Armstrong World Industries has decided to exit its European flooring business and cease further funding of its DLW subsidiary effective immediately. As a result of this decision, local DLW management filed for insolvency in Germany.

“Our difficult, but necessary, decision to exit the European flooring business and discontinue funding our DLW subsidiary in Germany was the culmination of a comprehensive evaluation of strategic alternatives following years of disappointing results, multiple restructuring initiatives and significant financial investments,” said Matthew Espe, Armstrong CEO.

DLW management concluded that its operations could not be financed and sustained without funding from its Armstrong parent and, as a result, filed for insolvency under applicable German law. Armstrong expects all operations at the two DLW manufacturing plants in Germany, as well as at the DLW administrative offices across Europe, to continue in the normal course for the near term. A preliminary insolvency administrator in Germany will be appointed by the local court. As a result of the insolvency filing and Armstrong’s loss of control of the DLW operations, Armstrong will classify the results of the European flooring business as discontinued operations starting in the fourth quarter of 2014. The following provides a summary of the operating results of the European flooring business for the nine-month period ended Sept. 30 (previously shown as part of the resilient flooring reporting segment). 

  • Net sales: $144.7 million
  • Operating loss: $23.2 million

In addition, the carrying value of assets was $152 million as of Sept. 30, including property, plant and equipment of $73.4 million and inventory of $57.1 million. The carrying value of liabilities was $171.3 million as of Sept. 30, including an unfunded pension liability of $126.5 million. 

Armstrong acquired DLW in 1998 to establish a stronghold and serve as a catalyst for the development of its European flooring business. DLW subsequently struggled with declining market conditions as a result of the ongoing economic crisis, including a significant decrease in public funding, which particularly affected the business’s key commercial segments, notably hospitals and schools. These developments contributed to intensified price pressure and overcapacities within the whole European flooring industry, further weakening DLW’s competitive position.

“Despite investing approximately $150 million in the business since 2007, DLW has been unable to generate profit or achieve its strategic plans. These results, and our ultimate decision, however, in no way reflect the dedication, effort and commitment of DLW employees over the years, for which we remain grateful,” Espe added.

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