☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
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☐ | Soliciting Material Pursuant to §240.14a-12 |
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ARMSTRONG WORLD INDUSTRIES, INC. 2500 COLUMBIA AVE., LANCASTER, PA 17603 P.O. BOX 3001, LANCASTER, PA 17604
www.armstrongceilings.com
April | ![]() ![]() |
20212024 ANNUAL MEETING OF SHAREHOLDERS
ARMSTRONG WORLD INDUSTRIES, INC.
Dear Fellow Shareholders:
We look forward to your attendance virtually via the Internet or by proxy at the 20212024 Armstrong World Industries, Inc. Annual Shareholders’ Meeting. We will hold the meeting at 8:11:00 a.m. Eastern Time on Thursday, June 24, 2021.13, 2024. 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 2020, despite a challenging operating environment resulting from the COVID-19 global pandemic:
Our business produced net sales, Adjusted EBITDA and Adjusted Free Cash Flow of $937 million, $330 million and $212 million, respectively;
In addition to implementing preventive health measures, including remote work, enhanced personal protective equipment and enhanced cleaning and sanitizing procedures, we implemented an Emergency Paid Leave program early in the pandemic 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 three design-focused companies (Turf Design, Moz Designs, and Arktura), each with custom metal and/or felt design and fabrication capabilities;
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We launched 35 new products, including offerings under our Healthy Spaces initiative in response to COVID-19, such as our “24/7 Defend” portfolio of solutions designed to contain, clean and protect the spaces where people live, work, learn, heal and play; and
We enhanced our regular quarterly dividend program by 5% and restarted our share repurchase program in October 2020 (after temporarily suspending it during the first quarter of 2020 due to COVID-19-based uncertainty).
As we look forward to 2021 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 looks 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.
At the 20212024 Annual Shareholders’ Meeting, we will vote on the election of directors, vote to ratifyon the selectionratification of KPMG LLP as our independent registered public accounting firm, and, vote on a non-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 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 virtually via the internet.Internet.
Looking back at 2023, our Board of Directors and management team are proud of the resilience Armstrong demonstrated while facing uncertain market conditions. With a focus on execution, we continued to advance our key growth initiatives, pursue market-driven product innovation, and make progress on our long-term strategy. We look forward to continuing our work in 2024 to grow our architectural specialties capabilities, advance our digital initiatives, innovate for a healthy and sustainable future, and deliver value for our stakeholders.
On behalf of your Board of Directors, thank you for your continued support.
Very truly yours,
Larry S. McWilliamsRoy W. Templin
ChairmanChair of the Board
NOTICE OF 20212024 ANNUAL MEETING OF SHAREHOLDERS
Time and Date |
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Attendance | Online atwww.virtualshareholdermeeting.com/ |
Record Date | 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 Internet. |
• Your broker will not 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/
Shareholders may vote and submit questions while attending the meeting on the Internet. |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR THE ANNUAL MEETING
TO BE HELD ON JUNE 24, 2021:13, 2024:
The Notice of Annual Meeting, this Proxy Statement and
the Company’s 20202023 Annual Report are available at www.proxyvote.com.
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Corporate Governance Principles and Other Corporate Governance Documents | |||||||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS | |||||||
PROXY STATEMENT
This proxy statement was prepared under the direction of our Board of Directors (“Board”) to solicit your proxy for use at the 20212024 Armstrong World Industries, Inc. annual meeting of shareholdersAnnual Shareholders’ Meeting (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 7, 2021.April 29, 2024.
At the 20202023 Annual Meeting of Shareholders (the “2020“2023 Annual Meeting”), which was held on June 25, 2020,15, 2023, our shareholders re-elected Stan A. Askren, Victor D. Grizzle, Tao Huang, Barbara L. Loughran, Larry S. McWilliams,Richard D. Holder, James C. Melville, William H. Osborne, Wayne R. Shurts, Roy W. Templin and Cherryl T. Thomas to the Board. Effective immediately upon his reelection as a director at the 2023 Annual Meeting, Mr. Templin was elected as Chair of the Board.
On the recommendation of the Nominating, Governance and Social Responsibility Committee (“Governance Committee”), our Board has nominated the nineseven persons listed below for election at the Annual Meeting, all of whomMeeting. All nominees are currentlycurrent directors of the Company. Mr. Templin will continue as Chair of the Board subject to his reelection as a director at the Annual Meeting. Current Board member James C. Melville, who joined the Board in 2012, will be ending his Board service effective as of the conclusion of the Annual Meeting. During his time on the Board, Mr. Melville served on several committees of the Board and made valuable contributions to shaping the Company’s strategic priorities that have led to value creation for shareholders. The Board thanks him for his service. Effective as of the conclusion of the Annual Meeting, the size of the Board is ninewill be reduced from eight members to seven 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 hersuch nominee’s election until our next annual shareholders’ meeting and until the election at suchour next annual meeting of shareholders and qualification of his or hersuch individual’s successor, or until his or her earlier disqualification, resignation, removal, death or 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 makingdecision-making responsibilities on behalf of the Company and its shareholders.
shareholders in a dynamic environment. 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.
Our Board does not have term limits or a mandatory retirement age. The Board believes that instituting fixed limits on the tenure of directors could deprive the Company of important experience and knowledge. While Board refreshment is an important consideration in the assessment of the Board’s composition, the Board believes that the interests of the Company are best served by being able to take advantage of all available talent, and that the Board should not make determinations with regard to its membership solely on the basis of age and tenure. Performance concerns or changes in the skill sets or experience appropriate to meet the needs of the Company, the Board and its committees are addressed directly through the Board’s evaluation, succession planning and refreshment processes.
Our Board 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 diversitywe seek to ensure that our Board is composed of directors with diverse viewpoints, educational backgrounds and professional experiences.experience and expertise. Our Board
AWI 2024 Proxy Statement | 1 |
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
recognizes 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.
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
The Governance Committee expects each of the Company’s directors to have proven leadership qualities, sound judgment, integrity and a commitment to the success of the Company. In evaluating director candidates and considering incumbent directors for
nomination to the Board, the Governance Committee considersevaluates 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, |
Financial Literacy |
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Technology |
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Risk Management |
Corporate Governance/Law |
Additionally, the Governance Committee may also establish additional specific skills and qualifications when recruiting potential Board candidates based upon an assessment by the Board of the current and future needs of the Company, the Board or its committees as part of the Board’s refreshment and succession planning process.
Each director nominee’s biography in the pages that follow includes notable skills and qualifications that contributed to his or herthe individual’s selection as a nominee. Director skills and qualifications are also featured in the chart immediately following the biographies.
Composition of Board Nominees:
89%
22%29% Women
11%43% Black
11% Asian
764.4 years average tenure
62.6 years average age
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE FOLLOWING NOMINEES:
Name | Age* | Director Since | Committee(s)† | Independent^ | ||||||||
Stan A. Askren | 60 | 2008 | AC, FC, MDCC‡ | ✓ | ||||||||
Victor D. Grizzle | 59 | 2016 | — |
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Tao Huang | 58 | 2010 | FC, NGSRC | ✓ | ||||||||
Barbara L. Loughran | 57 | 2019 | AC, FC, MDCC | ✓ | ||||||||
Larry S. McWilliams | 65 | 2010 | FC | ✓ | ||||||||
James C. Melville | 69 | 2012 | FC, MDCC, NGSRC‡ | ✓ | ||||||||
Wayne R. Shurts | 61 | 2019 | AC, FC, MDCC | ✓ | ||||||||
Roy W. Templin | 60 | 2016 | AC‡, FC‡, NGSRC | ✓ | ||||||||
Cherryl T. Thomas | 74 | 2016 | FC, MDCC, NGSRC | ✓ |
Name | Age* | Director Since | Current Committee(s)† | Independent^ | ||||||||
Victor D. Grizzle | 62 | 2016 | — |
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Richard D. Holder | 61 | 2022 | AC, FC, NGSRC‡ | ✓ | ||||||||
Barbara L. Loughran | 60 | 2019 | AC‡, FC, NGSRC | ✓ | ||||||||
William H. Osborne | 64 | 2022 | MDCC, NGSRC | ✓ | ||||||||
Wayne R. Shurts | 64 | 2019 | AC, MDCC‡ | ✓ | ||||||||
Roy W. Templin | 63 | 2016 | AC, FC‡ | ✓ | ||||||||
Cherryl T. Thomas | 77 | 2016 | MDCC, NGSRC | ✓ |
* | As of March 31, |
† | Committees: AC (Audit); FC (Finance); MDCC (Management Development & Compensation); NGSRC (Nominating, Governance & Social Responsibility) |
^ | 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)
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
All nominees currently serve as directors. Information concerning the nominees is provided below:
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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, 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 onin 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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RICHARD D. HOLDER Director since: 2022 Age: 61 Independent
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Mr. Holder is currently the Chief Executive Officer of Loparex, Inc., a leading supplier of engineered release liner solutions. With a strong focus on material science expertise and industry-leading technology, Loparex, Inc. enables sustainable performance for customers worldwide. Prior to his role at Loparex, Inc., Mr. Holder served as the President and CEO of HZO, Inc., a provider of thin-film nanocoatings for electronics. Before that, he held the position of President and CEO at NN, Inc., a publicly-traded diversified industrial manufacturing company, from June 2013 to September 2019. Mr. Holder’s professional journey also includes significant leadership roles at Eaton Corporation, where he served for over a decade. His experience extends to the aerospace industry, and he is a veteran of the U.S. Marine Corps. In addition to his current position, Mr. Holder serves on the board of Enerpac Tool Group Corp., a publicly-traded industrial tools and services company, where he is a member of the Audit Committee. He also holds positions on several private company boards. With extensive operating experience, senior executive leadership, and a background in manufacturing, Mr. Holder brings valuable insights to our Board. His expertise as a former public company CEO further enhances his contributions to our organization.
AWI 2024 Proxy Statement | 3 |
ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
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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:
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 PwC, including serving in its National Office from 2016 to 2018 and from 2000 to 2003, as Industrial Products Business Unit Leader of PwC’s New York Metro market from 2013 to 2015, and as Retail & Consumer Business Development Leader of PwC’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 GroupSolutions Inc., a publicly-traded engineering company, where she serves as chair of the Audit Committee and as a member of the ESG and Risk Committee. Ms. Loughran brings to our Board an extensive public accounting background, international experience, 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)
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Director since: Age:
Independent
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Mr. McWilliams has beenOsborne served as Senior Vice President of Total Quality and Operations for Boeing Defense, Space & Security, one of The Boeing Company’s three business units from May 2020 until October 2022. He was part of Boeing’s Executive Council and became the Co-Chief Executive Officerchair of Compass Marketing, Inc. since 2012Boeing’s Manufacturing Operations Council. Boeing is the world’s largest aerospace company and leading manufacturer of commercial jetliners and defense systems. In his role, Mr. Osborne maintained oversight for Environment, Health & Safety and was previously the presidentresponsible for Boeing’s factory operations. Previously, he was Boeing’s Senior Vice President, Enterprise Operations from May 2018 until April 2020. Before joining Boeing, Mr. Osborne served as Senior Vice President of Global Manufacturing and chief executive officerQuality at Navistar International Corporation, a holding company whose subsidiaries and affiliates produce International® brand commercial and military trucks, from August 2013 to May 2018. He was also Senior Vice President of Keystone Foods, a producer of proteins,Custom Products at Navistar from May 2011 to May 2012. From May 2005 to October 2010,August 2013. Before joining Navistar, he served as President and Chief Executive Officer of Federal Signal Corporation, a senior vice president at Campbell Soup Companydesigner and subsequently became the presidentmanufacturer of Campbell International, responsiblea suite of products and integrated solutions for all of Campbell Soup’s business in Europe, Latin Americamunicipal, governmental, industrial 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 formerly 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.
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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 Boardairport customers, from September 2009 until July 2010 and now also2008 to October 2010. Mr. Osborne began his career at Ford Motor Company. He currently serves on the board of directors of AFI (since April 1, 2016).Quaker Houghton, a publicly traded global manufacturer of industrial process fluids and on the board of directors of Invitae Corporation, a publicly traded firm specializing in genetic testing. 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. MelvilleOsborne brings to our Board extensive knowledge of corporate law, mergersdeep manufacturing, quality control, and acquisitions, executive compensation,leadership proficiencies, combined with valuable experience from his time as a public company chief executive officer and corporate governance matters, as well as international experience and financial acumen. He has also gained intimate knowledge of the Company through his service on our Board.board member.
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ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
![]() ![]() | WAYNE R. SHURTS Director since: 2019 Age:
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 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 of Con-Way 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 also serves on the board of directors of Stater Bros. Markets, a privately held grocery retailer, where he serves on the audit 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.
![]() ![]() | ROY W. TEMPLIN Director since: 2016 Age:
Independent |
Mr. Templin served as ChairmanChair of the Board of Directors of Con-Way Incorporated, 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, 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 servesalso previously served on the Board of Trustees of the Goldman Sachs Mutual Funds.Funds from 2013 to 2022. 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.
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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 provider of civil engineering firmand construction management services 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, LLC, Ms. Thomas served as chairmanchair of the board of the United States Railroad Retirement Board from 1998 until 2003, and as commissionerCommissioner of the departmentChicago Department of buildingsBuildings of the city of Chicago from 1989 until 1994. During her tenure as Buildings Commissioner, the Department updated the building codes regarding the use of building materials for new construction and renovation projects. 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.committees and on the board of directors of Spraying Systems Co., a privately held manufacturer of industrial spray nozzles, where she serves on the audit committee. 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, construction, distribution and risk management.
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ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
Skills and Qualifications of Board of Directors
Grizzle Holder Loughran Melville Osborne Shurts Templin Thomas Public Company CEO or COO (past 5 years) Senior Executive Leadership Manufacturing and Distribution Financial Literacy International Experience Finance and Capital Markets Transactions Technology M&A Risk Management Corporate Governance/Law
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ITEM 1 – ELECTION OF DIRECTORS (CONTINUED)
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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.investors.armstrongworldindustries.com/governance/governance-documents/default.aspx. Also available at the same location on our website under “About Us” and then “Governance” 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, along with 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.NYSE and the U.S. Securities and Exchange Commission (the “SEC”). 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, butand also from that of persons or organizations with which the director has an affiliation.affiliations. Consistent with our Corporate Governance Principles, to be considered “independent,” a director must meet qualifications established by the Governance Committee has established qualifications to assist in the determination, which qualifications either meet or exceed the independence requirements of the NYSE.NYSE and the SEC. Each of our standing Board committees must be composed entirely of independent directors and comply with all applicable rules and requirements of the NYSE and the SEC.
Our Board has determined that all of our director-nominees,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 Rule 10A-3(b)(1) under the Exchange Act.
BOARD’S ROLE IN RISK MANAGEMENT OVERSIGHT
Our Board oversees the Company’s 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 actively maintains an enterprise risk management 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 our:
AWI 2024 Proxy Statement | 9 |
CORPORATE GOVERNANCE (CONTINUED)
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 ownersindividuals responsible for mitigating risks to review and assess risk mitigation and control measures. In addition, senior management regularly reevaluates the appropriateness of risk assessments and priorities. This process includes identifying risks that could prevent achievement of business goals and strategic plans. Our internal audit team uses the resulting information as a basis for developing its annual audit plan.
Cybersecurity Risk Our Board has responsibility for oversight of management’s cybersecurity risk program and receives regular updates on cybersecurity risk and mitigation protocols from our Chief Information Officer. TheseThe updates, includeprovided on a reviewsemi-annual basis, cover a range of topics, including the performance of our cybersecurity program against established goals and assessment framework, as well as periodic updatesexternal standards, insights into the evolving cybersecurity landscape, current events and recent cybersecurity threats, and progress in enhancing the Company’s cybersecurity posture. Additional information about the Company’s cybersecurity risk program is available in Item 1C of the Company’s Annual Report 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.Form 10-K filed with the SEC on February 20, 2024.
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 its ongoing monitoring and review of those risks, including as described in “BOARD MEETINGS AND COMMITTEES” below.
BOARD OVERSIGHT OVER SUSTAINABILITY MATTERS
Pursuant to its charter, our Governance Committee is responsible for oversight of our corporate social responsibility program and practices, including its priorities, objectives, strategy and performance, and periodic sustainability reporting and disclosures. The Governance Committee receives updates from management on our sustainability program at least quarterly. Other Board committees assist the Governance Committee in fulfilling this responsibility by overseeing related risks in their areas of responsibility, including:
• | Compensation Committee - Oversees the Company’s diversity and inclusion practices. |
• | Audit Committee - Oversees management’s processes for data validation prior to issuing disclosures related to the Company’s corporate social responsibility program. |
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 leadership bench and succession plans with a focus on key positions at the senior officer level, including CEO. During 2020,2023, our Board and the Compensation Committee met on several occasions in furtherance of these initiatives. In addition, each committee of the Board regularly discusses the talent pipeline for specific critical roles. High potential leaders are given exposure and visibility to Board members
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CORPORATE GOVERNANCE (CONTINUED)
through formal presentations and informal events. More broadly, our Compensation Committee and our Board are 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 ChairmanChair of the Board and our CEO. Since 2010, our Board has determined to split the positions of ChairmanChair of the Board and CEO. The split of these positions allows Mr. Grizzle, our President and CEO, to focus on managing the business, while Mr. McWilliams,Templin, as Chairman,Chair of the Board, 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.
