false 0001655075 0001655075 2021-11-01 2021-11-01

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 4, 2021 (November 1, 2021)

 

 

ARMSTRONG FLOORING, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-37589   47-4303305

(State or other jurisdiction

of incorporation )

 

(Commission

File No.)

 

(IRS Employer

Identification No.)

 

1770 Hempstead Road

Lancaster, Pennsylvania

  17605
(Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code: (717) 672-9611

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.0001 par value   AFI   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 


Item 1.01 Entry into a Material Definitive Agreement

Amended ABL Credit Facility

On November 1, 2021 (the “Effective Date”), Armstrong Flooring, Inc. (the “Company”), entered into a Fourth Amendment to Credit Agreement (the “Amendment”), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the “ABL Agent”), and as letter of credit issuer and as swingline lender.

The Amendment amends that certain Credit Agreement, dated as of December 31, 2018, by and among the Company, the guarantors named therein, the lenders party thereto, the letter of credit issuer, the swingline lender and the ABL Agent (as amended, restated, supplemented or otherwise modified from time to time, including by the Amendment, the “Amended ABL Credit Facility”), in order to, among other things, (i) revise the minimum Consolidated Cash Flow (as defined in the Amended Credit Facility) requirement for the fiscal quarter period ending September 30, 2021, and (ii) add a new monthly minimum availability covenant which requires the Company and its subsidiaries to maintain minimum Availability (as defined in the Amended ABL Credit Facility) of (x) $32,500,000 from the Effective Date through and including November 30, 2021, and (y) $25,000,000 from December 1, 2021 through December 31, 2021, and each calendar month period thereafter, in each case commencing on the first day of such month and ending on the last day of such month (such amendments, the “Covenant Changes”).

In addition, the Company has engaged the services of Riveron RTS, LLC (“Riveron”) to provide certain consulting services and, under the terms of the Amended ABL Credit Facility, agreed to continue to retain Riveron. In accordance with the Amendment, the Company has agreed that, no later than November 15, 2021, Riveron will deliver a report (the “Riveron Report”) to the ABL Agent that is consistent with Riveron’s agreed-upon scope of engagement in form and substance reasonably satisfactory to the ABL Agent.

The Amendment also requires the Company to deliver Borrowing Base Reports and Consolidated Borrowing Base Reports (each as defined in the Amended ABL Credit Facility) to the ABL Agent on a no less than weekly basis.

Amended Term Loan Facility

On the Effective Date, the Company entered into a First Amendment to Term Loan Agreement (the “Term Loan Amendment”), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Pathlight Capital LP, as administrative agent and as collateral agent (in such capacities, the “Term Loan Agent”).

The Term Loan Amendment amends that certain Term Loan Agreement, dated as of June 23, 2020, by and among the Company, the guarantors named therein, the lenders party thereto and the Term Loan Agent (as amended, restated, supplemented or otherwise modified from time to time, including by the Term Loan Amendment, the “Amended Term Loan Facility”). The Term Loan Amendment is substantially consistent with the Amendment and incorporated the Covenant Changes into the Amended Term Loan Facility. The Term Loan Amendment also


requires the Riveron Report to be delivered to the Term Loan Agent and for the Company to deliver a Consolidated Borrowing Base Report (as defined in the Amended Term Loan Agreement) to the Term Loan Agent on a no less than weekly basis.

The foregoing summaries of the Amendment and the Term Loan Amendment do not purport to be complete and are subject to and qualified in their entirety by reference to the Amendment and the Term Loan Amendment, copies of which are filed as Exhibits 10.1 and 10.2 hereto and are incorporated herein by reference.

 

Item 2.02

Results of Operations and Financial Condition

On November 4, 2021, Armstrong Flooring, Inc. (the “Company”) issued a press release announcing its third quarter 2021 financial results. The full text of the press release is attached hereto as Exhibit 99.1.

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing.

Section 7 – Regulation FD

Item 7.01 Regulation FD Disclosure

On November 4, 2021, the Company issued a press release announcing that it will hold a live webcast and conference call to review financial results and conduct a question-and-answer session on Friday, November 5, 2021 at 8:30 a.m. ET. The live webcast will be available in the Investors section of the Company’s website at www.armstrongflooring.com. For those unable to access the webcast, the conference call will be accessible by dialing 877-407-0789 (domestic) or 201-689-8562 (international). A replay of the conference call will be available for 90 days, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13724622.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

 

Exhibit No.

  

Description

10.1    Fourth Amendment to Credit Agreement, dated as of November 1, 2021, by and among Armstrong Flooring, Inc., as borrower, the guarantors named therein, the lender parties thereto and Bank of America, N.A., as administrative agent, collateral agent, swingline lender and letter of credit issuer.
10.2    First Amendment to Term Loan Agreement, dated as of November 1, 2021, by and among Armstrong Flooring, Inc., as borrower, the guarantors named therein, the lender parties thereto and Pathlight Capital LP, as administrative agent and collateral agent.
99.1    Press Release of Armstrong Flooring, Inc., dated November 4, 2021.
104    Cover Page Interactive Data File (formatted as inline XBRL)


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

ARMSTRONG FLOORING, INC.
By:  

/s/ Christopher S. Parisi

 

Christopher S. Parisi

 

Senior Vice President, General Counsel & Secretary

Date: November 4, 2021

Exhibit 10.1

Execution Version

FOURTH AMENDMENT TO CREDIT AGREEMENT

This FOURTH AMENDMENT TO CREDIT AGREEMENT, dated as of November 1, 2021 (this “Amendment”), is by and among BANK OF AMERICA, N.A., in its capacity as administrative agent, (in such capacity, together with its successors and permitted assigns in such capacity, the “Administrative Agent”), as Swingline Lender, as L/C Issuer, and as collateral agent (in such capacity together with its successors and permitted assigns in such capacity, the “Collateral Agent”), the Lenders under and as defined in the Existing Credit Agreement defined below party hereto (collectively, the “Consenting Lenders”), ARMSTRONG FLOORING, INC., a Delaware corporation (the “Borrower”), and the guarantors party hereto (collectively with the Borrower, the “Loan Parties”).

W I T N E S S E T H :

WHEREAS, the Administrative Agent, Swingline Lender, L/C Issuer, certain financial institutions from time to time party thereto as lenders (collectively, the “Lenders”) and the Loan Parties are parties to that certain Credit Agreement, dated December 31, 2018 (as otherwise heretofore amended, supplemented or modified, the “Existing Credit Agreement”; capitalized terms used but not defined herein shall have the meanings set forth in the Existing Credit Agreement).

WHEREAS, the Borrower has requested that the Administrative Agent, the Collateral Agent, Swingline Lender, L/C Issuer and the Lenders consent to certain amendments to the Existing Credit Agreement, as more specifically set forth herein.

WHEREAS, the Administrative Agent, the Collateral Agent Swingline Lender, L/C Issuer and the Consenting Lenders have agreed to such requests, subject to the terms and conditions of this Amendment.

WHEREAS, by this Amendment, the Administrative Agent, the Collateral Agent and the Consenting Lenders (which Consenting Lenders constitute the Required Lenders), and the Borrower desire and intend to evidence the amendments set forth herein.

NOW THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendments to Credit Agreement. Effective as of the Fourth Amendment Effective Date (as defined below), the Existing Credit Agreement is hereby amended as follows:

(a) The definition of “Availability Block” in Section 1.01 of the Existing Credit Agreement is hereby deleted in its entirety.

(b) The definition of “Availability Reserve” in Section 1.01 of the Existing Credit Agreement is amended by replacing clause (h) thereof with “[reserved]”.

