Armstrong Will Exit Bankruptcy with Red Ink

Lancaster, PA, August 28, 2006--Armstrong World Industries will leave bankruptcy with a "substantial" splash of red ink, the firm said today, according to the Lancaster New Era. The newspaper reported that Armstrong, which last week won a federal judge's approval of its plan for emerging from bankruptcy, said its owner, Armstrong Holdings, also will incur a "substantial" loss. With the judge's confirmation of its plan, the maker of floors, ceilings and cabinets hopes to leave bankruptcy during this year's fourth quarter -- six years after it entered bankruptcy to resolve a deluge of asbestos-injury lawsuits. Armstrong's announcement about the impending red ink did not explain why the losses will occur. The statement did say that the losses could lead to a tax refund. The company did not estimate the size of the losses or potential refund. When Armstrong emerges from bankruptcy, the holding company's stock will be canceled and a new stock will be created. The value of that stock will be a major part of the $2.8 billion in assets that will go to Armstrong's unsecured creditors and to a trust formed to pay the asbestos claims. Armstrong has said that the holding company would be dissolved at that time. But today Armstrong said that decision will hinge on the potential tax refund and whether the holding company succeeds in a claim for "a few million dollars" from "intercompany accounts." These accounts are used for transactions between Armstrong and the holding company. Armstrong did not indicate what its holding company would do, if it continues to exist; the holding company would be separated from Armstrong by the bankruptcy emergence process. Meanwhile, Armstrong on Tuesday asked the U.S. Bankruptcy Court to extend again the company's protection from any rival reorganization plans. The protection, called the "exclusive period," expires Sept. 6. Armstrong said that although the federal judge confirmed Armstrong's plan last week, over the objections of the unsecured creditors, it's unknown whether the creditors will appeal or whether any unforeseen obstacles to emergence could arise. Armstrong asked the court to extend this "exclusive period" by six months to March 6. The court previously has extended this period 11 times.