CORPORATE GOVERNANCE (CONTINUED)
Responsibilities of the ChairmanChair of the Board 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 Board meetings, and overseeingassisting with the annual performance evaluations of the Board, its committees and its individual members.members coordinated by the Governance Committee. The ChairmanChair ensures that 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 ChairmanChair is also responsible for ensuringto ensure the effective functioning of Board committees through appropriate delegation to, and membership of, the committees. Finally, the ChairmanChair of the Board facilitates the independent oversight required by our Bylaws and Corporate Governance Principles, including by ensuring that:
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,Chair of the Board, 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. Youappropriate, depending on the facts and circumstances outlined in the communication. Any person may also send general messages to directors by email to directors@armstrongceilings.com. If you wishAn individual wishing to send an email message to the Governance Committee, including a recommendation regarding a prospective director, pleasemay send the message to CorpGovernance@armstrongceilings.com. The Corporate Secretary will forward these messages, as appropriate.
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 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 initiatedWe maintain a formal shareholder outreach program to obtain investor perspectives on key topics of interest, includingsuch as corporate governance, executive compensation, 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 ChairsChair of the Board and its Committee,the Board Committees, as appropriate. In 2020, in response to certain communications or inquiries,2023, members of Company management and our Board engaged in discussions with shareholders to discuss topics relating to corporate governancesustainability, executive compensation and executive compensation.other matters.
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CORPORATE GOVERNANCE (CONTINUED)
The Board met tensix times during 2020, five2023, one of which werewas a special meetings.meeting.
There are four standing committees of the Board: the Audit Committee, the Compensation Committee, the Finance Committee and the Governance Committee, eachas described below.
EachConsistent with our Corporate Governance Principles, each standing committee has a charter and consists solely of ‘independent’“independent” or ‘outside’“outside” directors who meet applicable independence standards required by the NYSE, the U.S. SecuritiesSEC, 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 corporatepublic company boards, and (ii) other directors should not serve on more than four other corporatepublic company boards.
All director nominees who served on the Board during 20202023 participated in over 75% of the meetings of the Board during their tenure and over 75% of the 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 except one director attended the annual meeting in 2020.
CORPORATE GOVERNANCE (CONTINUED)
Audit Committee The Audit Committee met sixfive times during 2020, one of which was a special meeting.2023. The members of the Audit Committee are Roy W. Templin (Chair), Stan A. Askren, Barbara L. Loughran and(Chair), Richard D. Holder, Wayne R. Shurts. During 2020, Tao HuangShurts, and John J. Roberts also served as members of the Audit Committee until Mr. Huang’s appointment to the Governance Committee and Mr. Robert’s retirement from the Board, following the 2020 Annual Meeting.Roy W. Templin. 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 and non-audit services performed by the Company’s independent registered public accounting firm, and (iii) the Company’s accounting practices and internal accounting controls; |
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CORPORATE GOVERNANCE (CONTINUED)
• | 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 and prior to issuing earnings press releases, reviewing with management the information being communicated to the public in the press release, including the use of any “pro forma” or “adjusted” non-GAAP information; |
Each member of the Audit Committee meets the NYSE and SEC financial literacy requirements. The Board has determined that each of Ms. Loughran and Mr. Templin qualifies as an “Audit Committee Financial Expert” as defined pursuant to the Exchange Act. The Audit Committee regularly meets independently with the Company’s internal and independent auditors, with the leadersleader of the Company’s compliance function, and with management.various members of management in furtherance of its responsibilities.
Finance Committee The Finance Committee met fivefour times during 2020, three2023, two of which were special meetings. The members of the Finance Committee are Roy W. Templin (Chair), Stan A. Askren, Tao Huang,Richard D. Holder, Barbara L. Loughran, Larry S. McWilliams,and James C. Melville, Wayne R. Shurts and 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.Melville. Under its charter, the Finance Committee:
Management Development and Compensation Committee The Compensation Committee met seven times during 2020,2023, two of which were special meetings. The members of the Compensation Committee are Stan A. AskrenWayne R. Shurts (Chair), Barbara L. Loughran, James C. Melville, Wayne R. ShurtsWilliam H. Osborne, and Cherryl T. Thomas. During 2020, Roy W. Templin also served as a member of the Compensation Committee until his appointment as Chair of the Audit Committee following the 2020 Annual Meeting. During 2020, Barbara L. Loughran was appointed to the Compensation Committee following the 2020 Annual Meeting. Under its charter, the Compensation Committee:
CORPORATE GOVERNANCE (CONTINUED)
Nominating, Governance and Social Responsibility Committee The Governance Committee met sevenfive times during 2020, two of which were special meetings.2023. The members of the Governance Committee are James C. MelvilleRichard D. Holder (Chair), Tao Huang, Roy W. TemplinBarbara L. Loughran, William H. Osborne and Cherryl T. Thomas. During 2020, John J. Roberts 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 2020 Annual Meeting. Under its charter, the Governance Committee:
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CORPORATE GOVERNANCE (CONTINUED)
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.
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.
REVIEW OF RELATED PERSON TRANSACTIONS
There are no transactionsFor the fiscal year ended December 31, 2023, one transaction with related persons, as defined in Item 404 of the SEC’s Regulation S-K (“Item 404”), to report was approved. Alexander K. King, the son of Ms. Dawn Kirchner-King, was a Production Manager for the fiscalperiod January 1, 2023 through February 28, 2023 at Architectural Components Group, Inc., a wholly owned subsidiary of the Company, and thereafter a Project Manager with the Company. Ms. Dawn Kirchner-King was the Senior Vice President and Chief Information Officer of the Company until her resignation as of June 30, 2023. For the year ended December 31, 2020.2023, Mr. King received a base salary of $135,000, a cash bonus of $7,550 as part of the Company’s Annual Incentive Program, retirement contributions of $8,437, and a cash payment of $20,000 in lieu of relocation benefits. He also participates in the Company’s other benefit programs on the same basis as other employees at the same level.
We have written policies pertaining to related person transactions. Any related person transaction that may arise is required to be reviewed and approved by the Governance Committee, who must have no connection with the transaction. Related person 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,shares, 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. 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, ourOur Board adoptedmaintains 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 CORPORATE GOVERNANCE (CONTINUED)
Policy provides that in an uncontested election of directors, any nominee who receives a greater number of votes “withheld” from his or herthe nominee’s election than votes “for” his or herthe nominee’s 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 Form 8-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 be re-appointed to fill the vacancy created by his or hersuch director’s resignation.
No director who is required to tender his or hersuch director’s 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 herthe 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 independent 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.
In October 2018, our Board, upon the recommendation of the Governance Committee, adopted a mandatory retirement age policy for directors within our Corporate Governance Principles such that a director may not stand for election, or be nominated to serve, as a member of our Board 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 re-election 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/en-us/about-us/board-committees.html.investors.armstrongworldindustries.com/governance/contact-the-board/default.aspx. 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)(l) 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 CORPORATE GOVERNANCE (CONTINUED)
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Our sustainability program complementsSustainability is an important part of our company purpose, namelyapproach 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, wedoing business. We aim to transformcontinually improve the designenvironmental sustainability of our products and building of spaces so that businessesoperating processes, build a more diverse, equitable and communities can thrive, both todayinclusive workforce, and into the future.provide meaningful support for our communities.
Our sustainability program is organized around three functional “pillars”: People, Planet and Product. Each pillar has adoptedencompasses 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.targets.
Our program pillars are focused on these key priorities and objectives:
Healthy and Circular Products We are committedintend to responsible sourcingcreate products and providing transparency in our products. In addition, we willsolutions from healthy, sustainably sourced materials by eliminating chemicals of concern through sustainable supply chains. We aim to design our products to minimizebe recycled, reused or repurposed and drive circularity in our operations, with customers, and throughout our value chain. We aim to make a positive contribution to spaces and the environment by decreasing our products’ carbon and water footprint, and by creating solutions that actively contribute to health and wellness.
Healthy Planet We intend to reduce our greenhouse gas emissions and increase our reliance on renewable energy using climate science-based targets that include, among other things, a reduction of Scope 1 and Scope 2 greenhouse gas (GHG) emissions by 30% from their respective 2019 baselines, which reduction is aligned with a well below 2-degree Celsius scenario and has been verified by the Science Based Target initiative (“SBTi”). We aim to eliminate waste through innovative manufacturing processes and pollution, support recycling, repurposing or reuse;by creating circular systems from order to delivery.
Thriving People and Communities We intend to continue engaging in communities where we operate to contribute to the regeneration of natural systems.vibrant places to live and work by strengthening and supporting local programs and fostering impactful relationships. We aim to continue developing an inclusive culture and diverse workforce at all locations. We aim to continue to cultivate a culture that leads to safe, healthy, fulfilled employees.
2023 SUSTAINABILITY REPORT
Healthy Planet AllIn July 2023, we published our third Sustainability Report (“2023 Sustainability Report”), in which we discussed the progress made in 2022 towards our 2030 goals and targets for each of our electricity sources will be renewable,pillars.
We prepared our 2023 Sustainability Report using the frameworks of the Sustainability Accounting Standards Board (SASB) Building Products & Furnishings standards, the Global Reporting Initiative (GRI), and we will dramatically reduce the carbon and water impacts of our products and operations.Task Force on Climate-Related Financial Disclosures (TCFD).
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 corporatesustainability program and practices. The Audit Committee maintains responsibility for overseeing management’s processes for validating data prior to management issuing material public disclosures related to the Company’s sustainability program. Additional information regarding the Governance Committee’s oversight responsibilities and the involvement of other Committees of the Board can be found in the “BOARD OVERSIGHT OVER SUSTAINABILITY MATTERS” Section on page 10.
Our sustainability programs and practices.
In 2019, we appointedprogram is led by a dedicated sustainability leader, Ms. Helen Sahi, as ourKelsey Herring, Director of Sustainability. Reporting to Mark Hershey, ourAustin K. So, Senior Vice President, General Counsel, Secretary and Chief Compliance Officer, Ms. Sahi leads our program andHerring is responsible for designing and implementing action plans towards our enterprise-wide goals. Ms. Sahi
Our Sustainability Council, comprising senior leaders from various functions within the organization, is an experiencedresponsible for embedding and implementing our sustainability leader,goals and has led similar initiatives throughout the organization.
In support of these goals and initiatives, cross-functional employee pillar teams – for other publicly-traded manufacturers, integrating sustainability intoeach of the everyday fabric of company businessPeople, Planet and shaping sustainability visionProduct pillars – help assess our current state and strategy.
OUR PLANET PILLAR
We recognize our responsibilitydevelop action plans and interim targets to protect our shared planet: In orderenable us 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 Climateachieve those goals.
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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
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 corporatesustainability program and social responsibility programspractices, including the 2023 Sustainability Report, is available in the “Sustainability” section of our website at http:https://www.armstrongceilings.com.armstrongceilings.com. Our website, is2023 Sustainability Report and other information available on our website are not part of, nor are they incorporated by reference into, 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,”
SUSTAINABILITY (CONTINUED)
“intend, “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, 2021.2024.
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 | ||||||||
| 47 | Armstrong World Industries, Inc. Senior Vice President, Vice President, Finance (January 2018 to | |||||||
| 54 | Armstrong World Industries, Inc.
Senior Vice President, Senior Vice President, General Counsel and Senior Vice President, General Counsel (July 2011 to January 2022) Chief Compliance Officer (February 2012 to January 2022) Secretary (April 2016 to January 2022) | |||||||
| Armstrong World Industries, Inc. Senior Vice President,
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Senior Vice President,
Chief & Secretary (July | ||||||||
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| 60 | Armstrong World Industries, Inc. Senior Vice President, Vice President, Digitalization (December 2019 to December 2022) Vice President, National Accounts and Retail (November 2018 to December 2019) | |||||||
James T. Burge | 48 | Armstrong World Industries, Inc. Vice President, Controller since April 2021 Americas Controller (December 2017 to April 2021) |
* | Information in parentheses regarding previously held positions indicates |
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 cash and equity annual retainers. Nonemployee directors receive more than half of their annual retainer in equity in order to align their compensation with the interests of 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”) andwhich program includes the 2016 Directors’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 a review in 2020, in response to the COVID-19 pandemic and based upon a recommendation by the Governance Committee, the Board approved a reduction of 10% for the Annual Retainer (Cash) and Committee Chair Fees, each effective June 1, 2020 through December 31, 2020.
The following table describes the elements of the compensation program for nonemployee directors in 2020:2023:
Director Compensation Program
Element | Amount | Terms | ||||
Annual Retainer (Cash) | $ $ | paid in quarterly installments, in arrears | ||||
Annual Retainer (Equity) | $ $ | annual (or pro-rated) grant of Director RSUs • Issued under the 2016 Directors Stock Unit Plan • vest at one year anniversary or earlier change in control if serving on such date •
• 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 ($1,250 for less than four hours) | may be paid in connection with: • one-on-one meetings with the CEO • plant visits • other non-scheduled significant activities approved by the Chair |
|
Committees: AC (Audit); FC (Finance); MDCC (Management Development & |
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20 | ||||||||||
AWI |
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COMPENSATION OF DIRECTORS (CONTINUED)
Annual grants for the equity portion of the retainer are effective as of the first business day following the date of the Annual Meeting, and the amount of
each grant is determined by the NYSE closing price of our shares of Common Stock on that date.
Director Compensation Table – 20202023
Name (a) | Fees Earned or Paid in Cash ($) (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 | 104,500 | 105,000 | — | — | — | 24,768 | 234,268 | |||||||||||||||||||||
T. Huang | 85,500 | 105,000 | — | — | — | 24,262 | 214,762 | |||||||||||||||||||||
B. Loughran | 85,500 | 105,000 | — | — | — | 1,862 | 192,362 | |||||||||||||||||||||
L. McWilliams | 133,000 | 145,000 | — | — | — | 25,451 | 303,451 | |||||||||||||||||||||
J. Melville | 99,750 | 105,000 | — | — | — | 15,307 | 220,057 | |||||||||||||||||||||
J. Roberts(6) | 45,000 | — | — | — | — | 18,748 | 63,748 | |||||||||||||||||||||
W. Shurts | 85,500 | 105,000 | — | — | — | 1,426 | 191,926 | |||||||||||||||||||||
R. Templin | 102,000 | 105,000 | — | — | — | 1,426 | 208,426 | |||||||||||||||||||||
C. Thomas | 85,500 | 105,000 | — | — | — | 7,653 | 198,153 |
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) | |||||||||||||||||||||
Richard D. Holder | 105,000 | 125,000 | — | — | — | 2,912 | 232,912 | |||||||||||||||||||||
Barbara L. Loughran | 110,000 | 125,000 | — | — | — | 7,475 | 242,475 | |||||||||||||||||||||
James C. Melville | 90,000 | 125,000 | — | — | — | 28,988 | 243,988 | |||||||||||||||||||||
William H. Osborne | 90,000 | 125,000 | — | — | — | 1,419 | 216,419 | |||||||||||||||||||||
Wayne R. Shurts | 110,000 | 125,000 | — | — | — | 1,624 | 236,624 | |||||||||||||||||||||
Roy W. Templin | 132,500 | 170,000 | — | — | — | 1,624 | 304,124 | |||||||||||||||||||||
Cherryl T. Thomas | 90,000 | 125,000 | — | — | — | 16,742 | 231,742 |
(1) |
|
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 (“ASC”) 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 undistributed shares and |
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| AWI |
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, 20212024 or the most recent 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
| Percent of Class Outstanding(1) | ||||
BlackRock, Inc.
