of 2002, the Audit Committee has ultimate authority in respect of the selection of our independent
registered public accounting firm. The Audit Committee may reconsider its selection if the appointment is not ratified by the shareholders.
A representative of KPMG LLP will be in attendance at the Annual Meeting to respond to appropriate questions and will be afforded the opportunity to make a statement at the meeting, if he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTEFOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP.
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The Audit Committee engaged KPMG LLP as the Company’s independent registered public accounting firm for 2018.2021. In making this selection, the Audit Committee considered KPMG LLP’s qualifications, discussed with KPMG LLP its independence, and reviewed the audit andnon-audit services provided by KPMG LLP to the Company.
Management of the Company has primary responsibility for preparing the Company’s financial statements and establishing effective internal control over financial reporting. KPMG LLP is responsible for auditing those financial statements and expressing an opinion on the conformity of the Company’s audited financial statements with accounting principles generally accepted in the United States and on the effectiveness of the Company’s internal control over financial reporting based on the criteria established in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Accordingly, the Audit Committee reviewed and discussed the audited consolidated financial statements for fiscal 20182020 with the Company’s management. The Audit Committee reviewed and discussed with management the critical accounting policies applied by the Company in the preparation of those financial statements. The Audit Committee also discussed with KPMG LLP the matters required to be discussed by applicable standards of the Public Company Accounting Oversight Board, and had the opportunity to ask KPMG LLP questions relating to such matters. The discussions included the quality, and not just the acceptability, of the accounting principles utilized, the reasonableness of significant accounting judgments, and the clarity of disclosures in the financial statements.
The Audit Committee regularly considers the independence, qualifications and performance of KPMG LLP. Such consideration includes reviewing the written disclosures and the letter received from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accountants’ communications with the Audit Committee concerning independence, and discussing with KPMG LLP their independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form10-K for the year ended December 31, 2018.2020. The Audit Committee and the Board believe that the continued retention of KPMG LLP to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its shareholders and have recommended that shareholders ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year 2019.2021.
Submitted by the Audit Committee
John J. Roberts (Chair)
Stan A. Askren
Tao Huang
Roy W. Templin
Cherryl T. Thomas
Submitted by the Audit Committee Roy W. Templin (Chair) Stan A. Askren Barbara L. Loughran Wayne R. Shurts |
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The following table presents fees for professional audit services rendered by KPMG LLP for the audit of our annual consolidated financial statements for 20182020 and 2017,2019, as well as fees billed for other services rendered by KPMG LLP. All fees in 20182020 and 20172019 werepre-approved by the Audit Committee.
(amounts in thousands) | 2018 | 2017 | 2020 | 2019 | ||||||||||||
Audit Fees(1) | $ | 3,648 | $ | 3,444 | $3,539 | $3,190 | ||||||||||
Audit Related Fees(2) | 90 | 1,823 | 70 | 103 | ||||||||||||
Audit and Audit Related Fees Subtotal | 3,738 | 5,267 | 3,609 | 3,293 | ||||||||||||
Tax Fees(3) | 2,844 | 983 | 217 | 662 | ||||||||||||
All Other Fees | — | — | ||||||||||||||
All Other Fees(4) | 11 | — | ||||||||||||||
Total Fees | $ | 6,582 | $ | 6,250 | $3,837 | $3,955 |
(1) |
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(2) |
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(3) | Tax |
(4) | Fees that do not fall within the categories set forth above. Fees in 2020 are for participation in executive education programs. |
The Audit Committee has considered whether the provision by KPMG LLP of thenon-audit services described above was allowed under Rule2-01(c)(4) of RegulationS-X and was compatible with maintaining auditor independence, and has concluded that KPMG LLP was and is independent of the Company in all respects.
Audit CommitteePre-Approval Policy
The Audit Committee adheres to a policy that requires the Audit Committee’s prior approval of any audit, audit-related andnon-audit services provided by the firm that serves as our independent registered public accounting firm. Pursuant to this policy, management cannot engage the firm for any services without the Audit Committee’spre-approval. The Audit Committee delegates to the Audit Committee Chair the authority topre-approvenon-auditpre-approve non-audit services for purposes of handling immediate needs, with a report to the full Audit Committee of such approvals at its next meeting. The policy complies with Section 10A(i) of the Exchange Act.
Auditor Tenure
Through more than 90 years of experience with Armstrong, KPMG LLP has gained institutional knowledge of and deep expertise regarding Armstrong’s global operations and businesses, accounting policies and practices, and internal control over financial reporting. We believe KPMG LLP’s aggregate fees are competitive with peer companiestheir peers because of KPMG LLP’s familiarity with our business.
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The Company is seeking your advisory vote on our executive compensation program. The Company asks that you support the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis section and the accompanying tables contained in this Proxy Statement.proxy statement. Because your vote is advisory, it will not be binding on the Board or the Company. However, the Board will review the voting results and take them into consideration when making future decisions regarding executive compensation.
The Company has in the past sought approval from shareholders regarding the incentive plans that we use to motivate, retain, and reward our executives. Those incentive plans, including the 2011 Long-Term Incentive Plan and the 2016 Long-Term Incentive Plan, make up a majority of the pay that the Company provides to our executives. Over the years, the Company has made a number of changes to its disclosures concerning executive compensation, as well as to its executive compensation programs, in response to shareholder input, including a number of enhancements mentioned in this proxy statement.
Our executive compensation program has played a material role in our ability to drive strong financial results and attract and retain a highly experienced, successful team to manage our company.
We believe that our executive compensation program which was modified by our Compensation Committee in connection with the separation, is structured appropriately to support our company and our business objectives, particularly our post-separation structure and strategies.objectives.
Our Compensation Committee has developed and maintained a compensation program that is intended to: align executive interests with shareholders’ interest; link pay and performance by placing a significant portion of compensation “at risk” based on performance againstpre-established goals; and provided a competitive level of compensation globally to enable access to high-quality executives in a competitive way.
As reflected in the total shareholder return components of our new program, if the value we deliver to our shareholders increases, so does the compensation we deliver to our executives.
We maintain strong corporate governance over our executive pay programs. We closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity, so that we may ensure that our compensation programs are within the norm of a range of market practices
Our Compensation Committee, our Chief Executive Officer, and our head of Human Resources engage in a rigorous talent review process annually to address succession and executive development for our CEO and other key executives.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTEFOR THE COMPANY’S COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION AND THE ACCOMPANYING COMPENSATION TABLES CONTAINED IN THIS PROXY STATEMENT.STATEMENT
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In this compensation discussion and analysis (“CD&A”) section, we review the objectives and elements of our executive compensation philosophy, as well as the Company’s performance and compensation decisions in 20182020 relating to our named executive officers (“NEOs”) who are:
Victor D. Grizzle President and CEO
Brian L. MacNeal Senior Vice President and CFO
Charles M. Chiappone Senior Vice President, Ceiling & Wall Solutions
Mark A. Hershey Senior Vice President, General Counsel & Business Development
Ellen R. Romano Senior Vice President, Human Resources
OUR COVID-19 RESPONSE
In response to the COVID-19 pandemic, we followed and continue to follow guidelines from health authorities throughout all of our facilities. We implemented and continue to maintain preventative measures that include working remotely, providing personal protective equipment (including masks), limiting group meetings, enhancing cleaning and sanitizing procedures, and social distancing. We developed and continue to execute contact tracing procedures when a COVID case occurs in our workplace. Employees who can meet the requirements of their role and our customer commitments by working remotely are doing so. A significant portion of our workforce began teleworking in mid-March 2020 and currently continue to telework. Early in the pandemic, we implemented an Emergency Paid Leave policy that granted additional paid time off for any employee who needed to miss work due to COVID-19-related reasons during 2020. We updated the leave policy to include pay for time required for vaccination in 2021. Through these measures and the dedicated efforts of our employees, particularly our production employees in our manufacturing facilities, we prevented service disruption and maintained high customer service levels, while keeping our employees safe and employed.
Our Board and Compensation Committee took several actions relative to compensation plans in response to the pandemic.
Our Compensation Committee effected a voluntary base salary reduction of 10% for the CEO and 5% for other NEOs, effective June 1, 2020 through December 31, 2020. Salaries were restored on January 1, 2021.
Our Board approved a revised annual operating plan in July 2020 in recognition of challenging market conditions due to COVID-19. Our Compensation Committee then revised the Annual Incentive Plan (“AIP”) design for the broad-based employee population, moving to a single metric of EBITDA at a target of $320 million. The modified AIP measuring EBITDA only was designed to provide eligible employees with an incentive opportunity for achieving results based on performance goals under the adjusted operating budget. Details on the redesigned AIP for broad-based employees found on page 44 of this proxy statement. Payout under the redesigned AIP for 2020 for the broad-based employee population under the revised plan was 64%. No change was made to the Annual Incentive Plan design for the CEO and other NEOs.
At year end, our Compensation Committee and Board considered financial performance, as well the Company’s operational performance, along with efforts to effectively lead through the pandemic, protect employees and ensure the Company’s strategic initiatives were accomplished for the year in order to position the Company for continued success in the future. Based on these and other factors, our Committee and Board exercised discretion and approved a payout of 56% for CEO and NEOs. Details on payments found on page 45 of this proxy statement.
Our Board effected a 10% reduction to non-employee director compensation, specifically to the annual cash retainer and committee chair fees for non-employee directors, effective June 1, 2020 through December 31, 2020. These reductions to non-employee director compensation were restored on January 1, 2021.
34 | AWI 2021 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
EXECUTIVE SUMMARY
Business Overview
We are a global leaderleading producer of ceiling and wall systems for use in the design, innovationconstruction and manufacturerenovation of commercial and residential buildings. We design, manufacture and sell ceiling and wall and suspension system solutions (primarilysystems, primarily systems composed of mineral fiber, fiberglass wool, metal, wood, wood fiber, glass-reinforced-gypsum and metal).felt in the Americas.
Our fiscal year 20182020 key performance highlights included:
• | Adjusted EBITDA*: Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of |
• | Consolidated Net Sales: Net sales |
• | Adjusted Free Cash Flow (“FCF”)*: |
• | Adjusted Earnings Per Share (“EPS”)*: Adjusted EPS of |
• | Total Shareholder Return (“TSR”): 13.2% for the 2018-2020 performance period. |
• | Business Development/ M&A: In July, we acquired TURF Design, Inc. Turf is a leading designer and fabricator of |
wall products based in Chicago, Illinois. In August, we acquired Moz Design, Inc., a designer and fabricator of custom architectural metal ceilings, walls, dividers, and column covers based in Oakland, California. In December, we acquired Arktura LLC. Arktura is a leading designer and fabricator of specialty architectural solutions, including metal and felt ceilings, walls and partitions, based in Los Angeles, California. |
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Please also see our Company’s Consolidated Financial Statements in our Annual Report on Form10-K filed with the SEC on February 25, 2019.23, 2021.
* | The Company uses thesenon-GAAP adjusted measures in managing the business and believes the adjustments provide meaningful comparisons of operating performance between periods. Adjusted EBITDA and Adjusted EPS exclude certain acquisition related expenses (i.e. changes in the fair value of earnouts, deferred compensation accruals, impact of |
2021 Priorities
Fiscal year 2021 key priorities include:
• | Profitable Revenue Growth: Driving revenue growth in our mineral fiber and architectural specialties segments by leveraging our existing capabilities, through the acquisition of new capabilities, and by focusing on broader ceilings and wall market opportunities |
• | EBITDA: Achieving EBITDA growth through sales gains, Architectural Specialties (“AS”) volume contribution, manufacturing productivity, and increased contributions from WAVE. |
• | Capabilities: Enhancing our manufacturing, commercial and digital capabilities and expanding our commercial sales capacity to align with broader market opportunities, through ongoing digitalization and other efficiency initiatives. |
• | Operational Efficiency: Continuing to pursue productivity, efficiency and working capital improvements in our manufacturing operations. |
• | Capital Allocation: Allocating capital to high return opportunities, continuing to invest in innovation and productivity initiatives, as well as value-creating acquisitions and business opportunities, and returning excess capital to our shareholders. |
• | Investments in Digitalization: Enabling customer productivity with digital optimization tools and solutions, including expanded connectivity and self-service options. Rapidly expanding our kanopi e-commerce platform with new tools and features to drive demand, support the customer buying journey and extend installation offerings. |
• | Healthy Spaces: Designing and launching safe and healthy solutions to make a difference in the places where people live, work, learn, heal and play. |
• | Business Development / M&A: Continuing to expand into adjacencies in our Architectural Specialties segment, and focusing on acquisition and partnership opportunities to enhance our offerings and capabilities in key product categories, including Healthy Spaces, and related design applications. |
• | Sustainability: Continuing the design implementation and communication of a comprehensive sustainability program to address the interests of our key stakeholders, namely our shareholders, employees, customers and communities, and enable our growth strategies. Our Sustainability Ambition is to lead a transformation in the design and building of spaces fit for today and for tomorrow. |
2020 Compensation Plan Design
Our Compensation Committee regularly reviews our compensation plans and, in anticipation of 2020, determined to generally continue and maintain the
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
2019 Priorities
Fiscal year 2019 key priorities include:
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2018 Compensation Highlights
During 2018, our Compensation Committee reviewed our compensation plans and generally continued the executive compensation programsdesign established in prior years. As in prior years, ourOur plans are designed to directly link compensation to meaningful improvementachievements in Company performance.
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
Named Executive Officers
Long-Term Incentive Program (“LTIP”): Our 2020 LTIP executive grants continued to be comprised of performance-based restricted stock units (“PSU”), with performance metrics based on absolute total shareholder return (“Absolute TSR”) and cumulative FCF, as well as Mineral Fiber Volume (“MFV”), a new metric for 2020. Our Compensation Committee selected Absolute TSR as a metric in our LTIP because it believes Absolute TSR most directly captures shareholder value creation, while providing senior management with the flexibility and levers needed to drive meaningful performance improvement. Our Compensation Committee selected FCF as a performance metric in the LTIP because it believes FCF growth is a strong indicator of value-creating activities over the performance period. Our Compensation Committee added MFV as a performance metric in the LTIP because of the strategic importance of volume growth in our mineral fiber business. The Company’s named2020 grants, intended to compensate for long term value creation, have a three-year performance period, challenging targets with meaningful payout upside for breakout performance, and a payout scale that includes significant performance hurdles. These plan features, and others as described in more detail in this CD&A, are all designed to strongly align the interests of management with those of shareholders, and to provide strong incentives for performance and growth consistent with our strategic plan. We did not grant time-based restricted stock units to our executive officers for the fiscal year ended December 31, 2018 were:
Victor D. Grizzle President and CEO
Brian L. MacNeal Senior Vice President and CFO
Charles M. Chiappone Senior Vice President, Ceiling & Wall Solutions(1)
Mark A. Hershey Senior Vice President, General Counsel & Chief Compliance Officer
Ellen R. Romano Senior Vice President, Human Resources
David S. Cookson Senior Vice President, Americas(1)
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Shareholder Engagement
In 2018,2020, we continued to engage with our shareholders to seek their perspectives on corporate governance, our executive compensation program, sustainability and other matters. We conducted formal outreach over the course of the year with shareholders representing approximately 26%39% of our outstanding shares at the time of outreach. These discussions were conducted by Mark Hershey, our Senior Vice President, General Counsel & Chief Compliance OfficerBusiness Development, and Ellen Romano, our Senior Vice President, Human Resources, and complemented our regular quarterly informal outreach initiatives led by our dedicated Investor Relations team. Detailed summaries of these discussions were shared with the Compensation Committee and our Nominating, Governance and Governance Committee. TheSocial Responsibility Committee, which considers and incorporates shareholder feedback in our governance processes. Our outreach discussions were productive andin 2020 focused primarily on PSU metrics, Board succession planningour sustainability initiatives, our actions in response to COVID-19, and sustainability initiatives.our LTIP performance metrics. We believe that our 20182020 nonbinding shareholder advisory vote on our executive compensation program resultapproval vote of 94% approval96% reflects strong shareholder support for the design and outcomes of our executive compensation program design.program. Shareholder communications and inquiries are shared with Company management and with the Chairs of the Board and its Committees, as appropriate. In 2020, in response to certain communications or inquiries, members of Company management and our Board engaged in discussions with shareholders to discuss topics relating to corporate governance and executive compensation.
