Armstrong emerges from bankruptcy; sets up trust, reorganizes board of directors
"Today we emerged from Chapter 11," said Michael D. Lockhart, Armstrong chairman and CEO. He noted that while in bankruptcy the company "made significant operation improvement that provide the opportunity to grow and strengthen our business" including "closing several plants and streamlining our workforce in the U.S."
"We have also expanded capacity to manufacture wood flooring, broadened our product lines and improved product quality and customer service" while under Chapter 11 protection, Lockhart said.
Lockhart will continue to serve in his current role, and no senior management changes are expected, the company said. Along with Lockhart, board members Judith Haberkorn and John Roberts are expected to serve on the new Armstrong board of directors. Six new members with experience outside of the flooring industry have also been added to the board. They are: James Gaffney, chairman of Imperial Sugar Co.; Robert Garland, CEO of AFR Holdco Inc., American Fiber Resources and Great Lakes Pulp Co.; Scott Miller, president and CEO of Six Sigma Academy; Russell Peppet, special advisor to Park Avenue Equity Partners; Arthur Pergament, CEO of Pergament Advisors LLC; and Hon. Alexander Sanders Jr., chief judge of the South Carolina Court of Appeals.
As part of the plan of reorganization, Armstrong has established a new trust, valued at $1.8 billion, to be funded with a one-time contribution of cash, notes and common stock of the reorganized company. Unsecured creditors are expected to receive distributions beginning Oct. 17, according to Armstrong. Current shareholders of Armstrong's parent company, Armstrong Holdings Inc. (AHI) will not receive any distributions under the plan. Following Armstrong's emergence, AHI is expected to dissolve, the company noted.
As part of its exit financing, Armstrong said it expects to receive $1.1 billion in a senior credit facility, made up of a $300 million revolving credit facility, a $300 million term loan with a five year maturity, and a $500 million term loan with a seven year maturity.
"We are emerging from Chapter 11 with less debt and a stronger balance sheet than six years ago," said Lockhart. "Our solid capital structure, combined with our recent financial performance, means that our employees, customers, distributors, suppliers and other business partners can be assured that the company is on strong financial footing with good prospects for continued growth and profitability going forward."
The company said it will also adopt "fresh-start accounting," which requires the company to mark-to-market its entire balance sheet. This includes revaluing assets and liabilities to current estimated fair values, setting shareholders' equity at an amount to be determined by a third party, and recording any portion of the equity value that cannot be attributed to specific assets. Armstrong noted that as a result of this approach, future financial statements will not be comparable with prior reports.