(c) The first sentence and second sentence through an including clause (a) of the definition of “Eligible Inventory” in Section 1.01 of the Existing Credit Agreement are amended to read as follows (provided that no changes are made to clauses (b) through (l) of the second sentence of such definition):

““Eligible Inventory” means Inventory (other than work in process) owned by the Borrower that the Administrative Agent, in its Permitted Discretion, deems to be Eligible Inventory. Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) is a finished good or raw material, and not packaging or shipping materials, labels, samples, display items or bags;”


(d) The following terms are added to Section 1.01 of the Existing Credit Agreement in alphabetical order:

““Fourth Amendment” means that certain Fourth Amendment to Credit Agreement, dated as of the Fourth Amendment Effective Date, by and among the Administrative Agent, the Collateral Agent, Swingline Lender, L/C Issuer, the Borrower, the other Loan Parties and each Lender party thereto.

Fourth Amendment Effective Date” means November 1, 2021.”

(e) Section 6.02(b) of the Existing Credit Agreement is amended by deleting “, at all times that the minimum Availability covenant set forth on Schedule 7.11(a) is required to be tested,”.

(f) Section 6.02(c) of the Existing Credit Agreement is deleted in its entirety and replaced with the following new Section 6.02(c):

“(c) Borrowing Base Reports. No later than the third Business Day of each week and at such other times as the Administrative Agent may request, (i) a Borrowing Base Report and (ii) a Consolidated Borrowing Base Report, in each case as of the close of business of the previous week (provided that it is understood and agreed that the information contained therein with respect to Inventory may be calculated as of the most recent month-end), together with such supporting information and backup documentation as the Administrative Agent may reasonably request. All information (including calculations of Availability) in a Borrowing Base Report and Consolidated Borrowing Base Report shall be certified by the Borrower. The Administrative Agent may from time to time adjust such report (w) to reflect the Administrative Agent’s reasonable estimate of declines in value of Collateral, due to collections received in the Dominion Account or otherwise; (x) to adjust advance rates to reflect changes in dilution, quality, mix and other factors affecting Collateral; (y) to reflect adjustments made to the Term Loan Borrowing Base by the Term Loan Agent in accordance with the Term Loan Agreement; and (z) to the extent any information or calculation does not comply with this Agreement.”

(g) Article VI of the Existing Credit Agreement is amended by adding the following new Section 6.25 at the end of such article:

6.25 Engagement and Retention of Consultant. The Loan Parties shall continue to retain Riveron RTS, LLC (the “Consultant”), or any replacement thereof from time to time that is satisfactory to the Administrative Agent and engaged promptly after the resignation or dismissal of the Consultant, as a consultant pursuant to the scope of engagement previously entered into as of October 1, 2021, between the Consultant and Borrower, as amended by that certain Amendment to Engagement Letter, dated November 1, 2021 (the “Consultant Amendment to Engagement Letter” and such engagement letter, as so amended and as it may be amended, restated, supplemented or otherwise modified from time to time after the Fourth Amendment Effective Date in accordance with this terms and with the prior written consent of the Administrative Agent, not to be unreasonably withheld, the “Consultant Engagement Letter”), or a replacement scope of engagement upon substantially similar terms as the Consultant Engagement Letter or otherwise acceptable to the Administrative Agent.

 

2


(h) Schedule 7.11 to the Existing Credit Agreement is hereby amended and restated by replacing such schedule with the Schedule 7.11 attached hereto as Annex A.

2. Conditions Precedent. The amendments, consents and other agreements contained herein shall only be effective upon the satisfaction or waiver by the Administrative Agent and Consenting Lenders of each of the following conditions precedent (the date of such satisfaction or waiver, the “Fourth Amendment Effective Date”):

(a) the Administrative Agent shall have received each of the following documents or instruments in form and substance reasonably acceptable to the Administrative Agent:

(i) a copy of this Amendment duly executed by the Borrower and each other Loan Party, the Administrative Agent, the Collateral Agent and Lenders sufficient to constitute Required Lenders;

(ii) a certificate from a Responsible Officer of each Loan Party, in form and substance reasonably satisfactory to the Administrative Agent and dated as of the Fourth Amendment Effective Date, certifying that, as of the Fourth Amendment Effective Date, immediately after giving effect to the this Amendment, the Term Loan Amendment (as defined below) and the transactions contemplated hereby (the “Fourth Amendment Transactions”): (x) each such Loan Party is in good standing, (y) its organizational documents have not changed since the Third Amendment Effective Date or attaching the current organizational documents, and (z) attaching certificates of resolutions or other corporate or other organizational action as may be necessary with respect to the Fourth Amendment Transactions;

(iii) a certificate from the chief financial officer of the Borrower (or other senior officer with substantially equivalent responsibilities) certifying that the Borrower and its subsidiaries, on a consolidated basis after giving effect to the Fourth Amendment Transactions, are Solvent;

(iv) a certificate from an authorized officer of the Borrower certifying that, as of the Fourth Amendment Effective Date, immediately after giving effect to the Fourth Amendment Transactions, (A) the representations and warranties of the Borrower and each other Loan Party contained in Article V of the Credit Agreement or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (or in all respects in the case of any representation and warranty qualified by materiality or Material Adverse Effect), in each case, on and as of the Fourth Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct, or true and correct in all material respects (or in all respects in the case of any representation and warranty qualified by materiality or Material Adverse Effect), as the case may be, as of such earlier date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent consolidated statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement, and (B) no Default or Event of Default has occurred and is continuing;

 

3


(v) the Administrative Agent shall have received a Borrowing Base Report and a Consolidated Borrowing Base Report, each calculating the Borrowing Base and the Consolidated Borrowing Base, respectively, as of the Fourth Amendment Effective Date and demonstrating, among other items, Availability as of the Fourth Amendment Effective Date of at least $32,500,000;

(b) payment to the Administrative Agent, in immediately available funds for the ratable benefit of the Consenting Lenders, an amendment fee equal to 0.05% of the aggregate principal amount of Commitments of all the Consenting Lenders;

(c) payment of all fees required to be paid to the Administrative Agent and the Lenders on or before the Fourth Amendment Effective Date, and all expenses in connection with this Amendment required to be reimbursed in accordance with Section 10.04 of the Credit Agreement, in each case, to the extent invoiced or otherwise documented no later than the date that is two (2) Business Days prior to the Fourth Amendment Effective Date or, if Borrower fails to provide at least three (3) Business Days prior notice of the desired Fourth Amendment Effective Date, no later than the date that is on or before the Fourth Amendment Effective Date;

(d) no order, injunction or judgment has been entered into prohibiting the closing of the Amendment;

(e) the Administrative Agent shall have received a fully executed amendment in form and substance satisfactory to it with respect to the Term Loan Documents (the “Term Loan Amendment”), including, without limitation, written consent of the Term Loan Agent to the amendments effected hereby in accordance with Section 5.2 of the Intercreditor Agreement; and

(f) the Administrative Agent shall have received a fully executed copy of the Consultant Amendment to Engagement Letter.

3. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

4. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

5. Affirmation of Loan Parties. Each Loan Party hereby consents to the amendments and modifications to the Credit Agreement effected hereby, and confirms and agrees that, notwithstanding the effectiveness of this Amendment, each Loan Document to which such Loan Party is a party is, and the obligations of such Loan Party contained in the Credit Agreement, as amended and modified hereby, or in any other Loan Documents to which it is a party are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects, in each case as amended and modified by this Amendment. Without limiting the generality of the foregoing, the execution of this Amendment shall not constitute a novation, and the Collateral Documents and all of the Collateral described therein and Liens granted in favor of the Administrative Agent created thereunder do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents to the extent provided in the Collateral Documents and that all such Liens continue to be perfected as security for the Obligations secured thereby.