Our Executive Compensation Philosophy, Objectives, Elements and Characteristics
Compensation Philosophy and Objectives
Our long-term success and growth depend on highly capable leaders with appropriate experience and skills to deliver our strategy in a volatile and challenging market environment. Our executive compensation program is designed to attract, motivate and retain those high-quality leaders. In developing and maintaining this program, theour Compensation Committee focuses on the following key objectives:
Aligning executive interests with shareholder interests.
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
Compensation Elements
In 2018,2020, we executed our compensation philosophy by providing compensation opportunities through a combination of: (a) fixed compensation, including (i) base salaries, (ii) benefits and (iii) limitedselect perquisites; and (b) performance-based compensation, including (i) cash incentive awards under our Annual Incentive Plan, and (ii) grants of PSUs under our 2016 Long-Term Incentive Plan (our omnibus equity award plan).
Type | Compensation Elements | Form and Objective | Further Information | Key | ||||
| Base Salary | • Delivered in cash
• Provides reasonable, market competitive fixed pay delivered to each NEO, and reflects his or her role, responsibility, individual performance and contribution to the Company
• Generally set at market median | • | • NEOs received merit increases averaging | ||||
Benefits | • Standard range of health, welfare, and retirement benefits generally similar to those provided to other salaried employees, except that executives:
• are eligible to receive enhanced Company-paid long-term disability benefits; and
• are eligible fornon-qualified retirement benefits | |||||||
• Personal financial counseling at a cost generally less than $4,500 per NEO
• Executive physicals at a cost generally less than $5,000 per NEO
• Executive long-term disability at a cost generally less than $5,000 per NEO
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| Annual Incentive Plan (AIP) | • Delivered in cash
• Provides an annual incentive opportunity for achieving financial results based on performance goals tied to our annual operating plan
• Drives selected target metric performance
• Payouts are tied to Company and individual performance, including leadership behaviors
• Target opportunity generally set at market median
| • AIP was based on revenue and EBITDA (as described on page | • | ||||
Long-Term Incentive Program (LTIP) | • Delivered in 100% PSUs for
• Drives and promotes
• Target opportunity generally set at market median
• In | • | • NEOs |
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
Compensation Characteristics
At the direction of our Compensation Committee, we subscribe to a“pay-for-performance” philosophy. Our compensation program maintains the following attributes:
• | Compensation at Risk – A significant amount of each NEO’s target total direct compensation (“TDC”), composed of base salary and short- and long-term incentive compensation, depends on the Company and the NEO achieving specific, performance-based results. Our NEOs’ short- and long-term incentive compensation is, therefore, “at risk” as the value is tied to the achievement of financial and/or other measures that the Company considers to be important drivers of shareholder value. |
• | Multiple and Appropriate Performance Metrics – We use multiple performance measures to avoid having compensation opportunities overly weighted toward the performance result of a single metric. In |
• | Emphasis on Long-Term Incentive and Annual Incentive Compensation – Short- and long-term incentive compensation comprises a significant percentage of TDC. Incentive compensation helps drive performance and aligns the interests of employees (including the NEOs) with those of shareholders. By tying a significant portion of TDC to long-term incentives over a three-year period, we promote longer-term perspectives regarding Company performance. |
• | Recoupment – We may recoup certain stock-based and cash awards distributed under our 2016 Long-Term Incentive Plan and Annual Incentive Plan, including to our NEOs, in the |
event of an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws; or certain misconduct causing significant financial or reputational harm to the Company. |
• | Prohibition on Derivative Transactions – Our insider trading policy prohibits derivative transactions in our shares of Common Stock, including trading in puts, calls, covered calls, or other derivative products involving our securities; prohibits engaging in any hedging transaction with respect to our securities; and prohibits holding company securities in a margin account or pledging our securities as collateral for a loan. |
• | Stock Ownership Guidelines – Our NEOs are subject to stock ownership guidelines, which help to promote longer-term perspectives and align interests with those of our long-term shareholders. The required ownership multiple is six times annual base pay for our CEO, and three times annual base pay for all other NEOs. As of December 2020, all of our NEOs had met their ownership requirements. |
• | Linear and Capped Incentive Compensation Payouts – |
• | Change in Control (“CIC”) |
• | No TaxGross-Ups – We do not have plans or agreements that provide taxgross-ups to our NEOs under Section 280G of the Internal Revenue Code. |
• | Holding Requirements – Post-vesting holding requirements apply for amounts payable above target |
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
The following table illustrates how our executive compensation elements align with our compensation objectives.
Executive Compensation Element | Attract Talented Employees | Align Management and Shareholder Interests | Pay for Performance | Motivate and Retain Management | ||||||||||||
Base Salary | ✓ | ✓ | ||||||||||||||
Annual Incentive | ✓ | ✓ | ||||||||||||||
| ✓ | ✓ | ||||||||||||||
Long-Term Incentive (LTIP) | ✓ | ✓ | ✓ | ✓ |
HOW WE MAKE COMPENSATION DECISIONS
Our Compensation Committee is responsible for executive compensation program design and the decision-making process relative to NEOs specifically, and broadly, as these programs apply to other senior leaders and participating employees. The Compensation Committee
solicits input from
the independent members of the Board, theour CEO, other members of management and its independent compensation consultant to assist with its responsibilities. The following summarizes the roles of each of the key participants in the executive compensation decision-making process.
Roles of Key Participants
Compensation Committee | • Sets the philosophy and principles that guide the executive compensation program;
• Oversees the design of our executive compensation program in the context of our culture, competitive practices, the legal and regulatory landscape, and governance trends;
• Reviews and approves short- and long-term incentive compensation design, including performance goals and the reward consequences for delivering above or below target performance;
• Reviews and approves corporate goals and individual objectives relevant to the compensation of the CEO, evaluates the CEO’s performance relative to those goals and objectives, and recommends CEO compensation to be ratified by the independent directors based on the evaluation; and
• Oversees the evaluation of the other executive officers and approves their compensation in collaboration with the CEO.
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Independent Members of the Board | • Participate in the performance assessment process for the CEO; and
• Review and approve decisions regarding CEO compensation, including base salary, AIP and LTIP awards for the CEO.
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Committee Consultant – Willis Towers Watson | • Provides analysis, advice and recommendations with regard to executive compensation;
• Attends Compensation Committee meetings, as requested, and communicates between meetings with the Compensation Committee Chair and other Committee members; and
• Advises the Compensation Committee on market trends, regulatory issues and developments and how they may impact our executive compensation programs.
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CEO | • Provides input to the Compensation Committee on senior executive performance and compensation |
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
Independent Compensation Consultant
In July 2018, the2020, our Compensation Committee renewed itsthe engagement of Willis Towers Watson as its independent consultant on executive compensation matters.
Willis Towers Watson also serves as our Pension Plan Actuary in Canada (an arrangement that has been in place for several years, prior to Willis Towers Watson becoming the Compensation Committee’s consultant). Typical actuary annual fees are $55,000.$40,000. We also purchase select compensation and HR survey data from the firm. Willis Towers Watson does not perform any other services for the Company. At the request of the Compensation Committee, in addition to providing general executive compensation advice, Willis Towers Watson performed the following services during 2018:relating to 2020 compensation decisions:
advised on the design considerations with respect to the 20182020 short- and long-term incentive programs to ensure appropriate linkage between short- and long-term performance and pay;
advised the Compensation Committee on the composition of a revised peer group;
advised the Compensation Committee on setting the CEO’s compensation; and
provided an update on current compensation trends, market practices and relevant executive compensation legislation.
The Compensation Committee determined the work of Willis Towers Watson did not raise any conflicts of interest in 2018.2020. In making this assessment, the Compensation Committee considered the independence factors enumerated in Rule10C-1(b) under the Exchange Act and corresponding rules of NYSE, including the fact that Willis Towers Watson provided limited other services to us, the level of fees received from us as a percentage of Willis Towers Watson’s total revenue, policies and procedures employed by Willis Towers Watson to prevent conflicts of interest, and whether the individual Willis Towers Watson advisors to the Compensation Committee own any shares of Common Stock or have any business or personal relationships with members of the Compensation Committee or our executive officers.
After considering all of the factors required byprovided in the SEC and the NYSE rules and all other factors
relevant to Willis
Towers Watson’s independence, the Compensation Committee has determined Willis Towers Watson is independent.
Use of Competitive Data
In setting NEO compensation, the Compensation Committee considers independent survey data, peer compensation data, tally sheets, wealth accumulation analyses and related benchmark information.
Annual Compensation Benchmarking
Annually, the Compensation Committee reviews all components of NEO compensation compared to the Competitive Market data (defined below). data.
In general, we target NEO pay to be at or near the 50th percentile of our defined Competitive Market, but we may deviate from this target based on an individual’s performance or internal equity with peers situated at similar levels, or to attract the required level of business knowledge and leadership needed to achieve our strategic objectives.
The principal sources of market data include the following (“Competitive Market”):
Survey data (all NEOs), including surveys by AonHewittAon and Willis Towers Watson
Peer Group data (CEO and CFO) (“Peer Group”)
Consideration of 20182020 Advisory Shareholder Vote on Executive Compensation
At our 2017 annual meeting, our shareholders expressed a preference that advisory votes on executive compensation occur every year. Accordingly, the Board implemented an annual advisory vote on executive compensation until the next required vote on the frequency of shareholder votes on the compensation of executives. That vote is scheduled to occur at the 2023 annual meeting. Our most recent advisory shareholder vote on executive compensation took place at the 20182020 annual meeting.
Our Board and Compensation Committee appreciate and value the views of our shareholders with respect to our executive compensation program. The favorable (96%) results of the 2018 favorable (94%)2020 advisory vote on executive compensation, confirmedprovided further support to the Compensation Committee that
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
shareholders agree our executive compensation programs have been effective in implementing our stated compensation philosophy and objectives in a manner consistent with shareholder preference.
The Compensation Committee recognizes executive pay practices and notions of sound governance principles continue to evolve. While no specific changes were implemented as a result of
the 2020 advisory vote, the Compensation Committee intends to continue to pay close attention to ongoingmonitor trends and invites our shareholders to communicate any concerns or opinions on executive pay directly to the Compensation Committee or the Board. Please refer to “COMMUNICATION WITH THE BOARD” on page 1013 for further information about communication with the Compensation Committee of the Board.
Peer Group
The Compensation Committee uses compensation data compiled from a group of peer companies based on a number ofpre-established criteria, including business model comparability, company size measured by both revenue (approximatelyone-half to two times the Company’s annual revenue) and market capitalization, globalgeographic presence and investorinvestment capital.
In 2018,2020, our Compensation Committee again reviewed our compensation Peer Group and removed Ply Gem, which have merged with NCI Building Systems, Inc. In addition, theGroup. The Committee removed AO Smith Corp and Louisiana-Pacific CorpOMNOVA Solutions Inc., because their revenue exceeded our range of 1/2 - 2.0x,they were acquired in early 2020 by Synthomer USA, LLC, and replaced them with Eagle Materials and NCI Building Systems.Patrick Industries, Inc.
Our current compensation Peer Group consists of the following 1718 manufacturing companies:
Allegion PLC | Herman Miller Inc. | PH Glatfelter Inc. | ||
Apogee Enterprises, | Interface, Inc. | Quanex Building Products Corp | ||
Eagle Materials Inc. | Knoll, Inc. | Simpson Manufacturing Co., | ||
Ferro Corporation | Kraton Performance Polymers Inc. | Trex Company, Inc. | ||
| Masonite International Corporation | |||
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Tally Sheets and Wealth Accumulation Analyses
The Compensation Committee uses tally sheets and wealth accumulation analyses when evaluating compensation-related decisions for each NEO.
Tally sheets provide historichistorical information on each executive’s equity andnon-equity compensation, and other compensation such as potential payments upon termination of employment.
Wealth accumulation analysis assesses the total Company-specific wealth that could be earned by each NEO given certain stock price assumptions.
Compensation Mix
To facilitate the link between NEO pay and Company performance, a significant amount of TDC is performance-based and “at risk.”
In 2018, 83%2020, 84% of our CEO’s target TDC, and 62%65% of the average target TDC of our other NEOs, was performance-basedvariable and “at risk.” The following chart shows the 20182020 compensation mix, consisting of base salary, performance-based AIP, and PSUs as the LTILTIP grants.
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
20182020 COMPENSATION DESIGN AND OUTCOMES
Base Salary
In 2018,2020, the Compensation Committee reviewed the base salaries of our NEOs afterNEOs. After consideration of the competitiveness of each NEO’s base salary compared to the Competitive Market.Market, the Compensation Committee increased base salaries for each of our NEOs. Pay increases were approved during the Compensation Committee meeting held in February 2020 effective April 1, 2018.2020.
In response to the impact of the COVID-19 pandemic, our Compensation Committee approved a voluntary reduction of 10% in the base salary for Mr. Grizzle and a voluntary reduction of 5% in the base salaries for all other NEOs, effective for the period from June 1, 2020 through December 31, 2020. These base salary reductions were reinstated effective January 1, 2021.
The table below represents the base salary raterates as of December 31.January 1, 2021 when the salary reductions were reinstated. This information differs from the Summary Compensation Table (“SCT”), which reflects the total base salary received for the year.
Name | 2017 Salary $ | 2018 Salary $ | Change in Base Salary | 2019 Salary $ | 2020 Salary $ | Change in Base Salary | ||||||||||||||||||
Victor D. Grizzle | 725,000 | 750,000 | 3.4% | |||||||||||||||||||||
Victor D. Grizzle(1) | 800,000 | 900,000 | 12.5% | |||||||||||||||||||||
Brian L. MacNeal | 411,750 | 425,000 | 3.2% | 446,250 | 457,410 | 2.5% | ||||||||||||||||||
Charles M. Chiappone(1) | 370,980 | 420,000 | 13.0% | |||||||||||||||||||||
Charles M. Chiappone | 441,000 | 452,030 | 2.5% | |||||||||||||||||||||
Mark A. Hershey | 405,000 | 419,000 | 3.5% | 435,950 | 449,030 | 3.0% | ||||||||||||||||||
Ellen R. Romano | 312,000 | 320,000 | 2.5% | 328,430 | 338,280 | 3.0% |
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Annual Incentive Plan Awards
AIP awards provide an annual incentive opportunity for achieving financial results based on short-term performance goals tied to the Company’s annual operating plan.
Each NEO’s target AIP opportunity (expressed as a percent of base salary) is based on the NEO’s role, responsibility and alignment with similar internal positions and the external Competitive Market. Actual payout varies based upon actual business performance relative to performance target, as well as individual performance.
For 2018,2020, AIP awards were determined based on the following formula, measures and weightings all subject to the approval of our Compensation Committee.