New York, NY 10001 |
| |||||
| ||||||
Capital International Investors 333 South Hope Street, 55th Fl
| ||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 | ||||||
| ||||||
The London Company 1800 Bayberry Court, Suite 301 Richmond, VA 23226 |
(1) | Based on |
(2) | On |
(3) | On a Schedule 13G Amendment No. |
(4) | On a Schedule 13G Amendment No. |
(5) | On a Schedule 13G Amendment No. 4 filed with the SEC on February |
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22 | ||||||||||
AWI |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS (CONTINUED)
The following table sets forth, as of March 31, 2021,2024, the amountnumber of shares of Common Stock beneficially owned by all directors and nominees, the Company’s named executive officers (“NEOs”) as identified in the “COMPENSATION DISCUSSION AND ANALYSIS” section on page 2831 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 | |||||||||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||||||||||
Stan A. Askren | 7,532 | * | * | 7,532 | 30,283 | 37,815 | ||||||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||||||||||||
Charles M. Chiappone | 26,725 | — | 26,725 | 18,301 | 45,026 | |||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | 267,752 | 79,951 | 347,703 | 121,339 | 469,042 | |||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | 44,103 | — | 44,103 | 19,949 | 64,052 | |||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tao Huang | — | * | * | — | 30,184 | 30,184 | ||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | — | * | * | — | 2,529 | 2,529 | ||||||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | ||||||||||||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | ||||||||||||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | ||||||||||||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | ||||||||||||||||||||||||||||||||||||||||||||||||||
Brian L. MacNeal | 48,150 | 3,740 | 51,890 | 18,150 | 70,040 | |||||||||||||||||||||||||||||||||||||||||||||
Larry S. McWilliams | — | * | * | — | 31,741 | 31,741 | ||||||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||
James C. Melville | 4,229 | * | * | 4,229 | 19,128 | 23,357 | ||||||||||||||||||||||||||||||||||||||||||||
James C. Melville | ||||||||||||||||||||||||||||||||||||||||||||||||||
James C. Melville | ||||||||||||||||||||||||||||||||||||||||||||||||||
James C. Melville | ||||||||||||||||||||||||||||||||||||||||||||||||||
James C. Melville | ||||||||||||||||||||||||||||||||||||||||||||||||||
John J. Roberts(4) | 23,497 | * | * | 23,497 | — | 23,497 | ||||||||||||||||||||||||||||||||||||||||||||
Ellen R. Romano | 15,680 | — | 15,680 | 11,254 | 26,934 | |||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | 1,064 | * | * | 1,064 | 1,465 | 2,529 | ||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | ||||||||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | ||||||||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | ||||||||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | ||||||||||||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | ||||||||||||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | ||||||||||||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | ||||||||||||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | ||||||||||||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | 9,736 | * | * | 9,736 | 1,465 | 11,201 | ||||||||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | — | * | * | — | 9,679 | 9,679 | ||||||||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | ||||||||||||||||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (15 persons)(5) | 464,040 | 86,444 | 550,484 | 323,039 | �� | 873,523 | ||||||||||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (13 persons)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (13 persons)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (13 persons)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (13 persons)(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Directors and Executive Officers as a group (13 persons)(5) |
(1) | Directors do not receive stock option grants under |
(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 and under the Equity and Cash Incentive Plan adopted in 2022, 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) |
|
(5) | Includes amounts for |
| AWI |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS (CONTINUED)
Directors – Aggregate Ownership
The table below sets forth, as of March 31, 2021,2024, additional detail as to each nonemployee director’s ownership and rights to ownership in the Company’s equity.
market | Common Shares | Vested Restricted Stock Units(1) | Unvested Restricted Stock Units(2) | Phantom Stock Units(3) | Total Equity(4) | Total Value(5) | ||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||
Name | ||||||||||||||||||||||||||||||||||||||||||||
Name | Common Shares | Vested Restricted Stock Units(1) | Unvested Restricted Stock Units(2) | Total Equity | Total Value(3) | |||||||||||||||||||||||||||||||||||||||
Stan A. Askren | 7,532 | 28,818 | 1,465 | — | 37,815 | $ | 3,406,753 | |||||||||||||||||||||||||||||||||||||
Tao Huang | — | 28,719 | 1,465 | — | 30,184 | $ | 2,719,277 | |||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | ||||||||||||||||||||||||||||||||||||||||||||
Richard D. Holder | — | 1,635 | 1,778 | 3,413 | $ | 423,963 | ||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | — | 1,064 | 1,465 | — | 2,529 | $ | 227,838 | |||||||||||||||||||||||||||||||||||||
Larry S. McWilliams | — | 29,718 | 2,023 | — | 31,741 | $ | 2,859,547 | |||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | ||||||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | ||||||||||||||||||||||||||||||||||||||||||||
Barbara L. Loughran | — | 5,156 | 1,778 | 6,934 | $ | 861,341 | ||||||||||||||||||||||||||||||||||||||
James C. Melville | 4,229 | 17,663 | 1,465 | — | 23,357 | $ | 2,104,232 | |||||||||||||||||||||||||||||||||||||
James C. Melville | ||||||||||||||||||||||||||||||||||||||||||||
James C. Melville | ||||||||||||||||||||||||||||||||||||||||||||
James C. Melville | 4,229 | 21,755 | 1,778 | 27,762 | $ | 3,448,596 | ||||||||||||||||||||||||||||||||||||||
John J. Roberts(6) | 23,497 | — | — | 11,773 | 23,497 | $ | 3,177,474 | (7) | ||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | ||||||||||||||||||||||||||||||||||||||||||||
William H. Osborne | 1,429 | — | 1,778 | 3,207 | $ | 398,374 | ||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | ||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | ||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | ||||||||||||||||||||||||||||||||||||||||||||
Wayne R. Shurts | 1,064 | — | 1,465 | — | 2,529 | $ | 227,838 | 5,167 | — | 1,778 | 6,945 | $ | 862,764 | |||||||||||||||||||||||||||||||
Roy W. Templin | 9,736 | — | 1,465 | — | 11,201 | $ | 1,009,098 | |||||||||||||||||||||||||||||||||||||
Roy W. Templin | ||||||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | ||||||||||||||||||||||||||||||||||||||||||||
Roy W. Templin | 13,828 | — | 2,418 | 16,246 | $ | 2,018,078 | ||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | — | 8,214 | 1,465 | — | 9,679 | $ | 871,981 | |||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | ||||||||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | ||||||||||||||||||||||||||||||||||||||||||||
Cherryl T. Thomas | — | 12,306 | 1,778 | 14,084 | $ | 1,749,514 | ||||||||||||||||||||||||||||||||||||||
Total | 46,058 | 114,196 | 12,278 | 11,773 | 172,532 | $ | 16,604,037 | |||||||||||||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||||||||||||||||||||
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Total | ||||||||||||||||||||||||||||||||||||||||||||
Total | 22,283 | 40,852 | 13,086 | 76,221 | $ | 9,468,229 |
(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 the six-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 vested units will be acquirable by the director, at the election of the director: (i) at the vesting of the units at the one-year anniversary of the grant or (ii) at the time of the director’s termination of service. |
(2) | 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 |
|
(3) |
|
|
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 |
|
|
24 | ||||||||||
AWI |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS (CONTINUED)
In accordance with our Corporate Governance Principles, each nonemployee director must acquire as reasonably promptly as practicable following such director’s appointment as a director (taking into account, among other things, the applicable director’s individual financial and other circumstances and the then-current price of our securities) and then hold until six months following the end of his or hersuch director’s service, phantom units and/or shares of Common Stock equal in value to three times the director’s annual cash retainer fee at the time he or shesuch director joined the Board. Directors endeavor to reach thatOnce the share ownership requirement is reached by a
leveldirector, any later fluctuation in stock price is disregarded and no additional stock acquisition is required by such director. This requirement is waived as to directors designated by shareholders who, while not holding shares individually, nevertheless have an equity interest in Common Stock of ownership within five yearsthe Company by virtue of joiningbeing a designee of the Board.shareholder. All of the current directors who have served on the Board for at least five years have achieved this ownership requirement. For further details inregarding stock ownership by nonemployee directors, see pages 27 and 28page 24 of this proxy statement. As an officer of the Company, Mr. Grizzle is not subject to the stock ownership guidelines for nonemployee directors.directors but is subject to separate stock ownership guidelines for executives.
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The Audit Committee selected KPMG LLP to audit our consolidated financial statements and our internal control over financial reporting for 2021.2024. 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 VOTE FOR 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 2021.2024. In making this selection, the Audit Committee considered KPMG LLP’s qualifications, discussed with KPMG LLP its independence, and reviewed the audit and non-audit services provided by KPMG LLP to the Company.
Management of the Company has primary responsibilityis responsible for preparing the Company’sfinancial reporting process, including preparation of consolidated financial statements, establishing and establishing effectivemaintaining an adequate system of internal controls, including internal control over financial reporting.reporting, enterprise risk management, and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. KPMG LLP is responsible for auditing those consolidated 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 basedreporting. The Audit Committee is responsible to monitor and oversee these processes and procedures. The Audit Committee relies, without independent verification, on the criteria establishedinformation provided to it and on the representations made by management regarding the effectiveness of internal control over financial reporting, the integrity and objectivity of financial statements provided to it and that such financial statements have been prepared in 2013 byconformity with accounting principles generally accepted in the United States. The Audit Committee of Sponsoring Organizationsalso relies on the opinions of the Treadway Commission. Accordingly,independent auditors on the consolidated financial statements, conformity of the consolidated financial statements with accounting principles generally accepted in the United States and the effectiveness of the Company’s internal control over financial reporting.
The Audit Committee’s meetings facilitate communication among the members of the Audit Committee, management, the Company’s internal auditors, and the Company’s independent auditors. The Audit Committee reviewed and discussed the audited consolidated financial statements for fiscal 2020year 2023 with the Company’s management.management and the Company’s independent auditors. 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 (“PCAOB”) 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 BoardPCAOB 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 Form 10-K for the year ended December 31, 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 2021.
Based on the reviews and discussions referenced above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. 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 2024. Submitted by the Audit Committee
Barbara L. Loughran (Chair) Richard D. Holder Wayne R. Shurts Roy W. Templin | ![]() | ![]() |
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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 20202023 and 2019,2022, as well as fees billed for other services rendered by KPMG LLP. All fees in 20202023 and 20192022 were pre-approved by the Audit Committee.
(amounts in thousands) | 2020 | 2019 | ||||||
Audit Fees(1) | $3,539 | $3,190 | ||||||
Audit Related Fees(2) | 70 | 103 | ||||||
Audit and Audit Related Fees Subtotal | 3,609 | 3,293 | ||||||
Tax Fees(3) | 217 | 662 | ||||||
All Other Fees(4) | 11 | — | ||||||
Total Fees | $3,837 | $3,955 |
(amounts in thousands) | 2023 | 2022 | ||||||
Audit Fees(1) | $ | 3,231 | $ | 3,665 | ||||
Audit Related Fees | — | 4 | ||||||
Total audit fees | 3,231 | 3,669 | ||||||
Tax Fees(2) | 140 | 510 | ||||||
Other(3) | 14 | 11 | ||||||
Total other fees | 154 | 521 | ||||||
Total Fees | $3,385 | $4,190 | ||||||
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(1) | For both years, audit fees are for services rendered in connection with the integrated audit of Armstrong’s consolidated financial statements as of and for the year then ended, for which a portion of billings occurred in the following years. For both years, audit fees were also incurred for reviews of condensed consolidated financial statements included in the Company’s quarterly reports on Form |
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Tax fees were primarily for tax compliance, tax planning, |
Fees that do not fall within the categories set forth above. Fees |
The Audit Committee has considered whether the provision by KPMG LLP of the non-audit services described above was allowed under Rule 2-01(c)(4) of Regulation S-X and was compatible with maintaining auditor independence, and has concluded that KPMG LLP was and is independent of the Company in all respects. KPMG LLP did not provide non-audit services to the Company during 2023 other than those described herein.
Audit Committee Pre-Approval Policy
The Audit Committee adheres to a policy that requires the Audit Committee’s prior approval of any audit, audit-related and non-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’s pre-approval. The Audit Committee delegates to the Audit Committee Chair the authority to pre-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.
Evaluation of Independent Auditors; Auditor Tenure
Through more than 90The Audit Committee is directly responsible for the selection, appointment, compensation, evaluation and, where appropriate, replacement of our independent registered public accounting firm. As in prior years, the Audit Committee has evaluated KPMG LLP in connection with the Audit Committee’s consideration of experiencewhether to recommend that the Company’s shareholders ratify the selection of KPMG LLP as the Company’s independent auditor for 2024. In that review, the Audit Committee considered both the continued independence of KPMG LLP and whether retaining KPMG LLP is in the best interests of the Company and its shareholders. The Audit Committee’s evaluation of KPMG LLP further included: (i) the results of an annual management survey of KPMG’s overall performance; (ii) review of external data on audit quality and performance, including recent PCAOB reports on KPMG LLP and its peer firms; (iii) an analysis of KPMG LLP’s known legal risks and significant proceedings that may impair KPMG LLP’s ability to perform the Company’s annual audit; and (iv) a review of the competitiveness of KPMG LLP’s fees given the services
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FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
provided to the Company. In addition, KPMG LLP reviews with Armstrong, the Audit Committee its analysis of its independence in accordance with PCAOB Rule 3526. The Audit Committee evaluates whether the independent registered public accounting firm should be rotated and considers the advisability and potential impact of selecting a different independent registered public accounting firm. In addition to the matters discussed above, factors considered by the Audit Committee when retaining its independent auditors include:
the firm’s technical expertise;
the firm’s knowledge of the Company’s business and industry;
the firm’s reputation;
the firm’s geographic footprint compared to our business;
the firm’s tenure as the Company’s independent auditor; and
continuous evaluation of the quality of communications and engagement with the firm.
KPMG LLP has gainedserved as the independent registered public accounting firm of the Company and its predecessors since 1929. We believe this long tenure is advantageous for several reasons, including the following:
Enhanced audit quality resulting from the institutional knowledge of and deep expertise regarding Armstrong’s global operations and businesses,business strategy, accounting policies and practices, and internal control over financial reporting. We believe KPMG LLP’s aggregate fees are competitive with their peers becausereporting;
Increased audit efficiency by virtue of KPMG LLP’s familiarity with Armstrong’s accounting policies and practices and relevant personnel; and
Avoidance of disruption and undue demands on management time involved in onboarding a new independent registered public accounting firm.
Regular Rotation of Primary Engagement Partner
In accordance with applicable rules on partner rotation, KPMG LLP’s lead engagement partner for our business.audit is changed every five years and was rotated in accordance with that cadence in 2024. The Audit Committee was involved in considering the selection of KPMG LLP’s new lead engagement partner, including interviewing the proposed candidate, and the Chair of the Audit Committee approved the selection of the new lead engagement partner.
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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. 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. This item, which is provided pursuant to Section 14A of the Exchange Act, is commonly referred to as a “say-on-pay” resolution.
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 20112016 Long-Term Incentive Plan and the 2016 Long-TermEquity and Cash Incentive Plan adopted in 2022, 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 is structured appropriately to support our company and our business objectives.
Our Compensation Committee has developed and maintained a compensation program that is intended to: align executive interests with shareholders’ interest;interests; link pay and performance by placing a significant portion of compensation “at risk” based on performance against pre-established goals; and providedprovide 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 practicespractices.
Our Compensation Committee, our Chief Executive Officer, and our head of Human Resources engage in a talent review process annually to address succession and executive development for our CEO and other key executives.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR 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 STATEMENTSTATEMENT.
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AWI 2024 Proxy 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 20202023 relating to our named executive officers (“NEOs”) who are:
Victor D. Grizzle President and CEO
Brian L. MacNealChristopher P. Calzaretta Senior Vice President and CFO
Charles M. ChiapponeMark A. Hershey Senior Vice President, Ceiling & Wall SolutionsAmericas
Mark A. HersheyAustin K. So Senior Vice President, General Counsel, & Business DevelopmentSecretary and Chief Compliance Officer
Ellen R. RomanoMonica Maheshwari Senior Vice President, Human Resources(1)
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.
(1) | Ms. Maheshwari joined the Company on March 1, 2023. Ms. Maheshwari left the organization on February 29, 2024. |
FISCAL 2023 COMPANY PERFORMANCE
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
EXECUTIVE SUMMARY
Business Overview
We are a leading producerleader in the design, innovation and manufacture of ceiling and wall systems for usesolutions in the construction and renovation of commercial and residential buildings. We design, manufacture and sell ceiling and wall systems,Americas. Our products primarily systems composed ofinclude mineral fiber, fiberglass wool, metal, wood, felt, wood fiber glass-reinforced-gypsum and feltglass-reinforced-gypsum. Our operating segments are Mineral Fiber, which produces suspended mineral fiber and soft fiber ceiling systems, Architectural Specialties, which produces, designs and sources specialty ceilings and walls and facades primarily for use in the Americas.commercial settings and Unallocated Corporate. We also manufacture ceiling suspension system (grid) products through a joint venture with Worthington Enterprises, Inc. called Worthington Armstrong Venture (“WAVE”) (results of WAVE are included in our Mineral Fiber segment).
Our fiscal year 20202023 key performance highlights included:were as follows (all comparisons are versus 2022 unless otherwise noted):
• | Consolidated Net Sales: Net sales increased $62 million, or 5%, primarily due to $43 million of favorable like-for-like pricing and product mix, or Average Unit Value (“AUV”), and $19 million of higher sales volumes. Mineral Fiber net sales increased $45 million, or 5%, and Architectural Specialties net sales increased $17 million, or 5%. |
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Adjusted Free Cash Flow (“adjusted FCF”)*: |
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Please also see our Consolidated Financial Statements in our Annual Report on Form 10-K filed with the SEC on February 23, 2021.20, 2024.
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2021 Priorities
Fiscal year 2021 key priorities include:
20202023 Compensation Plan Design
Our Compensation Committee regularly reviews our compensation plans at least annually and, in anticipation of 2020, 2023,
determined to generally continue and maintain the
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Annual Incentive Plan design established in prior years.recent years but made some changes to our Long-Term Incentive Program. Our plans are designed to work together to directly link compensation opportunities to meaningful achievements in Company strategy and performance and long term stock price performance.
