- Sale Price of $100 million Valued at Approximately 7.2 Times
the Wood Flooring Segment’s Trailing Twelve Month Adjusted
EBITDA
- Cost Optimization Plan to Simplify Operations Following
Divestiture
- Divestiture and Cost Optimization Plan Immediately Accretive
to Adjusted EBITDA Margin from Continuing Operations
- Strengthens Focus on Growing Resilient Flooring Segment
Armstrong Flooring, Inc. (NYSE: AFI) (“Armstrong Flooring” or
the “Company”) has entered into a definitive agreement to sell its
Wood Flooring segment to an affiliate of American Industrial
Partners (“AIP”) for a purchase price of $100 million, subject to
customary adjustments for working capital, debt, and other matters.
The transaction is valued at approximately 7.2 times the Wood
Flooring segment’s trailing twelve month Adjusted EBITDA. As of
October 31, 2018 Armstrong Flooring’s Wood Flooring segment
comprised six U.S. manufacturing facilities primarily serving the
North American region and approximately 1,700 employees. The
transaction, which is subject to customary closing conditions, is
expected to be completed at the end of the fourth quarter of 2018.
The net proceeds to the Company from the transaction after purchase
price adjustments are non-taxable and expected to be $85 to $90
million, which should increase the Company’s flexibility to further
invest in its growth strategies and other value-enhancing
opportunities.
Upon closing of the sale, Armstrong Flooring will intensify its
focus on the fastest-growing parts of the flooring industry,
including Luxury Vinyl Tile (“LVT”) and rigid core, as well as its
wide range of resilient products including Vinyl Composition Tile
and resilient sheet. AIP will gain Armstrong Flooring’s
high-quality wood flooring product portfolio and existing network
of wood floor manufacturing facilities, staffed by an experienced
wood flooring team. AIP will own the Bruce brand and all other Wood
Flooring segment brands. To ensure a seamless transition for our
customers, AIP will have full access to the Armstrong Flooring
brand for the sale of wood products for two years after
closing.
Don Maier, Chief Executive Officer, commented, “Today’s
announcement demonstrates our commitment to maximizing shareholder
value and focusing our portfolio on profitable growth strategies.
The wood flooring industry has been impacted by changing market
dynamics and now is the right time to deepen our focus on LVT and
other resilient flooring categories, where we are confident
fundamentals remain strong for future growth.”
Rick Hoffman, Partner at AIP, said, “Don and I believe this
strategic decision empowers both the resilient and wood flooring
businesses to better realize their core strengths and pursue
strategies for growth, product innovation and quality, and
exceptional service to customers. Our companies look forward to
working closely with each other to ensure a seamless transition for
employees, customers and suppliers.”
Additional Details on 2018 Outlook
The Company previously provided its Adjusted EBITDA outlook for
the full year 2018 in the range of $72 million to $78 million. The
segment level contribution to the full year Adjusted EBITDA outlook
is unchanged. On the current basis of presentation, Adjusted EBITDA
for the Resilient Flooring segment is expected to be $59 million to
$63 million for the full year 2018. Starting in the fourth quarter
2018, the Wood Flooring segment is expected to be classified as a
Discontinued Operation.
In connection with the divestiture of its Wood Flooring segment,
some shared costs currently allocated to the Wood Flooring segment
are expected to be assigned to the Resilient Flooring segment. As a
result, the Company announced a cost optimization plan to improve
its existing cost structure by eliminating essentially all shared
costs that will not be covered by transition service agreements
with AIP. The new structure is expected to better reflect the
simplification of the Company’s operations as a purely resilient
flooring Company. The Company expects these efforts to generate
annualized savings of approximately $5 million to $6 million and to
be substantially completed by the end of the fourth quarter of
2018, concurrent with the closing of the divestiture transaction.
In connection with these actions, the Company expects to incur
one-time charges of $1 million to $2 million in the fourth quarter.
These charges relate primarily to severance expenses. By the end of
2018, the Company expects to offset the impact of essentially all
shared costs reassigned to the Resilient Flooring segment through
the benefit of its cost optimization plan, along with transition
service agreements with AIP.
Mr. Maier stated, “The divesture and related cost optimization
are additional steps in our ongoing plan to streamline our
organization and deliver on our strategic priorities to innovate
products, elevate our operating performance and drive further
success. With a pure-play resilient flooring company, we will be
better positioned than ever to continue growing Adjusted EBITDA and
margin from continuing operations.”
Goldman Sachs is acting as financial advisor to Armstrong
Flooring on the transaction and Skadden, Arps, Slate, Meagher &
Flom LLP is acting as legal counsel.
Conference Call and Webcast
The Company will provide additional details about this
transaction during a special conference call and webcast at 11:00
a.m. ET on November 15. To participate in the call, please dial
877-407-0789 (domestic) or 201-689-8562 (international).
Supplemental financial information in connection with the proposed
transaction, including a non-GAAP reconciliation for Securities and
Exchange Commission Regulation G purposes, will be available in the
Investors section of the Company’s website at
www.armstrongflooring.com.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the
design and manufacture of innovative flooring solutions that
inspire spaces where people live, work, learn, heal and play SM.
Headquartered in Lancaster, Pa., Armstrong Flooring is a leading
manufacturer of resilient products across North America. The
Company safely and responsibly operates 15 manufacturing facilities
in three countries and employs approximately 3,500 individuals, all
working together to provide the highest levels of service, quality
and innovation to ensure it remains as strong and vital as its
150-year heritage. Learn more at www.armstrongflooring.com.
About American Industrial Partners
American Industrial Partners is an operationally oriented
private equity firm that makes control investments in industrial
businesses serving domestic and global markets. The firm has deep
roots in the industrial economy and has been active in private
equity investing since 1989. To date, AIP has completed over 90
transactions and currently has $4.2 billion of assets under
management on behalf of leading pension, endowment and financial
institutions. For more information on AIP,
visit www.americanindustrial.com.
Forward Looking Statements
Disclosures in this release, including without limitation those
regarding our entry into a definitive agreement to sell the Wood
Flooring segment to American Industrial Partners, the transactions
contemplated thereby and any financial expectations related
thereto, and in our other public documents and comments contain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements provide
our future expectations or forecasts and can be identified by our
use of words such as “anticipate,” “estimate,” “expect,” “project,”
“intend,” “plan,” “believe,” “outlook,” “target,” “predict,” “may,”
“will,” “would,” “could,” “should,” “seek,” and other words or
phrases of similar meaning in connection with any discussion of
future operating or financial performance. Forward-looking
statements, by their nature, address matters that are uncertain and
involve risks because they relate to events and depend on
circumstances that may or may not occur in the future. As a result,
our actual results may differ materially from our expected results
and from those expressed in our forward looking statements. A more
detailed discussion of the risks and uncertainties that could cause
our actual results to differ materially from those projected,
anticipated or implied is included in our reports filed with the
U.S. Securities and Exchange Commission. Forward-looking statements
speak only as of the date they are made. We undertake no obligation
to update any forward-looking statements beyond what is required
under applicable securities law.
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version on businesswire.com: https://www.businesswire.com/news/home/20181115005270/en/
Investors:Douglas Bingham, 717-672-9300VP, Treasury and Investor
RelationsIR@armstrongflooring.comorMedia:Steve Trapnell,
717-672-7218Corporate Communications
Manageraficorporatecommunications@armstrongflooring.com
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