20182020 AIP Design
Base Salary Earnings $
| x | Target AIP Opportunity % | = | Target AIP $ | x | Company Performance % | x | Individual Performance % | = | Annual AIP Payout $ |
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
20182020 Target AIP Opportunity
20182020 target AIP opportunities (expressed as a percentage of actual base salary earnings) for NEOs are set forth in the table below. WithThe target AIP opportunity percentages are the exception of Mr. Chiappone, who was promoted to his new role effective April 1, 2018, there were no changes to these target percentages from 2017.same as for 2019.
Name | Target AIP % Opportunity | Target AIP $ | ||||||
Victor D. Grizzle | 100% | 743,750 | ||||||
Brian L. MacNeal | 60% | 253,012 | ||||||
Charles M. Chiappone(1) | 50% / 60% | 235,373 | ||||||
Mark A. Hershey | 60% | 249,381 | ||||||
Ellen R. Romano | 55% | 175,160 | ||||||
David S. Cookson(2) | 60% | 93,756 |
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20182020 AIP Performance Metrics
TheOur Compensation Committee again selected revenue and EBITDA as our 2018 AIP performance metrics in order to create strong alignment with shareholders and reflect key measures of value creation. Revenue iswas weighted 25%30% and EBITDA was weighted 75%70%.
These measuresperformance metrics align to key elements of our operating plan and financial goals, including enhanced revenue growth, manufacturing productivity and competitive sales, general and administrative expense levels, and they are strong indicators of our overall operating performance.
For purposes of the 20182020 AIP, the Compensation Committee defined: (i) revenue to be gross sales
COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
minus returns, discounts and allowances andminus intercompany sales, and (ii) EBITDA to be operating incomeplus depreciation and amortizationplusnon-cash pension impact, subject to certain exceptions. The definitions of these metrics did not change from the prior year.
The 2018 In early 2020 the Compensation Committee established an AIP revenue target of $953$1,118 million and an AIP EBITDA target of $357$440 million, both of which were both directly tied to the annual operating plan.plan previously approved by our Board. These targets applied to all NEOs and were approved prior to the COVID-19 pandemic.
OurIn connection with those targets, the Compensation Committee also established the following performance ranges and associated payout ranges for the 20182020 AIP. The Company’s performance was converted to a corresponding payout factor on a straight linestraight-line basis between Thresholdthreshold and Targettarget and between Targettarget and Maximum.maximum. AIP payout factorspayouts are capped at 200%. These performance ranges and threshold applied to all of our NEOs and were approved prior to the COVID-19 pandemic.
Target $ (in millions) | Performance as % of Target | Payout | ||||||||||||||||||||||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||||
Revenue | 912.0 | 953.0 | 1,000.0 | 96 | % | 100 | % | 105 | % | 50 | % | 100 | % | 200 | % | |||||||||||||||||||||
EBITDA | 322.3 | 357.0 | 392.0 | 90 | % | 100 | % | 110 | % | 50 | % | 100 | % | 200 | % |
| Target $ (in millions) | Performance as % of Target | Payout | |||||||||||||||||||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||
Revenue (weighted 30%) | 1,061.0 | 1,118.0 | 1,154.0 | 95 | % | 100 | % | 103 | % | 50 | % | 100 | % | 200 | % | |||||||||||||||||||||
EBITDA (weighted 70%) | 408.0 | 440.0 | 460.0 | 93 | % | 100 | % | 105 | % | 50 | % | 100 | % | 200 | % |
In July 2020, our Board of Directors approved a revised annual operating plan. The Compensation Committee then revised AIP design for our eligible broad-based employee population moving to a single metric of EBITDA at a target of $320M; performance range and associated payout range for the revised 2020 AIP is below. The metric was solely EBITDA, together with an incentive relating to successful merger and acquisition activity. Based on final company results of $325M EBITDA, the resulting payout factor for the broad-based employee population was 56%. Together with the incentive for successful merger and acquisition activity, the resulting final payout factor was 64% for the broad-based employee population. Our NEOs and senior leadership team were excluded from eligibility under the redesigned AIP. The Compensation Committee exercised discretion at year-end for our NEOs based on overall company performance and other factors.
| Target $ (in millions) | Performance as % of Target | Payout | |||||||||||||||||||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||||||||||||||
EBITDA (weighted 100%) | 304.0 | 320.0 | 336.0 | 95 | % | 100 | % | 105 | % | 30 | % | 50 | % | 70 | % |
44 | AWI 2021 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
20182020 Performance and Payout Factors
Due primarily to the significant decrease in net sales resulting from delays in construction and renovation activity impacting both of our segments during the second through fourth quarters of 2020 as a result of the COVID-19 pandemic, actual 2020 revenue and EBITDA performances were below payout thresholds initially established for AIP. In determining to exercise its discretion and the level of AIP payouts to be made to NEOs, the Compensation Committee considered financial performance under the revised plan, as well the Company’s operational performance, along with efforts to effectively lead through the pandemic, protect employees and ensure the Company’s strategic initiatives were accomplished for the year in order to position the Company for continued success in the future.
More specifically the Compensation Committee considered among other factors, the speed and scope of our response to the pandemic, the work and results on retention and care of our employees, the nature and extent of cost saving initiatives, the breadth, complexity and impact of our business development and M&A activities, and the design, advancement and execution of key strategic themes and initiatives, including the following notable accomplishments:
• | The introduction of a new service, ProjectWorksTM, revolutionizing the way contractors estimate ceilings system costs; |
In consideration of these and other accomplishments, our Compensation Committee exercised its discretion to approve an AIP payout factor of 56% for our NEOs for 2020, which payout factor aligned to the payout determined for our broad-based employee population for EBITDA performance under the redesigned AIP.
2020 Individual Performance
The Board and the Compensation Committee also considered individual performance when finalizing AIP awards for the CEO and other NEOs and approved an individual increased performance adjustmentNEOs. The Compensation Committee modified the AIP payout for Mr. ChiapponeMacNeal by applying an 85% individual performance modifier based on an assessment of 15%. In 2018, Mr. Chiappone developed, articulated and executed a clear strategy for achieving 9% year-over-year revenue growth, industry-leading price realization in both mineral fiber and WAVE, and completing the Plasterform and Steel Ceilings Inc. acquisitions. No other NEO had their AIP adjusted due to performance.
2018 Performance and Payout Factors
Our 2018 revenueindividual performance, was 103% of plan resulting in a 153% payout, and our EBITDA performance represented 99% of plan with a corresponding 93% payout. These results yielded a combinedan adjusted payout factor of 108% for the NEOs.48%. Performance modifiers were not applied to any other NEO.
Further details are shown in the table below:
Measure | 2018 Target $M | 2018 Actual $M* | Performance % | Payout % | ||||||||||||
Revenue | 953.0 | 978.0 | 103% | 153% | ||||||||||||
EBITDA | 357.0 | 352.0 | 99% | 93% |
20182020 Final AIP Awards
The Compensation Committee determined the final 20182020 AIP payouts by multiplying each NEO’s target AIP amountopportunity by the final weighted payout factors as outlined below.
Name | Target AIP $ | Payout Factor | 2018 Final AIP Award $ | |||||||||
Victor D. Grizzle | 743,750 | 108 | % | 803,250 | ||||||||
Brian L. MacNeal | 253,012 | 108 | % | 273,260 | ||||||||
Charles M. Chiappone(1) | 235,373 | 108 | % | 292,340 | ||||||||
Mark A. Hershey | 249,381 | 108 | % | 269,340 | ||||||||
Ellen R. Romano | 175,160 | 108 | % | 189,180 | ||||||||
David S. Cookson | 93,756 | 108 | % | 101,260 |
Name | Target AIP $ | Payout Factor | 2020 Final AIP Award $ | |||||||||
Victor D. Grizzle | 822,500 | 56 | % | 460,600 | ||||||||
Brian L. MacNeal(1) | 264,767 | 56 | % | 126,030 | ||||||||
Charles M. Chiappone | 261,653 | 56 | % | 146,530 | ||||||||
Mark A. Hershey | 259,598 | 56 | % | 145,380 | ||||||||
Ellen R. Romano | 179,273 | 56 | % | 100,400 |
(1) | The final AIP award for Mr. |
Long-Term Incentive Program Awards 2020-2022 Performance Period
The goal of our LTIP is to provide equity-based long-term incentive awards that link management interests to shareholder returns and focus management on our long-term performance.
AWI 2021 Proxy Statement | 45 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
In determining the LTIP award opportunity for the CEO and other NEOs, our Board and Compensation Committee consider a number of factors, including
the Competitive Market, internal equity and cost (dilution and accounting cost), as well as tally sheet and wealth accumulation analyses.
COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
LTIP awards for a given year are typically made two business days following the release of our financial results for our prior fiscal year. This allows sufficient time forgovernance practice is designed to allow the marketequity markets to absorb the announcement of earnings and current year performance guidance.
The 20182020 LTIP grants for the 2020 – 2022 performance period consisted of awards differentiated between two leadership tiers. The Compensation Committee granted PSUs to the most senior executive tier, namely Messrs. Grizzle, MacNeal and Chiappone to vest based on achievement of Absolute TSR (75%(60% of the award), FCF (30% of the award) and FCF (25%MFV (10% of the award). The Compensation Committee granted PSUs to Mr. Hershey and Ms. Romano to vest based on achievement of Absolute TSR (25% of the award) and FCF (75% of the award), consistent with Tier II awards.
Messrs. Grizzle, MacNeal and Chiappone have post-vesting holding requirements for amounts payable above target in our 2018for the 2020 performance-based equity grants. If earned, the shares earned above target shares must be held for one year following the Vesting Date.vesting date.
2018 LTI2020 LTIP Performance Metrics and Weighting
The number of shares eligible to vest under the 2018 LTI2020 LTIP awards is based on the achievement of applicable performance targets relative to Absolute TSR, FCF and FCFMFV targets during the performance period (January 1, 20182020 to December 31, 2020)2022). The grants, intended to compensate for long termbased on long-term value creation, have a three-year performance period to allow a reasonable timeframe for value creation, challenging targets with substantial payout upside for breakout performance and a payout scale that defines meaningful performance hurdles. The PSUs for Messrs. Grizzle, MacNeal and Chiappone (Tier I)the NEOs can vest 25%53% of target at threshold performance to 275% of target at maximum performance and the PSUs for Mr. Hershey and Ms. Romano (Tier II) can vest at 50% of target at threshold performance to 225%270% of target at maximum performance. There is no payout below threshold performance.
46 | AWI 2021 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Absolute TSR tracks the appreciation in share price of the Company’s Common Stock, including dividends, and is annualized for the performance period. The ending share price for the Absolute TSR calculation will be based on the volume-weighted, average closing price of the Company stock for the highest consecutive 30 trading days in the60-trading-day-period beginning with and
immediately following January 2, 2021.3, 2023. The starting price was based on the volume-weighted average of the highest consecutive 30 trading days in the subsequent60-trading-day-period closing price of the Company stock for the highest 30 trading days immediately following January 2, 20182020 – resulting in $62.18$103.96 per share.
Incentive Payout | ||||||||||||||||||||||||||||
Performance to TSR Target | Annualized TSR Target | Ending Share Price | Tier I (75% weighting) | Tier II (25% weighting) | Annualized TSR Target | Ending Share Price | Incentive Payout | |||||||||||||||||||||
50% | 5.25% | $ | 72.50 | 0% | 50% | |||||||||||||||||||||||
60% | 6.0% | $ | 123.82 | 50% | ||||||||||||||||||||||||
75% | 7.9% | $ | 78.11 | 25% | 75% | 7.5% | $ | 129.05 | 75% | |||||||||||||||||||
83% | 8.7% | $ | 79.86 | 50% | 83% | 8.3% | $ | 132.05 | 83% | |||||||||||||||||||
100% | 10.5% | $ | 83.90 | 100% | 100% | 10.0% | $ | 138.37 | 100% | |||||||||||||||||||
167% | 17.5% | $100.87 | 200% | 200% | 16.7% | $ | 165.23 | 200% | ||||||||||||||||||||
250% | 26.3% | $ | 125.27 | 300% | 300% | |||||||||||||||||||||||
200% | 25.0% | $ | 179.64 | 300% |
Cumulative FCF is defined as cash flow from operations less cash used in investing activities.activities, adjusted for the impact of cash used or proceeds received for acquisitions and divestitures and environmental insurance recoveries and expenses, and the cash impact of certain other non-recurring extraordinary items outside of the normal course of our business.
Incentive Payout | ||||||||||||||||||||
Performance to FCF Target | FCF $(M) | Tier I (25% weighting) | Tier II (75% weighting) | FCF $(M) | Incentive Payout | |||||||||||||||
80% | $ | 546 | 25% | 50% | $ 739 | 50% | ||||||||||||||
100% | $ | 682 | 100% | 100% | $ 924 | 100% | ||||||||||||||
113% | $ | 771 | 150% | 150% | $1,044 | 150% | ||||||||||||||
118% | $ | 805 | 175% | 175% | $1,090 | 175% | ||||||||||||||
125% | $ | 853 | 200% | 200% | $1,155 | 200% |
MFV is defined as total square feet of Mineral Fiber products sold during the plan period. The Miner Fiber definition is consistent with that used for the external reporting segment.
MFV (Million Sq Ft in 2020) | CAGR | Incentive Payout | ||||||
878 | -0.5% | 80% | ||||||
904 | 0.5% | 100% | ||||||
946 | 2.0% | 200% | ||||||
960 | 2.5% | 300% |
20182020 Target LTILTIP
The Compensation Committee annually determines the LTILTIP target opportunity (expressed as a percent of base salary) based on each NEO’s role, responsibility, alignment with similar positions internally and the external Competitive Market, as well as a review of tally sheets and wealth accumulation analyses.
After a review of the Competitive Market data provided by Willis Towers Watson during the Compensation Committee meeting held in February 2020, the Compensation Committee increased Mr. Grizzle’s target LTIP opportunity in 20182020 to $3,100,000.$3,700,000. This adjustment to Mr. Grizzle’s LTIP valueopportunity positioned him at market median TDC. Mr. MacNeal’sChiappone’s LTIP opportunity increased to 110%130% from 100%110% of base salary to align to market median TDC. Mr. Chiappone’sHershey’s LTIP opportunity increased to 100%140% from 75%125% of base salary uponin recognition of his promotion.expanded role, as the leader of our Business Development function. No other LTIP targets were adjusted in 2018.2020.
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COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
The respective target percentages for annual LTIP grants to our NEOs in 20182020 and the resulting Grant Date Fair Valuegrant date fair value are set forth in the table below.
Name | 2018 LTIP Target as % of Base Salary | 2018 LTI Annual Target Value ($)(1) | 2020 LTIP Target as % of Base Salary | 2020 LTIP Annual Target Value ($)(1) | ||||||||||||
Victor D. Grizzle | 413% | 3,100,000 | 411% | 3,700,000 | ||||||||||||
Brian L. MacNeal | 110% | 452,900 | 120% | 535,500 | ||||||||||||
Charles M. Chiappone | 100% | 370,900 | 130% | 573,300 | ||||||||||||
Mark A. Hershey | 125% | 506,300 | 140% | 610,300 | ||||||||||||
Ellen R. Romano | 100% | 312,600 | 100% | 328,400 | ||||||||||||
David S. Cookson(2) | 75% | 278,500 |
(1) | Amounts represent the |
|
Payout of 2016-20182018-2020 Performance Restricted Stock Units
The performance for PSUs awarded in 20162018 for the 20162018 – 20182020 performance period was determined on April 1, 2019.5, 2021. The awards were based on Absolute TSR and FCF over the performance period. The Compensation Committee granted PSUs to the most senior executive tier, namely Messrs. Grizzle, MacNeal Chiappone and CooksonChiappone to vest based on achievement of Absolute TSR (75% of the award) and FCF (25% of the award). The Compensation Committee granted PSUs to Mr. Hershey and Ms. Romano to vest based on achievement of Absolute TSR (25% of the award) and FCF (75% of the award).