• | Long-Term Incentive Program (“LTIP”): The Compensation Committee, after discussion with its independent compensation consultant, decided to change the instruments granted to NEOs under our LTIP from 100% performance-based restricted stock units (“PSUs”) to 60% PSUs and 40% restricted stock units (“RSUs”) in order to enhance alignment with market practice and our compensation objectives, including access to and retaining high quality executives in a highly competitive talent market. Our 2023 PSU performance metrics are based on 3-year absolute TSR (“Absolute TSR”), 3-year cumulative adjusted FCF and 3-year Mineral Fiber adjusted EBITDA (“MF adjusted EBITDA”), which is a change from Mineral Fiber volume growth (“MFV”) in prior years. The Compensation Committee recognized there is a strong market influence on MFV outside of leadership’s control including expected macro-economic weakness. MF adjusted EBITDA is directly connected to leadership’s decisions and actions to manage MFV growth investments and profitability. Our Compensation Committee selected Absolute TSR as an LTIP performance metric 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 adjusted FCF as an LTIP performance metric because it believes adjusted FCF growth is a strong indicator of value-creating activities over the performance period. The 2023 PSU grants, intended to compensate for long term value creation, have a three-year performance period, challenging targets with meaningful payout upside for superior performance, and a |
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
payout scale that includes challenging performance hurdles. These plan features, and others as described in more detail in this CD&A, are designed to strongly align the interests of management with those of shareholders, and to provide meaningful incentives for performance and growth consistent with our strategic plan. |
Shareholder Engagement
In 2020,2023, 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 39%25% of our outstanding shares at the time of outreach. These discussions were conducted by Mark Hershey,Austin So, our Senior Vice President, General Counsel, & Business Development,Secretary and Ellen Romano,Chief Compliance officer, and Monica Maheshwari, our Senior Vice President, Human Resources, andas well as other subject matter experts within the Company. These discussions were complemented by our regular quarterly informalongoing outreach initiatives led by our Investor Relations team. Detailed summaries of these discussions were shared with the Compensation Committee and our Nominating, Governance and Social Responsibility Committee, which considers and incorporates shareholder feedback in our governance processes. OurNoteworthy topics from our outreach discussions in 2020 focused primarily2023 included discussions on talent acquisition and retention considering current labor market challenges and incremental investment required for meeting our 2030 sustainability targets. We consistently received positive feedback on our sustainability initiatives, our actions in response to COVID-19, and our LTIP performance metrics. We believe that our 2020disclosure program. Our 2023 nonbinding shareholder advisory vote on executive
compensation approval vote of 96%95% reflects strong shareholder support for the design and outcomes of our executive compensation program.programs. 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 ofThe Company management and our Board engaged in discussions with shareholders to discuss topics relating to corporateconsiders shareholder feedback as it shapes its governance and executive compensation.compensation programs and policies and disclosures. Past examples of disclosure added after communications with shareholders includes a Board skill matrix, enhanced disclosure on Board diversity and additional information on environmental and social initiatives.
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 volatilevariable and challenging market environment. Our executive compensation program is designed to attract, motivate and retain those leaders. In developing and maintaining this program, our Compensation Committee focuses on the following key objectives:
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Compensation Elements
In 2020,2023, we executed our compensation philosophy by providing compensation opportunities through a combination of: (a)(i) fixed compensation, including (i) base salaries, (ii) benefits and (iii) selectlimited perquisites; and (b) performance-based(ii) at-risk compensation, including (i) cash incentive awards under our Annual Incentive Plan,AIP, and (ii) grants of PSUs underand RSUs, governed by our 2016 Long-TermEquity and Cash Incentive Plan adopted in 2022 (“2022 ECIP”) (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
• 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 for non-qualified retirement benefits | |||||||
Select Perquisites | • 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 | |||||||
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
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• Payouts
• Target opportunity | • AIP was based on revenue and adjusted EBITDA (as described on page | • | |||||
Long-Term Incentive Program (LTIP) | • Delivered in
• Drives and promotes long-term value-creation for our shareholders, and fosters retention, by rewarding execution and achievement of goals linked to our
• Target opportunity
• In | • LTIP performance goals were based on adjusted FCF, | • NEOs were granted a mix of PSU / RSU awards in |
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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 |
• | 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 – |
• | Recoupment (Clawback) – We may recoup certain stock-based and cash awards distributed |
event of an accounting restatement due to material noncompliance with any financial reporting requirement under |
required to prepare an accounting restatement of any of the Company’s financial statements. |
• | 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 |
• | Linear and Capped Incentive Compensation Payouts – Our Compensation Committee establishes financial performance goals that are used to plot a payout formula for annual and long-term incentive compensation to avoid |
• | Change in Control (“CIC”) Double-Trigger – Our CIC agreements include double-trigger vesting provisions for equity grants upon a |
• | No Tax Gross-Ups – We do not have plans or agreements that provide tax gross-ups to our |
• | Holding Requirements – Post-vesting holding requirements apply for amounts payable above target under the |
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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 | ✓ |
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Annual Incentive (AIP) | ✓ | ✓ | ✓ | ✓ | ||||||||||||||||||||||||
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, our 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
• 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 | • 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 recommendations (except with respect to his own performance and compensation). |
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Independent Compensation Consultant
In July 2020, our Compensation Committee renewed the engagement ofAfter partnering with Willis Towers Watson for the past ten years as its independent consultant, in July 2023 the Compensation Committee terminated this relationship and engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant (“Compensation 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 $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 relating to 20202023 compensation decisions:
The Compensation Committee determined the work of Willis Towers Watson and Meridian did not raise any conflicts of interest in 2020.2023. In making this assessment, the Compensation Committee considered the independence factors enumerated in Rule 10C-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.
NYSE. After considering all of the factors provided in the SEC and the NYSE rules and all other factors
relevant to Willis Towers Watson’s or Meridian’s independence, the Compensation Committee has determined Willis Towers Watson isboth were 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 (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”):
Consideration of 20202023 Advisory Shareholder Vote on Executive Compensation
At our 2017 annual meeting,2023 Annual Meeting, our shareholders expressed a preference that advisory votes on executive compensation occur every year. Accordingly, the Board implementedis continuing the practice of an annual advisory vote on executive compensation until the next required vote on the frequency of shareholder votes on the compensation of executives. ThatThe next vote concerning the frequency of the advisory vote on executive compensation is scheduled to occur at the 20232029 annual meeting. Our most recent advisory shareholder vote on executive compensation took place at the 2020 annual meeting. of shareholders.
Our Board and Compensation Committee appreciate and value the views of our shareholders with respect toregarding our executive compensation program.
The strongly favorable (96%(95%) results of the 20202023 advisory vote on executive compensation, provided further support to the Compensation Committee that
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
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 20202023 advisory vote, the Compensation Committee intends to continue to monitormonitoring 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 1311 for further information about communication with the Compensation Committee ofor the Board.
AWI 2024 Proxy Statement | 37 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Peer Group
The Compensation Committee uses compensation data compiled from a group of peer companies based on a number of several pre-established criteria, including business model comparability, company size measured by both revenue (approximately one-half to two times the Company’s annual revenue) and market capitalization, geographic presence and investment capital.
In 2020,2023, our Compensation Committee again reviewed our compensation Peer Group. The Committee removed OMNOVA SolutionsAllegion PLC, Ferro Corporation, GCP Applied Technologies, Inc., because they were acquiredHerman Miller, Inc., Knoll, Inc., Kraton Performance Polymers Inc., and Patrick Industries, Inc. due to increase in early 2020 by Synthomer USA, LLC,their revenue due to their merger and replaced them with Patrick Industries,acquisition activities during 2022. The Committee added the following companies to the Peer Group: American Woodmark Corporation, Franklin Electric Co, Inc., SPX Technologies, Inc., The AZEK Company, AAON and CSW Industrials, Inc.
Our current compensation Peer Group consists of the following 1817 manufacturing companies:companies (“Peer Group”):
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Advanced Drainage Systems, Inc. | Gibraltar Industries, Inc. | Quanex Building Products Corporation | ||
American Woodmark Corporation | Griffon Corporation | Simpson Manufacturing Co., Inc. | ||
The AZEK Company | Interface, Inc. | SPX Technologies, Inc. | ||
Apogee Enterprises, Inc. | Masonite International Corporation | Trex Company, Inc. | ||
CSW Industrials, Inc. | ||||
Eagle Materials Inc. | ||||
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 historical information on each executive’s equity and non-equity compensation, and other compensation such as potential payments upon termination of employment. |
Compensation Mix
To facilitate the link between NEO pay and Company performance, a significant amount of TDC is performance-based and “at risk.”
In 2020, 84%2023, 86% of our CEO’s target TDC, and 65%64% of the average target TDC of our other NEOs, was variable and “at risk.” The following chart shows the 20202023 compensation mix, consisting of base salary, performance-based AIP, and RSUs/PSUs as the LTIP grants.
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
20202023 COMPENSATION DESIGN AND OUTCOMES
Base Salary
In 2020,2023, the Compensation Committee reviewed the base salaries of our NEOs. After consideration of individual performance and the competitiveness of each NEO’s base salary compared to the Competitive Market, the Compensation Committee increased base salaries for each of our NEOs. Pay increases were approved during the Compensation Committee meeting held in February 20202023 effective April 1, 2020.2023.
38 | AWI 2024 Proxy Statement |
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.COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
The table below represents theeach NEO’s base salary rates as of January 1, 2021 when the salary reductions were reinstated.December 31, 2023. This information differs from the Summary Compensation Table (“SCT”), which reflects the total base salary received for the year.
Name | 2019 Salary $ | 2020 Salary $ | Change in Base Salary | |||||||||
Victor D. Grizzle(1) | 800,000 | 900,000 | 12.5% | |||||||||
Brian L. MacNeal | 446,250 | 457,410 | 2.5% | |||||||||
Charles M. Chiappone | 441,000 | 452,030 | 2.5% | |||||||||
Mark A. Hershey | 435,950 | 449,030 | 3.0% | |||||||||
Ellen R. Romano | 328,430 | 338,280 | 3.0% |
Name | 2022 Salary $ | 2023 Salary $ | Change in Base Salary | |||||||||
Victor D. Grizzle | 927,000 | 1,000,000 | 7.9% | |||||||||
Christopher P. | 425,000 | 433,500 | 2.0% | |||||||||
Mark A. Hershey | 490,000 | 499,800 | 2.0% | |||||||||
Austin K. So | 420,000 | 436,800 | 4.0% | |||||||||
Monica M Maheshwari(1) | — | 340,000 |
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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 astargets, and may be subject to individual performance.performance modifiers against pre-established individual goals, including, performance related to sustainability initiatives.
For 2020,2023, AIP awards were determined based on the following formula, measures and weightings all subject to the approval of our Compensation Committee.
20202023 AIP Design
Base Salary Earnings $
| x | Target AIP Opportunity % | = | Target AIP $ | x | Company Performance % | x | Individual Performance % Modifier | = | Annual AIP Payout $ |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
20202023 Target AIP Opportunity
20202023 target AIP opportunities (expressed as a percentage of actual base salary earnings) for NEOs are set forth in the table below. TheWith the exception of Mr. Grizzle, there were no changes to these target AIP opportunity percentages are the same as for 2019.from 2022.
Name | Target AIP % Opportunity | Target AIP $ | ||||||
Victor D. Grizzle | 100% | 822,500 | ||||||
Brian L. MacNeal | 60% | 264,767 | ||||||
Charles M. Chiappone | 60% | 261,653 | ||||||
Mark A. Hershey | 60% | 259,598 | ||||||
Ellen R. Romano | 55% | 179,273 |
Name | Target AIP % Opportunity as % of Base Salary | Target AIP $ | ||||||
Victor D. Grizzle(1) | 110% | 1,080,000 | ||||||
Christopher P. Calzaretta | 60% | 258,825 | ||||||
Mark A. Hershey | 70% | 348,145 | ||||||
Austin K. So | 55% | 237,930 | ||||||
Monica M. Maheshwari | 50% | 141,667 |
2020
(1) | Mr. Grizzle’s target increased from 100% to 110% effective January 2023 to better align to market. |
2023 AIP Performance Metrics
Our Compensation Committee selected revenue and adjusted EBITDA as AIP performance metrics in order to create strong alignment with shareholders and reflect key measures of value creation. Revenue was weighted 30% and adjusted EBITDA was weighted 70%.
These performance metrics align to key elements of our operating plan and financial goals, including revenue growth, manufacturing productivity, optimization of invested capital and competitive sales, general and administrative expenseSG&A levels, and they are strong indicators of our overall operating performance.
For purposes of the 20202023 AIP, the Compensation Committee defined: (i) revenue to be gross sales minus returns, discounts and allowances and minus intercompany sales, and (ii) adjusted EBITDA to be operating income plus depreciation and amortization plusplus/minusnon-cash pension impact and plus/minus earnout/deferred purchase price accruals and certain acquisition-related charges, subject to certain exceptions.exceptions which is consistent with the calculation of adjusted EBITDA that we report with our quarterly earnings. The revenue and adjusted EBITDA definitions of these metrics did not change from the prior year. In early 2020 the Compensation Committee established an AIPThe 2023 revenue target of $1,118$1,299 million and an AIPadjusted EBITDA target of $440$414 million, both of whichrepresented a 5% increase and a 7% increase, respectively, from prior-year results. These targets were directly tied to the Company’s annual operating plan previously approved by our Board. These targets applied to all NEOs and were approved prior to the COVID-19 pandemic.plan.
AWI 2024 Proxy Statement | 39 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
In connection with those targets, the Compensation Committee also established the following performance ranges and associated payout ranges for the 20202023 AIP. The Company’s performance was converted to a corresponding payout factor on a straight-line basis between threshold and target and between target and maximum. AIP payouts are capped at 200%. of target. These performance ranges and thresholdthresholds applied to all of our NEOs and were approved prior to the COVID-19 pandemic.NEOs.
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| Target $ (in millions) | Performance as % of Target Goal | Payout as % of Target Bonus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Target $ (in millions) | Performance as % of Target | Payout | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold | Target | Maximum | Threshold | Target | Maximum | Threshold | Target | Maximum | 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 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Revenue (weighted 30%) | 1,195.0 | 1,299.0 | 1,377.0 | 92 | % | 100 | % | 106 | % | 50 | % | 100 | % | 200 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBITDA (weighted 70%) | 408.0 | 440.0 | 460.0 | 93 | % | 100 | % | 105 | % | 50 | % | 100 | % | 200 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA (weighted 70%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA (weighted 70%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Adjusted EBITDA (weighted 70%) | 373.0 | 414.0 | 443.0 | 90 | % | 100 | % | 107 | % | 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 | % |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
20202023 Performance and Payout Factors
Due primarilyFor AIP purposes our 2023 revenue performance was 99% of target goal, resulting in a payout equal to the significant decrease in net sales resulting from delays in construction93% of target, and renovation activity impacting both of our segments during the second through fourth quarters of 2020 as a resultadjusted EBITDA performance represented 104% of the COVID-19 pandemic, actual 2020 revenue and EBITDA performances were belowtarget goal with a corresponding 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 scope150% of our response to the pandemic, the work andtarget. These 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:
In consideration of these and other accomplishments, our Compensation Committee exercised its discretion to approve an AIPcombined payout factor of 56%133% of the target bonus for the NEOs. Current year revenue and adjusted EBITDA of acquired entities are excluded from our NEOsfinal results for 2020, which payout factor aligned toAIP calculations, resulting in $1,284 million of revenue versus the payout determined for our broad-based employee population foroverall Company result of $1,295 million and $429 million of adjusted EBITDA performance underversus the redesigned AIP.overall Company result of $430 million.
2020
Measure | 2023 AIP Target $M | 2023 AIP Actual $M | Performance % of Target Goal | Payout % of Target Bonus | ||||||||||||
Revenue | 1,299 | 1,284 | 99 | % | 93 | % | ||||||||||
Adjusted EBITDA | 414 | 429 | 104 | % | 150 | % | ||||||||||
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2023 Individual Performance
The Board and the Compensation Committee also considered individual performance when finalizing AIP awards for the CEO and other NEOs. The Compensation Committee modified the AIP payoutNEOs and decided not to make any upward or downward adjustments for Mr. MacNeal by applying an 85% individual performance modifier based on an assessment of individual performance, resulting in an adjusted payout factor of 48%. Performance modifiers were not applied to any other NEO.performance.
20202023 Final AIP Awards
The Compensation Committee determined the final 20202023 AIP payouts by multiplying each NEO’s target AIP opportunity by the final weighted payout factors as outlined below.
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 |
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Name | Target AIP $ | Payout Factor | 2023 Final AIP Award $ | |||||||||
Victor D. Grizzle | 1,079,925 | 133 | % | 1,436,310 | ||||||||
Christopher P. Calzaretta | 258,825 | 133 | % | 344,240 | ||||||||
Mark A. Hershey | 348,145 | 133 | % | 463,040 | ||||||||
Austin K. So | 237,930 | 133 | % | 316,450 | ||||||||
Monica M. Maheshwari | 141,667 | 133 | % | 188,420 |
Long-Term Incentive Program Awards 2020-20222023-2025 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.
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 with peers at similar levels and cost (dilution and accounting cost), as well as tally sheet and wealth accumulation analyses.
40 | AWI 2024 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
LTIP awards for a given year are typically made two business daysshortly following the release of our financial results for our prior fiscal year. This governance practice is designed to allow the equity markets to absorb the announcement of earnings and performance guidance.
The 2020Compensation Committee after discussion with its Compensation Consultant, decided to change the mix of vehicles for our LTIP to NEOs from 100% PSUs to 60% PSUs and 40% RSUs beginning in 2023 in order to better align with market practice and our compensation objectives, including access to high quality executives in a highly competitive talent market. The high proportion of PSUs reflects our pay-for-performance philosophy. The time-based awards support retention and are linked to shareholder value and ownership, which are important goals of our executive compensation program.
The RSU grants will fully vest and be issued if the NEO is still actively employed and in good standing on March 1, 2026 (three-year cliff vesting). Three-year vesting is common in our industry and supports executive retention and alignment with shareholder value.
The 2023 LTIP PSU grants for the 20202023 – 20222025 performance period (“2023 LTIP PSU Awards”) consisted of awards based on achievement of Absolute TSR (60% of the award), adjusted FCF (30%(25% of the award) and MFV (10%MF adjusted EBITDA (15% of the award). The Compensation Committee recognized there is a strong market influence on MFV outside of leadership’s control including expected macro-economic weakness. Therefore, the Committee moved from MFV to Mineral Fiber adjusted EBITDA, which is directly connected to leadership’s decisions and actions to manage MFV growth investments and profitability.