 

4


6. Representations and Warranties. In order to induce the Administrative Agent, the Collateral Agent and the Consenting Lenders to enter into this Agreement, each Loan Party represents and warrants to the Administrative Agent, the Collateral Agent and the Lenders as follows:

(a) the representations and warranties made by each Loan Party in Article V of the Existing Credit Agreement (as amended hereby and as otherwise amended, restated, supplemented or modified from time to time in accordance with its terms, the “Credit Agreement”) and in each of the other Loan Documents to which such Loan Party is a party are true and correct in all material respects (or in all respects in the case of any representation and warranty qualified by materiality or Material Adverse Effect) on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date in which case they are true and correct in all material respects (or in all respects in the case of any representation and warranty qualified by materiality or Material Adverse Effect) as of such earlier date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement will be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement;

(b) the Persons appearing as Guarantors on the signature pages to this Amendment constitute all Persons who are required to be Guarantors pursuant to the terms of the Credit Agreement and the other Loan Documents, including without limitation all Persons who became Subsidiaries or were otherwise required to become Guarantors after the Closing Date, and each of such Persons has become and remains a party to a Guaranty as a guarantor thereunder;

(c) this Amendment has been duly authorized, executed and delivered by each of the other Loan Parties party hereto and constitutes a legal, valid and binding obligation of each such party, except as may be limited by general principles of equity or by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally; and

(d) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing.

7. Reference to and Effect on the Credit Agreement and the Loan Documents.

(a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended and modified by this Amendment.

(b) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended and modified by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver or novation of any right, power or remedy of any Lender, L/C Issuer, Swing Line Lender, the Collateral Agent or the Administrative Agent under any of the Loan Documents, nor constitute a waiver or novation of any provision of any of the Loan Documents.

(d) The Administrative Agent, the Lenders and the Loan Parties agree that this Amendment shall be a Loan Document for all purposes of the Credit Agreement (as specifically amended by this Amendment) and the other Loan Documents.

8. Waiver, Modification, Etc. No provision or term of this Amendment may be modified, altered, waived, discharged or terminated orally, but only by an instrument in writing executed by the party against whom such modification, alteration, waiver, discharge or termination is sought to be enforced.

 

5


9. Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment.

10. Counterparts. This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in “pdf” or similar format by electronic mail shall be effective as delivery of a manually executed counterpart of this Amendment.

11. Release; Indemnification.

(a) Release. In further consideration of Administrative Agent’s, Collateral Agent’s and each Consenting Lender’s execution of this Amendment, the Borrower and the Guarantors, individually and on behalf of their successors (including any trustees or any debtor-in-possession acting on behalf of Borrower or a Guarantor), assigns, subsidiaries and affiliates, hereby forever release each of the Administrative Agent, Collateral Agent and the Lenders and their respective successors, assigns, parents, subsidiaries, and affiliates and their officers, employees, directors, agents and attorneys (collectively, the “Releasees”) from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions and causes of actions (whether at law or in equity), and obligations of every nature whatsoever (other than any obligations to advance Loans under and in accordance with the Credit Agreement), whether liquidated or unliquidated, whether matured or unmatured, whether fixed or contingent that Borrower or any Guarantor has or may have against the Releasees, or any of them, in each case which arise from or relate to any actions which the Releasees, or any of them, have or may have taken or omitted to take in connection with the Credit Agreement or the other Loan Documents prior to the date hereof (including with respect to the Obligations, any Collateral and any third parties liable in whole or in part for the Obligations). This provision shall survive and continue in full force and effect whether or not the Loan Parties shall satisfy all other provisions of the Credit Agreement or the other Loan Documents.

(b) Related Indemnity. The Borrower and each Guarantor hereby agree that its release of the Releasees set forth in Section 11(a) hereof shall include an obligation to indemnify and hold the Releasees, or any of them, harmless with respect to any and all liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by the Releasees, or any of them, whether direct, indirect or consequential, as a result of or arising from or relating to any proceeding by, or on behalf of any Person, including officers, directors, agents, trustees, creditors, partners or shareholders of the Borrower or any Guarantor or any parent, subsidiary or affiliate of Borrower or such Guarantor, whether threatened or initiated, asserting any claim for legal or equitable remedy under any statutes, regulation, common law principle or otherwise arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Amendment or any other document executed in connection herewith; provided, that Borrower shall not be liable for any indemnification to a Releasee to the extent that any such liability, obligation, loss, penalty, action, judgment, suit, cost, expense or disbursement results from the applicable Releasee’s gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. The foregoing indemnity shall survive the payment in full of the Obligations and the termination of the Credit Agreement and the other Loan Documents.

12. Consent to Term Loan Amendment. In accordance with Section 5.2 of the Intercreditor Agreement, each of the undersigned Consenting Lenders hereby authorizes the Administrative Agent to consent to, and the Administrative Agent hereby consents to the amendments to the Term Loan Agreement effected by, the Term Loan Amendment in the form and substance attached hereto as Exhibit A hereto.

 

6


[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

7


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

BANK OF AMERICA, N.A., as Administrative Agent
By:   /s/ William J. Wilson
  Typed Name: William J. Wilson
  Typed Title:   Senior Vice President

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

BANK OF AMERICA, N.A.,

as a Lender, L/C Issuer and Swingline Lender

By:   /s/ William J. Wilson
  Typed Name: William J. Wilson
  Typed Title:   Senior Vice President

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

JPMORGAN CHASE BANK, N.A., as a Lender
By:   /s/ Anthony Galea
  Typed Name: Anthony Galea
  Typed Title: Executive Director

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

TRUIST BANK, as a Lender
By:   /s/ JC Fanning
  Typed Name: JC Fanning
  Typed Title: Director

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

HSBC BANK USA, NATIONAL ASSOCIATION,

as a Lender

By:   /s/ Jennifer Jordan
  Typed Name: Jennifer Jordan
  Typed Title: Sr. Associate Relationship Manager

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

MANUFACTURERS AND TRADERS TRUST COMPANY, as a Lender
By:   /s/ Dylan Browdie
  Typed Name: Dylan Browdie
  Typed Title: Assistant Vice President

 

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

BORROWER:   ARMSTRONG FLOORING, INC.
  By:   

/s/ Amy P. Trojanowski

     Typed Name: Amy P. Trojanowski
     Typed Title: Senior Vice President and Chief Financial Officer

 

GUARANTOR:   AFI LICENSING LLC
  By:   

/s/ Christopher S. Parisi

     Typed Name: Christopher S. Parisi
     Typed Title: Secretary

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Signature Page


Annex A

to Fourth Amendment to Credit Agreement

Schedule 7.11

I.

