(Bloomberg) — Armstrong Flooring Inc. filed for bankruptcy protection, saying it couldn’t raise prices high enough to keep up with rising supply and transportation costs.
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The Chapter 11 filing came after the company spent months trying to find a buyer and haggling with lenders, according to court papers filed in U.S. Bankruptcy Court in Wilmington, Delaware. Armstrong said it owed creditors $317.8 million and had assets worth $517 million.
“Simply stated, the company’s increasing costs significantly outpaced its pricing power,” Armstrong Chief Executive Officer Michel S. Vermette said in a court filing.
The maker of vinyl sheets, planks and tiles is the latest company to seek court protection from creditors to deal with spiraling costs and weak sales lingering from the Covid-19 pandemic. Last month, Sungard Availability Services LP, a technology company that helps corporate clients recover from disasters, laid part of the blame for its bankruptcy on higher energy prices that hit its U.K. affiliate.
Rising Costs
Armstrong was hit last year with $85 million in additional product and transportation costs, Vermette said, and raising prices for retail customers by 10% and for commercial customers by 15% wasn’t enough to keep its finances afloat. A Chapter 11 filing allows a company to keep operating while it works out a recovery plan.
Armstrong, based in Lancaster, Pennsylvania, plans to continue working with advisers at Houlihan Lokey Capital to find a buyer.
As it struggled with higher costs, Armstrong haggled with lenders who imposed harsh restrictions that hampered its turnaround efforts, the CEO said in court papers. The company had started to modernize operations early 2020 as the pandemic began to hit.
Armstrong Flooring was spun out of Armstrong World Industries, which exited bankruptcy in 2006 after winning court approval for a plan to deal with lawsuits related to asbestos. The substance can cause fatal lung diseases including cancer. Armstrong Flooring became a separate, publicly traded company in 2016.
The case is Armstrong Flooring Inc., 22-10426, U.S. Bankruptcy Court, District of Delaware (Wilmington).
(Updates with inflation impact on other companies in fourth paragraph and company history in eighth paragraph)
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