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The fate of about 400 local jobs remained uncertain Monday as Armstrong Flooring Inc. told investors it is likely to file for bankruptcy after it failed to find a buyer for the East Lampeter Township-headquartered company.
Meanwhile, Armstrong Flooring has hired a consultant at $815 an hour to provide advice on what is described as cash management, bankruptcy and strategic alternatives. The median employee salary in 2021, according to a SEC filing, was $56,826.
The company faced a Monday deadline imposed by lenders to enter into a definitive binding purchase agreement, merger agreement or other similar agreement. The 160-year-old company’s ability to continue depends on completing a sale or refinance no later than June 30, it had said previously.
Armstrong employs about 420 between plant and corporate offices in Lancaster County, according to Alison van Harskamp, director of corporate communications. That’s down about 80 people since December 2020.
It is not clear how the financial situation is affecting or will affect workers. Representatives of United Steelworkers Union Local 285, which represents about 180 workers, could not be reached for comment. After a lock out and negotiations, the union’s last contract ran from 2019 until February 2022, according to LNP archives. The union had ratified a new three-year contract in March. Details were not available.
A memo from Armstrong management to employees obtained by LNP instructed workers to route all media inquiries to corporate communications without comment. It said employees who deal with customers and vendors would be given “resources” to answer questions.
Armstrong Flooring faces a new deadline to find a buyer
Armstrong Flooring faces a new deadline to find a buyer
Lancaster-based Armstrong Flooring explores possible sale, other strategic options
Lancaster-based Armstrong Flooring explores possible sale, other strategic options
A look at the resilient life of Armstrong Flooring’s #5352 pattern
A look at the resilient life of Armstrong Flooring’s #5352 pattern
“Please rest assured that if we should file for Chapter 11 protection, we would file certain motions with the Court that will enable us to transition into Chapter 11 without disruption to our ordinary course of operations – including benefits and wages,” wrote Harskamp on behalf of Michel S. Vermette, president and CEO in the memo to employees. “To be very clear, we continue to believe in the value and brand of Armstrong Flooring, and remain firmly committed to our customers, suppliers – and most importantly – our employees.”
Important to Lancaster County
Lisa Riggs, president of the Economic Development Company of Lancaster County, said it is too early to tell what the impact of Armstrong Flooring’s financial situation will be.
“We continue to watch this very carefully and keep lines of communication open as they navigate this very challenging circumstance,” Riggs said. “Our hope is they can find some resolution that keeps the plant and employees here.”
Riggs said Armstrong is an important business that has deep roots in the county. She said EDC does not have any tools locally that would impact Armstrong’s decision but the economic development organization conveyed how important Armstrong is to the county.
Armstrong said in its SEC filing there are interested buyers but it was not able to complete a deal by Monday. It negotiated an extension and now has until May 8.
Armstrong Flooring said “at this time it appears unlikely that any of the parties expressing interest in a transaction with the Company would be in a position to sign a definitive binding purchase agreement, merger agreement or other similar agreement” on or before May 8.
It is not clear whether lenders would agree to further extensions past May 1, Armstrong Flooring said in its filing with the Securities and Exchange Commission.
“Armstrong Flooring has received an extension from our lenders on our credit amendments until May 8 to evaluate the best path forward for the business,” said Harskamp, director of corporate communications, in an emailed statement. “While there has been no definitive decision made on how we will move forward, we are considering all available options, including seeking protection to execute a transaction through the Chapter 11 process. Armstrong Flooring is open for business and is operating as usual. We will provide an update when there is news to share.”
Armstrong said in its SEC filing that no course of action has been approved by its board of directors but based on the on the state of discussions with the company’s lenders and the liquidity needs of the company, it is likely that the company will seek bankruptcy protection under Chapter 11 and will seek to implement one or more such transactions through a competitive sale process in bankruptcy.
Chapter 11 bankruptcy allows a company to stay in business and restructure its obligations. Armstrong said it would seek to sell the company in one or more transactions through a competitive sale process in bankruptcy.
“In the event the company seeks bankruptcy protection, holders of our equity securities would likely be entitled to little or no recovery on their investment and recoveries to other stakeholders cannot be determined at this time,” Armstrong said in its filing.
In Chapter 11 bankruptcy, the debtor usually remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money. A plan of reorganization is proposed, creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements.
$815 an hour consultant
Wind blows flags at the Armstrong Flooring plant, 1067 Dillerville Road in Lancaster city Thursday, April 7, 2022.
Armstrong Flooring’s board appointed Dalton Edgecomb of Riveron Consulting LLC as chief transformation officer at $815 an hour effective May 1. He was hired to help with the company’s cash management processes and advise through any bankruptcy proceedings and exploration of strategic alternatives. Edgecomb could not be reached for comment.
Edgecomb, billed as an expert in turnaround and restructuring, has been a senior managing director of Riveron Consulting LLC, a national business advisory firm specializing in accounting, finance and operations, since November 2020. Riveron will also be entitled to compensation at specified hourly rates for the services of other Riveron personnel, as well as reimbursement for reasonable out-of-pocket expenses incurred in connection with the engagement.
The New York Stock Exchange briefly halted trading on Armstrong Flooring stock at 8 a.m. Monday. About a year ago stock was going for $5.71 a share. By the end of trading on Monday, stock closed at 40 cents a share.
In 2019, Armstrong Flooring locked out union workers for almost two months at its Dillerville Road plant in a contract dispute. The union ultimately ratified a 2 1/2 year contract that annually provided an extra $1,500 lump sum payment to workers in tier 1, a 2% raise for workers in tier 2 and a 2.5% raise for workers in tier 3. Tiers were based on years of service.
In January, the company announced it had amended its term loan with private credit investment management firm Pathlight Capital LP to provide an additional $35 million to give it “financial flexibility to pursue its operational and strategic goals.”
Armstrong hired investment bank Houlihan Lokey Capital Inc. to assist with a process for the sale of the company and with the consideration of other strategic alternatives.
It has not revealed its finances since the beginning of March when it gave a report for 2021.
For the year ended Dec. 31, Armstrong Flooring reported a net loss of $53 million, despite a 11% increase in sales revenue. As of Dec. 31, the company had an accumulated deficit of $356.2 million and a total debt of $111.3 million, with $110 million due June.
Armstrong has struggled with four straight years of losses since it shed its hardwood flooring division in December 2018.
Last year, it sold its Los Angeles-area plant for nearly $77 million and moved its headquarters and technical center, another cost-saving move. It relocated its headquarters and technical center to Greenfield in East Lampeter Township. Armstrong Flooring was spun off from Armstrong World Industries in 2016, a move that left Armstrong Industries with the far more profitable ceilings business.
Armstrong reported it had 1,568 employees globally as of Dec. 31, with 1,172 in the United States. In December 2020, it had around 1,500 employees, including 500 in Lancaster. As of Monday, the company said it has 420 employees in the county. The remainder are in Canada, Australia, China, the Philippines, Singapore and Vietnam.
Armstrong Flooring debuted with around 3,700 employees, including 750 between its Dillerville Road floor plant and its former Columbia Avenue headquarters.
Armstrong Flooring operates seven manufacturing plants in three countries. Two plants are in Pennsylvania, one in Lancaster city and one in Beech Creek Township, Clinton County. There are plants in Illinois, Mississippi, Oklahoma and one plant each in China and Australia.