Leaner Armstrong Exits Bankruptcy Today

Lancaster, PA, October 5, 2006--Armstrong World Industries will quietly begin its new life today by emerging from bankruptcy, nearly six years after it started the process, according to the Lancaster New Era. The reorganized Lancaster-based firm is a new, leaner corporation with a new board of directors and new stock. Most important, it's permanently free of the billions of dollars of asbestos liability, present and future, that drove the old corporation into bankruptcy in December 2000. But the transition, expected to be completed late today, is coming at a cost. Armstrong canceled its old stock, leaving those shareholders with nothing, after creditors thwarted Armstrong's plan to give them options to buy the new stock. Armstrong also used bankruptcy to restructure its vinyl flooring business, improving profits but closing eight plants and idling 1,500 workers, including 450 at its Lancaster plant. Chairman and chief executive officer Michael D. Lockhart explained that those sacrifices tempered his feelings about exiting bankruptcy. "We have not said, 'Oh, this is a happy day' and all of the other stuff because, while it is a successful end to a long and at times daunting process, we don't view it as a great, happy day"... "I can't celebrate today because look at what's happened," he continued, citing the toll the bankruptcy took on shareholders and employees "...I just can't celebrate that. "The thing that is worth celebrating is that the people who are here have busted their rear ends for six years to get to this point," he added, calling their effort "a real source of satisfaction for me." As was previously reported, Armstrong's $2.8 billion reorganization plan will create a new corporation. About a third will be owned by unsecured creditors and the balance by a trust formed to pay and administer all asbestos claims. Armstrong entered bankruptcy facing nearly 200,000 such claims, alleging personal injury from exposure to asbestos insulation which Armstrong stopped selling in 1969. For customers, retirees and employees, though, the change from the old to new Armstrong is transparent, said Lockhart. "If you worked for Armstrong World Industries yesterday, you work for them today," he said. "The fact that it's actually a different Armstrong World Industries will be lost on everybody." The many technicalities involved in launching the new Armstrong are set to be wrapped up by mid October. By then, the new Armstrong will have new financing, and its new stock will begin trading. Lockhart and the other members of senior management will be part of the new Armstrong. Lockhart said he was "pretty optimistic" about the new Armstrong, noting that the company has lessened its reliance on the vinyl flooring business and the new housing market -- both in decline. At the same time, Armstrong has added capacity in the wood flooring business, which has much brighter prospects, put more emphasis on the commercial market, cut its debt and strengthened its balance sheet. "Things have gone pretty well for us the last couple of quarters...Generally we've been the beneficiaries of cost reductions we've taken and we've had reasonable sales growth," he said during an interview at the company's Columbia Avenue headquarters. The maker of floors, ceilings and cabinets, which posts annual sales of $3.6 billion and has about 2,000 workers here, initially figured it might emerge from bankruptcy three years ago. But its unsecured creditors, who at first had supported Armstrong's plan, turned against it, filing objections to numerous aspects in hopes of forcing a bigger payout. The unsecured creditors managed to knock out the plan's provision to give the stock options. But in August, a federal judge rejected their argument that the plan unfairly discriminated against them and confirmed the plan, leading to today's emergence from