Galbato Update

Lancaster, PA, Aug. 5--A consolidation of the top offices at Armstrong World Industries Inc. has left its number two man, Chan W. Galbato, the odd man out, according to the Lancaster New Era. The newspaper said as a result, Galbato has resigned after just two years with the company. His duties have been assumed by Michael D. Lockhart, Armstrong's chairman and chief executive officer, it was announced last Wednesday. Galbato, 40, ran the company's resilient-flooring division, its flagship and largest business, and the wood-flooring division, its third largest, which operated together as Armstrong Floor Products. Galbato earned $1.9 million in total pay last year, according to the company's financial filings. His resignation is effective immediately. He will receive $1.4 million in severance, as specified in his contract, Lockhart said in an interview today at Armstrong's Columbia Avenue headquarters. "There is a change in the philosophy of the company about the role of corporate. We're trying to go from a company where corporate was a holding company," he said. "Instead, we want to slam together corporate and the flooring business, then have two subsidiaries, cabinets and building products (ceilings), to reduce costs and take advantage of the talent we have," said Lockhart. The new structure made Galbato's role "redundant," said Lockhart. "Chan and I have talked about this for months--whether we needed myself, Chan and Steve (Senkowski, head of building products), whether we needed three talented guys, or at least guys we think are talented, for essentially two jobs," he said. Beyond that, with the company set to emerge from Chapter 11 by year's end, bankruptcy matters are consuming much less of Lockhart's time, so he's able to add the flooring duties. Lockhart said Galbato, an "extraordinary" and "charismatic" executive, will have no trouble landing another top job elsewhere. Ironically, in July 2001, when Galbato joined Armstrong as president and chief executive officer of Armstrong Floor Products, he was widely perceived as Lockhart's heir apparent. His career path mirrored Lockhart's--both have MBAs from the University of Chicago and are former General Electric executives. More significantly, Galbato's five-page employment contract provided that, if someone else was selected to succeed Lockhart, Galbato could choose to leave Armstrong and collect at least $1.1 million. A company spokeswoman said at the time that Galbato was being groomed to become the next CEO, calling him "a leading candidate" to get the job. Today, Lockhart said the spokeswoman overstated Galbato's situation, that Galbato was not the only Armstrong executive to have such a contract provision and that Galbato was one of several potential CEOs. Lockhart added that, at 54, he intends to stay at the helm for the foreseeable future, noting that the automatic renewal of the three-year contract he signed in August 2000 has gone into effect. "I enjoy what I'm doing and I don't have any plans to leave...," Lockhart said. "I think it's way too early to talk about (my successor). It was too early then (when Galbato was hired in 2001) and it's too early now. Obviously, we thought he was a talented guy, but he was 38 when he came here," he said. Galbato's contributions to Armstrong included overseeing the merger of Armstrong's two flooring businesses, renewing Armstrong's focus on commercial flooring and cutting costs in its European flooring business, said Lockhart. The two flooring businesses posted mixed results during Galbato's tenure, faced with rising raw-material costs, a soft economy and other obstacles.