Based upon performance during the measurement period, the Absolute TSR achievement for the 2016-20182018-2020 period was 23.57%13.2%, with a calculated price of $73.94.$90.21. This exceeded our 12%10.5% annualized TSR target resulting in a 236%139% payout. The starting share price for the TSR PSUs was $41.31.$62.18. The adjusted cumulative FCF was $507M$692M for the performance period, exceedingbelow our target of $403M.$700.6M. The Committee approved a payout factor of 175%95% for Messrs. Grizzle, MacNeal and Chiappone and 97% for Mr. Hershey and Ms. Romano. The difference in FCF payout factors resulted in the performance scale established in 2018. Messrs. Grizzle, MacNeal and Chiappone had a FCF scale with threshold at 25% and maximum at 200% and the threshold for Mr. Hershey and Ms. Romano’s scale was 50% with maximum at 200%. Based on the metrics and the certified Absolute TSR and FCF results, the PSUs for Messrs. Grizzle, MacNeal Chiappone and CooksonChiappone vested at 221%128% of target and the PSUs for
for Mr. Hershey and Ms. Romano vested at 190%108% of target. For Messrs. Grizzle, MacNeal and Chiappone, PSUs distributed in excess of target must be held for one year following the vesting date.
Name | 2016 PSU Shares Granted (#) | 2016 PSU Payout Factor | 2016 PSU (#) | 2018 PSU Shares Granted (#) | 2018 PSU Payout Factor | 2018 PSU Final Payout (#) | ||||||||||||||||||
Victor D. Grizzle | 125,779 | 221 | % | 277,658 | 52,454 | 128 | % | 67,142 | ||||||||||||||||
Brian L. MacNeal | 26,953 | 221 | % | 59,500 | 7,664 | 128 | % | 9,811 | ||||||||||||||||
Charles M. Chiappone | 19,140 | 221 | % | 42,252 | 6,276 | 128 | % | 8,034 | ||||||||||||||||
Mark A. Hershey | 12,130 | 190 | % | 23,078 | 8,567 | 108 | % | 9,211 | ||||||||||||||||
Ellen R. Romano | 7,308 | 190 | % | 13,904 | 5,290 | 108 | % | 5,687 | ||||||||||||||||
David S. Cookson | 15,902 | 221 | % | 35,104 |
20182020 Total Direct Compensation
The table below summarizes TDC paid or awarded to our current NEOs during 2018.2020. This table is not intended to be a substitute for the SCT or Grants of Plan-Based Awards Table (‘‘GPBAT’’). Base salary reflects the total salary paid for 2018.2020 reflective of the April 2020 salary increase and the subsequent reductions related to COVID-19. AIP awards and LTIP awards for 20182020 are reflected in the SCT and GPBAT. LTIP awards are shown at target and represent an incentive for future performance, not current cash compensation, and are “at risk” of forfeiture.
Name | 2018 Salary $ | 2018 Final AIP $ | 2018 LTIP $(1) | TDC $ | 2020 Salary | 2020 Final AIP $ | 2020 LTIP $ (1) | TDC $ | ||||||||||||||||||||||||
Victor D. Grizzle | 743,750 | 803,250 | 3,100,000 | 4,647,000 | 822,500 | 460,600 | 3,700,000 | 4,983,100 | ||||||||||||||||||||||||
Brian L. MacNeal | 421,687 | 273,260 | 452,900 | 1,147,847 | 441,279 | 126,030 | 535,500 | 1,102,809 | ||||||||||||||||||||||||
Charles M. Chiappone | 407,745 | 292,340 | 370,900 | 1,070,985 | 436,088 | 146,530 | 573,300 | 1,155,918 | ||||||||||||||||||||||||
Mark A. Hershey | 415,635 | 269,340 | 506,300 | 1,191,275 | 432,663 | 145,380 | 610,300 | 1,188,343 | ||||||||||||||||||||||||
Ellen R. Romano | 318,472 | 189,180 | 312,600 | 820,252 | 325,951 | 100,400 | 328,400 | 754,751 |
(1) | Amounts represent the |
2018 Additional Compensation
The Compensation committee approved aone-time special cash bonus of $280,000 on October 25, 2018 for Mr. Hershey. The bonus was paid to Mr. Hershey in recognition of his leadership and performance in connection with certain significant projects, including the pending sale of our International Businesses to Knauf, as well as environmental litigation matters. The special bonus is separate from our AIP.
COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
20192021 Compensation Program Design
For 2019,2021, the Compensation Committee reviewed the design of our executive compensation program and decided to maintain the 20182020 metrics for both our AIP and our LTIP. LTIP, namely Absolute TSR, FCF and MFV.
48 | AWI 2021 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
ADDITIONAL INFORMATION REGARDING OUR COMPENSATION PROGRAMS
Qualified andNon-Qualified Defined Benefit Pension Plans
Mr. Cookson and Ms. Romano werewas the only NEOsNEO who participated in the Company’s qualified defined benefit pension plan, the Retirement Income Plan (“RIP”), which was closed to newly hired salaried employees after January 1, 2005. Pension benefits were frozen for all salaried employees on December 31, 2017.
Anon-qualified defined benefit pension plan, the Retirement Benefit Equity Plan (“RBEP”), pays benefits that cannot be paid under the RIP due to statutory limits. This plan was also closed to newly hired salaried employees after January 1, 2005 and pension benefits were frozen on December 31, 2017.
Qualified Defined Contribution Savings Plan andNon-qualified Deferred Compensation Plan
The Company maintains a 401(k) plan. For salaried employees, we provide a 401(k) match of 100% on the first 4% of employee contributions and a 50% match on the next 4% of employee contributions for a maximum company match of 6%. All NEOs participateparticipated in this program.program in 2020.
The Company offers an unfunded, nonqualified deferred compensation plan, the Armstrong Nonqualified Deferred Compensation Plan, to restore Company contributions that would be lost due to Internal Revenue Code limits on compensation that can be taken into account under the Company’stax-qualified 401(k) plan and to allow participants to voluntarily elect to defer base salary and AIP until a future date.
Participants in the Armstrong Nonqualified Deferred Compensation Plan (“NQDCCP”) receive a Company match identical to the 401(k) Company match on compensation in excess of the Internal Revenue Code limits, up to a maximum contribution of 6% of eligible earnings. All NEOs are eligible to participateparticipated in this program.program in 2020.
SeparationSeverance Arrangements
Each NEO has a separationseverance agreement with the Company. These agreements are designed to:
assure continuity of executive management during the evaluation and execution of any transaction that may result in loss of or material changes to employment;
ensure executive management is able to objectively evaluate any transaction and act in the best interests of shareholders during the design and execution of such a transaction; and
define transition support and terms in the event ofnot-for-cause termination.
Payments upon Termination of Employment
Our separationseverance arrangements provide for executive entitlement to certain cash severance benefits if the executive’s employment is terminated by the Company without Cause or by the executive for Good Reason (as such terms are defined in the separationseverance agreement). Under the separationseverance agreements that apply in absence of a change in control the severance is equal to (i) 1.5 times (two times in the case of Mr. Grizzle) the executive’s then-current annual base salary plus target annual incentive under the AIP program, payable in a lump sum, and (ii) apro-rated annual incentive bonus based on actual performance for the year of termination, payable at the time that bonuses are paid to employees of the Company generally.
Under each executive’s separationseverance agreement, the executive is entitled to receive severance payments upon involuntary termination without Cause or termination for Good Reason within two years following a change in control (“CIC”), or within six months preceding a CIC if the termination is in connection with a potential CIC. In a CIC the severance is equal to (i) two times (2.5 times in the case of Mr. Grizzle) the executive’s then-current annual base salary plus target annual incentive under the AIP program, payable in a lump sum, and (ii) apro-rated annual incentive bonus based on actual performance for the year of termination, payable at the time that bonuses are paid to employees of the Company generally.
|
COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
None of the separationseverance agreements provide for taxgross-ups under Sections 280G and 4999 of the Internal Revenue Code. For more information regarding our NEO separation arrangements, please refer to the “Potential Payments upon Termination ofor Change in Control” section on page 50.62.
Stock Ownership Guidelines
The Compensation Committee maintains stock ownership guidelines for our NEOs to ensure that our NEOs have significant long-term value creation tied to stock price appreciation. Ownership requirements and progress toward their achievement are reviewed annually as part of the compensation planning process. A significant percentage of each NEO’s compensation is directly linked to our stock price appreciation. The guidelines require retention of 100% of net shares acquired upon any vesting or exercise of equity awards until the ownership guidelines are met.
The stock ownership guidelines for our NEOs are calculated as a fixed number of shares using a required ownership multiple, the executive’s annualized base salary as of a certain date, and the stock price as of a fixed date. The required ownership multiple is six times annual base pay for our CEO and is three times annual base pay for our other NEOs.
For purposes of the stock ownership guidelines, we include direct ownership of shares and stock units held inunder employee plans. Stock options are included to the extent they are“in-the-money.” PSUs are not included in determining whether an executive has achieved the ownership levels.
The stock ownership guidelines require achievement of the ownership multiple within five years from date of hire or promotion into the role for the NEOs.
The Compensation Committee last reviewed the NEOs’ progress toward meeting the stock ownership requirements in December 2018.2020. As of the date of the review, Messrs. Grizzle, Hershey and Ms. Romanoall of our NEOs had met their ownership requirements.
Restrictive Covenants
Each NEO has a restrictive covenants agreement as part of their separationseverance agreement. The agreements require the following:
For 12 months following a termination the NEO shall not, directly for the NEO or any third party, become engaged in any business or activity which is directly in competition with any services or products sold by, or any business or activity engaged in by, the Company or any of its affiliatesaffiliates;
50 | AWI 2021 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
TheFor 24 months following a termination, the NEO shall not, directly for the NEO or any third party, solicit, induce, recruit or cause another person in the employment of the Company or any of its affiliates to terminate such employee’s employment for the purposes of joining, associating, or becoming employed with any business or activity which is in competition with any services or products sold, or any business or activity engaged in, by the Company or any of its affiliates.
Recoupment Policy
In 2019, our Compensation Committee amendedUnder our 2016 Long-Term Incentive Plan, to expand the scope and coverage or its recoupment provision. Under the amended plan, the Compensation Committee has the ability to exercise discretion and take action to recoup settled or unsettled stock-based and cash awards from a plan participant in the following events:
an accounting restatement of the Company’s financial statements that is required due to material noncompliance with any financial reporting requirements under the securities laws and GAAP;
the participant is involved in (i) the commission of a felony or a crime involving moral turpitude; (ii) fraud, dishonesty, misrepresentation, theft or misappropriation of funds; (iii) a violation of our
COMPENSATION DISCUSSION AND ANALYSIS(CONTINUED)
during the participant’s employment or theone-year period thereafter, the participant engages in business that is competitive with the Company or substantially injurious to the Company’s business interests;
during the participant’s employment or thetwo-year period thereafter, the participant solicits the Company’s customers or employees; or
All of our NEOs are subject to the above recoupment terms of the plan. Prohibition on Hedging and Derivative Trading All members of our Board and senior management, including our NEOs and certain other employees, are required to clear any transaction involving Company securities with our General Counsel’s office prior to entering into such transaction. By policy, we prohibit derivative transactions in our Company securities, including: Trading in puts, calls, covered calls, or other derivative products involving Company securities. Engaging in any hedging transaction with respect to Company securities. Holding Company securities in a margin account or pledging Company securities as collateral for a loan. We permit senior management to use stock trading plans that comply with Rule10b5-1 of the
Exchange Act. All such plans are subject to ourpre-approval, and the ability to enter into such plans remains subject to policy prohibitions on trading while in possession of materialnon-public information.
Assessment and Management of Risk
We monitor the risks associated with our compensation program on an ongoing basis. In addition, we are committed to performing formal assessments on a periodic basis. At the conclusion of the most recent analysis (conducted in 2018)2020) of our compensation programs and associated risks, it was the assessment of the Compensation Committee that our compensation programs are structured and operated with an appropriate balance of risk and reward and, by their design, do not encourage executives to take unnecessary, excessive, or inappropriate risks and do not create risks reasonably likely to have a material adverse effect on the Company. Accordingly, there were no material adjustments made to our compensation policies and practices. We will continue to monitor our compensation policies and practices to
determine whether our risk management objectives
AWI 2021 Proxy Statement | 51 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
are being met with respect to incentivizing the Company’s employees.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount a public company may deduct for compensation paid to certain of the Company’s highest paid officers.
For 2018,2020, the executive officers to whom the Section 162(m) deduction limit applies included the Company’s Chief Executive Officer and Chief
Financial Officer, the next three most highly compensated executive officers, and any persons who were such “covered employee”.employees” in 2017 or a later year.
The Compensation Committee considers both tax and accounting treatment in establishing our compensation program. The Compensation Committee retains discretion to authorize compensation arrangements that are not fully tax deductible as it deems appropriate.
AWI |
The Management Development and Compensation Committee (MDCC) of our Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with our management. Based on this review and discussion, the MDCC recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by the Management Development and Compensation Committee
Stan A. Askren, Chair
Barbara L. Loughran
James C. Melville
Gregory P. SpivyWayne R. Shurts
Cherryl T. Thomas
This report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor incorporated by reference into any future SEC filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates it by reference therein.
AWI | |
The table below sets forth the total compensation for our NEOs during fiscal 2018, 20172020, 2019 and 2016.2018.
