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February 23, 2015 01:00 AM

Armstrong World splitting into two companies

Catherine Kavanaugh
Senior Reporter
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    Armstrong World Industries Inc. is splitting into two publicly traded companies with one concentrated on flooring and the other on ceilings and building products.

    The board of directors of the Lancaster, Pa.-based company announced Feb. 23 it would separate the two businesses, in part to pursue a tax-free spinoff of the flooring business to company shareholders.

    The separation process will be completed in the first quarter of 2016, creating a company called Armstrong Flooring in addition to AWI. Both business units are expected to benefit from increased strategic focus, streamlined operations and improved capital allocations. Each of the companies will have different operating and financial models, end-market business cycles and growth opportunities for investors, according to Matthew J. Espe, Armstrong's president and CEO.

    "We are committed to taking decisive actions to deliver shareholder value, and separating our businesses at this time is the best way to accomplish that goal,” Espe said in a news release. “We expect both businesses to improve their industry-leading positions and maximize their strategic opportunities. 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.”

    There should also be minimal impact on employees, Espe added.

    Armstrong has about 7,400 employees working at 31 plants in eight countries. Net sales for the flooring and ceiling manufacturer were $2.5 billion in 2014 with about $1.3 billion of sales generated from building products and $1.2 billion from flooring.

    Following the separation, AWI will have 3,400 employees at 22 factories in eight countries. One of the goals will be further consolidating the ceilings market. The flooring unit will have 3,600 employees at 17 manufacturing operations in three countries. One of its major goals will be continued investment in luxury vinyl tile.

    The formation of the two public companies is subject to several conditions, including a legal opinion about the tax-free nature of the transaction, a registration filing with the Securities and Exchange Commission, and approval by the company's board of directors.

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