Lancaster, Pa.-based Armstrong Flooring Inc. has filed for protection under Chapter 11 bankruptcy laws as it continues pursuing sale of the business.
The company owes creditors $317.8 million and has assets worth $517 million, according to filings 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, making linoleum.
Armstrong grew into one of North America's largest producers of resilient flooring products for residential and commercial applications with U.S. flooring plants in Lancaster and Beech Creek, Pa.; Kankakee, Ill.; Jackson, Miss.; and Stillwater, Okla.
However, rising supply and transportation costs for flooring products like vinyl sheet, plank and tile can't be offset any longer by price increases, according to Armstrong Flooring officials.
"Simply stated, the company's increasing costs significantly outpaced its pricing power," CEO Michel Vermette said in a court filing.
The company and certain subsidies are seeking protection under the U.S. Bankruptcy Code to keep operating while they work out a recovery plan.
Armstrong's businesses in Wujiang, China, and Victoria, Australia, aren't included in the Chapter 11 filing, but they are part of the sale process, which began in December 2021.
That's when Armstrong Flooring retained Houlihan Lokey Capital Inc. to assist with "an efficient and value-maximizing sale" and other strategic alternatives.
Company officials hope to complete a sale of the entire business or its core assets as soon as practicable, according to Vermette.
"Our business and team members have been working diligently to strengthen our financial foundation in the face of several macroeconomic trends, including supply chain challenges, the current inflationary environment and continued headwinds from the COVID-19 pandemic," Vermette said in a news release.
The board of directors supports use of the Chapter 11 process to effectuate 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 puts us in the best possible position to preserve and maximize value for our stakeholders," he said. "In the meantime, we are open for business and remain firmly committed to our customers, vendors 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 liquidity to operate and cover administrative expenses, including employee wages and benefits, as it pursues a sale.