Name and Principal Position | Year | Salary ($) | Bonus(3) ($) | Stock Awards(1) ($) | Option Awards(1) ($) | Non-Equity Incentive Plan ($) | Change in Pension Value & Nonqualified Deferred Compensation Earnings(4) ($) | All Other Compensation(5) ($) | Total ($) | |||||||||||||||||||||||||||
Victor D. Grizzle | 2018 | 743,750 | — | 3,100,000 | — | 803,250 | — | 83,319 | 4,730,319 | |||||||||||||||||||||||||||
President and Chief | 2017 | 718,750 | — | 2,300,000 | — | 567,820 | — | 92,921 | 3,679,491 | |||||||||||||||||||||||||||
Executive Officer | 2016 | 650,050 | — | 5,250,000 | — | 754,930 | — | 68,977 | 6,723,957 | |||||||||||||||||||||||||||
Brian L. MacNeal | 2018 | 421,688 | — | 452,900 | — | 273,260 | — | 31,523 | 1,179,371 | |||||||||||||||||||||||||||
Senior Vice | 2017 | 402,563 | — | 375,000 | — | 190,820 | — | 32,642 | 1,001,025 | |||||||||||||||||||||||||||
President and Chief Financial Officer | 2016 | 347,875 | — | 1,125,000 | — | 238,400 | — | 21,339 | 1,732,614 | |||||||||||||||||||||||||||
Charles M. Chiappone | 2018 | 407,745 | — | 370,900 | — | 292,340 | — | 18,500 | 1,089,485 | |||||||||||||||||||||||||||
Senior Vice President, | 2017 | 366,985 | — | 266,300 | — | 144,960 | — | 23,122 | 801,367 | |||||||||||||||||||||||||||
Ceiling Solutions | ||||||||||||||||||||||||||||||||||||
Mark A. Hershey | 2018 | 415,635 | 280,000 | 506,300 | — | 269,340 | — | 44,207 | 1,515,482 | |||||||||||||||||||||||||||
Senior Vice President, | 2017 | 418,200 | — | 506,300 | — | 252,940 | — | 48,413 | 1,225,853 | |||||||||||||||||||||||||||
General Counsel and Chief Compliance Officer | 2016 | 415,675 | 671,550 | 1,071,300 | — | 304,280 | — | 57,373 | 2,520,178 | |||||||||||||||||||||||||||
Ellen R. Romano | 2018 | 318,473 | — | 312,600 | — | 189,180 | 34,159 | 854,412 | ||||||||||||||||||||||||||||
Senior Vice President, | 2017 | 310,723 | — | 305,000 | — | 143,560 | 559,893 | 10,830 | 1,330,006 | |||||||||||||||||||||||||||
Human Resources | 2016 | 310,750 | 492,000 | 680,000 | — | 208,520 | 581,273 | 11,346 | 2,283,889 | |||||||||||||||||||||||||||
David S. Cookson | 2018 | 187,513 | — | 278,500 | — | 101,260 | 13,002 | 580,275 | ||||||||||||||||||||||||||||
Senior Vice President, | 2017 | 368,615 | — | 270,400 | — | 136,390 | 615,964 | 9,982 | 1,401,351 | |||||||||||||||||||||||||||
Americas | 2016 | 371,315 | — | 811,200 | — | 211,650 | 375,379 | 9,331 | 1,778,875 |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards(1) ($) | Non-Equity Incentive Plan ($) | Change in Pension Value & Nonqualified Deferred Compensation Earnings(4) ($) | All Other Compensation(5) ($) | Total ($) | ||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | 2020 | 822,500 | — | 3,539,454 | — | 460,600 | — | 250,488 | 5,073,042 | ||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer | | 2019 2018 | | 787,500 743,750 | | — — | | 3,300,000 3,100,000 | | — — | | 826,880 803,250 | | — — | | 195,375 83,319 | | 5,109,755 4,730,319 | |||||||||||||||||||||||||||
Brian L. MacNeal | 2020 | 441,279 | — | 512,304 | — | 126,030 | — | 40,033 | 1,119,646 | ||||||||||||||||||||||||||||||||||||
Senior Vice | 2019 | 440,938 | — | 510,000 | — | 277,800 | — | 56,917 | 1,285,655 | ||||||||||||||||||||||||||||||||||||
President and Chief Financial Officer | 2018 | 421,688 | — | 452,900 | — | 273,260 | — | 31,523 | 1,179,371 | ||||||||||||||||||||||||||||||||||||
Charles M. Chiappone | | 2020 2019 | | 436,088 435,750 | | — — | | 548,463 462,000 | | — — | | 146,530 274,530 | | — — | | 40,942 39,406 | | 1,172,023 1,211,686 | |||||||||||||||||||||||||||
Senior Vice President, Wall and Ceiling Solutions | 2018 | 407,745 | — | 370,900 | — | 292,340 | — | 18,500 | 1,089,485 | ||||||||||||||||||||||||||||||||||||
Mark A. Hershey | 2020 | 432,663 | — | 583,815 | — | 145,380 | — | 74,029 | 1,235,887 | ||||||||||||||||||||||||||||||||||||
Senior Vice President, General Counsel, Chief Compliance Officer and Business Development | | 2019 2018 | | 431,758 415,635 | | — 280,000 | (3) | | 524,000 506,300 | | — — | | 272,010 269,340 | | — — | | 54,226 44,207 | | 1,281,994 1,515,479 | ||||||||||||||||||||||||||
Ellen R. Romano | 2020 | 325,951 | — | 314,226 | — | 100,400 | 513,426 | 48,611 | 1,302,614 | ||||||||||||||||||||||||||||||||||||
Senior Vice President, Human Resources | | 2019 2018 | | 326,428 318,473 | | — — | | 320,400 312,600 | | — — | | 188,520 189,180 | | 958,061 — | | 35,987 34,159 | | 1,829,396 854,412 |
(1) | The amounts reflect the aggregate grant date fair value of stock units granted in the fiscal year, computed in accordance with |
(2) | The |
(3) | Mr. Hershey received aone-time special cash bonus of $280,000 on October 25, 2018. The bonus was paid in recognition of his leadership and performance in connection with certain significant projects. The special bonus was separate from our AIP. |
(4) | For 2018, the change in pension value decreased from |
(5) | The amounts shown in the “All Other Compensation” column include: (i) Company matching |
AWI |
20182020 SUMMARY COMPENSATION TABLE(CONTINUED)
(6) | The following table provides the detail for the amounts reported in the All Other Compensation for |
Name | Perquisites and Other Benefits ($) | Company Match Savings Plan Contributions ($) | Executive Long- Term Disability ($) | All Other Compensation ($) | Perquisites and Other Benefits ($) | Cash Dividends ($) | Company Match Savings Plan Contributions ($) | Executive Long- Term Disability ($) | All Other Compensation ($) | ||||||||||||||||||||||||||||||||
Victor D. Grizzle | 83,319 | — | 83,319 | — | 144,650 | 105,838 | — | 250,488 | |||||||||||||||||||||||||||||||||
Brian L. MacNeal | 31,523 | — | 31,523 | — | 23,587 | 16,446 | — | 40,033 | |||||||||||||||||||||||||||||||||
Charles M. Chiappone | 18,500 | — | 18,500 | — | 16,750 | 24,193 | — | 40,943 | |||||||||||||||||||||||||||||||||
Mark A. Hershey | 42,377 | 1,830 | 44,207 | — | 27,848 | 44,753 | 1,428 | 74,029 | |||||||||||||||||||||||||||||||||
Ellen R. Romano | 32,329 | 1,830 | 34,159 | — | 17,081 | 30,103 | 1,428 | 48,612 | |||||||||||||||||||||||||||||||||
David S. Cookson | 12,087 | 915 | 13,002 |
CEO Pay Ratio
Our philosophy is to pay our employees competitively with employees in similar positions in the applicable labor market. We follow this approach globally,in every country where we have employees, whether it be an executive level position or hourly job. As such, we typically benchmark by position to the applicable labor market every year and adjust compensation to match the applicable market. By doing so, we believe we maintain a high-quality, stable workforce. The compensation we paid to the median employee identified below was benchmarked in accordance with this process to verify competitive compensation.
There has been no change in the company’s employee population or employee compensation arrangements that would result in a significant change in the pay ratio disclosure. Further, there has been no change in the circumstances of the employee identified as the median employee in 2017.2019. Accordingly, the pay ratio calculation has been made using the 20182020 compensation for the median employee identified in 2017.2019.
As a result of rules the SEC adopted under the Dodd-Frank Act, we are providing the following disclosure about the ratio of the annual total
compensation of our CEO to the annual total compensation of our median employee. For the year ended December 31, 2018:2020:
the annual total compensation of our median employee was reasonably estimated to be $80,607,
based on this information, the ratio of the annual total compensation of the CEO to that of the median employee is estimated to be 59:1
We identified our median employee using a multistep process that is permitted under the SEC rules. We first examined the annual taxable earnings paid to each of our employees during 2017,2019, which we gathered from payroll data. Then, we excluded 162seven non-U.S. employees in countries outside the U.S. where the headcount is less than approximately 35, as allowed under the deminimis exception to the SEC rules.Latin America. The total numbers of U.S. employees andnon-U.S. employees were 2,1461,578 and 1,754,197, respectively, before taking into account such exclusions and for purposes of calculating such exclusions.
Countries and number of employees excluded (162):
We annualized the total taxable compensation paid to those employees who commenced work with us during 20172019 and therefore did not work for us the entire calendar year. Using this annual taxable compensation data, we identified the employee
whose total taxable compensation was closest to the median. We then calculated the total annual compensation of the median employee, in the same way as we calculate total annual compensation for our CEO in the Summary Compensation Table.
AWI | |
The table below shows information on AIP awards and PSUs granted to each NEO in 2018.2020. There is no assurance that the grant date fair value of PSU/RSU awards will be realized by the executive.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards |
Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Under-Lying (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Under- Lying (#) | Exercise of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | (1 | ) | N/A | 371,875 | 743,750 | 1,487,500 | (1 | ) | N/A | 400,000 | 800,000 | 1,600,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/27/2018 | 13,114 | 52,454 | 144,249 | 3,100,000 | (2 | ) | 2/25/2020 | 17,521 | 35,042 | 94,613 | 3,539,454 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brian L. MacNeal | (1 | ) | N/A | 126,506 | 253,013 | 506,025 | (1 | ) | N/A | 133,875 | 267,750 | 535,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/27/2018 | 1,916 | 7,664 | 21,076 | 452,900 | (2 | ) | 2/25/2020 | 2,536 | 5,072 | 13,694 | 512,304 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles M. Chiappone | (1 | ) | N/A | 117,686 | 235,373 | 470,745 | (1 | ) | N/A | 132,300 | 264,600 | 529,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/27/2018 | 1,569 | 6,276 | 17,259 | 370,900 | (2 | ) | 2/25/2020 | 2,715 | 5,430 | 14,661 | 548,463 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | (1 | ) | N/A | 124,691 | 249,381 | 498,762 | (1 | ) | N/A | 130,785 | 261,570 | 523,140 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/27/2018 | 4,284 | 8,567 | 19,276 | 506,300 | (2 | ) | 2/25/2020 | 2,890 | 5,780 | 15,606 | 583,815 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ellen R. Romano | (1 | ) | N/A | 87,580 | 175,160 | 350,320 | (1 | ) | N/A | 90,318 | 180,637 | 361,273 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/27/2018 | 2,645 | 5,290 | 11,903 | 312,600 | (2 | ) | 2/25/2020 | 1,556 | 3,111 | 8,400 | 314,226 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David S. Cookson | (1 | ) | N/A | 46,878 | 93,756 | 187,513 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2 | )(3) | 2/27/2018 | 1,178 | 4,713 | 12,961 | 278,500 |
(1) | The amounts shown represent the |
(2) | In |
|
AWI |
The table below shows the number of shares covered by exercisable and unexercisable stock options, and unvested RSUs and PSUs held by each NEO on December 31, 2018.2020. Market or payout values in the table below are based on the closing price of our shares of Common Stock on that date, $58.21.$74.39. Equity awards held by NEOs at the time of the 2016 separation of Armstrong Flooring Inc. were adjusted to reflect such separation, consistent with equity awards held by other Company employees, and the table below includes outstanding adjusted awards as of December 31, 2018.2020.
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant Date | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plans Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plans Awards Market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($) | Grant Date | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market of Shares Vested ($) | Equity Incentive Plans Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plans Awards Market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable(1) | Exercisable | Unexercisable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | 1/17/2011 | 19,158 | 32.03 | 01/17/21 | 2/28/2012 | 31,348 | 37.83 | 02/28/22 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3/2/2011 | 31,200 | 31.15 | 03/02/21 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2012 | 31,348 | 37.83 | 02/28/22 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/20/2013 | 25,689 | 45.32 | 02/20/23 | 2/20/2013 | 25,689 | 45.32 | 02/20/23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2014 | 22,914 | 47.17 | 02/25/24 | 2/25/2014 | 22,914 | 47.17 | 02/25/24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/11/2016 | 125,779 | (2) | 7,321,596 | 2/27/2018 | 52,454 | (1) | 3,902,053 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2017 | 50,000 | (3) | 2,910,500 | 2/26/2019 | 44,403 | (2) | 3,303,139 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/27/2018 | 52,454 | (4) | 3,053,347 | 2/25/2020 | 35,042 | (3) | 2,606,774 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brian L. MacNeal | 6/24/2014 | 3,740 | 49.96 | 06/24/24 | 6/24/2014 | 3,740 | 49.96 | 06/24/24 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/11/2016 | 26,953 | (2) | 1,568,934 | 2/27/2018 | 7,664 | (1) | 570,125 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2017 | 8,153 | (3) | 474,586 | 2/26/2019 | 6,863 | (2) | 510,539 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/27/2018 | 7,664 | (4) | 446,121 | 2/25/2020 | 5,072 | (3) | 377,306 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles M. Chiappone | 2/28/2012 | 2,307 | 37.83 | 02/28/22 | 2/27/2018 | 6,276 | (1) | 466,872 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/20/2013 | 3,781 | 45.32 | 02/20/23 | 2/26/2019 | 6,217 | (2) | 462,483 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2014 | 5,904 | 47.17 | 02/25/24 | 2/25/2020 | 5,430 | (3) | 403,938 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/11/2016 | 19,140 | (2) | 1,114,139 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2017 | 5,790 | (3) | 337,036 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/27/2018 | 6,276 | (4) | 365,326 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | 2/20/2013 | 17,539 | 45.32 | 02/20/23 | 2/27/2018 | 8,567 | (1) | 637,299 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2014 | 16,184 | 47.17 | 02/25/24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/11/2016 | 9,025 | (1) | 525,345 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/11/2016 | 12,130 | (2) | 706,087 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2017 | 11,007 | (3) | 640,717 | 2/26/2019 | 7,051 | (2) | 524,524 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/27/2018 | 8,567 | (4) | 498,685 | 2/25/2020 | 5,780 | (3) | 429,974 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ellen R. Romano | 4/11/2016 | 5,990 | (1) | 348,678 | 2/27/2018 | 5,290 | (1) | 393,523 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4/11/2016 | 7,308 | (2) | 425,399 | 2/26/2019 | 4,312 | (2) | 320,770 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2017 | 6,631 | (3) | 385,991 | 2/25/2020 | 3,111 | (3) | 231,427 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/27/2018 | 5,290 | (4) | 307,931 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David S. Cookson | 4/11/2016 | 15,902 | (2) | 925,655 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/28/2017 | 2,940 | (3) | 171,137 |
(1) |
|
(2) | The number of shares of Common Stock represents the amount that vests if |
(3) | The number of shares of Common Stock represents the amount that vests if |
|
AWI | |
The following table shows the exercise of stock options by each NEO during 2018,2020, as well as stock awards held by each NEO that became free of restrictions during 2018.2020.
Option Awards | Restricted Stock Awards | Option Awards | Restricted Stock Awards | |||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||||||
Victor D. Grizzle | — | — | 5,983 | 367,655 | 50,358 | 2,339,618 | 131,500 | 9,642,895 | ||||||||||||||||||||||||
Brian L. MacNeal | — | — | 980 | 60,221 | — | — | 21,443 | 1,572,415 | ||||||||||||||||||||||||
Charles M. Chiappone | — | — | 1,519 | 93,343 | 11,992 | 680,329 | 15,227 | 1,116,596 | ||||||||||||||||||||||||
Mark A. Hershey | 35,773 | 1,191,109 | 8,657 | 509,187 | 33,723 | 1,139,586 | 25,317 | 1,905,958 | ||||||||||||||||||||||||
Ellen R. Romano | — | — | 5,586 | 328,135 | — | — | 15,528 | 1,171,493 | ||||||||||||||||||||||||
David S. Cookson | 27,336 | 562,010 | 1,798 | 110,487 |
(1) | Represents the number of RSUs/ PSUs that vested in |
The performance period for PSUs granted in 20162018 ended on December 31, 2018.2020. The final payout determination was made in April 20192021 by the Compensation Committee after a review of the Company’s performance and certification of achievement of the performance goals. The final 20162018 PSU shares paid out and the value realized in April 20192021 are set forth below.