(a) Minimum Availability. On and after the Fourth Amendment Effective Date, permit Availability at any time during any Measurement Period specified in the table below to be less than the Minimum Availability specified in the table below:

 

Measurement Period

   Minimum Availability  

Fourth Amendment Effective Date through and including November 30, 2021

   $ 32,500,000  

December 1, 2021 through December 31, 2021, and each calendar month period thereafter, in each case commencing on the first day of such month and ending on the last day of such month

   $ 25,000,000  

(b) Minimum Consolidated Cash Flow. From and after the fiscal quarter ending September 30, 2020, at all times when the Outstanding Amount of all Revolving Loans and Swingline Loans exceeds zero Dollars ($0), the Loan Parties shall not permit Consolidated Cash Flow as of each Measurement Period set forth in the table below to be less than the amount set forth opposite such Measurement Period in the table below:

 

Measurement Period ending

   Minimum Consolidated Cash Flow  

September 30, 2020

   $ (39,345,000

December 31, 2020

   $ (54,450,000

March 31, 2021

   $ (71,925,000

June 30, 2021

   $ (70,600,000

September 30, 2021

   $ (84,000,000

December 31, 2021

   $ (67,800,000

March 31, 2022

   $ (52,900,000

June 30, 2022

   $ (35,575,000

September 30, 2022

   $ (22,300,000

December 31, 2022

   $ (10,800,000

II. No later than November 15, 2021, the Consultant shall deliver to Administrative Agent a report on its review of cash flows, projections and other matters covered by its scope of engagement in form and substance reasonably satisfactory to the Administrative Agent.

 

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Exhibit A


III. No later than December 31, 2021, or such later date as the Administrative Agent may agree in its sole and absolute discretion so long as the Term Loan Agent also consents to such extension and no Event of Default has occurred and is then continuing, the Administrative Agent, the Lenders, the Loan Parties, the Term Loan Agent and Term Loan Lenders shall have entered into amendments to the Loan Documents and the Term Loan Documents, as applicable, addressing, among other things, modifications to the financial covenants set forth in the Agreement and the Term Loan Agreement for future periods and addressing the Borrowers’ liquidity needs, all such amendments to be in form and substance acceptable to the Administrative Agent and Lenders in their sole and absolute discretion.

 

 

Armstrong Flooring, Inc.

Fourth Amendment to Credit Agreement

Exhibit A

Exhibit 10.2

EXECUTION VERSION

FIRST AMENDMENT TO TERM LOAN AGREEMENT

This FIRST AMENDMENT TO TERM LOAN AGREEMENT, dated as of November 1, 2021 (this “Amendment”), is by and among PATHLIGHT CAPITAL LP, in its capacity as administrative agent (in such capacity, together with its successors and permitted assigns in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity together with its successors and permitted assigns in such capacity, the “Collateral Agent”), the Lenders under and as defined in the Existing Credit Agreement defined below party hereto (collectively, the “Consenting Lenders”), ARMSTRONG FLOORING, INC., a Delaware corporation (the “Borrower”), and the guarantors party hereto (collectively with the Borrower, the “Loan Parties”).

W I T N E S S E T H :

WHEREAS, the Administrative Agent, certain financial institutions from time to time party thereto as lenders (collectively, the “Lenders”) and the Loan Parties are parties to that certain Term Loan Agreement, dated June 23, 2020 (as otherwise heretofore amended, supplemented or modified, the “Existing Credit Agreement”; capitalized terms used but not defined herein shall have the meanings set forth in the Existing Credit Agreement).

WHEREAS, the Borrower has requested that the Administrative Agent and the Lenders consent to certain amendments to the Existing Credit Agreement, as more specifically set forth herein.

WHEREAS, the Administrative Agent and the Consenting Lenders have agreed to such requests, subject to the terms and conditions of this Amendment.

WHEREAS, by this Amendment, the Administrative Agent, the Collateral Agent and the Consenting Lenders (which Consenting Lenders constitute the Required Lenders), and the Borrower desire and intend to evidence the amendments set forth herein.

NOW THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendments to Credit Agreement. Effective as of the First Amendment Effective Date (as defined below), the Existing Credit Agreement is hereby amended as follows:

(a) The following terms are added to Section 1.01 of the Existing Credit Agreement in alphabetical order:

First Amendment” means that certain First Amendment to Term Loan Agreement, dated as of the First Amendment Effective Date, by and among the Administrative Agent, the Collateral Agent, the Borrower, the other Loan Parties and each Lender party thereto.

First Amendment Effective Date” means November 1, 2021.”

(b) The definition of “Fee Letter” as set forth in Section 1.01 of the Existing Credit Agreement is amended so that it reads, in its entirety, as follows:

Fee Letter” means the Amended and Restated Fee Letter dated as of the First Amendment Effective Date, between the Borrower and the Administrative Agent.

 

1


(c) Section 6.02(c) of the Existing Credit Agreement is deleted in its entirety and replaced with the following new Section 6.02(c):

“(c) Consolidated Borrowing Base Reports. No later than the third Business Day of each week and at such other times as the Administrative Agent may request, a Consolidated Borrowing Base Report as of the close of business of the previous week (provided that it is understood and agreed that the information contained therein with respect to Inventory may be calculated as of the most recent month-end), together with a true and complete copy of the ABL Borrowing Base Report for such period and such supporting information and backup documentation as the Administrative Agent may reasonably request. All information (including all calculations of Availability) in a Consolidated Borrowing Base Report shall be certified by the Borrower. With respect to Eligible Real Property and Eligible Machinery and Equipment included in the Term Loan Borrowing Base, the Administrative Agent may from time to time adjust such report (a) to reflect the Administrative Agent’s reasonable estimate of declines in value of such Collateral; and (b) to the extent any information or calculation does not comply with this Agreement.”

(d) Schedule 7.11 to the Existing Credit Agreement is hereby amended and restated by replacing such schedule with the Schedule 7.11 attached hereto as Annex A.

2. Conditions Precedent. The amendments, consents and other agreements contained herein shall only be effective upon the satisfaction or waiver by the Administrative Agent and Consenting Lenders of each of the following conditions precedent (the date of such satisfaction or waiver, the “First Amendment Effective Date”):

(a) the Administrative Agent shall have received each of the following documents or instruments in form and substance reasonably acceptable to the Administrative Agent:

(i) a copy of this Amendment duly executed by the Borrower and each other Loan Party, the Administrative Agent, the Collateral Agent and Lenders sufficient to constitute Required Lenders;

(ii) a certificate from a Responsible Officer of each Loan Party, in form and substance reasonably satisfactory to the Administrative Agent and dated as of the First Amendment Effective Date, certifying that, as of the First Amendment Effective Date, immediately after giving effect to the this Amendment, the ABL Amendment (as defined below) and the transactions contemplated hereby (the “First Amendment Transactions”): (x) each such Loan Party is in good standing, (y) its organizational documents have not changed since the Closing Date or attaching the current organizational documents, and (z) attaching certificates of resolutions or other corporate or other organizational action as may be necessary with respect to the First Amendment Transactions;

(iii) a certificate from the chief financial officer of the Borrower (or other senior officer with substantially equivalent responsibilities) certifying that the Borrower and its subsidiaries, on a consolidated basis after giving effect to the First Amendment Transactions, are Solvent;

(iv) a certificate from an authorized officer of the Borrower certifying that, as of the First Amendment Effective Date, immediately after giving effect to the First Amendment Transactions, (A) the representations and warranties of the Borrower and each other Loan Party contained in Article V of the Credit Agreement (as defined below) or any

 

2


other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects (or in all respects in the case of any representation and warranty qualified by materiality or Material Adverse Effect), in each case, on and as of the First Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct, or true and correct in all material respects (or in all respects in the case of any representation and warranty qualified by materiality or Material Adverse Effect), as the case may be, as of such earlier date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement shall be deemed to refer to the most recent consolidated statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement, and (B) no Default or Event of Default has occurred and is continuing;

(v) the Administrative Agent shall have received an ABL Borrowing Base Report and a Consolidated Borrowing Base Report, calculating the ABL Borrowing Base and the Term Loan Borrowing Base as of the First Amendment Effective Date and demonstrating, among other items, Availability as of the First Amendment Effective Date of at least $32,500,000;

