Armstrong’s Bankruptcy Still on Hold
Lancaster, PA, Mar. 15--Armstrong World Industries' drive out of bankruptcy will continue to be stuck in neutral indefinitely, a company document indicates.
The Lancaster New Era reported that after expecting to emerge from bankruptcy at the end of last year, Armstrong remains stalled by a legal challenge to the federal judge weighing its reorganization plan.
Ironically, the legal challenge originated in the bankruptcy of another former asbestos-products firm, Owens-Corning.
But the matter has affected Armstrong's case, too.
"...(W)hen confirmation of the plan of reorganization will be considered by the U.S. District Court is uncertain," Armstrong said.
Armstrong made the statement last week in a filing with the U.S. Securities & Exchange Commission. It also disclosed: Armstrong's chairman and president Michael D. Lockhart, got paid $2.4 million in 2003, down from $4.3 million in 2002.
In the face of sliding sales and profits, Armstrong continued to slash spending on advertising, research-and-development and new equipment.
Armstrong filed for bankruptcy reorganization in December 2000 to resolve more than 170,000 asbestos-injury lawsuits, stemming from its past sales and installation of asbestos insulation.
Armstrong was not alone; it was one of dozens of former asbestos firms to file for bankruptcy about that time.
To streamline the bankruptcy process, the 3rd U.S. Circuit Court of Appeals appointed a federal judge to handle the asbestos issues in five of the largest bankruptcies, including those of Armstrong and Owens-Corning.
But last year two creditors in the O-C case questioned the impartiality of the judge, Alfred M. Wolin, because he hired two consultants who'd represented asbestos claimants in the past.
Then unsecured creditors who were unhappy with the Armstrong plan entered the dispute.
The Armstrong creditors asked that, if Wolin steps aside in the O-C case, he do so in the Armstrong case too.
Last month, Wolin refused to step aside, but he postponed all action by him on any of the five cases until the impartiality issue is settled for good.
The O-C creditors have appealed to the 3rd Circuit; a hearing is set for April 19.
So, for now, it's unknown if or when Wolin will decide the fate of the Armstrong plan, although a bankruptcy judge last November recommended Wolin approve it.
In the meantime, shareholders in January overwhelmingly approved a key step in the transition to life after bankruptcy under a new corporate structure.
Some 17.2 million shares were voted in favor of dissolving Armstrong's holding company; 4.8 million shares were voted against, according to last week's filing. Armstrong previously announced that shareholders had approved the action but said a tally was not available.
Lockhart's compensation fell in 2003 because he collected no bonus, compared to $1.1 million in 2002, and his long-term incentive pay fell 39 percent, the Armstrong filing shows.
The total compensation for the other top executives in 2003 was: Stephen J. Senkowski, who's president of Armstrong's building products division, received $987,000; Matthew J. Angello, senior vice president of human resources, $711,000; John N. Rigas, senior vice president, secretary and general counsel, $681,000; William C. Rodruan, vice president and controller, $544,000.
Armstrong's filing also disclosed how the company has curtailed spending in several key areas, in the face of falling sales (excluding foreign currency effects) and operating profits (excluding asbestos charges).
For instance, Armstrong spent $78.1 million on capital additions in 2003, down 39 percent from two years earlier.
Advertising spending has been trimmed 34 percent over the past two years to $32.7 million, and spending on R&D has been reduced by 21 percent to $44.4 million.
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