Name | 2016 PSU aTSR Shares Granted (#) | 2016 PSU aTSR Payout Factor | 2016 PSU aTSR (#) | PSU aTSR Value on ($) | 2018 PSU Absolute TSR Shares Granted (#) | 2018 PSU Absolute TSR Payout Factor | 2018 PSU Absolute TSR Final Payout (#) | PSU Absolute TSR Value on Vesting(a) ($) | ||||||||||||||||||||||||
Victor D. Grizzle | 94,334 | 236 | % | 222,629 | 18,070,796 | 39,341 | 139 | % | 54,684 | 5,063,738 | ||||||||||||||||||||||
Brian L. MacNeal | 20,215 | 236 | % | 47,708 | 3,872,458 | 5,748 | 139 | % | 7,990 | 739,874 | ||||||||||||||||||||||
Charles M. Chiappone | 14,355 | 236 | % | 33,878 | 2,749,877 | 4,707 | 139 | % | 6,543 | 605,882 | ||||||||||||||||||||||
Mark A. Hershey | 3,033 | 236 | % | 7,158 | 581,015 | 2,142 | 139 | % | 2,978 | 275,763 | ||||||||||||||||||||||
Ellen R. Romano | 1,827 | 236 | % | 4,312 | 350,005 | 1,323 | 139 | % | 1,839 | 170,291 | ||||||||||||||||||||||
David S. Cookson | 11,926 | 236 | % | 28,146 | 2,284,611 | |||||||||||||||||||||||||||
Name | 2016 PSU FCF Shares Granted (#) | 2016 PSU FCF Payout Factor | 2016 PSU FCF (#) | PSU FCF Value on ($) | 2018 PSU FCF Shares Granted (#) | 2018 PSU FCF Payout Factor | 2018 PSU FCF Final Payout (#) | PSU FCF Value on ($) | ||||||||||||||||||||||||
Victor D. Grizzle | 31,445 | 175 | % | 55,029 | 4,466,704 | 13,113 | 95 | % | 12,458 | 1,153,611 | ||||||||||||||||||||||
Brian L. MacNeal | 6,738 | 175 | % | 11,792 | 957,157 | 1,916 | 95 | % | 1,821 | 168,625 | ||||||||||||||||||||||
Charles M. Chiappone | 4,785 | 175 | % | 8,374 | 679,718 | 1,569 | 95 | % | 1,491 | 138,067 | ||||||||||||||||||||||
Mark A. Hershey | 9,097 | 175 | % | 15,920 | 1,292,226 | 6,425 | 97 | % | 6,233 | 577,176 | ||||||||||||||||||||||
Ellen R. Romano | 5,481 | 175 | % | 9,592 | 778,583 | 3,967 | 97 | % | 3,848 | 356,325 | ||||||||||||||||||||||
David S. Cookson | 3,976 | 175 | % | 6,958 | 564,781 |
(a) | Value at |
AWI |
The table below shows the present value of accumulated benefits payable to each of the NEOs, including the number of years of service credited to each such NEO, under the RIP and the RBEP as of December 31, 2018.2020. The amounts were determined using the same interest rate and mortality rate assumptions used in the Company’s Consolidated Financial Statements in our Annual Report on Form10-K for the year ended December 31, 2018.2020. Information regarding the RIP and RBEP can be found in Note 1618 to the Company’s Consolidated Financial Statements in our Annual Report on Form10-K for the year ended December 31, 2018.2020.
Name | Plan Name | Number of Years (#) | Present Value of ($) | Payments During ($) | Plan Name | Number of Years (#) | Present Value of ($) | Payments During ($) | ||||||||||||||||||||
Victor D. Grizzle | Not eligible | Not eligible |
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Brian L. MacNeal | Not eligible | Not eligible |
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Charles M. Chiappone | Not eligible | Not eligible |
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Mark A. Hershey | Not eligible | Not eligible |
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| Retirement Income Plan for Employees of Armstrong World Industries, Inc. | 37.5 | 2,131,538 | 0 | ||||||||||||||||||||||||
Retirement Income Plan for Employees of Armstrong World Industries, Inc. | 34.5 | 1,371,335 | 0 | |||||||||||||||||||||||||
Ellen R. Romano |
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Retirement Benefit Equity Plan of Armstrong World Industries, Inc. | 34.5 | 1,258,480 | 0 | |||||||||||||||||||||||||
Retirement Income Plan for Employees of Armstrong World Industries, Inc. | 38.5 | 2,086,113 | 71,232 | Retirement Benefit Equity Plan of Armstrong World Industries, Inc. | 37.5 | 1,969,764 | 0 | |||||||||||||||||||||
David S. Cookson | ||||||||||||||||||||||||||||
Retirement Benefit Equity Plan of Armstrong World Industries, Inc. | 38.5 | 1,594,969 | 0 |
The RBEP was established to pay any benefit which cannot be paid under the RIP due to Internal Revenue Code compensation or benefits limitations. All pension benefits are paid by the Company. The pension plans were closed to new salaried participants effective January 1, 2005 and pension benefits were frozen for all salaried employees on December 31, 2017. Benefits payable under the RIP and RBEP are based on a formula that yields an annual amount payable over the participant’s lifetime beginning at the age where the participant qualifies for an unreduced life annuity benefit.
In addition, Mr. Cookson and Ms. Romano qualified for an additional annuity payment under the ESOP Pension Account (the “EPA”) to the extent such benefit can be paid under the qualified pension plan. The EPA was established in 2000 to restore a portion of the value lost by a broad group of employees who had purchased shares of Company
stock and received Company contributions of additional shares which were intended to help fund the cost of their retiree health care coverage. The starting EPA balance was determined by multiplying the number of ESOP shares held by the participant by $47.75 which was the guaranteed value of the original ESOP convertible preferred shares. The EPA is credited
with interest annually using theNovember 30-year Treasury bond rate. Interest is credited up to the date the participant commences regular pension benefits under the RIP.
Participants in the RIP may retire as early as age 55 provided the participant is vested under the plan. Participants become vested after completing five years of continuous employment having worked at least 1,000 hours in each year. Normal retirement date is the first of the month nearest the participant’s 65th birthday. Except as noted below, there is a reduction for early retirement for salaried participants who retire between the ages of 55 and
PENSION BENEFITS(CONTINUED)
65. An employee who retires from active employment can receive an unreduced pension benefit commencing on the date of retirement if the employee’s age (minimum age 55) and Total Servicetotal service totals 90 points (the “Rule of 90”). The unreduced Rule of 90 benefit is limited to the employee’s pension amount accrued to February 28, 2006. Employees receive credit for post-March 1, 2006 age and service for Rule of 90 eligibility.
The normal form of benefit payment is a monthly annuity. Except for payments having a lump sum present value of $100,000 or less under the qualified plan, no involuntary lump sum payments
AWI 2021 Proxy Statement | 59 |
PENSION BENEFITS (CONTINUED)
are permitted. Various forms of annuity payments (including life, joint and survivor, period certain and level income options) are available under the pension plans. The annuity payments for these options are determined by actuarially adjusting the life annuity pension amount for the selected form of payment. The formula for the regular life annuity pension benefit for salaried employees under the RIP is based on the following factors:
the participant’s Average Final Compensation (the “AFC”) which is the average of the three highest years of eligible compensation (base salary plus annual incentive) during the last ten years of employment;
the participant’s number of years of Total Service (credited years of employment with the Company) used to calculate the pension amount; and
the participant’s Adjusted Covered Compensation (the “ACC”), which is a percentage of the average Social Security tax base for the35-year period ending with the year the participant will qualify for an unreduced Social Security pension benefit.
The unreduced annual life annuity pension is the sum of the following four calculations, each of which may not be less than zero:
1. | AFC x 0.009 x Total Service to a maximum of 35 years; plus |
2. | (AFC – ACC) x 0.005 x Total Service to 35 years; plus |
3. | (AFC – 2 x ACC) x 0.0015 x Total Service to 35 years; plus |
4. | AFC x 0.012 x Total Service over 35 years. |
To the extent the participant is eligible for an EPA pension benefit that can be paid from the RIP, all of the allowable portion of the calculated EPA annuity will be added to the regular pension amount. EPA annuity amounts that cannot be paid from the qualified plan are forfeited.
Special provisions apply if the qualified pension plan is terminated within five years following an Extraordinary Event, as this term is defined in the RIP. Upon the occurrence of such an event, plan liabilities would first be satisfied, and then remaining plan assets would be applied to increase retirement income to employees. The amount of the increase is based on the assumption that the employee would have continued employment with Armstrong until retirement. The NEOs who are eligible for RIP pension benefitsMs. Romano would be entitled to this benefit under these circumstances.
The assumptions used to calculate the actuarial present values shown in the table above are as follows:
Discount rated used to value benefit obligations equals 4.26%2.33%;
RP 2014PRI2012 Projected from 20062012 with MP2018;
EPA interest rate of 2.80%2.28%;
1994 GAR(RR2001-62) Mortality Table for EPA annuity conversion; and
Retirement at age 65 or Rule of 90 eligibility, as specified.
AWI |
The table below shows the executive contributions, earnings and account balances for each NEO who participates in the NQDCP.
Name | Executive Contributions in 2018 ($)(1) | Registrant Contributions in 2018 ($)(2) | Aggregate Earnings in 2018 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/18 ($) | Executive Contributions in 2020 ($)(1) | Registrant Contributions in 2020 ($)(2) | Aggregate Earnings in 2020 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/2020 ($) | ||||||||||||||||||||||||||||||
Victor D. Grizzle | 86,426 | 64,819 | (39,368 | ) | — | 621,005 | 115,117 | 86,338 | 173,882 | — | 1,320,196 | |||||||||||||||||||||||||||||
Brian L. MacNeal | 30,501 | 22,876 | (12,008 | ) | — | 163,394 | 10,162 | 7,621 | 74,917 | — | 376,376 | |||||||||||||||||||||||||||||
Charles M. Chiappone | — | — | (2,821 | ) | — | 45,728 | 5,214 | 4,693 | 13,576 | — | 91,404 | |||||||||||||||||||||||||||||
Mark A. Hershey | 34,986 | 26,240 | (35,576 | ) | — | 481,133 | 38,327 | 28,745 | 106,828 | — | 833,067 | |||||||||||||||||||||||||||||
Ellen R. Romano | 18,463 | 13,847 | (2,215 | ) | — | 30,095 | 22,752 | 17,064 | 19,731 | — | 135,372 | |||||||||||||||||||||||||||||
David S. Cookson | Not Eligible |
(1) | The amount in this column is also reported as either Salary orNon-Equity Incentive Plan Compensation in the SCT. |
(2) | The amount in this column is also reported in the All Other Compensation column of the SCT. |
(3) | The table below reflects amounts reported in the aggregate balance at last fiscal year end that were previously reported as compensation to the NEO in the SCT for previous years. |
Name | Amount Previously Reported ($) | |||
Victor D. Grizzle | ||||
Brian L. MacNeal | ||||
Charles M. Chiappone | ||||
Mark A. Hershey | ||||
Ellen R. Romano | 67,742 |
Our defined benefit pension plans were closed to new salaried participants effective January 1, 2005, and frozen for existing salaried participants who did not meet the age and service requirements as of March 1, 2006. Pension benefits were frozen for all salaried employees on December 31, 2017.
All salaried employees, including the NEOs, are eligible to participate in a 401(k) savings plan. We match 100% on the first 4% of employee contributions and 50% on the next 4% of employee contributions.
The NQDCP was established to provide benefits similar to the 401(k) plan as it applies to eligible employees whose eligible earnings (base salary plus annual incentive) exceed 12.5 times the Internal Revenue Code 402(g) elective deferral limit in effect for the plan year. A participant may elect to defer up to 25% of eligible base salary earnings and up to 25% of eligible annual incentive earnings. The Company matching contribution will be the same as that provided under the 401(k) savings plan with the Company match. Participants may transfer account balances between any of the applicable plans’ available investment options.
Under the NQDCP, participants become 100% vested in the Company match account after completing three years of continuous employment having worked at least 1,000 hours in each year.
Under the NQDCP, except in the case of an unforeseeable emergency or having reached age 70, noin-service distributions are permitted. Participants can elect to receive plan benefits as a single lump sum or in 120 monthly installments commencing after the date of the participant’s termination of employment. All elections must comply with the Internal Revenue Code requirements. If the total account value is less than $10,000, the entire account balance will be paid as a single sum at the time of termination. In the event of a participant’s death, any remaining payments shall be paid to the participant’s designated beneficiary or estate.
Under the NQDCP, the Company reserves the right to cause the participant to forfeit or require repayment of the Company match benefits where the participant is discharged for willful, deliberate or gross misconduct or where the participant has engaged in conduct that is injurious to the Company.Company
AWI | |
The tables below summarize the estimated value of the potential payments and benefits under the Company’s plans and arrangements to which each NEO would be entitled upon termination of employment under the circumstances indicated. Except for the continuation of health and welfare benefits and outplacement support, amounts would be paid as a lump sum at termination. The amounts shown assume that such termination was effective December 31, 2018.2020.
The “Change in Control” column assumes that there is no limitation on payments under the “best net” provision in each CIC agreement relating to tax under Section 4999 of the Internal Revenue Code. Amounts in the “Change in Control” column are “double trigger” payments and are therefore applicable only in the event both a change in control (“CIC”) event and either an involuntary (without cause) termination or a termination for Good Reason under the CIC agreement occur. The PSUs are valued at target.target for purposes of the tables below.