Messrs.Mr. Grizzle MacNeal and Chiappone havehas post-vesting holding requirements for amounts payable above target for the 20202023 performance-based equity grants. If earned, theany shares earned above target must be held for one year following the vesting date.
20202023 LTIP Performance Metrics and Weighting
The number of shares eligible to vest under the 20202023 LTIP awardsPSU Awards is based on the achievement of applicable performance targets relative to Absolute TSR, adjusted FCF and MFVMF adjusted EBITDA targets during the performance
AWI 2024 Proxy Statement | 41 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
period (January 1, 20202023 to December 31, 2022)2025). The grants, intended to compensate based on long-term value creation, have a three-year performance period to allow a reasonable timeframe for value creation, challenging targets with a substantial payout upside for breakout performance, and a payout scale that defines meaningful performance hurdles. The PSUs for the NEOs can vest 53%50% of target at threshold performance to 270%275% of target at maximum performance.performance, on a weighted-average basis. There is no payout below threshold performance.
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 stockCompany’s Common Stock for the highest consecutive 30 trading days in the 60-trading-day-period beginning with and immediately following January 3, 2023.2, 2026. The starting price was based on the volume-weighted average of the highest consecutive 30 trading days in the subsequent 60-trading-day-period closing price of the Company stock for the highest 30 trading days immediately following January 2, 2020 –2023, resulting in $103.96$79.00 per share. Share repurchases only impact Absolute TSR to the extent they affect our stock price.
Performance to TSR Target | Annualized TSR Target | Ending Share Price | Incentive Payout | |||||||||||||||||||||
Performance to TSR Target | ||||||||||||||||||||||||
Performance to TSR Target | ||||||||||||||||||||||||
Performance to TSR Target | Annualized Absolute TSR Target | Ending Share Price | Incentive Payout | |||||||||||||||||||||
60% | 6.0% | $ | 123.82 | 50% | ||||||||||||||||||||
50% | ||||||||||||||||||||||||
50% | ||||||||||||||||||||||||
50% | ||||||||||||||||||||||||
50% | 5.0% | $ | 91.45 | 50% | ||||||||||||||||||||
75% | ||||||||||||||||||||||||
75% | ||||||||||||||||||||||||
75% | ||||||||||||||||||||||||
75% | 7.5% | $ | 129.05 | 75% | 7.5% | $ | 98.14 | 75% | ||||||||||||||||
83% | 8.3% | $ | 132.05 | 83% | ||||||||||||||||||||
83% | ||||||||||||||||||||||||
83% | ||||||||||||||||||||||||
83% | 8.3% | $ | 100.35 | 83% | ||||||||||||||||||||
100% | 10.0% | $ | 138.37 | 100% | ||||||||||||||||||||
100% | ||||||||||||||||||||||||
100% | ||||||||||||||||||||||||
100% | 10.0% | $ | 105.15 | 100% | ||||||||||||||||||||
167% | 16.7% | $ | 165.23 | 200% | ||||||||||||||||||||
150% | ||||||||||||||||||||||||
150% | ||||||||||||||||||||||||
150% | ||||||||||||||||||||||||
150% | 15.0% | $ | 120.15 | 200% | ||||||||||||||||||||
200% | 25.0% | $ | 179.64 | 300% | ||||||||||||||||||||
200% | ||||||||||||||||||||||||
200% | ||||||||||||||||||||||||
200% | 20.0% | $ | 136.51 | 300% |
CumulativeAdjusted FCF is defined as cumulative three-year cash flow from operations, lessminus (i) cash payments to purchase property, plant and equipment (Cap Ex), plus (ii) the return of investment from WAVE. The Adjusted FCF definition differs from that used in investing activities,for external reporting purposes due to the exclusion of proceeds from company-owned life insurance, which are classified as a component of Cash Flows from Investing Activities on our Consolidated Statements of Cash Flows within our Annual Report on Form 10-K.
Performance to FCF Target | Adjusted FCF $(M) | Incentive Payout | ||||||
80% | $ 622 | 50% | ||||||
100% | $ 778 | 100% | ||||||
110% | $ 856 | 150% | ||||||
115% | $ 895 | 175% | ||||||
120% | $ 928 | 200% |
MF 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.
Performance to FCF Target | FCF $(M) | Incentive Payout | ||||||
80% | $ 739 | 50% | ||||||
100% | $ 924 | 100% | ||||||
113% | $1,044 | 150% | ||||||
118% | $1,090 | 175% | ||||||
125% | $1,155 | 200% |
MFVEBITDA is defined as total square feetcumulative three-year operating income plus depreciation, plus/minus environmental site expenses, plus/minus restructuring charges and related costs and certain acquisition-related charges, subject to certain exceptions which is consistent with the calculation of Mineral Fiber products sold during the plan period.adjusted EBITDA that we report with our quarterly earnings. The MinerMineral 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% |
Performance to MF EBITDA Target | MF Adjusted EBITDA $(M) | Incentive Payout | ||||||
85% | $ 941 | 50% | ||||||
100% | $ 1,107 | 100% | ||||||
108% | $ 1,196 | 200% | ||||||
115% | $ 1,273 | 300% |
20202023 Target LTIP
The Compensation Committee annually determines the LTIP 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 theindividual performance and Competitive Market data provided by Willis Towers Watson during the Compensation Committee meeting held in February 2020,2023, the Compensation Committee increased Mr. Grizzle’s target LTIP opportunity in 20202023 to $3,700,000. This adjustment to Mr. Grizzle’s LTIP opportunity positioned him at market median TDC. Mr. Chiappone’s LTIP opportunity increased to 130% from 110% of base salary to align to market median TDC. Mr. Hershey’s LTIP opportunity increased to 140% from 125% of base salary in recognition of his expanded role, as the leader of our Business Development function. No other LTIP targets were adjusted in 2020.$5 million.
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AWI 2024 Proxy Statement |
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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
The respective target percentages for annual LTIP grants to our NEOs in 20202023 and the resulting grant date fair valuetarget values are set forth in the table below.
Name | 2020 LTIP Target as % of Base Salary | 2020 LTIP Annual Target Value ($)(1) | ||||||||||||||||||||||
Name | ||||||||||||||||||||||||
Name | ||||||||||||||||||||||||
Name | 2023 LTIP Target as % of March 2023 Base Salary | 2023 RSUs Value ($)(1) | 2023 PSUs Value ($)(1) | 2023 LTIP Annual Target Value ($)(1) | ||||||||||||||||||||
Victor D. Grizzle | 411% | 3,700,000 | ||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||
Victor D. Grizzle | 539% | 2,000,000 | 3,000,000 | 5,000,000 | ||||||||||||||||||||
Brian L. MacNeal | 120% | 535,500 | ||||||||||||||||||||||
Charles M. Chiappone | 130% | 573,300 | ||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||
Christopher P. Calzaretta | 110% | 187,000 | 280,500 | 467,500 | ||||||||||||||||||||
Mark A. Hershey | 140% | 610,300 | ||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||
Mark A. Hershey | 140% | 274,400 | 411,600 | 686,000 | ||||||||||||||||||||
Ellen R. Romano | 100% | 328,400 | ||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||
Austin K. So | 120% | 201,600 | 302,400 | 504,000 | ||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||
Monica M. Maheshwari | 100% | 136,000 | 204,000 | 340,000 |
(1) | Amounts represent the targeted value of the long-term incentive equity awards granted in |
Other Long Term Awards – Issued in 2023
On April 28, 2023, the independent directors, following the recommendation of the Compensation Committee, approved a grant of time-based restricted stock units to Mr. Grizzle with a target value of $5.0 million that vests in full on the third anniversary of the grant date. The award is intended to incentivize Mr. Grizzle, who on the date of grant was 61 years old, to continue his employment as President and CEO of the Company. In making the award, the independent directors considered Mr. Grizzle’s strong performance and leadership of the Company, his importance to the execution of the Company’s strategic priorities, and to facilitate a comprehensive CEO succession planning process. The independent directors determined to grant this award to serve as an additional retention tool in a highly competitive environment for senior executives with Mr. Grizzle’s skills, experience and track record of strong performance.
In addition, Ms. Maheshwari received a one-time RSU grant upon hire valued at $150,000. The RSU award was scheduled to vest over three years, vesting one-third each year. Ms. Maheshwari left the organization on February 29, 2024.
Payout of 2018-2020 Performance2021-2023 Performance-Based Restricted Stock Units
The performance for PSUs awarded in 20182021 for the 2018 – 20202021 to 2023 performance period was determined on April 5, 2021.4, 2024. The awards were based on Absolute TSR, adjusted FCF and FCFMFV over the performance period. TheIn 2021, the Compensation Committee granted PSUs to Messrs. Grizzle, MacNealTier I (CEO and Chiapponehis direct reports) to vest based on achievement of
Absolute TSR (60% of the award), adjusted FCF (30% of the award) and MFV (10% of the award) and Tier II (below CEO and his direct reports) to vest based on achievement of Absolute TSR (75%(30% of the award), adjusted FCF (60% 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%MFV (10% of the award).
Based upon performance during the measurement period, the Absolute TSR achievement for the 2018-20202021 to 2023 period was 13.2%12.01%, with a calculated price of $90.21.$124.04 compared to the starting price for the TSR PSUs of $88.27. This exceeded our 10.5%10% annualized TSR target, resulting in a 139% payout. The starting share price for the TSR PSUs was $62.18.130% payout under this metric. The cumulative adjusted FCF was $692M$670 million for the performance period, below our target of $700.6M.$687 million. The Compensation Committee approved a payout factor of 95%94%. The MFV was below threshold 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 establishedperiod, resulting 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%.no payout under this metric. Based on the metrics and the certified Absolute TSR and adjusted FCF results, the PSUs for Messrs. Grizzle MacNeal and ChiapponeHershey vested at 128%106% of target and(Tier I). Mr. Calzaretta was in Tier II at the time of the 2021 – 2023 PSU grant. His PSUs
for vested at 96% of target. Mr. HersheySo and Ms. Romano vestedMaheshwari were not employed by us at 108%the time of target. For Messrs. Grizzle, MacNeal and Chiappone, PSUs distributed in excessthe commencement of target must be held for one year following the vesting date.measurement period.
Name | 2018 PSU Shares Granted (#) | 2018 PSU Payout Factor | 2018 PSU Final Payout (#) | |||||||||||||||||||||
Name | ||||||||||||||||||||||||
Name | ||||||||||||||||||||||||
Name | 2021 PSU Shares Granted (#) | 2021 PSU Payout Factor | 2021 PSU Final Payout (#) | |||||||||||||||||||||
Victor D. Grizzle | 52,454 | 128 | % | 67,142 | ||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||
Victor D. Grizzle | 41,894 | 106 | % | 44,491 | ||||||||||||||||||||
Brian L. MacNeal | 7,664 | 128 | % | 9,811 | ||||||||||||||||||||
Charles M. Chiappone | 6,276 | 128 | % | 8,034 | ||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||
Christopher P. Calzaretta | 1,314 | 96 | % | 1,256 | ||||||||||||||||||||
Mark A. Hershey | 8,567 | 108 | % | 9,211 | ||||||||||||||||||||
Ellen R. Romano | 5,290 | 108 | % | 5,687 | ||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||
Mark A. Hershey | 7,118 | 106 | % | 7,561 |
2020
AWI 2024 Proxy Statement | 43 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
2023 Total Direct Compensation
The table below summarizes TDC paid or awarded to our current NEOs during 2020.2023. This table is not intended to be a substitute for the SCT or the Grants of Plan-Based Awards Table (‘‘GPBAT’’). Base salary reflects the total salary paid for 20202023 reflective of the April 20202023 salary increase for Messrs. Grizzle, Calzaretta, Hershey and the subsequent reductions related to COVID-19.So. AIP awards and LTIP awards for 20202023 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 | 2020 Salary | 2020 Final AIP $ | 2020 LTIP $ (1) | TDC $ | ||||||||||||
Victor D. Grizzle | 822,500 | 460,600 | 3,700,000 | 4,983,100 | ||||||||||||
Brian L. MacNeal | 441,279 | 126,030 | 535,500 | 1,102,809 | ||||||||||||
Charles M. Chiappone | 436,088 | 146,530 | 573,300 | 1,155,918 | ||||||||||||
Mark A. Hershey | 432,663 | 145,380 | 610,300 | 1,188,343 | ||||||||||||
Ellen R. Romano | 325,951 | 100,400 | 328,400 | 754,751 |
Name | 2023 Salary Earnings $ | 2023 Final AIP $ | 2023 LTIP $(1) | 2023 Other Long Term Grants $ | TDC $ | |||||||||||||||
Victor D. Grizzle(2) | 981,750 | 1,436,310 | 5,000,000 | 5,000,000 | 12,418,060 | |||||||||||||||
Christopher P. Calzaretta | 431,350 | 344,240 | 467,500 |
|
|
| 1,243,090 | |||||||||||||
Mark A. Hershey | 497,350 | 463,040 | 686,000 |
|
|
| 1,646,390 | |||||||||||||
Austin K. So | 432,600 | 316,450 | 504,000 |
|
|
| 1,253,050 | |||||||||||||
Monica M. Maheshwari(3) | 283,333 | 188,420 | 340,000 | 150,000 | 811,753 |
(1) | Amounts represent the |
(2) | Mr. Grizzle received a retention grant |
(3) | Ms. Maheshwari received a one-time grant upon hire of $150,000. |
2021
2024 Compensation Program Design
For 2021,2024, the Compensation Committee reviewed the design of our executive compensation program and decided to maintain the 20202023 metrics for our AIP (Revenue and LTIP,adjusted EBITDA) and PSUs, namely Absolute TSR, adjusted FCF and MFV.
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
ADDITIONAL INFORMATION REGARDING OUR COMPENSATION PROGRAMS
Qualified and Non-Qualified Defined Benefit Pension Plans
Ms. Romano was the only NEO whoNone of our NEOs participated in the Company’s qualified defined benefit pension plan, the U.S. 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.
A non-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 pensionRBEP benefits were frozen on December 31, 2017. None of our NEOs participated in the Company’s RBEP.
Qualified Defined Contribution Savings Plan and Non-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 participated in this program in 2020.2023.
The Company offers an unfunded, nonqualified deferred compensation plan, the Armstrong Nonqualified Deferred Compensation Plan (“NQDCP”), 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’s tax-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”)NQDCP 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 participated in this program in 2020.2023.
Severance Arrangements
Each NEO has a severance 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;
44 | AWI 2024 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
transaction that may result in loss of or material changes to employment; |
• | define transition support and terms in the event of not-for-cause termination to foster retention of key executives during times of uncertainty. |
Payments upon Termination of Employment
Our severance 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 severance agreement). Under the severance agreements that apply in absence of a change in control, the severance benefit 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) a pro-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 severance 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) a pro-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 severance agreements provide for tax gross-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 or Change in Control” section on page 62.54.
Stock Ownership Guidelines
The Compensation Committee maintainsreviews our NEOs’ compliance with applicable stock ownership guidelines for our NEOs to ensure that our NEOs have significantfoster long-term value creation tied toownership of company stock price appreciation.and further align the NEOs’ interests with those of shareholders. 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. Theperformance via LTIP awards. In 2023, Meridian benchmarked our stock ownership guidelines requireand recommended modifications which were implemented after consultation with the Compensation Committee: create three tiers of ownership based on position, cease counting “in-the-money” stock options towards compliance with the guidelines, and modify the retention ratio from 100% to 50% of 100% ofthe net shares acquired upon any vesting or exercise of equity awards until the stock 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 annualizedannual 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 paysalary for our CEO, and is three times annual base paysalary for our other NEOs.Messrs. Calzaretta and Hershey and one and one-half times base salary for Mr. So (and was for Ms. Maheshwari).
For purposes of the stock ownership guidelines, we include direct ownership of shares and stock units held under employee plans. Stock options are included to the extent they are “in-the-money.”Options and 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 2020.2023. As of the date of the review, all of our NEOsDecember 2023, Messrs. Grizzle and Hershey had met their ownership requirements. Messrs. Calzaretta and So have five years from date of hire or promotion to achieve the guidelines.
AWI 2024 Proxy Statement | 45 |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Restrictive Covenants
Each NEO has a restrictive covenants agreement as part of their severance agreement. The agreements require the following:
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
Recoupment (Clawback) Policies
Mandatory Clawback Policy
Effective October 18, 2023, the Board of Directors implemented an Incentive Compensation Recoupment Policy. The policy was adopted in compliance with the rules implemented by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act and corresponding NYSE listing standards.
If the Company is required to prepare an accounting restatement (including a “Big R” or a “little r” restatement) due to material noncompliance with any federal securities laws, any Erroneously Awarded Compensation Received by a Covered Executive during the applicable three-year lookback period must be forfeited or paid back to the Company reasonably promptly (as such terms are defined in the Mandatory Clawback Policy).
“Erroneously Awarded Compensation” is limited to certain Section 16 officer compensation, including our NEOs, that is granted, earned or vested based wholly or in part upon the attainment of a financial reporting measure, such as PSUs and annual incentive plan pay outs.
Compensation must be “Received” (as defined by the NYSE listing standards) on or after the effective date of the applicable NYSE listing standards to be subject to recovery, among other limitations. Compensation is deemed “Received” in the Company’s fiscal period during which the financial reporting measure specified in or otherwise relating to the applicable award is attained.