(vi) the Administrative Agent and the Borrower shall have entered into the Fee Letter, which shall be in form and substance satisfactory to the Administrative Agent;

(b) payment to the Administrative Agent in immediately available funds, for the ratable benefit of the Consenting Lenders, an amendment fee in the amount of $300,000;

(c) payment of all fees required to be paid to the Administrative Agent and the Lenders on or before the First Amendment Effective Date, and all expenses in connection with this Amendment required to be reimbursed in accordance with Section 11.04 of the Credit Agreement, in each case, to the extent invoiced or otherwise documented no later than the date that is two (2) Business Days prior to the First Amendment Effective Date or, if Borrower fails to provide at least three (3) Business Days prior notice of the desired First Amendment Effective Date, no later than the date that is on or before the First Amendment Effective Date;

(d) no order, injunction or judgment has been entered into prohibiting the closing of the Amendment;

(e) the Administrative Agent shall have received a fully executed amendment in form and substance satisfactory to it with respect to the ABL Documents (the “ABL Amendment”), including, without limitation, written consent of the ABL Agent to the amendments effected hereby in accordance with Section 5.2 of the Intercreditor Agreement; and

(f) the Administrative Agent shall have received a fully executed copy of the Consultant Amendment to Engagement Letter.

3. Consultant. Each Loan Party agrees that the Loan Parties shall (a) continue to retain Riveron RTS, LLC (the “Consultant”), or any replacement thereof from time to time that is satisfactory to the Administrative Agent and engaged promptly after the resignation or dismissal of the Consultant, as a consultant pursuant to the scope of engagement previously entered into as of October 1, 2021, between the Consultant and Borrower, as amended by that certain Amendment to Engagement Letter, dated October 30, 2021 (the “Consultant Amendment to Engagement Letter” and such engagement letter, as so amended and as it may be amended, restated, supplemented or otherwise modified from time to time after the First

 

3


Amendment Effective Date in accordance with its terms and with the prior written consent of the Administrative Agent, not to be unreasonably withheld, the “Consultant Engagement Letter”), or a replacement scope of engagement upon substantially similar terms or otherwise acceptable to the Administrative Agent and (b) cause the Consultant to communicate directly with the Administrative Agent and the Lenders at such times and regarding such business and financial matters related to the Loan Parties as the Administrative Agent and the Lenders shall reasonably request.

4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

5. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

6. Affirmation of Loan Parties. Each Loan Party hereby consents to the amendments and modifications to the Credit Agreement and the Fee Letter effected hereby, and confirms and agrees that, notwithstanding the effectiveness of this Amendment, each Loan Document to which such Loan Party is a party is, and the obligations of such Loan Party contained in the Credit Agreement and the Fee Letter, each as amended and modified hereby, or in any other Loan Documents to which it is a party are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects, in each case as amended and modified by this Amendment. Without limiting the generality of the foregoing, the execution of this Amendment shall not constitute a novation, and the Collateral Documents and all of the Collateral described therein and Liens granted in favor of the Administrative Agent created thereunder do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents to the extent provided in the Collateral Documents and that all such Liens continue to be perfected as security for the Obligations secured thereby.

7. Representations and Warranties. In order to induce the Administrative Agent, the Collateral Agent and the Consenting Lenders to enter into this Agreement, each Loan Party represents and warrants to the Administrative Agent, the Collateral Agent and the Lenders as follows:

(a) the representations and warranties made by each Loan Party in Article V of the Existing Credit Agreement (as amended hereby and as otherwise amended, restated, supplemented or modified from time to time in accordance with its terms, the “Credit Agreement”) and in each of the other Loan Documents to which such Loan Party is a party are true and correct in all material respects on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date in which case they are true and correct in all material respects as of such earlier date, and except that the representations and warranties contained in subsections (a) and (b) of Section 5.05 of the Credit Agreement will be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01 of the Credit Agreement;

(b) the Persons appearing as Guarantors on the signature pages to this Amendment constitute all Persons who are required to be Guarantors pursuant to the terms of the Credit Agreement and the other Loan Documents, including without limitation all Persons who became Subsidiaries or were otherwise required to become Guarantors after the Closing Date, and each of such Persons has become and remains a party to a Guaranty as a guarantor thereunder;

(c) this Amendment has been duly authorized, executed and delivered by each of the other Loan Parties party hereto and constitutes a legal, valid and binding obligation of each such party, except as may be limited by general principles of equity or by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally; and

 

4


(d) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing.

8. Reference to and Effect on the Credit Agreement and the Loan Documents.

(a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended and modified by this Amendment.

(b) The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended and modified by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver or novation of any right, power or remedy of any Lender, the Collateral Agent or the Administrative Agent under any of the Loan Documents, nor constitute a waiver or novation of any provision of any of the Loan Documents.

(d) The Administrative Agent, the Lenders and the Loan Parties agree that this Amendment shall be a Loan Document for all purposes of the Credit Agreement and the other Loan Documents.

9. Waiver, Modification, Etc. No provision or term of this Amendment may be modified, altered, waived, discharged or terminated orally, but only by an instrument in writing executed by the party against whom such modification, alteration, waiver, discharge or termination is sought to be enforced.

10. Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment.

11. Counterparts. This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or in “pdf” or similar format by electronic mail shall be effective as delivery of a manually executed counterpart of this Amendment.

12. Release; Indemnification.

(a) Release. In further consideration of Administrative Agent’s, Collateral Agent’s and each Consenting Lender’s execution of this Amendment, the Borrower and the Guarantors, individually and on behalf of their successors (including any trustees or any debtor-in-possession acting on behalf of Borrower or a Guarantor), assigns, subsidiaries and affiliates, hereby forever release each of the Administrative Agent, Collateral Agent and the Lenders and their respective successors, assigns, parents, subsidiaries, and affiliates and their officers, employees, directors, agents and attorneys (collectively, the “Releasees”) from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions and causes of actions (whether at law or in equity), and obligations of every nature whatsoever (other than any obligations to advance loans under and in accordance with the Credit Agreement), whether liquidated or unliquidated, whether matured or unmatured, whether fixed or contingent that Borrower or any Guarantor has or may have against the Releasees, or any of them, in each case which arise from or relate to any actions which the Releasees, or any of them, have or may have taken

 

5


or omitted to take in connection with the Credit Agreement or the other Loan Documents prior to the date hereof (including with respect to the Obligations, any Collateral and any third parties liable in whole or in part for the Obligations). This provision shall survive and continue in full force and effect whether or not the Loan Parties shall satisfy all other provisions of the Credit Agreement or the other Loan Documents.

(b) Related Indemnity. The Borrower and each Guarantor hereby agree that its release of the Releasees set forth in Section 12(a) hereof shall include an obligation to indemnify and hold the Releasees, or any of them, harmless with respect to any and all liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by the Releasees, or any of them, whether direct, indirect or consequential, as a result of or arising from or relating to any proceeding by, or on behalf of any Person, including officers, directors, agents, trustees, creditors, partners or shareholders of the Borrower or any Guarantor or any parent, subsidiary or affiliate of Borrower or such Guarantor, whether threatened or initiated, asserting any claim for legal or equitable remedy under any statutes, regulation, common law principle or otherwise arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Amendment or any other document executed in connection herewith; provided, that Borrower shall not be liable for any indemnification to a Releasee to the extent that any such liability, obligation, loss, penalty, action, judgment, suit, cost, expense or disbursement results from the applicable Releasee’s gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. The foregoing indemnity shall survive the payment in full of the Obligations and the termination of the Credit Agreement and the other Loan Documents.

