Armstrong Flooring Inc., based in Lancaster, Pa., has filed for protection under Chapter 11 bankruptcy laws as it pursues the sale of the business.
The company owes $317.8 million to creditors and has assets worth $517 million, according to documents filed in U.S. bankruptcy court in Wilmington, Del.
Founded in 1860 as a two-man cork-cutting shop in Pittsburgh, the company found new uses for the material in shoe insoles, insulation, acoustic panels and, in 1909, manufacturing. of linoleum.
Armstrong has become one of North America’s largest producers of resilient flooring for residential and commercial applications with US flooring plants in Lancaster and Beech Creek, Pennsylvania; Kankakee, Ill.; Jackson, miss; and Stillwater, Okla.
However, rising sourcing and transportation costs for flooring products such as vinyl sheet, plank and tile can no longer be offset by price increases, Armstrong Flooring officials say.
“Put simply, the company’s rising costs have far exceeded its pricing power,” CEO Michel Vermette said in a court filing.
The company and some grants are seeking protection under the US bankruptcy code to continue operating while they develop a recovery plan.
Armstrong’s operations in Wujiang, China, and Victoria, Australia, are not included in the Chapter 11 filing, but are part of the sale process, which began in December 2021.
That’s when Armstrong Flooring hired Houlihan Lokey Capital Inc. to help with “efficient, value-maximizing selling” and other strategic alternatives.
Company officials hope to complete the sale of the entire company or its major assets as soon as possible, according to Vermette.
“Our company and our team members have worked diligently to strengthen our financial footing in the face of several macroeconomic trends, including supply chain challenges, the current inflationary environment and the continued headwinds of the COVID pandemic. -19,” Vermette said in a press release.
The board supports using the Chapter 11 process to make a potential sale as the right next step for the company, Vermette added.
“As we have said previously, we firmly believe in the value and potential of Armstrong Flooring – and we are confident that this definitive action places us in the best possible position to preserve and maximize value for our stakeholders,” did he declare. “In the meantime, we are open for business and remain firmly committed to our customers, suppliers and employees as we navigate the path forward.”
To fund operations during the Chapter 11 process, Armstrong Flooring entered into a credit agreement, which is subject to bankruptcy court approval, to provide $30 million of debtor-in-possession (DIP) financing. If approved, the DIP financing will give Armstrong Flooring enough cash to operate and cover administrative expenses, including employee salaries and benefits, as it pursues a sale.