Victor D. Grizzle
Reason for Termination | ||||||||||||||||||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | ||||||||||||||||||||||||||
Cash Severance | — | — | $ | 3,000,000 | $ | 3,000,000 | $ | 3,750,000 | — | — | $ | 3,240,000 | $ | 3,240,000 | $ | 4,050,000 | ||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 98,972 | — | — | — | — | 37,462 | ||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | — | — | 30,000 | 30,000 | 30,000 | ||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 750,000 | 750,000 | 750,000 | — | — | 810,000 | 810,000 | 810,000 | ||||||||||||||||||||||||||
Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 13,285,443 | — | — | — | — | 9,811,967 | ||||||||||||||||||||||||||
Restricted Stock | — | — | — | — | — | |||||||||||||||||||||||||||||||
Stock Options | — | — | — | — | — | |||||||||||||||||||||||||||||||
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Total | — | — | $ | 3,780,000 | $ | 3,780,000 | $ | 17,914,415 | — | — | $ | 4,080,000 | $ | 4,080,000 | $ | 14,739,429 |
Brian L. MacNeal
Brian L. MacNeal | ||||||||||||||||||||||||||||||||||||
| Reason for Termination | |||||||||||||||||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | ||||||||||||||||||||||||||
Cash Severance | — | — | $ | 1,020,000 | $ | 1,020,000 | $ | 1,360,000 | — | — | $ | 1,042,895 | $ | 1,042,895 | $ | 1,390,526 | ||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 82,522 | — | — | — | — | 57,010 | ||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | — | — | 30,000 | 30,000 | 30,000 | ||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 255,000 | 255,000 | 255,000 | — | — | 260,724 | 260,724 | 260,724 | ||||||||||||||||||||||||||
Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 2,489,642 | — | — | — | — | 1,457,970 | ||||||||||||||||||||||||||
Restricted Stock | — | — | — | — | — | |||||||||||||||||||||||||||||||
Stock Options | — | — | — | — | — | |||||||||||||||||||||||||||||||
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Total | — | — | $ | 1,305,000 | $ | 1,305,000 | $ | 4,217,164 | — | — | $ | 1,333,619 | $ | 1,333,619 | $ | 3,196,230 |
AWI |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL(CONTINUED)
Charles M. Chiappone
Charles M. Chiappone | ||||||||||||||||||||||||||||||||||||
| Reason for Termination | |||||||||||||||||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | ||||||||||||||||||||||||||
Cash Severance | — | — | $ | 1,008,000 | $ | 1,008,000 | $ | 1,344,000 | — | — | $ | 1,030,628 | $ | 1,030,628 | $ | 1,374,171 | ||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 90,169 | — | — | — | — | 64,062 | ||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | — | — | 30,000 | 30,000 | 30,000 | ||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 252,000 | 252,000 | 252,000 | — | — | 257,657 | 257,657 | 257,657 | ||||||||||||||||||||||||||
Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 1,816,501 | — | — | — | — | 1,333,292 | ||||||||||||||||||||||||||
Restricted Stock | — | — | — | — | — | |||||||||||||||||||||||||||||||
Stock Options | — | — | — | — | — | |||||||||||||||||||||||||||||||
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Total | — | — | $ | 1,290,000 | $ | 1,290,000 | $ | 3,532,670 | — | — | $ | 1,318,286 | $ | 1,318,286 | $ | 3,059,182 | ||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||||||
Cash Severance | — | — | $ | 1,006,032 | $ | 1,006,032 | $ | 1,341,376 | ||||||||||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 76,644 | |||||||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | |||||||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 251,508 | 251,508 | 251,508 | |||||||||||||||||||||||||||||||
Accelerated Long-Term Incentives | ||||||||||||||||||||||||||||||||||||
Performance Shares | — | — | — | — | 1,346,805 | |||||||||||||||||||||||||||||||
Restricted Stock | — | — | — | — | 525,345 | |||||||||||||||||||||||||||||||
Stock Options | — | — | — | — | — | |||||||||||||||||||||||||||||||
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Total | — | — | $ | 1,287,540 | $ | 1,287,540 | $ | 3,571,678 | ||||||||||||||||||||||||||||
Ellen R. Romano | ||||||||||||||||||||||||||||||||||||
Reason for Termination | ||||||||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||||||
Cash Severance | — | — | $ | 744,977 | $ | 744,977 | $ | 993,302 | ||||||||||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 50,489 | |||||||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | |||||||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 176,231 | 176,231 | 176,231 | |||||||||||||||||||||||||||||||
Accelerated Long-Term Incentives | ||||||||||||||||||||||||||||||||||||
Performance Shares | — | — | — | — | 811,389 | |||||||||||||||||||||||||||||||
Restricted Stock | — | — | — | — | 348,678 | |||||||||||||||||||||||||||||||
Stock Options | — | — | — | — | — | |||||||||||||||||||||||||||||||
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Total | — | — | $ | 951,208 | $ | 951,208 | $ | 2,410,089 |
Mark A. Hershey
| Reason for Termination | |||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||
Cash Severance | — | — | $ | 1,023,788 | $ | 1,023,788 | $ | 1,365,051 | ||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 55,239 | |||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | |||||||||||
Pro-rated Bonus | — | — | 255,947 | 255,947 | 255,947 | |||||||||||
Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 2,046,618 | |||||||||||
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Total | — | — | $ | 1,309,736 | $ | 1,309,736 | $ | 3,752,855 |
Ellen R. Romano
| Reason for Termination | |||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||
Cash Severance | — | — | $ | 747,176 | $ | 747,176 | $ | 996,235 | ||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 28,693 | |||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | |||||||||||
Pro-rated Bonus | — | — | 176,751 | 176,751 | 176,751 | |||||||||||
Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 945,720 | |||||||||||
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Total | — | — | $ | 953,927 | $ | 953,927 | $ | 2,177,399 |
AWI | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL(CONTINUED)
Resignation or Involuntary Termination for Cause
No incremental benefits are provided to any of the NEOs in the event of a voluntary resignation or an involuntary termination for Cause. Cause is defined as (i) the willful and continued failure by the executive to substantially perform the executive’s duties after a written demand for substantial performance is delivered to the executive by the Board, or (ii) the willful engaging by the executive in conduct which is demonstrably and materially injurious to the Company, or (iii) the executive’s conviction of any felony.
Involuntary Termination without Cause in the absence of CIC
In the event of a qualifying involuntary termination, all salaried employees are eligible for continuation of health care and life insurance benefits at active employee premium contributions for a period of six months unless the employee is eligible for and elects retiree health care coverage. In addition, senior executives, including the NEOs, are eligible for twelve months of executive outplacement support provided by an outside service provider.
Pursuant to the individual separationseverance agreements, and upon the execution of a release of claims, Messrs. Grizzle, MacNeal, Chiappone, and Hershey and Ms. Romano are entitled to severance upon a termination by the Company without cause or Good Reason (as defined below) in an amount equal to one andone-half times (two times for Mr. Grizzle) their then current annual base salary plus target annual incentive under the Company’s AIP program, payable in a lump sum, and apro-rated annual incentive bonus based on actual performance for the year of termination, payable at the time that bonuses are paid to employees of the Company
For purposes of the separationseverance agreements, Good Reason is generally defined to mean: (i) a material diminution in authority, duties, or responsibilities or the assignment of duties or responsibilities that are materially inconsistent with those currently in effect; (ii) a 10% reduction of base salary, except foracross-the-board salary reductions similarly affecting all senior executive officers of the Company; (iii) the relocation of principal place of
employment to a location more than 50 miles from his or her current principal place of employment; (iv) a material breach by the Company of its obligations under the severance agreement; or (v) failure of the Company to obtain assumption and agreement by a successor of the Company to be bound by the severance agreement.
Information in the tables above assumes that any termination was effective December 31, 20182020 and is based on the program parameters in effect as of December 31, 20182020 as outlined above.
Qualifying Involuntary Termination Following a Change in Control
Under each executive’s separationseverance agreement, the executive is entitled to receive severance payments upon involuntary termination without cause or termination for Good Reason within two years following a CIC, or within six months preceding a CIC if the termination is in connection with a potential CIC. Termination for Good Reason is defined in each executive’s individual CIC agreement and includes any one of the following events following a CIC:
(i) | the assignment to the executive of any duties inconsistent with the executive’s status as an executive officer of the Company or a substantial adverse alteration in the nature or status of the executive’s responsibilities, including diminution as a result of the Company no longer being a publicly traded corporation following the CIC; |
(ii) | a reduction by the Company in the executive’s annual base salary; |
(iii) | relocation of the executive’s principal place of employment to a location more than 50 miles from the principal place of employment immediately before the CIC; |
(iv) | failure by the Company to pay to the executive any portion of the executive’s current compensation; or |
(v) | failure by the Company to continue in effect any compensation or benefit plan in which the executive participates immediately prior to a CIC which is material to the executive’s total compensation unless an equitable arrangement has been made. |
AWI |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL(CONTINUED)
CIC Arrangements – Key Terms
We will not provide taxgross-ups under Sections 280G and 4999 of the Internal Revenue Code to any of our officers. Set forth below are certain key terms of the CIC agreements:
Term of Agreement | Fixedone-year term that automatically renews for an additional year unless notice is given at least 90 days prior to the anniversary of intent not to renew; term automatically continues for two years if the CIC occurs during term | |
Severance Benefits | 2.5 times base salary plus target AIP for Mr. Grizzle, two times base salary plus target AIP for Messrs. MacNeal, Chiappone, and Hershey and Ms. Romano | |
Pro rata AIP | Prorated target AIP bonus for year of termination | |
Accelerated Equity Vesting | Double-trigger accelerated vesting (requires a CIC and qualifying termination of employment) for stock options, RSUs, PSUs and other equity grants to vest if assumed by the acquirer; the Compensation Committee may cash out equity grants if not assumed by the acquirer. | |
280G Taxation | Any amounts paid under the CIC Agreement will be reduced to the maximum amount that can be paid without being excess parachute payments under Internal Revenue Code Section 280G and that are subject to the excise tax imposed under Internal Revenue Code Section 4999, but only if theafter-tax benefit of the reduced amount is higher than theafter-tax benefit of the unreduced amount |
“Change in Control” (CIC) generally means the occurrence of one of the following events:
(I) | any person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 35% or more of the combined voting power of the Company’s then outstanding securities, excluding any person who becomes such a beneficial owner in connection with a transaction described in clause (i) of paragraph (III) below; or |
(II) | the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Company’s board of directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Company’s board of directors or nomination for election by the Company’s shareholders was approved or recommended by a vote of at leasttwo-thirds (2/3) of the |
directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or; |
(III) | there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation immediately following which the individuals who comprise the Company’s board of directors immediately prior thereto constitute at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a subsidiary, the ultimate parent thereof, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates) representing 35% or more of the combined voting power of the Company’s then outstanding securities; or |
AWI | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL(CONTINUED)
(IV) | the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or |
substantially all of the Company’s assets immediately following which the individuals who comprise the board of directors of the Company immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or any parent thereof. |
AWI |
Securities authorized for issuance under equity compensation plans as of December 31, 2018.2020.
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| (a) Number of securities to be issued upon exercise of outstanding options, warrants, and rights | (b) Weighted-average exercise price of outstanding options, warrants, and rights | (c) Number of securities remaining available for future Issuance under equity compensation plans (excluding securities reflected in column (a)) | |||
Equity compensation plans approved by security holders | 654,497(1) | $42.41(2) | 2,360,722(3) | |||
Equity compensation plans not approved by security holders | 94,230(4) | Not Applicable | 513(5) | |||
Totals | 748,727 | $42.41(2) | 2,361,235 |
(1) | Includes RSUs, PSUs and stock options to purchase our shares of Common Stock granted under the Company’s 2016 LTIP and the 2008 and 2016 Directors Stock Unit Plans. |
(2) | Represents the weighted-average exercise price of the outstanding stock options only; the outstanding RSUs and PSUs are not included in this calculation. |
(3) | Reflects shares available pursuant to the issuance of stock options, RSUs, PSUs, or other stock-based awards under the 2016 LTIP and the 2008 and 2016 Director Stock Unit Plans. The aggregate number of shares of Common Stock reserved for the grant or settlement of awards under the 2016 LTIP (Share Limit) is 5,142,138, subject to adjustment as provided therein. With respect to awards granted on or after June 24, 2011, the number of shares of Common Stock reserved for award and issuance under this LTIP is reduced on aone-for-one basis for each Common Share subject to a Stock Option or Stock Appreciation Right and is reduced by a fixed ratio of 1.6 shares of Common Stock for each Common Share subject to a Restricted Stock Award or Stock Unit granted under the LTIP. |
(4) | Includes RSAs of Common Stock granted under the Company’s 2020 Inducement Award Plan and as part of the Arktura Equity Interest Purchase Agreement entered into as of November 19, 2020. |
(5) | Reflects shares available pursuant to the issuance of RSAs under the 2020 Inducement Award Plan. The 2020 Inducement Award 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 Award Plan. |
AWI | |
Why did I receive aone-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
This year we have again utilized the SEC rule allowing companies to furnish proxy materials to their shareholders over the Internet. We believe that this approach enables us to provide the materials to shareholders more quickly, while also reducing the impact of our annual meeting on the environment and the costs associated with printing and mailing.
How can I receive printed shareholder and proxy materials?
Please follow the instructions for “How to Access the Proxy Materials” on theone-page notice described above.
Who is soliciting my proxy?
The Board is soliciting your proxy in order to provide you with an opportunity to vote on all matters scheduled to come before the meeting, whether or not you attend the meeting in person.via the internet.
Who is entitled to vote?
Each holder of record of our shares of Common Stock, at the close of business on the record date, April 23, 201919, 2021 (“Record Date”), is entitled to one vote for each Common Share owned on each matter to be voted on. As of the Record Date, 48,959,25547,883,531 shares of Common Stock were issued and outstanding and entitled to vote at the Annual Meeting.
What must I do to attend the meeting via the Internet?
You may attend and participate in the Annual Meeting via the Internet atwww.virtualshareholdermeeting.com/awi2019awi2021 where you will be able to vote and submit questions during the meeting. Shareholders who use the control number that was furnished to them (either with the notice sent to them regarding the availability of these proxy materials or with their copy of these proxy materials) to log on to the meeting will be able to vote and submit questions during the meeting.
What mustWhy can’t I do to attend the meeting in person?
If you wishDue to attend the meeting in person, you must have been a shareholder on the Record Date and you must present an admission ticket and photo identification. To request an admission ticket and get directions, please email or write the Officecontinuing threat of the Corporate Secretary atAdmissionTicket@armstrongceilings.com or Attention: B. Tham, Armstrong World Industries, Inc., P. O. Box 3001, Lancaster, PA 17604-3001. We must receive your request at least ten business days priorcoronavirus (COVID-19) global pandemic, we are sensitive to the meeting. If your shares of Common Stock are held directly in an account withpublic health and travel concerns our transfer agent, American Stock Transfer & Trust Company (“AST”), your name will appear inshareholders may have and the protocols that federal, state, and local governments have imposed. Hosting a virtual annual meeting provides easy access for our Record Date shareholder list. If your shares of Common Stock are inshareholders and facilitates participation since shareholders can participate from any location around the name of a broker, bank or other institution, you must provide evidence of your beneficial stock ownership on the Record Date.world.
How can I revoke my proxy?
Proxies are voted at the Annual Meeting. You may revoke your proxy at any time before it is voted, and your last vote is the vote that will be counted. If you are a shareholder of record on the Record Date and you returned a paper proxy card, you can write to the Corporate Secretary at our corporate offices, 2500 Columbia Avenue Lancaster, Pennsylvania 17603, stating that you wish to revoke your proxy and that you need another proxy card. If you submitted your proxy by the Internet or by telephone, you can vote again over the Internet or by telephone. If you hold your shares of Common Stock through a broker, bank or other nominee, you can revoke your proxy by contacting the broker, bank or other nominee and following its procedure for revocation. If you are a shareholder of record on the Record Date and you attend meeting in person via the Annual Meeting,Internet, you must request a revocation of your submitted proxy and vote by ballot tomay revoke your proxy.proxy by voting electronically during the meeting. Your appearanceattendance via the Internet alone at the Annual Meeting will not of itself constitute a revocation of your proxy.
How many votes can be cast by all shareholders?
48,959,25547,883,531 votes, consisting of one vote for each outstanding Common Share outstanding on the Record Date.
ADDITIONAL MEETING INFORMATION(CONTINUED)
What is the quorum requirement for the Annual Meeting?
A quorum of the holders of the outstanding shares of Common Stock must be present for the Annual Meeting to be held. A “quorum” is the presence at the Annual Meeting, in personvirtually or represented by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on a matter to be acted on at the
68 | AWI 2021 Proxy Statement |
ADDITIONAL MEETING INFORMATION (CONTINUED)
Annual Meeting. Abstentions and broker“non-votes” are counted as present and entitled to vote for purposes of determining a quorum. A broker“non-vote” occurs when a broker does not vote on a particular proposal because the broker does not have discretionary voting power with respect to the proposal and has not received voting instructions from the beneficial owner.
What if a quorum is not present at the Annual Meeting?
If the Annual Meeting cannot be organized because a quorum is not present, the shareholders present at the Annual Meeting will have the power, except as otherwise provided by statute, to adjourn the Annual Meeting to such time and place as they may determine. Those shareholders who attend the second of such adjourned meetings, even if less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors.
What vote is required to elect directors at the Annual Meeting?
At the Annual Meeting, in connection with the election of directors, you will be entitled to cast one vote for each share held by you for each nominee. Votes may be cast “for” or “withheld” with respect to each nominee. Directors will be elected by a plurality of the votes cast at the Annual Meeting. A plurality means that the nominees with the largest number of votes cast “for” their election, up to the ten (10)nine (9) directors to be chosen at the Annual Meeting, will be elected. Votes that are “withheld” will be excluded entirely from the vote and will have no effect, other than for purposes of determining the presence of a quorum. However, the Board has adopted a Policy on Majority Voting, pursuant to which, in an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election will within 10 business days following certification of the shareholder vote, tender his or her resignation to the Board. See “CORPORATE
GOVERNANCE — Policy on Majority Voting in the Election of Directors.”
