Armstrong Flooring Signs Definitive Agreement to Sell South Gate, California Property for $76.7 Million
February 25 2021 - 4:38PM
Armstrong Flooring, Inc. (NYSE: AFI) (“Armstrong Flooring” or the
“Company”), a leader in the design and manufacture of innovative
flooring solutions, today announced it has entered into a
definitive agreement to sell its production facility, warehouse and
real estate property located in South Gate, California to an
affiliate of Overton Moore Properties, one of the leading
industrial developers in California, for a purchase price of $76.7
million in cash. Armstrong Flooring will receive proceeds of
approximately $65 million in cash, net of fees, expenses, and $10.5
million to be held in an environmental related escrow. The
transaction is subject to customary closing conditions and is
expected to close in the first quarter of 2021.
“The sale of South Gate represents a major
milestone in the transformation of Armstrong Flooring,” said Michel
Vermette, President and Chief Executive Officer. “The opportunity
to monetize this facility and extract meaningful value from a land
parcel in one of the nation’s strongest real estate markets is an
all-around win. The consolidation of our tile production capability
will provide operational synergies and enable us to effectively
serve our customers. We are already seeing encouraging results from
our multi-year transformation that began in 2020 and we are excited
to have an even stronger capital base to pursue what we believe to
be a rapidly growing market opportunity for our Company. We are
committed to expanding, simplifying, and strengthening our business
to deliver improved results and stronger returns for
shareholders."
The transaction brings considerable operational
and financial benefits to Armstrong Flooring. The Company had
previously announced its intention to sell the South Gate property
and has taken steps to ensure a seamless transition within its
manufacturing network. In December 2020, the Company announced the
planned closure of the manufacturing facility in furtherance of its
tile manufacturing footprint optimization strategy. Products
formerly produced at South Gate have been successfully moved to two
of the Company’s facilities located in Illinois and Mississippi.
The Company has also opened a 100,000 square foot warehouse in
Southern California to serve as its new West Coast distribution
hub, which has already started shipping to customers. The new
warehouse replaces storage space currently located on the South
Gate property, which will be sold in the transaction, and leased
from the buyer for two months following the closing. The
optimization of the manufacturing network, combined with
investments to modernize the Company’s five remaining U.S.
facilities, is expected to result in efficiencies, cost savings and
higher capacity utilization.
The transaction will provide for a significant
increase in financial flexibility to effectively execute the
Company’s near and long-term objectives. At December 31, 2020, the
Company had available liquidity of $52.7 million, including a $30
million block withheld under the credit facilities, until a sale of
South Gate is completed. The Company expects to have restoration of
availability under the ABL following the closing of the
transaction. Under the terms of its credit agreements, $20 million
of proceeds will be used to pay down a portion of borrowings on its
term loan facility. Upon closing, the Company expects net proceeds
to increase available liquidity by approximately $75 million,
giving effect to the release of cash currently withheld under the
block and the repayment of a portion of debt. The funds to be held
for environmental related purposes will remain in escrow until the
sooner to occur of the exhaustion of the escrow or a determination
by the appropriate authority that no further action is required.
Cash income taxes resulting from the sale are expected to be less
than $1 million. The remaining cash and liquidity will be available
to accelerate investments in the Company’s multi-year
transformation of its operations to become a leaner, faster growing
and more profitable business. The Company will continue to invest
in its business with a customer-centric and returns-focused
approach to execute on its multi-year transformation.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a
leading global manufacturer of flooring products and one of the
industry’s most trusted and celebrated brands. The company
continually builds on its resilient, 150-year legacy by delivering
on its mission to create a stronger future for customers through
adaptive and inventive solutions. Headquartered in Lancaster,
Pennsylvania, Armstrong Flooring safely and responsibly operates
eight manufacturing facilities globally. Learn more at
www.armstrongflooring.com.
About Overton Moore
Properties
Ranked among the largest real estate developers
in Los Angeles, Overton Moore Properties (OMP) is a privately held
company specializing in real estate development, acquisition,
master planning, marketing, asset management, property management,
construction management, and financial reporting of industrial,
self-storage, office and mixed-use projects. OMP’s long-term
franchise value, local market knowledge, deep relationships with
tenants and the brokerage community and strong institutional
relationships have contributed to its success throughout the past
42 years. OMP has developed and acquired more than 38 million
square feet of office, industrial, self-storage and mixed-use
space, representing over $2 billion in value. The firm has offices
in Southern and Northern California and manages nearly 10 million
square feet of space in California.
Forward-Looking Statements
Disclosures in this release, including those
relating to the sale, proceeds and expected closing of the
transaction, as well as expected financial flexibility and
operational synergies, 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.
Contact InformationInvestors:
Amy TrojanowskiSVP, Chief Financial Officer
ir@armstrongflooring.com
Media: Alison van HarskampDirector, Corporate
Communicationsaficorporatecommunications@armstrongflooring.com
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