13. Consent to ABL Amendment. In accordance with Section 5.2 of the Intercreditor Agreement, each of the undersigned Consenting Lenders hereby authorizes the Administrative Agent to consent to, and the Administrative Agent hereby consents to. the amendments to the ABL Credit Agreement effected by the ABL Amendment in the form and substance attached as Exhibit A hereto.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

6


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

PATHLIGHT CAPITAL LP,
as Administrative Agent and Collateral Agent
By:   Pathlight GP LLC, its General Partner

 

By:   /s/ Katie Hendricks
  Typed Name: Katie Hendricks
  Typed Title: Managing Director

Armstrong Flooring, Inc.

First Amendment to Term Loan Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

PATHLIGHT CAPITAL FUND I LP ,
as a Lender
By:   Pathlight Partners GP LLC, its General Partner

 

By:   /s/ Katie Hendricks
  Typed Name: Katie Hendricks
  Typed Title: Managing Director

Armstrong Flooring, Inc.

First Amendment to Term Loan Agreement

Signature Page


IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their authorized officers as of the day and year first above written.

 

BORROWER:     ARMSTRONG FLOORING, INC.
    By:   /s/ Amy P. Trojanowski
      Typed Name: Amy P. Trojanowski
      Typed Title: Senior Vice President and Chief Financial Officer
GUARANTOR:     AFI LICENSING LLC
    By:   /s/ Christopher S. Parisi
      Typed Name: Christopher S. Parisi
      Typed Title: Secretary

Armstrong Flooring, Inc.

First Amendment to Term Loan Agreement

Signature Page


Annex A

Schedule 7.11

I.

(a) Minimum Availability. On and after the First Amendment Effective Date, Borrowers shall not permit Availability at any time during any Measurement Period specified in the table below to be less than the Minimum Availability specified in the table below:

 

Measurement Period    Minimum Availability
First Amendment Effective Date through and including November 30, 2021    $32,500,000
December 1, 2021 through December 31, 2021, and each calendar month period thereafter, in each case commencing on the first day of such month and ending on the last day of such month    $25,000,000

(b) Minimum Consolidated Cash Flow. At all times when the Outstanding Amount of all Revolving Loans and Swingline Loans exceeds zero Dollars ($0), the Loan Parties shall not permit Consolidated Cash Flow as of each Measurement Period set forth in the table below to be less than the amount set forth opposite such Measurement Period in the table below:

 

Measurement Period ending    Minimum Consolidated
Cash Flow
 

September 30, 2020

   $ (39,345,000

December 31, 2020

   $ (54,450,000

March 31, 2021

   $ (71,925,000

June 30, 2021

   $ (70,600,000

September 30, 2021

   $ (84,000,000

December 31, 2021

   $ (67,800,000

March 31, 2022

   $ (52,900,000

June 30, 2022

   $ (35,575,000

September 30, 2022

   $ (22,300,000

December 31, 2022

   $ (10,800,000

II. No later than November 15, 2021, Riveron RTS, LLC shall deliver to Administrative Agent a report on its review of cash flows, projections and other matters covered by its scope of engagement in form and substance reasonably satisfactory to the Administrative Agent.

III. No later than December 31, 2021, or such later date as the Administrative Agent may agree in its sole and absolute discretion so long as the ABL Agent also consents to such extension and no Event of Default has occurred and is then continuing, the Administrative Agent, the Lenders, the Loan Parties, the ABL Agent and ABL Lenders shall have entered into amendments to the Loan Documents and the ABL Loan Documents, as applicable, addressing, among other things, modifications to the financial covenants set forth in the Agreement and the ABL Credit Agreement for future periods and addressing the Borrowers’ liquidity needs, all such amendments to be in form and substance acceptable to the Administrative Agent and Lenders in their sole and absolute discretion.

Exhibit 99.1

ARMSTRONG FLOORING REPORTS THIRD QUARTER 2021 RESULTS

Third Quarter 2021 Highlights

 

   

Net sales of $168.5 million

 

   

Net loss of $29.7 million

 

   

Adjusted EBITDA loss of $17.9 million

LANCASTER, Pa – November 4, 2021. Armstrong Flooring, Inc. (NYSE:AFI) (“Armstrong Flooring” or the “Company”) a leader in the design and manufacture of innovative flooring solutions, today reported financial results for the third quarter ended September 30, 2021.

Michel Vermette, President and Chief Executive Officer, commented, “During the third quarter we were able to grow our sales by approximately 8% year-over-year, and we continue to see strong demand for our products, carrying an order backlog of approximately $67 million into the fourth quarter. However, we experienced further supply chain disruptions and inflationary pressures that significantly impacted our profitability. While we are disappointed with our results, we are proactively taking measures to address these issues. To that point, we followed-up on our August price increase by announcing the largest set of comprehensive pricing actions in our history, which became effective November 1st. Additionally, we curtailed our capital expenditures and planned SG&A spend in the third quarter and have taken actions to continue to reduce this spend in the near term. Finally, we are continuing to work to address the disruptions to our supply chain and are expecting a large volume of incoming sourced material in the fourth quarter to help address our backlog and support our go-to-market transformation.”

Amy Trojanowski, Chief Financial Officer, stated, “As announced in our filings with the U.S. Securities and Exchange Commission today, we negotiated amendments to our Credit and Term Loan facilities, which will provide us financial covenant relief through at least December 31, 2021, and which will allow us to work with our lenders to evaluate options for long-term relief. We are in on-going discussions with our lenders and expect to make additional comments concerning these discussions before the end of this year. During the quarter, we took a concerted look at our Transformation Plan initiatives, electing to postpone certain marketing and merchandising activities, reducing planned SG&A in the quarter, and balancing this external spend with long-term strategic goals. In October we announced a temporary furlough and further headcount reductions which are expected to result in approximately $4 million of cost savings on a go-forward basis. These initiatives, along with our recently announced pricing actions, are designed to improve our financial position in the near-term.”

Mr. Vermette, added, “We are balancing these near-term initiatives with the long-term strategic goals of our multi-year Transformation Plan to expand our customer reach, simplify our portfolio and operations, and strengthen our capabilities. We are pleased to have an established direct residential salesforce and to have launched several new products that have been well received by our customers and the market. Looking ahead, our focus into 2022 is to capture the return on these investments while addressing recent financial obstacles and continuing to optimize our cost structure.”


Third Quarter 2021 Results

 

     Three Months Ended September 30,  

(Dollars in millions except per share data)

   2021     2020     Change  

Net sales

   $ 168.5     $ 156.6     7.6

Operating income (loss)

     (28.8     (10.1     185.1

Net income (loss)

     (29.7     (11.7     153.8

Diluted earnings (loss) per share

   $ (1.34   $ (0.53     N/M  

Adjusted EBITDA

     (17.9     2.8     N/M  

Adjusted EBITDA margin

     (10.6 )%      1.8     N/M  

Adjusted net (loss)

     (31.0     (11.3     N/M  

Adjusted diluted (loss) per share

     (1.40     (0.51     N/M  

Net sales in the third quarter increased 7.6% to $168.5 million compared to $156.6 million in the third quarter of 2020, reflecting growth in the Company’s North American, China, and Australian business. In North America, recent pricing initiatives and favorable product mix offset slower supply chain related end-of-quarter volumes in Commercial and Residential channels, while sales recovery from the pandemic drove improved results in the Company’s China and Australian businesses.