Amounts of Erroneously Awarded Compensation are recoverable to the extent they exceed the amount that otherwise would have been granted, vested or paid had such amount been determined based on the applicable restatement, computed on a pre-tax basis.
The Compensation Committee is generally required to pursue (and does not have discretion to waive) recovery in the event of an accounting restatement, except if it determines that recovery is impracticable, in accordance with narrow exceptions described in the Incentive Compensation Recoupment Policy and in accordance with the SEC clawback rule and corresponding NYSE listing standards. Accordingly, whether recovery is sought under the Incentive Compensation Recoupment Policy is not dependent on a Covered Executive’s commission of fraud or misconduct or consideration of any other mitigating circumstances, including the relative culpability, if any, of any Covered Executive in the events that gave rise to the triggering of an accounting restatement.
Other Recoupment Provisions
Under our 2016 Long-Term Incentive Plan,2022 ECIP, 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:
46 | AWI 2024 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)
• | during the participant’s employment or the one-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 the two-year period thereafter, the participant solicits the Company’s customers or employees; or |
• | the participant breaches any written noncompetition, confidentiality or non-solicitation covenant with the Company. |
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:
We permit senior management to use stock trading plans that comply with Rule 10b5-1 of the Exchange Act. All such plans are subject to our
pre-approval, and the ability to enter into such plans remains subject to policy prohibitions on trading while in possession of material non-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 2020)2023) 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
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 $1 million limit on the amount a public company may deduct for compensation paid to certain of the Company’s highest paid officers.
For 2020,2023, the executive officers to whom the Section 162(m) deduction limit applies included the Company’s Chief Executive Officer and the Chief
Financial Officer, the next three most highly compensated executive officers, and any persons who were such “covered employees” in 2017 or a later year.
The Compensation Committee considers both tax and accounting treatment in establishing our compensation program. The Compensation Committee retains discretion to authorize compensation arrangements that are not fully tax deductible as it deems appropriate.
47 |
The Management Development and Compensation Committee (MDCC)(Compensation Committee) of our Board has reviewed and discussed the Compensation Discussion and AnalysisCD&A required by Item 402(b) of Regulation S-K with our management. Based on this review and discussion, the MDCCCompensation Committee recommended to the Board that the Compensation Discussion and AnalysisCD&A be included in this proxy statement.statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Submitted by the Management Development andfollowing independent directors, who comprise the Compensation Committee
Stan A. Askren,Wayne R. Shurts, Chair
Barbara L. Loughran
James C. Melville
Wayne R. ShurtsWilliam H. Osborne
Cherryl T. Thomas
This report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor incorporated by reference into any future SEC filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates it by reference therein.
48 | |||||||||||||
AWI 2024 Proxy Statement |
|
The table below sets forth the total compensation for our NEOs during fiscal 2020, 20192023, 2022 and 2018.2021.
Name and Principal Position | Year | Salary ($) | 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 ($) | ||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | 2020 | 822,500 | — | 3,539,454 | — | 460,600 | — | 250,488 | 5,073,042 | ||||||||||||||||||||||||||||||||||||
President and Chief Executive Officer | | 2019 2018 | | 787,500 743,750 | | — — | | 3,300,000 3,100,000 | | — — | | 826,880 803,250 | | — — | | 195,375 83,319 | | 5,109,755 4,730,319 | |||||||||||||||||||||||||||
Brian L. MacNeal | 2020 | 441,279 | — | 512,304 | — | 126,030 | — | 40,033 | 1,119,646 | ||||||||||||||||||||||||||||||||||||
Senior Vice | 2019 | 440,938 | — | 510,000 | — | 277,800 | — | 56,917 | 1,285,655 | ||||||||||||||||||||||||||||||||||||
President and Chief Financial Officer | 2018 | 421,688 | — | 452,900 | — | 273,260 | — | 31,523 | 1,179,371 | ||||||||||||||||||||||||||||||||||||
Charles M. Chiappone | | 2020 2019 | | 436,088 435,750 | | — — | | 548,463 462,000 | | — — | | 146,530 274,530 | | — — | | 40,942 39,406 | | 1,172,023 1,211,686 | |||||||||||||||||||||||||||
Senior Vice President, Wall and Ceiling Solutions | 2018 | 407,745 | — | 370,900 | — | 292,340 | — | 18,500 | 1,089,485 | ||||||||||||||||||||||||||||||||||||
Mark A. Hershey | 2020 | 432,663 | — | 583,815 | — | 145,380 | — | 74,029 | 1,235,887 | ||||||||||||||||||||||||||||||||||||
Senior Vice President, General Counsel, Chief Compliance Officer and Business Development | | 2019 2018 | | 431,758 415,635 | | — 280,000 | (3) | | 524,000 506,300 | | — — | | 272,010 269,340 | | — — | | 54,226 44,207 | | 1,281,994 1,515,479 | ||||||||||||||||||||||||||
Ellen R. Romano | 2020 | 325,951 | — | 314,226 | — | 100,400 | 513,426 | 48,611 | 1,302,614 | ||||||||||||||||||||||||||||||||||||
Senior Vice President, Human Resources | | 2019 2018 | | 326,428 318,473 | | — — | | 320,400 312,600 | | — — | | 188,520 189,180 | | 958,061 — | | 35,987 34,159 | | 1,829,396 854,412 |
Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | All Other Compensation(4) ($) | Total ($) | ||||||||||||||||||||||||
Victor D. Grizzle | 2023 | 981,750 | — | 11,019,636 | — | 1,436,310 | 104,020 | 13,541,716 | ||||||||||||||||||||||||
President & Chief Executive Officer | | 2022 2021 | | | 927,000 920,250 | | | — — |
| | 4,433,797 4,442,344 | | | — — | | | 658,170 1,251,540 | | | 255,691 216,637 | | | 6,274,658 6,830,771 | | ||||||||
Christopher P. Calzaretta Senior Vice President & Chief Financial Officer | | 2023 2022 | | | 431,375 344,314 | | | — — |
| | 562,964 471,446 | | | — — | | | 344,240 117,000 | | | 14,625 18,219 | | | 1,353,204 950,979 | | ||||||||
Mark A. Hershey Senior Vice President, Americas | | 2023 2022 2021 | | | 497,350 490,000 463,340 | | | — — — |
| | 825,879 1,516,375 754,784 | | | — — — | | | 463,040 243,530 378,090 | | | 48,424 59,471 53,960 | | | 1,834,693 2,309,376 1,650,174 | | ||||||||
Austin K. So Senior Vice President, General Counsel, Secretary & Chief Compliance Officer | | 2023 2022 | | | 432,600 385,000 | | | — 175,000 | | | 606,837 933,682 | | | — — | | | 316,450 150,350 | | | 192,795 18,066 | | | 1,548,682 1,662,098 | | ||||||||
Monica M. Maheshwari(5) Senior Vice President, Human Resources | 2023 | 283,333 | — | 559,413 | — | 188,420 | 15,271 | 1,046,436 |
(1) | Mr. So received a signing bonus upon hire in the amount of $175,000. |
(2) | The amounts reflect the aggregate grant date fair value of stock units granted in the fiscal year, computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 718. Under ASC Topic 718, the grant date fair value is calculated using the closing price of the Company’s shares of Common Stock ($ |
The |
|
(4) |
|
The amounts shown in the “All Other Compensation” column include: (i) Company matching |
(5) | Ms. Maheshwari joined the Company on March 1, 2023. Ms. Maheshwari left the organization on February 29, 2024. |
2020 SUMMARY COMPENSATION TABLE (CONTINUED)
|
Name | Perquisites and Other Benefits ($) | Cash Dividends ($) | Company Match Savings Plan Contributions ($) | Executive Long- Term Disability ($) | All Other Compensation ($) | ||||||||||||||||||||
Victor D. Grizzle | — | 144,650 | 105,838 | — | 250,488 | ||||||||||||||||||||
Brian L. MacNeal | — | 23,587 | 16,446 | — | 40,033 | ||||||||||||||||||||
Charles M. Chiappone | — | 16,750 | 24,193 | — | 40,943 | ||||||||||||||||||||
Mark A. Hershey | — | 27,848 | 44,753 | 1,428 | 74,029 | ||||||||||||||||||||
Ellen R. Romano | — | 17,081 | 30,103 | 1,428 | 48,612 |
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 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 2019. Accordingly, the pay ratio calculation has been made using the 2020 compensation for the median employee identified in 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, 2020:
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 2019, which we gathered from payroll data. Then, we excluded seven non-U.S. employees in Latin America. The total numbers of U.S. employees and non-U.S. employees were 1,578 and 197, respectively, before taking into account such exclusions and for purposes of calculating such exclusions.
We annualized the total taxable compensation paid to those employees who commenced work with us during 2019 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.
Name | Perquisites and Other Benefits ($) | Cash Dividends ($) | Company Match Savings Plan Contributions ($) | Executive Long- Term Disability ($) | Vacation Termination ($) | Relocation ($) | All Other Compensation ($) | |||||||||||||||||||||
Victor D. Grizzle | — | — | 104,020 | — | — | — | 104,020 | |||||||||||||||||||||
Christopher P. Calzaretta | — | 1,055 | 13,570 | — | — | — | 14,625 | |||||||||||||||||||||
Mark A. Hershey | — | 3,853 | 43,392 | 1,179 | — | — | 48,424 | |||||||||||||||||||||
Austin K. So | 35,064 | 1,201 | 34,091 | — | — | 122,439 | 192,795 | |||||||||||||||||||||
Monica M. Maheshwari | — | — | 15,271 | — | — | — | 15,271 |
| AWI |
The table below shows information on AIP awards and PSUs and RSUs granted to each NEO in 2020.2023. There is no assurance that the grant date fair value of PSU/PSU or 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 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 ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | (1 | ) | N/A | 400,000 | 800,000 | 1,600,000 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/25/2020 | 17,521 | 35,042 | 94,613 | 3,539,454 | ||||||||||||||||||||||||||||||||||||||||
Brian L. MacNeal | (1 | ) | N/A | 133,875 | 267,750 | 535,500 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/25/2020 | 2,536 | 5,072 | 13,694 | 512,304 | ||||||||||||||||||||||||||||||||||||||||
Charles M. Chiappone | (1 | ) | N/A | 132,300 | 264,600 | 529,200 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/25/2020 | 2,715 | 5,430 | 14,661 | 548,463 | ||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | (1 | ) | N/A | 130,785 | 261,570 | 523,140 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/25/2020 | 2,890 | 5,780 | 15,606 | 583,815 | ||||||||||||||||||||||||||||||||||||||||
Ellen R. Romano | (1 | ) | N/A | 90,318 | 180,637 | 361,273 | ||||||||||||||||||||||||||||||||||||||||
(2 | ) | 2/25/2020 | 1,556 | 3,111 | 8,400 | 314,226 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Units (#) | All Other Options | Exercise Awards | Grant Date Awards ($) | |||||||||||||||||||||||||||||||||||||||
Name/Award Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||||||||||||||
Annual Cash Incentive | N/A | 550,000 | 1,100,000 | 2,200,000 | ||||||||||||||||||||||||||||||||||||||||
Performance Stock Units | 3/1/2023 | (2) | 19,308 | 38,616 | 106,194 | 4,019,557 | ||||||||||||||||||||||||||||||||||||||
Restricted Stock Units | 3/1/2023 | 25,744 | 2,000,051 | |||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units | 4/28/2023 | (3) | 72,823 | 5,000,027 | ||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||||||
Annual Cash Incentive | N/A | 130,050 | 260,100 | 520,200 | ||||||||||||||||||||||||||||||||||||||||
Performance Stock Units | 3/1/2023 | (2) | 1,806 | 3,611 | 9,930 | 375,887 | ||||||||||||||||||||||||||||||||||||||
Restricted Stock Units | 3/1/2023 | 2,408 | 187,078 | |||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||||||||||
Annual Cash Incentive | N/A | 174,930 | 349,860 | 699,720 | ||||||||||||||||||||||||||||||||||||||||
Performance Stock Units | 3/1/2023 | (2) | 2,649 | 5,298 | 14,570 | 551,478 | ||||||||||||||||||||||||||||||||||||||
Restricted Stock Units | 3/1/2023 | 3,532 | 274,401 | |||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||||||
Annual Cash Incentive | N/A | 120,120 | 240,240 | 480,480 | ||||||||||||||||||||||||||||||||||||||||
Performance Stock Units | 3/1/2023 | (2) | 1,947 | 3,893 | 10,706 | 405,231 | ||||||||||||||||||||||||||||||||||||||
Restricted Stock Units | 3/1/2023 | 2,595 | 201,606 | |||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||||||||||||||||||||||
Annual Cash Incentive | N/A | 85,000 | 170,000 | 340,000 | ||||||||||||||||||||||||||||||||||||||||
Performance Stock Units | 3/1/2023 | (2) | 1,313 | 2,626 | 7,222 | 273,358 | ||||||||||||||||||||||||||||||||||||||
Restricted Stock Units | 3/1/2023 | (4) | 3,682 | 286,055 |
(1) | The amounts shown represent the |
(2) | In |
(3) | 72,823 restricted stock units were granted to Mr. Grizzle on April 28, 2023 as a retention grant. The restricted stock units will vest in a single installment three years from the effective date of the grant provided he remains continuously employed until that date. |
(4) | Ms. Maheshwari was granted 3,682 restricted stock units upon hire. The restricted stock units were scheduled to vest in three equal installments at one, two, and three years from the effective date of the grant. The first equal installment vested in full on March 1, 2024 as scheduled. The remaining restricted stock units will be accelerated and vest pro-rata based on the period of Ms. Maheshwari’s employment. |
50 | ||||||||||
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, 2020.2023. Market or payout values in the table below are based on the closing price of our shares of Common Stock on that date, $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, 2020.$98.32.
Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant Date | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market of Shares Vested ($) | Equity Incentive Plans Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plans Awards Market or Payout Value of Unearned Shares or Other Rights That Have Not Vested ($) | Grant Date | Number of Securities Underlying Unexercised Options | Number of Securities Underlying Unexercised Options (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned 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 ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | 2/28/2012 | 31,348 | 37.83 | 02/28/22 | 2/24/2021 | 41,894 | (3) | 4,119,018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/20/2013 | 25,689 | 45.32 | 02/20/23 | 2/23/2022 | 45,015 | (4) | 4,425,875 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2014 | 22,914 | 47.17 | 02/25/24 | 3/1/2023 | 25,744 | (1) | 2,531,150 | 38,616 | (6) | 3,796,725 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/27/2018 | 52,454 | (1) | 3,902,053 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | 2/24/2021 | 1,314 | (3) | 129,192 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2019 | 44,403 | (2) | 3,303,139 | 2/23/2022 | 1,632 | (4) | 160,458 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2020 | 35,042 | (3) | 2,606,774 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brian L. MacNeal | 6/24/2014 | 3,740 | 49.96 | 06/24/24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/27/2018 | 7,664 | (1) | 570,125 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2019 | 6,863 | (2) | 510,539 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2020 | 5,072 | (3) | 377,306 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charles M. Chiappone | 2/27/2018 | 6,276 | (1) | 466,872 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2019 | 6,217 | (2) | 462,483 | 8/1/2022 | 2,234 | (5) | 219,647 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2020 | 5,430 | (3) | 403,938 | 3/1/2023 | 2,408 | (1) | 236,755 | 3,611 | (6) | 355,034 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | 2/27/2018 | 8,567 | (1) | 637,299 | 2/24/2021 | 7,118 | (3) | 699,842 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2019 | 7,051 | (2) | 524,524 | 2/23/2022 | 11,659 | (4) | 1,146,313 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2020 | 5,780 | (3) | 429,974 | 3/1/2023 | 3,532 | (1) | 347,266 | 5,298 | (6) | 520,899 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ellen R. Romano | 2/27/2018 | 5,290 | (1) | 393,523 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Austin K. So | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2019 | 4,312 | (2) | 320,770 | 2/23/2022 | 5,672 | (4) | 557,671 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/25/2020 | 3,111 | (3) | 231,427 | 3/1/2023 | 2,595 | (1) | 255,140 | 3,893 | (6) | 382,760 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1,751 | (1) | 172,158 | 2,626 | (6) | 258,188 |
(1) |
|
(2) |
|
(3) | The number of shares of Common Stock represents the amount that vests if threshold is achieved for the |
(4) | The number of shares of Common Stock represents the amount that vests if threshold is achieved for the 2022 PSU grant (based on Absolute TSR, Cumulative FCF and MFV goals). The awards will vest on December 31, 2024. Messrs. Grizzle and Hershey can earn up to 275% of target. Mr. Calzaretta can earn up to 245% of target. |
(5) | The number of shares of Common Stock represents the amount that vests if threshold is achieved for the 2022 PSU grant (based on Absolute TSR, Cumulative FCF and MFV goals). The awards will vest on December 31, 2024. Mr. Calzaretta can earn up to 275% of target. |
(6) | The number of shares of Common Stock represents the amount that vests if threshold is achieved for the 2023 PSU grant (based on Absolute TSR, Cumulative FCF and MF adjusted EBITDA goals). The awards will vest on December 31, 2025. Messrs. Grizzle, Calzaretta, Hershey, So, and Ms. Maheshwari can earn up to 275% of target. |
| AWI |
The following table shows the exercise of stock options by each NEO during 2020,2023, as well as stock awards held by each NEO that became free of restrictions during 2020.2023.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Option Awards | Restricted Stock Awards |
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|
| |||||||||||||||||||||||||||
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 of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||||||
Victor D. Grizzle | 50,358 | 2,339,618 | 131,500 | 9,642,895 | ||||||||||||||||||||||||||||
Brian L. MacNeal | — | — | 21,443 | 1,572,415 | ||||||||||||||||||||||||||||
Charles M. Chiappone | 11,992 | 680,329 | 15,227 | 1,116,596 | ||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||
Victor D. Grizzle | 22,914 | 1,188,013 | — | — | ||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | — | — | 1,088 | 77,509 | ||||||||||||||||||||||||||||
Mark A. Hershey | 33,723 | 1,139,586 | 25,317 | 1,905,958 | ||||||||||||||||||||||||||||
Ellen R. Romano | — | — | 15,528 | 1,171,493 | ||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||
Mark A. Hershey | — | — | 3,972 | 270,890 | ||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||
Austin K. So | — | — | 1,268 | 101,491 | ||||||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||||||||||
Monica M. Maheshwari | — | — | — | — |
(1) | Represents the number of |
The performance period for PSUs granted in 20182021 ended on December 31, 2020.2023. The final payout determination was made in April 20212024 by the Compensation Committee after a review of the Company’s performance and certification of achievement of the performance goals. The final 20182021 PSU shares paid out and the value realized in April 20212024 are set forth below. See “Payout of 2021—2023 Performance-Based Restricted Stock Units” on page 43.