What vote is required to approve the other items at the Annual Meeting?
The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 20192021 requires the affirmative vote of a majority of the votes present and entitled to vote at the
meeting to be approved. The advisory approval of executive compensation requires the affirmative vote of a majority of the votes present and entitled to vote at the meeting to be approved. The advisory approval of the frequency period of future shareholder advisory votes on our executive compensation programs requires the affirmative vote of a majority of the votes present and entitled to vote at the meeting to be approved. Any other matters that may be acted upon at the Annual Meeting will be determined by the affirmative vote of the holders of a majority of our shares of Common Stock represented in person, via the Internet, or by proxy at the Annual Meeting and entitled to vote on the matter.
How are votes, abstentions and brokernon-votes counted?
Brokernon-votes will be included in determining whether a quorum is present but will have no effect on the outcome of the matters to be voted upon at the Annual Meeting, including in connection with the election of directors. Abstentions are not considered a vote cast under Pennsylvania law. Under our Bylaws, however, other than in connection with the election of directors, abstentions will have the effect of a negative vote with respect to matters to be voted upon at the Annual Meeting.
Who will count the votes and how much does it cost the Company?
We have engaged Broadridge Investor Communications Solutions, Inc. to tabulate the proxy votes and any votes cast in personat the meeting for a fee of approximately $25,000$50,000 plus reasonable expenses.
What does it mean if I receive more than one proxy card or voting instructions?
It means that you have multiple accounts in which you own our shares of Common Stock. Please vote
ADDITIONAL MEETING INFORMATION(CONTINUED)
all proxy cards/voting instructions from the Company to ensure that all your shares of Common Stock are voted. However, you may want to contact your broker, bank or the Company’s transfer agent to consolidate as many accounts as possible under a single name and address. Our transfer agent is AST. All communications concerning shares of Common Stock you hold in your name, including address changes, name changes, requests to transfer and similar issues, can be handled by contacting AST at American Stock Transfer & Trust Company, LLC, 6201 15th Avenue Brooklyn, NY 11219; or by email to info@amstock.com; or by phone(1-800-937-5449).
AWI 2021 Proxy Statement | 69 |
ADDITIONAL MEETING INFORMATION (CONTINUED)
What should we do if multiple shareholders reside in our household, and we wish to change the copies of proxy materials that we receive?
Some banks, brokers, broker-dealers and other similar organizations acting as nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that, unless we have received contrary instructions from such bank, broker, broker-dealer or similar organization, only one copy of this proxy statement and the annual report may have been sent to multiple shareholders in your household. If you would prefer to receive separate copies of a proxy statement or annual report for other shareholders in your household, either now or in the future, please contact your bank, broker,
broker-dealer or other similar organization serving as your nominee. Upon written or oral request to the attention of Investor Relations, 2500 Columbia Avenue Lancaster, Pennsylvania 17603, or via telephone to the Investor Relations department at717-396-6354, we will promptly provide separate copies of the annual report and/or this proxy
statement. Shareholders sharing an address who are receiving multiple copies of this proxy statement or annual report and who wish to receive a single copy of such materials in the future will need to contact their bank, broker, broker-dealer or other similar organization serving as their nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
Who may solicit proxies on the Company’s behalf?
Our directors, officers and employees may solicit proxies from our shareholders. These persons will not receive any additional compensation for these services. We will request that the Notice of Annual Meeting, this proxy statement, the proxy card, and related materials (if any), be forwarded to beneficial owners by banks, brokers and other persons for their reasonableout-of-pocket expenses in handling these materials. We will bear the costs of preparing, assembling and mailing the proxy materials and expect to reimburse such beneficial owners for all such solicitations.
The Board knows of no matters other than the foregoing to come before the meeting. However, if any other matters properly come before the meeting, the persons named in the enclosed proxy will vote in their discretion with respect to such other matters.
Section 16(a) of the Exchange Act and the regulations thereunder require certain of our officers, as well as our directors and persons who own more than 10% of a registered class of our equity securities (collectively, the “reporting persons”) to file reports of ownership and changes in ownership with the SEC and to furnish us with copies of these reports. Based solely on our review
of the copies of these reports within a prescribed period of time and written representations we received from the reporting persons, we believe that all filings required to be made by the reporting persons during or with respect to the period January 1, 20182020 through December 31, 20182020 were made on a timely basis.
70 | AWI 2021 Proxy Statement |
In order to submit shareholder proposals for the 20202022 annual meeting for inclusion in the Company’s 20202022 proxy statement pursuant to SEC Rule14a-8, materials must be received by the Corporate Secretary at the Company’s corporate offices in Lancaster, Pennsylvania, no later than January 1, 2020.7, 2022.
The proposals must comply with all of the requirements of SEC Rule14a-8. Proposals should be addressed to: Corporate Secretary, 2500 Columbia Avenue, Lancaster, Pennsylvania 17603. As the rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.
The Bylaws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the proxy statement, but that a shareholder instead wishes to present directly at an annual meeting. To be properly brought before the 20202022 annual meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting must be delivered to the Corporate Secretary at the Company’s corporate offices in Lancaster (see above), not later than 90 days nor
earlier than 120 days prior to the first anniversary of the date of this annual meeting. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Bylaws (and not pursuant to SEC Rule14a-8) must be received no earlier than February 24, 2022 and no later than April 12, 2020.March 26, 2022. All director nominations and shareholder proposals must comply with the requirements of our Bylaws, a copy of which may be obtained at no cost from the Corporate Secretary.
In either case, if the date of our 20202022 annual meeting is more than 30 calendar days before or after the first anniversary of this annual meeting, your proposal must be received by the Corporate Secretary by close of business on the fifteenth day following the day we publicly announce the date of the 20192022 annual meeting.
Any shareholder proposals not received by such applicable dates will be considered untimely and, if presented at the 20202022 annual meeting, the proxy holders will be able to exercise discretionary authority to vote on any such proposal to the extent authorized by SECExchange Act Rule 14a-4(c).
Our Annual Report to Shareholders, including financial statements, is being furnished simultaneously with this proxy statement to all shareholders of record as of the Record Date. A copy of our Annual Report and Form10-K for the year ended December 31, 2018,2020, including financial statements, but excluding the financial statement schedules and most exhibits, and Form10-K/A No.1 for the year ended December 31, 2018 will be provided without charge to shareholders upon written request to: Armstrong World Industries, Inc., Investor Relations, P.O. Box 3001, Lancaster, PA 17604.
Our Annual Report is also available at www.proxyvote.com, or www.armstrongceilings.com – Investors – SEC Filings –10-K. The Form10-K and Form10-K/A No. 1 will include a list of exhibits to the Form10-K10-K. and Form10-K/A No. 1, respectively. Copies of exhibits will be furnished to shareholders upon written request and upon our receipt of payment of reproduction and mailing expenses.
AWI 2021 Proxy Statement | 71 |
To the extent that this proxy statement has been or will be specifically incorporated by reference into any other filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, as amended, the sections of this proxy statement
entitled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) and “Compensation Committee Report” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.
A list of shareholders entitled to vote at the Annual Meeting will be available for examination by shareholders at the Annual Meeting.Meeting through the website portal for shareholders (see Additional Meeting Information section above).
AWI |
ANNEX A to Armstrong World Industries, Inc. 20192021 Proxy Statement
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company provides additional measures of performance adjusted to exclude the impact of foreign exchange, restructuring charges and related costs, impairments, thenon-cash impact of the U.S. pension plan and certain other gains and losses. Adjusted figures are reported in comparable dollars using the budgeted exchange rate for 2018. The Company uses these adjusted performance measures in managing the business, including communications with its Board of Directors and employees, and believes that they provide users of this financial information with meaningful comparisons of operating performance between current results and results in prior periods. The Company believes that thesenon-GAAP financial measures are appropriate to enhance understanding of its past performance, as well as prospects for its future performance. A reconciliation of these adjustments to the most directly comparable GAAP measures is included in this release and on the Company’s website. Thesenon-GAAP measures should not be considered in isolation or as a substitute for the most comparable GAAP measures.Non-GAAP financial measures utilized by the Company may not be comparable tonon-GAAP financial measures used by other companies. Dollars are in millions unless otherwise indicated.
2018 | ||||
Adjusted EBITDA* | $ | 353 | ||
Depreciation and Amortization** | (78 | ) | ||
Operating Income, Adjusted | $ | 275 | ||
U.S. Pension Credit | 6 | |||
Litigaiton Expense | 7 | |||
Cost Reduction Initatives | 8 | |||
Net Proforma International Allocations, Other | 6 | |||
Net Environmental Recoveries | (1 | ) | ||
Operating Income, Reported | $ | 249 | ||
Mineral Fiber | ||||
2018 | ||||
Adjusted EBITDA | $ | 315 | ||
Depreciation and Amortization | (75 | ) | ||
Operating Income, Adjusted | $ | 240 | ||
Litigation Expense | $ | 7 | ||
Cost Reduction Initatives | $ | 8 | ||
Net Proforma International Allocations, Other | $ | 3 | ||
Net Environmental Recoveries | (2 | ) | ||
Operating Income, Reported | $ | 224 | ||
Architectural Specialties | ||||
2018 | ||||
Adjusted EBITDA | $ | 38 | ||
Depreciation and Amortization | (4 | ) | ||
Operating Income, Reported | $ | 34 | ||
Unallocated Corporate | ||||
2018 | ||||
Adjusted EBITDA | $ | — | ||
U.S. Pension Credit | 6 | |||
Net Proforma International Allocations, Other | 3 | |||
Operating Income (Loss), Reported | $ | 9 |
2020 | ||||
Adjusted EBITDA | $ | 330 | ||
Depreciation and Amortization | (84 | ) | ||
Operating Income, Adjusted | $ | 246 | ||
Charitable Contribution | $ | (10 | ) | |
Net Environmental Recoveries (Expenses) | $ | 6 | ||
Acquisition Related Expenses | (3 | ) | ||
U.S. Pension Expense | (6 | ) | ||
Gain on Sale of Idled China Plant Facility | 21 | |||
Operating Income, Reported | $ | 255 | ||
MINERAL FIBER | ||||
2020 | ||||
Adjusted EBITDA | $ | 294 | ||
Depreciation and Amortization | (72 | ) | ||
Operating Income, Adjusted | $ | 222 | ||
Charitable Contribution | $ | (10 | ) | |
Net Environmental Recoveries (Expenses) | 6 | |||
Operating Income, Reported | $ | 219 | ||
ARCHITECTURAL SPECIALTIES | ||||
2020 | ||||
Adjusted EBITDA | $ | 36 | ||
Depreciation and Amortization | (11 | ) | ||
Operating Income, Adjusted | $ | 25 | ||
Acquisition Related Expenses | $ | (3 | ) | |
Operating Income, Reported | $ | 22 | ||
UNALLOCATED CORPORATE | ||||
2020 | ||||
Adjusted EBITDA | $ | — | ||
Depreciation and Amortization | $ | (1 | ) | |
Operating Income, Adjusted | $ | (1 | ) | |
U.S. Pension Expense | (6 | ) | ||
Gain on Sale of Idled China Plant Facility | $ | 21 | ||
Operating Income (Loss), Reported | $ | 14 |
AWI | |
CASH FLOW | ||||||||
2018 | ||||||||
Continuing Ops | ||||||||
Net cash from operations | $ | 203 | ||||||
Add (Less): Net cash provided by (used for) investing | 310 | |||||||
(Less) Add: Acquisition, net | 22 | |||||||
(Less): Environmental (net) | (27 | ) | ||||||
(Less): Net impact from sale of international businesses to Knauf International GmbH | (272 | ) | ||||||
Free Cash Flow | $ | 236 |
CASH FLOW | ||||
2020 | ||||
Net cash from operations | $ | 219 | ||
Net cash (used for) investing activities | (141 | ) | ||
Add: Acquisition, net | 165 | |||
Add: Litigation, net | — | |||
Add/(Less): Environmental (Recoveries) Payment, net | (12 | ) | ||
Add/(Less): Payments for (Proceeds from) Sale of international, net | (20 | ) | ||
Add: Net Payments to WAVE for Portion of Proceeds from Sale of International Businesses | 13 | |||
(Less): Proceeds from sale of Idled China Plant Facility | (22 | ) | ||
Add: Charitable Contribution | 10 | |||
Adjusted Free Cash Flow | $ | 212 |
AWI |
ARMSTRONG WORLD INDUSTRIES, INC. MARK A. HERSHEY 2500 COLUMBIA AVENUE LANCASTER, PA 17603 VOTE BY INTERNET Before The Meeting: www.proxyvote.com Use- www.proxyvote.comUse the Internet to transmit your voting instructions and for electronic delivery of information up untilinformation. Vote by 11:59 P.M. Eastern Time the day before thecut-off date or meeting date.ET on 06/23/2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting:Meeting - Go to www.virtualshareholdermeeting.com/awi2019AWI2021 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically viae-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BYPHONE— PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up untilinstructions. Vote by 11:59 P.M. Eastern Time the day before thecut-off date or meeting date.ET on 06/23/2021. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ARMSTRONG WORLD INDUSTRIES, INC. MARK A. HERSHEY 2500 COLUMBIA AVENUE LANCASTER, PA 17603 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E80626-P23475 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY ARMSTRONG WORLD INDUSTRIES, INC. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: 01) Stan A. Askren 06) James C. Melville 02) Victor D. Grizzle 07) John J. Roberts 03) Tao Huang 08) Wayne R. Shurts 04) Barbara L. Loughran 09) Roy W. Templin 05) Larry S. McWilliams 10) Cherryl T. ThomasFor Withhold For All WithholdAll All Except For All To withhold authority to vote for any individual nominee(s), mark “ForFor All Except”Except and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR the following proposals:following: 1. Election of Directors Nominees 01) Stan A. Askren 02) Victor D. Grizzle 03) Tao Huang 04) Barbara L. Loughran 05) Larry S. McWilliams 06) James C. Melville 07) Wayne R. Shurts 08) Roy W. Templin 09) Cherryl T. Thomas The Board of Directors recommends you vote FOR proposals 2 and 3. 2. To ratify the selection of KPMG LLP as our independent registered public accounting firm for 2019.2021. 3. To approve, on an advisory basis, our executive compensation program.Executive Compensation Program. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. In their discretion, the proxy holders are authorized to vote on such other business as may properly come before the meeting or any postponement or adjournment thereof. For Against Abstain Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. 0000490209_1 R1.0.0.177 Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report, and Notice &and Proxy Statement are available at www.proxyvote.com. E80627-P23475www.proxyvote.com ARMSTRONG WORLD INDUSTRIES, INC. Annual Meeting of Shareholders July 11, 2019June 24, 2021 8:00 a.m.AM This proxy is solicited by the Board of Directors The undersigned hereby appoints Victor D. Grizzle and Larry S. McWilliams as proxies, each with full power of substitution, to represent and vote as designated on the reverse side, all of the common shares of Armstrong World Industries, Inc. held of record by the undersigned on April 23, 2019,19, 2021, at the Annual Meeting of Shareholders to be held on July 11, 2019June 24, 2021 at 8:00 a.m.,AM, or any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’Directors' recommendations. Continued and to be signed on reverse side 0000490209_2 R1.0.0.177