Operating loss in the third quarter was $28.8 million compared to a loss of $10.1 million in the third quarter of 2020, primarily the result of cumulative inflation in our product costs along with higher domestic and ocean freight, which continued to outpace pricing actions resulting in lower gross profit compared to the prior year. Third quarter operating results were hampered by an additional $21 million of inflation when compared to the third quarter of 2020, with pricing initiatives serving to offset approximately 43% of these costs. Selling, general, and administrative expenses were $41.7 million for the quarter, versus $37.7 million in the third quarter 2020, with the increase reflective of more normalized spend versus pandemic levels in the prior year. Year-over-year increases were mainly attributable to $3.6 million in higher cost associated with salaries, benefits and normalized travel for our expanded sales force and higher marketing and merchandising expenses associated with our change in go-to-market, $2.5 million in normalized corporate support expenses, partially offset by $2.1 million of lower IT and consulting spend, along with the benefits of lower facility costs associated with the Company’s headquarter relocation completed in the first half of 2021.

Net loss in the third quarter of 2021 was $29.7 million, or diluted loss per share of $1.34, compared to a net loss of $11.7 million, or diluted loss per share of $0.53, in the third quarter of 2020. Adjusted net loss was $31.0 million, or adjusted diluted loss per share of $1.40, compared to an adjusted net loss of $11.3 million, or adjusted diluted loss per share of $0.51, in the prior year quarter.

Third quarter 2021 adjusted EBITDA was a loss of $17.9 million, compared to adjusted EBITDA of $2.8 million in the prior year quarter. The difference in adjusted EBITDA was primarily due to higher input costs, driven by the inflationary impacts of both raw materials and shipping costs, along with higher selling, general & administrative expenses in 2021, as well as lower operating expenses in the third quarter 2020, due to the COVID-19 related environment.

Liquidity and Capital Resources Update

At September 30, 2021, the Company had total liquidity of approximately $76.8 million including $14.9 million of cash plus availability under its credit facilities. The Company’s Net Debt on September 30, 2021, was $59.2 million.


Webcast and Conference Call

The Company will hold a live webcast and conference call to review financial results and conduct a question-and-answer session on Friday, November 5, 2021 at 8:30 a.m. ET. The live webcast will be available in the Investors section of the Company’s website at www.armstrongflooring.com. For those unable to access the webcast, the conference call will be accessible by dialing 877-407-0789 (domestic) or 201-689-8562 (international). A replay of the conference call will be available for 90 days, by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13724622.

About Armstrong Flooring

Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the design and manufacture of innovative flooring solutions that inspire beauty wherever your life happens. Headquartered in Lancaster, Pennsylvania, Armstrong Flooring continually builds on its resilient, 150-year legacy by delivering on its mission to create a stronger future for customers through adaptive and inventive solutions. The company safely and responsibly operates seven manufacturing facilities globally, working to provide the highest levels of service, quality, and innovation to ensure it remains as strong and vital as its 150-year heritage. Learn more www.armstrongflooring.com.

Forward Looking Statements

Disclosures in this release and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding discussions with our lenders regarding financial covenant relief under our credit and term loan facilities. Those statements provide our future expectations or forecasts and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,” “will,” “would,” “could,” “should,” “seek,” and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward-looking statements. A more detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those projected, anticipated, or implied is included in our reports filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.

Contact Information

Investors:

Matt McColgan

Treasurer & Head of Investor Relations

ir@armstrongflooring.com    

Media:

Alison van Harskamp

Director, Corporate Communications

communications@armstrongflooring.com


Armstrong Flooring, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

(In millions, except per share data)

   2021     2020     2021     2020  

Net sales

   $ 168.5   $ 156.6   $ 485.5   $ 440.9

Cost of goods sold

     155.6     129.0     431.5     365.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     12.9     27.6     54.0     75.6

Selling, general and administrative expenses

     41.7     37.7     119.3     104.6

Gain on sale of property

     —         —         (46.0     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (28.8     (10.1     (19.3     (29.0

Interest expense

     2.6     2.8     8.9     4.6

Other expense (income), net

     (2.3     (1.5     (6.7     (2.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (29.1     (11.4     (21.5     (31.2

Income tax expense (benefit)

     0.6     0.3     0.5     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (29.7   $ (11.7   $ (22.0   $ (31.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per share of common stock:

        

Basic earnings (loss) per share of common stock

   $ (1.34   $ (0.53   $ (1.00   $ (1.42

Diluted earnings (loss) earnings per share of common stock:

 

Diluted earnings (loss) per share of common stock

   $ (1.34   $ (0.53   $ (1.00   $ (1.42


Armstrong Flooring, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

 

(In millions)

   September 30,
2021
    December 31,
2020
 
Assets     

Current assets:

    

Cash and cash equivalents

   $ 14.9   $ 13.7

Accounts and notes receivable, net

     47.8     43.0

Inventories, net

     128.6     122.9

Prepaid expenses and other current assets

     20.1     12.9

Assets held-for-sale

     —         17.8
  

 

 

   

 

 

 

Total current assets

     211.4     210.3

Property, plant and equipment, net

     233.7     246.9

Operating lease assets

     18.9     8.5

Intangible assets, net

     14.0     19.0

Deferred income taxes

     4.4     4.4

Other noncurrent assets

     11.5     4.4
  

 

 

   

 

 

 

Total assets

   $ 493.9   $ 493.5
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Current liabilities:

    

Short-term debt

   $ 5.9   $ 5.5

Current installments of long-term debt (a)

     67.3     2.9

Trade account payables

     89.2     78.5

Accrued payroll and employee costs

     18.3     14.8

Current operating lease liabilities

     2.7     2.7

Other accrued expenses

     21.1     17.7
  

 

 

   

 

 

 

Total current liabilities

     204.5     122.1

Long-term debt (a)

     0.9     71.4

Noncurrent operating lease liabilities

     17.2     5.8

Postretirement benefit liabilities

     54.2     55.6

Pension benefit liabilities

     4.5     4.6

Deferred income taxes

     1.5     2.4

Other long-term liabilities

     7.7     9.0
  

 

 

   

 

 

 

Total liabilities

     290.5     270.9
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity:

    

Common stock

     —         —    

Preferred stock

     —         —    

Treasury stock

     (85.8     (87.1

Additional paid-in capital

     678.0     677.4

Accumulated deficit

     (330.4     (308.4

Accumulated other comprehensive (loss)

     (58.4     (59.3
  

 

 

   

 

 

 

Total stockholders’ equity

     203.4     222.6
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 493.9   $ 493.5
  

 

 

   

 

 

 

 

(a)

Net of unamortized debt issuance costs. The Company has reclassified certain long-term debt to current at September 30, 2021.


