Armstrong Flooring mulls sale amid debt, supply chain challenges

Armstrong Flooring, one of Central Pennsylvania’s largest manufacturers and a long-time staple in the Lancaster economy, said late Friday it is considering a sale or other strategic alternative.

How hard: Armstrong Flooring lost $22 million in the first nine months of 2021 on sales of $485.5 million. It lost $31.2 million on sales of $440.9 million in the same period in 2020. Contributing to the company’s performance this year was the $76.7 million sale in March of a production and distribution center in Los Angeles.

  • The company carries significant debt and sent up red flags in its third-quarter earnings filing
  • “While the Company has implemented substantial pricing actions, continues to work with its lenders to secure longer-term relief and evaluates other initiatives that could enhance its liquidity, there can be no assurances that these actions will be successful. These factors raise substantial doubt about the Company’s ability to continue as a going concern,” the company said in the November filing.
  • At the same time, Armstrong Flooring announced staff furloughs and other spending cuts, as well as price hikes for its products.
  • The company operates five plants in the U.S. — including two in Pennsylvania — one in China and one in Australia. As of the end of 2020, it had about 1,550 employees.

What’s next: To assist with a sale or other alternative, Armstrong Flooring said in a press release it has hired investment bank Houlihan Lokey Capital. The release did not disclose a timeline, though it said more details would be available this morning in a regulatory filing.

  • In the release, Armstrong Flooring also noted it has modified some of its loan agreements and received $35 million in capital from one of its lenders, Pathlight Capital.
  • “These credit amendments and additional term loan funding position us well to pursue our strategic initiatives and effectively manage our operations,” Michel Vermette, the company’s president and CEO, said in a statememt. “We believe in the value and brand of Armstrong Flooring, and remain firmly committed to our customers, suppliers and employees.”
  • Investors seemed to like the moves. In after-hours trading on Friday, shares of Armstrong Flooring jumped more than 50% in value.

The background: Armstrong Flooring was born in 2016 after it split off from Armstrong World Industries, which makes ceilings. 

  • In 2018, Armstrong Flooring bet on luxury vinyl tile and sold off its hardwood flooring unit to American Industrial Partners, a private equity for firm, for $100 million.
  • American Industrial is now selling the division, known as AHF Products, to an affiliate of Dallas-based Paceline Equity Partners. Terms of the deal — expected to close in the first quarter this year — were not disclosed.

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