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Listen to this articleThe two product lines will be following separate paths early next year after Armstrong splits into two stand-alone companies, one devoted to flooring and one to ceilings. The $1.3 billion ceiling business will retain the Armstrong World name. The $1.2 billion flooring unit will be known as Armstrong Flooring.
Leaders of the Manor Township-based manufacturer say the division will allow each company to sharpen its focus without having to compete against the other for corporate resources and attention.
Some observers, however, believe the flooring business could be ripe for takeover by some of the sector’s larger players.
“That’s a consolidating industry,” said Jim Barrett, research director for CL King & Associates, an institutional brokerage firm in New York City. He also owns Armstrong shares. “There have been other companies outside of Armstrong that have been acquirers in consolidating the space.”
The split itself is not unusual. Specialization is a fairly common tactic among manufacturers today, said John W. Lloyd, president and CEO of Mantec, a York-based nonprofit that assists manufacturers across southcentral Pennsylvania.
“It’s hard to be good at everything,” Lloyd said. “It’s much simpler to choose a focus industry and be the best you can possibly be at that one industry.”
Armstrong has taken numerous steps to simplify its structure since emerging from bankruptcy in 2006. The company sold off its sports and textile flooring subsidiaries in Europe in 2007, sold its cabinet business in 2012 and exited its European flooring business in late 2014.
As they prepare to go their separate ways, the two remaining pieces of Armstrong’s business have their work cut out for them. Sales of floors and ceilings sank during the recession as construction slowed. Armstrong’s revenue remains relatively flat, due to the effect of a stronger dollar on the company’s overseas sales. Revenue from continuing operations came in at $2.52 billion in 2014, down slightly from $2.53 billion in 2013.
Moving forward, the flooring business will focus on two areas for growth: hardwood flooring and luxury vinyl tile, according to Don Maier, CEO of Armstrong Flooring, which will serve both residential and commercial markets.
The company recently brought production of some hardwood products back to the U.S. and in 2013 announced it was investing $41 million to expand its Lancaster County plant to produce luxury vinyl tile, which customers are using in place of carpeting and ceramic tile.
“Both of these decisions give us better quality control over our products and improve delivery time to customers in the market where we sell these products — North America,” Maier said via email. “And we’re also making significant investments at retail to help our showrooms and the consumers who are shopping for floors understand our products and the floor-buying process so they make the best choices for their lifestyles.”
Renovation work has outpaced new-home construction, Maier said. But, he added, the latter is starting to pick up, a trend confirmed by others.
“Flooring for the past two years has been robust compared to the years immediately before that when we were trying to crawl our way out of something,” said E.C. “Bill” Dearing, president of the North American Laminate Flooring Association and an industry consultant based in Las Vegas.
As Armstrong carves out a slice of that growing pie, it faces competition from large rivals. They include Georgia-based Shaw Industries Group Inc., a Berkshire Hathaway company, which reportedly has more than $4 billion in annual sales, and Georgia-based Mohawk Industries, which recorded $7.8 billion in sales last year.
One of those companies could become more than a rival. They could view Armstrong Flooring, its brand and its manufacturing assets as a takeover target, said Don Roberts, president of Kansas-based MyFlorStor Consulting, which serves flooring retailers.
“They’ve got a lot of manufacturing in the U.S. for lumber and wood floors, and that’s worth something to the right player,” Roberts said
For Armstrong, however, the goal of the split remains better performance.
“As an independent company, Armstrong Flooring will have greater flexibility to pursue our strategic growth opportunities and will be 100 percent focused on flooring,” Maier said.
About Don Maier
Title: CEO, Armstrong Flooring
Background: Maier joined Armstrong World Industries Inc. in 2010 as senior vice president of global operations. In February, he was named CEO of Armstrong Flooring, which is expected to operate 17 factories in three countries.
Before Armstrong: Maier worked at TPG Capital Advisors, the global buyout group of private investment firm TPG. He previously held a series of positions at Hillenbrand Industries, beginning in 1987.
Education: Bachelor’s degree in industrial systems engineering, The Ohio State University; MBA, with a concentration in marketing, Xavier University.