Armstrong Flooring, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

 

     Three Month Ended
September 30,
    Nine Months Ended
September 30,
 

(In millions)

   2021     2020     2021     2020  

Cash flows from operating activities:

        

Net income (loss)

   $ (29.7   $ (11.7   $ (22.0   $ (31.2

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

 

Depreciation and amortization

     10.3     11.1     33.3     32.0

Inventory write down

     —         —         1.2     —    

Deferred income taxes

     0.2     (0.3     (0.5     (0.9

Stock-based compensation expense

     0.6     0.7     2.0     2.0

Gain on sale of property

     —         —         (46.0     —    

Gain from long-term disability plan change

     —         —         —         (1.1

U.S. pension expense (income)

     (1.8     0.9     (5.3     2.8

Other non-cash adjustments, net

     0.5     0.1     0.8     0.6

Changes in operating assets and liabilities:

        

Receivables

     3.3     1.5     (10.3     (7.7

Insurance receivable

     3.8     —         3.8     —    

Inventories

     (5.2     (7.0     (7.4     (18.0

Accounts payable and accrued expenses

     18.7     (4.2     24.4     11.2

Insurance liability

     (3.8     —         (3.8     —    

Income taxes payable and receivable

     —         —         —         —    

Other assets and liabilities

     (5.8     (0.5     (10.8     (6.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) operating activities

     (8.9     (9.4     (40.6     (16.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Purchases of property, plant and equipment

     (5.0     (4.3     (16.1     (15.2

Proceeds from sale of assets

     —         0.1     65.4     0.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) investing activities

     (5.0     (4.2     49.3     (15.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Proceeds from revolving credit facility

     20.8     1.9     70.1     43.1

Payments on revolving credit facility

     (5.3     —         (55.4     (79.2

Issuance of long-term debt

     —         —         0.2     70.0

Financing costs

     —         (0.5     —         (7.4

Payments on long-term debt

     (1.0     (0.1     (22.1     (0.2

Value of shares withheld related to employee tax withholding

     (0.1     —         (0.2     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used for) financing activities

     14.4     1.3     (7.4     26.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (0.2     0.4     (0.1     0.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     0.3     (11.9     1.2     (4.9

Cash and cash equivalents at beginning of year

     14.6     34.1     13.7     27.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 14.9   $ 22.2   $ 14.9   $ 22.2
  

 

 

   

 

 

   

 

 

   

 

 

 


Armstrong Flooring, Inc. and Subsidiaries

Reconciliation of Free Cash Flow to Net Cash Provided by (Used for) Operating Activities (unaudited)

 

     Three Month Ended
September 30,
    Nine Months Ended
September 30,
 

(In millions)

   2021     2020     2021     2020  

Net cash provided by (used for) operating activities

   $ (8.9   $ (9.4   $ (40.6   $ (16.3

Less: Capital expenditures

     (5.0     (4.3     (16.1     (15.2

Add: Proceeds from asset sales

     —         0.1     65.4     0.1
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ (13.9   $ (13.6   $ 8.7   $ (31.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow is a non-GAAP financial measure and consists of Net cash provided by (used for) operating activities less capital expenditures net of proceeds from asset sales. The Company’s management believes Free cash flow is meaningful to investors because management reviews Free cash flow in assessing and evaluating performance. However, this measure should be considered in addition to, rather than a substitute for Cash flows provided by (used for) operating activities provided in accordance with GAAP. The Company’s method of calculating Free cash flow may differ from methods used by other companies and, as a result, Free cash flow may not be comparable to other similarly titled measures disclosed by other companies.


Armstrong Flooring, Inc. and Subsidiaries

Reconciliation of Net Debt to Total Debt Outstanding (unaudited)

 

(In millions)

   September 30,
2021
     December 31,
2020
 

Total debt outstanding:

     

Short-term debt

   $ 5.9    $ 5.5

Current installments of long-term debt (a)

     67.3      2.9

Long-term debt (a)

     0.9      71.4
  

 

 

    

 

 

 

Total debt outstanding

     74.1      79.8

Less: Cash and cash equivalents

     14.9      13.7
  

 

 

    

 

 

 

Net debt

   $ 59.2    $ 66.1
  

 

 

    

 

 

 

 

(a)

Net of unamortized debt issuance costs. The Company has reclassified certain long-term debt to current at September 30, 2021.

Net debt is a non-GAAP financial measure and consists of total debt outstanding reduced by cash and cash equivalents. The Company‘s management believes Net debt is meaningful to investors because management reviews Net debt in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for total debt outstanding in accordance with GAAP. The Company’s method of calculating Net debt may differ from methods used by other companies and, as a result, Net debt may not be comparable to other similarly titled measures disclosed by other companies.


Armstrong Flooring, Inc. and Subsidiaries

Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss) (unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

(In millions, except per share data)

   2021     2020     2021     2020  

Net income (loss)

   $ (29.7   $ (11.7   $ (22.0   $ (31.2

Add-back (deduct) business transformation items:

        

Site exit costs

     0.2     —         1.0     —    

Legacy legal matter

     0.2     —         0.2     —    

Additional costs related to business transformation initiatives

     —         1.5     —         1.9

Gain on sale of South Gate property

     —         —         (46.0     —    

Canadian Pension Settlement Charge

     —         —         0.2     —    

U.S. Pension expense

     0.2     0.6     0.7     1.9

Other (income) expense, net

     (2.3     (1.5     (6.7     (2.4

Tax impact of adjustments (at statutory rate)

     0.4     (0.2     12.7     (0.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income (loss)

   $ (31.0   $ (11.3   $ (59.9   $ (30.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted diluted earnings (loss) per share

   $ (1.40   $ (0.51   $ (2.73   $ (1.38
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income (loss) is a non-GAAP financial measures and consists of Net income (loss) adjusted to remove the impact of business transformation items, U.S. pension expense, other (income) expense, net; and adjust such items for the related tax impacts. Adjusted diluted earnings (loss) per share is a non-GAAP financial measure and consists of Adjusted net income (loss) divided by weighted average diluted shares outstanding for the corresponding period. The Company’s management believes Adjusted net income (loss) and Adjusted diluted earnings (loss) per share are meaningful to investors because management reviews Adjusted net income (loss) and Adjusted diluted earnings (loss) per share in assessing and evaluating performance. However, these measures should be considered in addition to, rather than a substitute for Net income (loss) and Diluted earnings (loss) per share provided in accordance with GAAP. The Company’s method of calculating Adjusted net income (loss) and Adjusted diluted earnings (loss) per share may differ from methods used by other companies and, as a result, Adjusted net income (loss) and Adjusted diluted earnings (loss) per share may not be comparable to other similarly titled measures disclosed by other companies.


Armstrong Flooring, Inc. and Subsidiaries

Reconciliation of Adjusted EBITDA to Net Income (Loss) (unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

(In millions)

   2021     2020     2021     2020  

Net income (loss)

   $ (29.7   $ (11.7   $ (22.0   $ (31.2

Add-back (deduct):

        

Income tax expense (benefit)

     0.6     0.3     0.5     —    

Other (income) expense, net

     (2.3     (1.5     (6.7     (2.4

Interest expense

     2.6     2.8     8.9     4.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss)

     (28.8     (10.1     (19.3     (29.0

Add-back: Depreciation and amortization expense

     10.3     11.1     33.3     32.0

Add-back: U.S. Pension expense

     0.2     0.6     0.7     1.9

Add-back (deduct) Business transformation items:

 

Site exit costs

     0.2     —         1.0     —    

Legacy legal matter

     0.2     —         0.2     —    

Additional costs related to business transformation initiatives

     —         1.2     1.2     3.1

Gain on sale of South Gate property

     —         —         (46.0     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (17.9   $ 2.8   $ (28.9   $ 8.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA is a non-GAAP financial measure and consists of Net income (loss) adjusted to remove the impact of income tax expense (benefit), other (income) expense, interest expense, depreciation and amortization expense, U.S. pension expense and business transformation items. The Company‘s management believes Adjusted EBITDA is meaningful to investors because management reviews Adjusted EBITDA in assessing and evaluating performance. However, this measure should be considered in addition to, rather than as a substitute for Net income (loss) provided in accordance with GAAP. The Company’s method of calculating Adjusted EBITDA may differ from methods used by other companies and, as a result, Adjusted EBITDA may not be comparable to other similarly titled measures disclosed by other companies.