Name | 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 | 39,341 | 139 | % | 54,684 | 5,063,738 | |||||||||||
Brian L. MacNeal | 5,748 | 139 | % | 7,990 | 739,874 | |||||||||||
Charles M. Chiappone | 4,707 | 139 | % | 6,543 | 605,882 | |||||||||||
Mark A. Hershey | 2,142 | 139 | % | 2,978 | 275,763 | |||||||||||
Ellen R. Romano | 1,323 | 139 | % | 1,839 | 170,291 | |||||||||||
Name | 2018 PSU FCF Shares Granted (#) | 2018 PSU FCF Payout Factor | 2018 PSU FCF Final Payout (#) | PSU FCF Value on ($) | ||||||||||||
Victor D. Grizzle | 13,113 | 95 | % | 12,458 | 1,153,611 | |||||||||||
Brian L. MacNeal | 1,916 | 95 | % | 1,821 | 168,625 | |||||||||||
Charles M. Chiappone | 1,569 | 95 | % | 1,491 | 138,067 | |||||||||||
Mark A. Hershey | 6,425 | 97 | % | 6,233 | 577,176 | |||||||||||
Ellen R. Romano | 3,967 | 97 | % | 3,848 | 356,325 |
Grizzle | Calzaretta | Hershey | So | Maheshwari | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 PSU Metric | Payout Factor | PSUs Granted | Final Payout (#) | Value on Vesting (a) ($) | PSUs Granted | Final Payout | Value on Vesting (a) ($) | PSUs Granted | Final Payout | Value on Vesting (a) ($) | PSUs Granted | Final Payout | PSUs Granted | Final Payout | ||||||||||||||||||||||||||||||||||||||||||
Absolute TSR | 130 | % | 25,136 | 32,677 | 3,934,311 | 395 | 514 | 61,886 | 4,271 | 5,553 | 668,581 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Cumulative FCF | 94 | % | 12,568 | 11,814 | 1,422,406 | 789 | 742 | 89,337 | 2,136 | 2,008 | 241,763 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Cumulative MFV | 0 | % | 4,190 | — | — | 130 | — | — | 711 | — | — | — | — | — |
(a) | Value at |
52 | ||||||||||
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, 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 Form 10-K for the year ended December 31, 2020. Information regarding the RIP and RBEP can be found in Note 18 to the Company’s Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
Name | Plan Name | Number of Years (#) | Present Value of ($) | Payments During ($) | ||||||||||
Victor D. Grizzle | Not eligible |
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Brian L. MacNeal | Not eligible |
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Charles M. Chiappone | Not eligible |
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Mark A. Hershey | Not eligible |
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| Retirement Income Plan for Employees of Armstrong World Industries, Inc. | 37.5 | 2,131,538 | 0 | ||||||||||
Ellen R. Romano |
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| ||||
| Retirement Benefit Equity Plan of Armstrong World Industries, Inc. | 37.5 | 1,969,764 | 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, 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 the November 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 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 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 $100,000 or less under the qualified plan, no involuntary lump sum payments
PENSION BENEFITS (CONTINUED)
are permitted. Various forms of annuity payments (including life, joint and survivor, period certain and level income options) are available under the pension plans. The annuity payments for these options are determined by actuarially adjusting the life annuity pension amount for the selected form of payment. The formula for the regular life annuity pension benefit for salaried employees under the RIP is based on the following factors:
The unreduced annual life annuity pension is the sum of the following four calculations, each of which may not be less than zero:
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|
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To the extent the participant is eligible for an EPA pension benefit that can be paid from the RIP, all of the allowable portion of the calculated EPA annuity will be added to the regular pension amount. EPA annuity amounts that cannot be paid from the qualified plan are forfeited.
Special provisions apply if the qualified pension plan is terminated within five years following an Extraordinary Event, as this term is defined in the RIP. Upon the occurrence of such an event, plan liabilities would first be satisfied, and then remaining plan assets would be applied to increase retirement income to employees. The amount of the increase is based on the assumption that the employee would have continued employment with Armstrong until retirement. Ms. Romano would be entitled to this benefit under these circumstances.
The assumptions used to calculate the actuarial present values shown in the table above are as follows:
The table below shows the executive and company contributions, earnings and account balances for each NEO who participates in the NQDCP.
Name | Executive Contributions in 2020 ($)(1) | Registrant Contributions in 2020 ($)(2) | Aggregate Earnings in 2020 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/2020 ($) | Executive Contributions in 2023 ($)(1) | Registrant Contributions in 2023 ($)(2) | Aggregate Earnings in 2023 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/2023 ($) | ||||||||||||||||||||||||||||||
Victor D. Grizzle | 115,117 | 86,338 | 173,882 | — | 1,320,196 | |||||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | ||||||||||||||||||||||||||||||||||||||||
Victor D. Grizzle | 108,694 | 81,520 | 242,121 | — | 2,031,632 | |||||||||||||||||||||||||||||||||||
Brian L. MacNeal | 10,162 | 7,621 | 74,917 | — | 376,376 | |||||||||||||||||||||||||||||||||||
Charles M. Chiappone | 5,214 | 4,693 | 13,576 | — | 91,404 | |||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | ||||||||||||||||||||||||||||||||||||||||
Christopher P. Calzaretta | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Mark A. Hershey | 38,327 | 28,745 | 106,828 | — | 833,067 | |||||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | ||||||||||||||||||||||||||||||||||||||||
Mark A. Hershey | 36,770 | 27,578 | 151,261 | — | 1,175,496 | |||||||||||||||||||||||||||||||||||
Ellen R. Romano | 22,752 | 17,064 | 19,731 | — | 135,372 | |||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||
Austin K. So | ||||||||||||||||||||||||||||||||||||||||
Austin K. So | 75,425 | 18,102 | 18,503 | — | 152,188 | |||||||||||||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari | ||||||||||||||||||||||||||||||||||||||||
Monica M. Maheshwari | 167 | 125 | — | — | 292 |
(1) | The amount in this column is also reported as either Salary or Non-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. |
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
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Victor D. Grizzle | |||||||
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Mark A. Hershey | |||||||
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Monica M. Maheshwari | — |
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, no in-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 CompanyCompany.
| 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, 2020.2023.
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”)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 using the December 31, 2023 stock price for purposes of the tables below.
Victor D. Grizzle
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| Reason for Termination | Reason for Termination | ||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Cash Severance | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | $ | 3,240,000 | $ | 3,240,000 | $ | 4,050,000 | — | — | $ | 4,200,000 | $ | 4,200,000 | $ | 5,250,000 | ||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 37,462 | |||||||||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 40,700 | |||||||||||||||||||||||||||
Outplacement Support | ||||||||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | — | — | 210,000 | 210,000 | 210,000 | ||||||||||||||||||||||
Pro-rated Bonus | — | — | 810,000 | 810,000 | 810,000 | |||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 1,100,000 | 1,100,000 | 1,100,000 | |||||||||||||||||||||||||||
Accelerated Long-Term Incentives |
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Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 9,811,967 | |||||||||||||||||||||||||||
Performance Stock Units | ||||||||||||||||||||||||||||||||
Performance Stock Units | — | — | — | — | 12,341,618 | |||||||||||||||||||||||||||
Time-Based Restricted Stock Units | ||||||||||||||||||||||||||||||||
Time-Based Restricted Stock Units | — | — | — | — | 9,691,107 | |||||||||||||||||||||||||||
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Total | — | — | $ | 4,080,000 | $ | 4,080,000 | $ | 14,739,429 | ||||||||||||||||||||||||
Total | — | — | $ | 5,510,000 | $ | 5,510,000 | $ | 28,633,426 |
Brian L. MacNealChristopher P. Calzaretta
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| Reason for Termination | Reason for Termination | ||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Cash Severance | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | $ | 1,042,895 | $ | 1,042,895 | $ | 1,390,526 | — | — | $ | 1,040,400 | $ | 1,040,400 | $ | 1,387,200 | ||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 57,010 | |||||||||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 54,600 | |||||||||||||||||||||||||||
Outplacement Support | ||||||||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | — | — | 69,400 | 69,400 | 69,400 | ||||||||||||||||||||||
Pro-rated Bonus | — | — | 260,724 | 260,724 | 260,724 | |||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 260,100 | 260,100 | 260,100 | |||||||||||||||||||||||||||
Accelerated Long-Term Incentives |
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Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 1,457,970 | |||||||||||||||||||||||||||
Performance Stock Units | ||||||||||||||||||||||||||||||||
Performance Stock Units | — | — | — | — | 864,331 | |||||||||||||||||||||||||||
Time-Based Restricted Stock Units | ||||||||||||||||||||||||||||||||
Time-Based Restricted Stock Units | — | — | — | — | 236,755 | |||||||||||||||||||||||||||
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Total | — | — | $ | 1,333,619 | $ | 1,333,619 | $ | 3,196,230 | ||||||||||||||||||||||||
Total | — | — | $ | 1,369,900 | $ | 1,369,900 | $ | 2,872,386 |
54 | ||||||||||
AWI |
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL (CONTINUED)
Charles M. Chiappone
| Reason for Termination | |||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||
Cash Severance | — | — | $ | 1,030,628 | $ | 1,030,628 | $ | 1,374,171 | ||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 64,062 | |||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | |||||||||||
Pro-rated Bonus | — | — | 257,657 | 257,657 | 257,657 | |||||||||||
Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 1,333,292 | |||||||||||
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Total | — | — | $ | 1,318,286 | $ | 1,318,286 | $ | 3,059,182 |
Mark A. Hershey
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| Reason for Termination | Reason for Termination | ||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Cash Severance | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | $ | 1,023,788 | $ | 1,023,788 | $ | 1,365,051 | — | — | $ | 1,274,490 | $ | 1,274,490 | $ | 1,699,320 | ||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 55,239 | |||||||||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 63,900 | |||||||||||||||||||||||||||
Outplacement Support | ||||||||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | — | — | 85,000 | 85,000 | 85,000 | ||||||||||||||||||||||
Pro-rated Bonus | — | — | 255,947 | 255,947 | 255,947 | |||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 349,860 | 349,860 | 349,860 | |||||||||||||||||||||||||||
Accelerated Long-Term Incentives |
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Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 2,046,618 | |||||||||||||||||||||||||||
Performance Stock Units | ||||||||||||||||||||||||||||||||
Performance Stock Units | — | — | — | — | 2,367,054 | |||||||||||||||||||||||||||
Time-Based Restricted Stock Units | ||||||||||||||||||||||||||||||||
Time-Based Restricted Stock Units | — | — | — | — | 347,266 | |||||||||||||||||||||||||||
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Total | — | — | $ | 1,309,736 | $ | 1,309,736 | $ | 3,752,855 | ||||||||||||||||||||||||
Total | — | — | $ | 1,709,350 | $ | 1,709,350 | $ | 4,912,400 |
Ellen R. RomanoAustin K. So
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| Reason for Termination | Reason for Termination | ||||||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||||||||||||||||||
Cash Severance | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | $ | 747,176 | $ | 747,176 | $ | 996,235 | — | — | $ | 1,056,178 | $ | 1,056,178 | $ | 1,408,237 | ||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 28,693 | |||||||||||||||||||||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 57,000 | |||||||||||||||||||||||||||
Outplacement Support | ||||||||||||||||||||||||||||||||
Outplacement Support | — | — | 30,000 | 30,000 | 30,000 | — | — | 70,400 | 70,400 | 70,400 | ||||||||||||||||||||||
Pro-rated Bonus | — | — | 176,751 | 176,751 | 176,751 | |||||||||||||||||||||||||||
Pro-rated Bonus | — | — | 249,849 | 249,849 | 249,849 | |||||||||||||||||||||||||||
Accelerated Long-Term Incentives |
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Accelerated Long-Term Incentives |
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Performance Shares | — | — | — | — | 945,720 | |||||||||||||||||||||||||||
Performance Stock Units | ||||||||||||||||||||||||||||||||
Performance Stock Units | — | — | — | — | 940,431 | |||||||||||||||||||||||||||
Time-Based Restricted Stock Units | ||||||||||||||||||||||||||||||||
Time-Based Restricted Stock Units | — | — | — | — | 504,578 | |||||||||||||||||||||||||||
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Total | — | — | $ | 953,927 | $ | 953,927 | $ | 2,177,399 | ||||||||||||||||||||||||
Total | — | — | $ | 1,376,426 | $ | 1,376,426 | $ | 3,230,495 |
Monica M. Maheshwari(1)
| Reason for Termination | |||||||||||||||
Program Element | Resignation | Involuntary for Cause | Involuntary without Cause | Termination for Good Reason | Change in Control | |||||||||||
Cash Severance | — | — | $ | 765,000 | $ | 765,000 | $ | 1,020,000 | ||||||||
Health & Welfare Benefit Continuation | — | — | — | — | 48,600 | |||||||||||
Outplacement Support | — | — | 51,000 | 51,000 | 51,000 | |||||||||||
Pro-rated Bonus | — | — | 170,000 | 170,000 | 170,000 | |||||||||||
Accelerated Long-Term Incentives |
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Performance Stock Units | — | — | — | — | 258,188 | |||||||||||
Time-Based Restricted Stock Units | — | — | — | — | 362,014 | |||||||||||
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Total | — | — | $ | 986,000 | $ | 986,000 | $ | 1,909,803 |
(1) | While Ms. Maheshwari was employed by us on December 31, 2023, as previously announced, Ms. Maheshwari left the Company in February 2024. As such, Ms. Maheshwari is no longer entitled to any of the above-listed potential payments. |
| 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, (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 severance agreements, and upon the execution of a release of claims, Messrs. Grizzle, MacNeal, Chiappone, andCalzaretta, Hershey and Ms. RomanoSo are entitled to severance upon a termination by the Company without cause or Good Reason (as defined below) in an amount equal to one and one-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 a pro-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 severance 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 for across-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, 20202023, and is based on the program parameters in effect as of December 31, 20202023 as outlined above.
Qualifying Involuntary Termination Following a Change in Control
Under each executive’s severance 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. |
56 | ||||||||||
AWI |
|
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL (CONTINUED)
CIC Arrangements – Key Terms
We will not provide tax gross-upsgross 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 | Fixed one-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. | |
Pro rata AIP | Prorated target AIP bonus for year of termination | |
Accelerated Equity Vesting | ||
280G Taxation | Any amounts paid under the CIC |
“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 least two-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; |
(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 |
| 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 |
substantially all |
58 | ||||||||||
AWI |
|
Securities authorized for issuance under equity compensation plans as of December 31, 2020.2023.
| (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 |
| (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 | 574,000(1) | $48.86(2) | 2,881,605(3) | |||
Equity compensation plans not approved by security holders | —(4) | Not Applicable | 8,903(5) | |||
Totals | 574,000 | $48.86(2) | 2,890,508 |
(1) | Includes RSUs, PSUs and stock options to purchase our shares of Common Stock granted under the Company’s 2022 ECIP, 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 |
(4) |
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(5) | Reflects shares available pursuant to the issuance of RSAs under the 2020 Inducement Award |
| AWI |
We offer a wide range of benefits to our employee population, and we are committed to paying our employees competitively and equitably based on their role.
In 2023 as required by SEC rules, we selected a new median employee due to changes in our organization structure as a result of new acquisitions that we reasonably believed would result in a change in the pay ratio disclosure. We determined our median compensated employee by examining the total gross taxable earnings for fiscal 2023 gathered from payroll data. Exclusions from the analyzed population included 60 non-U.S. employees in Argentina, Latin America and Mexico. The total numbers of U.S. employees and non-U.S. employees were 3,023 and 60, respectively, before taking into account such exclusions and for purposes of calculating such exclusions. We annualized the total taxable compensation paid to those employees who commenced work with us during 2023 and therefore did not work for us in the
entire calendar year. Using this annual taxable compensation data, we identified the employee whose total taxable compensation was closest to the median.
Disclosed below is the 2023 annual total compensation of our CEO, Victor D. Grizzle, the 2023 annual total compensation of our median employee, and the ratio of these amounts. We calculated the annual total compensation for both Mr. Grizzle and our median employee using the same methodology that is used for the Summary Compensation Table.
