Armstrong World Industries (Lancaster, Pa.) will split its flooring business from its ceilings business, creating two independent and publicly traded companies, according to a statement released this morning alongside Armstrong’s financial results from the fourth quarter of 2014.
The flooring segment will now be called Armstrong Flooring. The ceilings business will continue under the Armstrong World Industries name. The separation could be completed in early 2016, pending approval from the Securities and Exchange Commission and the company’s board of directors.
Don Maier, currently the CEO of Armstrong Flooring Products, will continue to lead the flooring business after the split is approved. Both companies will remain headquartered in Lancaster, Pa.
The division will help the companies benefit from a more concentrated focus, streamlined operating structures and improved capital allocation, the statement says.
“There is little existing overlap between the businesses, and we expect the separation to create minimal incremental operating expenses and result in no disruption to our customers, distributors and suppliers,” said Matthew Espe, president and CEO, in a statement. “Both businesses will remain headquartered in Lancaster and we expect minimal impact on our employees."
The move was a continuation of Armstrong’s actions since it filed bankruptcy in 2000 to increase the value of the company in the eyes of shareholders, he added.
Those actions include reducing expenses, divesting its cabinets and European flooring businesses and investing in global growth opportunities.
Armstrong discussed the separation during its fourth quarter earnings broadcast this morning. A recording of that event is available on Armstrong’s website, in the “Investors” section, and will be viewable for up to one year.
In the call, Armstrong World Industries CFO Dave Schulz estimated the separation would cost $20–$40 million in 2015.
He also said that the company will be “ramping up” its marketing for its engineered flooring operation in Somerset, Ky., and will invest more in the wood flooring business in 2015 than it had previously.
Those investments will turn into profits come 2016, Schulz added.
Armstrong World Industries also released its earnings from the fourth quarter of 2014 this morning.
The company made $10.6 million in profit in the fourth quarter of 2014, compared with a $23.4 million profit in the fourth quarter of 2013. Net sales in 2014 were $587.3 million compared with $614.8 million in the fourth quarter of 2013.
"We delivered fourth quarter and full year results within our guidance range when adjusting for the exit of our European Flooring business," Espe said in a statement.
The wood flooring business segment reported an operating loss $19.4 million in the fourth quarter of 2014, an unfavorable decrease from 2013’s operating income of $0.4 million.
Although Armstrong raised prices in its wood flooring business in 2014, any benefit was negated by sales declines due to lower volumes and continued elevated lumber pricing.
Sales decreased by 14.7 percent, from $133.1 million in the fourth quarter of 2013 to $113.6 million in the fourth quarter of 2014.