60 | AWI 2024 Proxy Statement |
Value of $100 Investment Based on | ||||||||||||||||||||||||||||||||
Year | Summary Compensation Table Total for CEO (1) | Compensation Actually Paid CEO (2) | Average Summary Compensation Table Total for other NEOs (3) | Average Compensation Actually Paid for NEOs (4) | TSR (5) | Peer Group TSR (6) | Net Income (loss) $ in millions (7) | Company Selected Measure: Adjusted EBITDA $ in millions (8) | ||||||||||||||||||||||||
2023 | 13,541,716 | 19,471,327 | 1,445,754 | 1,829,459 | 109.42 | 164.00 | 223.8 | 430 | ||||||||||||||||||||||||
2022 | 6,274,658 | (9,191,709 | ) | 1,519,954 | 342,164 | 75.18 | 114.00 | 202.9 | 385 | |||||||||||||||||||||||
2021 | 6,830,772 | 19,752,199 | 1,497,830 | 2,878,943 | 126.07 | 169.00 | 183.2 | 372 | ||||||||||||||||||||||||
2020 | 5,073,042 | (7,730,792 | ) | 1,207,543 | (387,858 | ) | 80.05 | 122.00 | (99.1 | ) | 330 |
(1) | Mr. Grizzle was the CEO for each of 2020, 2021, 2022 and 2023. |
(2) | SEC rules require certain adjustments be made to the Summary Compensation Table totals to determine “compensation actually paid” as reported in the Pay versus Performance Table. “Compensation actually paid” does not necessarily represent cash and/or equity value transferred to our CEO without restriction, but rather is a value calculated under applicable SEC rules. In general, “compensation actually paid” is calculated as Summary Compensation Table total compensation adjusted to include the fair market value of equity awards as of December 31 of the applicable year or, if earlier, the vesting date (rather than the grant date) and certain adjustments in the values of pensions. Compensation actually paid generally fluctuates due to stock price achievement and varying levels of projected and actual achievement of performance goals (as reflected in the significant decrease to 2020 and 2022 compensation actually paid). For information regarding the decisions made by our MDCC in regard to the CEOs compensation for each fiscal year, please see the “Compensation Discussion and Analysis” sections in this proxy statement and in the proxy statement for our annual meeting of shareholders for 2020, 2021 and 2022. |
Year | 2023 | 2022 | 2021 | 2020 | ||||||||||||
CEO | ||||||||||||||||
SCT Total Compensation | 13,541,716 | 6,274,658 | 6,830,772 | 5,073,042 | ||||||||||||
Less: Stock Award Values Reported in SCT for the Covered Year ($) | (11,019,636 | ) | (4,433,797 | ) | (4,442,344 | ) | (3,539,454 | ) | ||||||||
Plus: Fair Value at Year-End for Stock Awards Granted in the Covered Year that Remain Outstanding ($) | 15,171,133 | 1,376,041 | 7,261,925 | 1,030,646 | ||||||||||||
Change in Fair Value during the Year of Outstanding Unvested Stock Awards Granted in Prior Years ($) | 1,778,114 | (8,646,831 | ) | 6,754,468 | (8,114,358 | ) | ||||||||||
Change in Fair Value of Stock Awards Granted in Prior Years that Vested in the Covered Years ($) | — | (3,761,780 | ) | 3,347,378 | (2,180,668 | ) | ||||||||||
Less: Fair Value of Stock Awards Forfeited during the Covered Year ($) | — | — | — | — | ||||||||||||
Compensation Actually Paid ($) | 19,471,327 | (9,191,709 | ) | 19,752,199 | (7,730,792 | ) |
AWI 2024 Proxy Statement | 61 |
(3) | The following non-CEO named executive officers are included in the average figures shown |
a. | 2023: Christopher Calzaretta, Mark Hershey, Austin So and Monica Maheshwari |
b. | 2022: Christopher Calzaretta, Mark Hershey, Austin So and Ellen Romano |
c. | 2021: Brian MacNeal, Charles Chiappone, Mark Hershey, and Ellen Romano |
d. | 2020: Brian MacNeal, Charles Chiappone, Mark Hershey, and Ellen Romano |
(4) | Average “compensation actually paid” for our non-CEO NEOs in each of 2023, 2022, 2021 and 2020 reflects the adjustments to the Summary Compensation Table totals required by the SEC rules. For information regarding the decisions made by our MDCC in regard to thenon-CEO NEOs compensation for each fiscal year, please see the “Compensation Discussion and Analysis” in this proxy statement and in the proxy statement for our annual meeting of shareholders for 2021, 2022 and 2023. |
Year | 2023 | 2022 | 2021 | 2020 | ||||||||||||
Non-CEO NEOs | ||||||||||||||||
SCT Total Compensation | 1,445,754 | 1,519,954 | 1,497,830 | 1,207,543 | ||||||||||||
Less: Stock Award Values Reported in SCT for the Covered Year ($) | (638,773 | ) | (884,408 | ) | (631,405 | ) | (489,702 | ) | ||||||||
Plus: Fair Value at Year-End for Stock Awards Granted in the Covered Year that Remain Outstanding ($) | 847,663 | 396,089 | 966,107 | 142,599 | ||||||||||||
Change in Fair Value during the Year of Outstanding Unvested Stock Awards Granted in Prior Years ($) | 170,743 | (601,087 | ) | 706,872 | (807,863 | ) | ||||||||||
Change in Fair Value of Stock Awards Granted in Prior Years that Vested in the Covered Years ($) | 4,072 | (88,384 | ) | 339,539 | (312,079 | ) | ||||||||||
Less: Fair Value of Stock Awards Forfeited during the Covered Year ($) | — | — | — | — | ||||||||||||
Less: Aggregate Change in Actuarial Present Value of Accumulated Benefit Under Pension Plans ($) | (128,357 | ) | ||||||||||||||
Plus: Aggregate Service Cost and Prior Service Cost for Pension Plans ($) | ||||||||||||||||
Compensation Actually Paid ($) | 1,829,459 | 342,164 | 2,878,943 | (387,858 | ) |
(5) | For the relevant fiscal year, represents the cumulative total shareholder return (TSR) of Armstrong World Industries for the measurement periods ending on December 31 of each of 2023, 2022, 2021 and 2020, respectively, assuming $100 invested in our shares of Common Stock on December 31, 2019, and reinvestment of all dividends. |
(6) | For the relevant fiscal year, represents the cumulative TSR of our financial peer group (“Peer Group TSR”) for the measurement periods ending on December 31 of each of 2023, 2022, 2021 and 2020, respectively, assuming $100 invested in shares of common stock of our Peer Group on December 31, 2019, and reinvestment of all dividends. The financial peer group is composed of the following companies: Allegion PLC, A.O. Smith Corporation, Apogee Enterprises, Inc., Acuity Brands, Inc., Masonite International Corp., Fortune Brands Home & Security, Inc., James Hardie Industries, Lennox International Inc., Masco Corporation, Mohawk Industries, Inc., Owens Corning, Sherwin-Williams Company, Simpson Manufacturing Co., Inc. and Interface, Inc. |
(7) | Reflects “Net Income (Loss)” as reported in the Company’s Consolidated Income Statements included in the Company’s Annual Reports on Form 10-K for each of the years ended December 31, 2023, 2022, 2021 and 2020. |
(8) | Company-selected Measure is adjusted EBITDA, which is operating income plus depreciation, amortization plus/minus non-cash pension impact and plus/minus earnout/deferred purchase price accruals and certain acquisition-related charges, subject to certain exceptions and described more fully in “Compensation Discussion and Analysis” in this proxy statement. |
62 | AWI 2024 Proxy Statement |
a. | Adjusted EBITDA |
b. | Absolute Total Shareholder Return |
c. | Adjusted Free Cash Flow |
d. | Revenue |
e. | Mineral Fiber Adjusted EBITDA |
AWI 2024 Proxy Statement | 63 |
ADDITIONAL MEETING INFORMATION
Why did I receive a one-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 the one-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 via the internet.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 19, 202118, 2024 (“Record Date”), is entitled to one vote for each share of Common ShareStock owned on each matter to be voted on. As of the Record Date, 47,883,53143,758,653 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 at www.virtualshareholdermeeting.com/awi2021AWI2024 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.
Why can’t I attend the meeting in person?
DueOur Board has opted, as with the 2023 Annual Meeting, to hold a virtual-only annual meeting that affords shareholders the continuing threat ofsame rights and opportunities to participate in the coronavirus (COVID-19) global pandemic, we are sensitive to the public health and travel concerns our shareholders mayvirtual meeting as they would have and the protocols that federal, state, and local governments have imposed.at an in-person meeting. Hosting a virtual annual meeting provides easy access for our shareholders and facilitates participation since shareholders can participate from any location around the world.world at no cost to them.
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 meetingthe Annual Meeting in person via the Internet, you may revoke your proxy by voting electronically during the meeting. Your attendance 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?
47,883,53143,758,653 votes, consisting of one vote for each outstanding share of Common ShareStock outstanding on the Record Date.
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, virtually 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
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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.
Under the rules of the NYSE, a broker will generally have discretionary voting power on “routine” matters but cannot vote on “non-routine” matters. The election of directors and the advisory approval of executive compensation are non-routine matters. The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2024 is a routine matter.
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 nine (9)seven (7) 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 20212024 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. 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 via the Internet or by proxy at the Annual Meeting and entitled to vote on the matter.
How are votes, abstentions and broker non-votes counted?
Broker non-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 at the meeting for a fee of approximately $50,000$85,000 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 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.Equiniti Trust Company, LLC. All communications concerning shares of Common Stock you hold in
AWI 2024 Proxy Statement | 65 |
ADDITIONAL MEETING INFORMATION (CONTINUED)
your name, including address changes, name changes, requests to transfer and similar issues, can be handled by contacting AST at American Stock Transfer &Equiniti at:
Equiniti Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219; or by email to info@amstock.com; or by phone (1-800-937-5449).
55 Challenger Road, Floor 2
ADDITIONAL MEETING INFORMATION (CONTINUED)Ridgefield Park, NJ 07660
E-mail: HelpAST@equiniti.com
Telephone: 1-800-937-5449
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 at 717-396-6354, 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 reasonable out-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, 2020 through December 31, 2020 were made on a timely basis.
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In order to submit shareholder proposals for the 20222025 annual meeting of shareholders for inclusion in the Company’s 20222025 proxy statement pursuant to SEC Rule 14a-8, materials must be received by the Corporate Secretary at the Company’s corporate offices in Lancaster, Pennsylvania, no later than January 7, 2022.December 30, 2024.
The proposals must comply with all of the requirements of SEC Rule 14a-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. 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. To be properly brought before the 20222025 annual meeting of shareholders, 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.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 Rule 14a-8) must be received no earlier than February 24, 202213, 2025 and no later than March 26, 2022. All director nominations15, 2025. Further, shareholders who intend to nominate an individual for election to the Board and shareholder proposalssolicit proxies in support of such nominee at the 2025 annual meeting of shareholders must comply withalso provide the notice and additional information required by SEC Rule 14a-19 to our Corporate Secretary not later than April 14, 2025. The supplemental notice and information required by Rule 14a-19 are in addition to the advance notice requirements of ourunder the Company’s Bylaws, a copy of which may be obtained at no cost fromdescribed above, and do not extend any such deadline set forth under the Corporate Secretary.Bylaws.
In either case, if the date of our 20222025 annual meeting of shareholders is more than 30 calendar days before or after the first anniversary of this annual meeting,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 20222025 annual meeting.meeting of shareholders.
Any shareholder proposals not received by such applicable dates will be considered untimely and, if presented at the 20222025 annual meeting of shareholders, the proxy holders will be able to exercise discretionary authority to vote on any such proposal to the extent authorized by Exchange 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 Form 10-K for the year ended December 31, 2020,2023, including financial statements, but excluding the financial statement schedules and most exhibits, will be provided without charge to shareholders upon written request to: Armstrong World Industries, Inc.,
Investor Relations, P.O. Box 3001,2500 Columbia Avenue, Lancaster, PA 17604.
17603. Our Annual Report is also available at www.proxyvote.com, or www.armstrongceilings.com – Investors – SEC FilingsFinancials – 10-K.Annual Reports & Proxy Statements. The Form 10-K will include a list of exhibits to the Form 10-K. Copies of exhibits will be furnished to shareholders upon written request and upon our receipt of payment of reproduction and mailing expenses.
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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, 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 through the website portal for shareholders (see Additional Meeting Information section above).
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ANNEX A to Armstrong World Industries, Inc. 20212024 Proxy Statement
To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP)(“GAAP”), the Company provides additional measures of performance adjusted to exclude the impact of restructuring chargescertain discrete expenses and related costs, impairments, the non-cash impact of the U.S. pension planincome including adjusted Earnings Before Interest, Taxes, Depreciation and certain other gainsAmortization (“Adjusted EBITDA”) and losses.adjusted free cash flow. 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 these non-GAAP financial measures are appropriate to enhance understanding of its past performance, as well as prospects for its future performance. These non-GAAP financial measures should not be considered in isolation or as a substitute for the most comparable GAAP measures. Non-GAAP financial measures utilized by the Companyand may not be comparable to non-GAAP financialdefined and calculated the same as similar measures used by other companies. Dollars are in millions unless otherwise indicated.
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 |
Adjusted EBITDA | ||||||||||||
2023 | 2022 | 2021 | ||||||||||
Net earnings | $ | 224 | $ | 203 | $ | 183 | ||||||
Less: Net earnings (loss) from discontinued operations | — | 3 | (2 | ) | ||||||||
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Earnings from continuing operations | $ | 224 | $ | 200 | $ | 185 | ||||||
Add: Income tax expense | 75 | 58 | 57 | |||||||||
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Earnings from continuing operations before income taxes | $ | 298 | $ | 258 | $ | 243 | ||||||
Add: Interest/other income and expense, net | 25 | 21 | 17 | |||||||||
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Operating income | $ | 324 | $ | 279 | $ | 260 | ||||||
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Add: RIP expense(1) | 3 | 4 | 5 | |||||||||
Add: Acquisition-related impacts(2) | 11 | 19 | 10 | |||||||||
Add: Cost reduction initiatives and other | 3 | — | — | |||||||||
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Adjusted operating income | $ | 340 | $ | 301 | $ | 275 | ||||||
Add: Depreciation and amortization | 89 | 84 | 97 | |||||||||
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Adjusted EBITDA | $ | 430 | $ | 385 | $ | 372 | ||||||
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(1) | RIP expense represents only the plan service cost that is recorded within Operating Income. For all periods presented, we were not required to and did not make cash contributions to our RIP. |
(2) | Represents the impact of acquisition-related adjustments for the fair value of acquired inventory and deferred revenue, changes in fair value of contingent consideration, deferred compensation and restricted stock expenses. |
Adjusted Free Cash Flow | ||||||||
2023 | 2022 | |||||||
Net cash provided by operating activities | $ | 234 | $ | 182 | ||||
Purchases of property, plant and equipment | (84 | ) | (75 | ) | ||||
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Free Cash Flow | $ | 150 | $ | 107 | ||||
Add: Return of investment from joint venture | 97 | 105 | ||||||
Add: Net environmental expenses | 1 | 1 | ||||||
Add: Contingent consideration in excess of acquisition-date fair value(1) | 5 | 2 | ||||||
Add: Arktura deferred compensation(2) | 8 | 5 | ||||||
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Adjusted Free Cash Flow | $ | 260 | $ | 220 | ||||
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(1) | Contingent consideration payments related to 2020 acquisitions recorded as a component of net cash provided by operating activities. |
(2) | Contingent compensation payments related to the acquisition. |
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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 |
ARMSTRONG WORLD INDUSTRIES, INC. AUSTIN K. SO 2500 COLUMBIA AVENUE LANCASTER, PA 17603 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET Before The Meeting - www.proxyvote.comUseGo to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 06/23/2021.June 12, 2024. 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 - Go to www.virtualshareholdermeeting.com/AWI2021AWI2024 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. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 06/23/2021.June 12, 2024. 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 17603The deadline for our receipt of proxies submitted by mail or by express delivery services for voting is 3:00 P.M., local time, on June 12, 2024. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V43904-P04725 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY For Withhold For All All All Except To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line below.ARMSTRONG WORLD INDUSTRIES, INC. The Board of Directors recommends you vote FOR the following: 1. Election of Directors NomineesFor All Withhold All Except For All [ ] [ ] [ ] To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. Nominees: 01) Stan A. Askren 02) Victor D. Grizzle 05) Wayne R. Shurts 02) Richard D. Holder 06) Roy W. Templin 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 04) William H. Osborne The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. To ratify the selection of KPMG LLP as our independent registered public accounting firm for 2021.2024. [ ] [ ] [ ] 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 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.comwww.proxyvote.com. V43905-P04725 ARMSTRONG WORLD INDUSTRIES, INC. Annual Meeting of Shareholders June 24, 2021 8:13, 2024 11:00 AM This proxy is solicited by the Board of Directors The undersigned hereby appoints Victor D. Grizzle and Larry S. McWilliamsRoy W. Templin as proxies, each with full power of substitution, to represent and vote as designated on the reverse side, all of the common sharesCommon Shares of Armstrong World Industries, Inc. held of record by the undersigned on April 19, 2021,18, 2024, at the Annual Meeting of Shareholders to be held on June 24, 202113, 2024 at 8:11:00 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