Armstrong World Industries, Inc.

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Armstrong World Industries, Inc.

313 West Liberty Street
Lancaster, Pennsylvania 17604
U.S.A.
(717)397-0611
Fax: (717) 396-2787

Public Company
Incorporated: 1891 as Armstrong, Brother & Company, Inc.
Employees: 26,000
Sales: $2.51 billion
Stock Exchanges: New York Philadelphia Pacific

Armstrong World Industries is a leading international manufacturer and marketer of interior furnishings for homes and other buildings. Its products include resilient floorings such as Solarian no-wax flooring, ceramic tile, ceiling systems, and a broad line of furniture sold under the names Thomasville and Armstrong. To a lesser extent the company also produces specialty products such as gaskets, insulation materials, and coverings for the building, automotive, textile, and other industries.

In 1860 Thomas Morton Armstrong, the 24-year-old son of Scottish-Irish immigrants from Londonderry, Ireland, used $300 of savings from his job as a shipping clerk to buy a small cork-cutting shop in Pittsburgh. The firm was originally named for his partner in the venture, John O. Glass, but Glass’s interest was purchased by Armstrong’s brother in 1864 and the company’s name was changed to Armstrong, Brother & Company.

Armstrong’s original business was cutting cork stoppers, first by hand then after 1862 by machine, from the bark of cork trees which grow in Portugal, Spain, and northern Africa. During the Civil War, 1861 to 1865, the company made bottle stoppers for the Union Army and was singled out for official praise for fulfilling its contracts at the agreed prices with top-grade corks. This good publicity enabled Armstrong to land a large contract with a New York drug firm after the war, beginning the move toward national distribution of its products. In 1864 Thomas Armstrong pioneered the concept of brand-name recognition in his industry by stamping “Armstrong” on each cork and offering a written guarantee of quality with each sale.

Originally cork was purchased from American importers, but in 1878 Armstrong made arrangements to purchase, process, and ship corkwood and corks direct from Spain, thus beginning the foreign operations which eventually would make the company the largest cork processor in Spain. By the 1890s Armstrong was the world’s largest cork company, employing more than 750 people, most of whom Thomas Armstrong knew by name. In 1891 the company incorporated as Armstrong, Brother & Company and, in 1893, purchased the Lancaster Cork Works, beginning its long involvement with the Pennsylvania Dutch area. During the 1890s Armstrong expanded its cork product line to include insulation, cork-board, gaskets, and flexible coverings for machinery. In addition, foreign markets were expanded with sales offices opening in Montreal and Toronto in 1895. In that year the corporate name was changed to Armstrong Cork Company. Thomas Armstrong died in 1908 and was succeeded as president by his son, Charles Dickey Armstrong.

Searching for new cork-based products, the company decided to add linoleum floor covering to its line and, in 1908, the first Armstrong linoleum was produced in a new plant in Lancaster. Invented in England in 1863 by Frederick Walton, linoleum was basically a mixture of cork flour, mineral fillers, and linseed oil, which was pressed under high temperature onto burlap backing and colored with pigments. The linoleum line was the beginning of the company’s involvement with floor products, which in the 1990s, in a variety of modern forms, provided nearly one-half of its sales volume.

Under Charles Armstrong’s leadership the firm expanded its product lines with cork insulating board and other insulating materials, packaging closures, and gaskets, as well as linoleum and related flooring materials, becoming in the process a much more consumer-oriented company than before. He also continued his father’s policy of responsibility towards his employees by initiating benefits which were rare, if not unprecedented, early in this century. In 1909 he established free dental service for employees. Other pioneering examples of corporate responsibility followed: extra pay for overtime in 1913, shop committees to communicate with management in 1919, paid vacations in 1924, and group life insurance in 1931. Armstrong was one of the first U.S. companies to provide such fringe benefits as pensions and group medical insurance. Thus Charles Armstrong’s presidency expressed the company’s philosophy that employees should be provided for voluntarily by industry rather than by means of government compulsion.

Charles Armstrong became chairman of the board in 1928 and the next year John J. Evans succeeded him as president. In 1934, the vice president, Henning Webb Prentis Jr., who was to have a great impact on the company’s development, became the next president of Armstrong.

Prentis had joined the firm in 1907 when, as a 23-year-old with an M.A. in economics, he took a job with Armstrong’s insulation division in Pittsburgh in order to gain some practical experience before beginning a teaching career. It was a significant hiring decision. Prentis became interested in the possibilities of advertising and public relations. He wrote the first promotional literature on cork products to be published by Armstrong, including selling aids for retailers and booklets on home decoration for consumers. In 1911 he became head of the tiny advertising department and persuaded management to support a three-year, $50,000 advertising campaign. In 1917 he arranged for the company’s first national advertisement in the mass media, to appear in the September 1917 issue of The Saturday Evening Post. He pioneered his industry’s recruitment of college graduates as salesmen and, with Charles Armstrong’s support, helped develop the strenuous training programs which enormously strengthened company management. He improved distribution practices by initiating price lists with discounts based on quantities purchased, and insisted on the establishment of close, friendly relations with wholesalers and retailers.

Thanks largely to Prentis’s marketing innovations, Armstrong grew substantially during the 1920s, reaching nearly $48 million in sales by 1929, when the company moved its headquarters from Pittsburgh to Lancaster, Pennsylvania. When the Depression cut sales in half and produced large losses by 1934, Prentis was appointed president to improve the company’s situation. He diversified by purchasing rubber-and asphalt-tile factories, and in 1938 acquired two glass companies, Whitall Tatum and Hart Glass Manufacturing.

The company’s personnel policies helped to maintain morale and loyalty during those hard times. One example was the research employee who was laid off because of the Depression but continued to come to work without pay and, eventually rehired, made significant contributions to the development of a new flooring process. With Armstrong’s debtfree balance sheet, Prentis’s efforts were successful. By 1935 dividends on the common stock were restored and in 1936 Armstrong had its most profitable year to that point, a stunning achievement at a time when the country was still in the grip of the Great Depression. By 1937 the common stock had climbed from a low of $3.25 in 1932 to a price of approximately $65.

In addition to improving Armstrong’s profitability, Prentis became much more of a public figure than his predecessors. He spoke frequently on behalf of conservative business philosophies in opposition to the New Deal policies of the Roosevelt administration. He served as director of the United States Chamber of Commerce and as president of the National Association of Manufacturers. When World War II began, Prentis organized Armstrong’s conversion to war production, including the establishment of a munitions division. In 1942 and 1943 he served as deputy director of the War Production Board for the Philadelphia region, becoming an employee of the government administration which he had so frequently criticized.

After the war, Armstrong prepared to meet the tremendous demand for building materials for new houses. Two more asphalt-tile plants, a fiberboard plant, and a bottle-closure plant were built. In addition the company expanded its industrial-adhesives business and added the production of glass bottles to its packaging division. By 1950 annual sales had climbed to $163 million, and earnings were at record levels. In that year Prentis became chairman of the board and was succeeded as president by Clifford J. Backstrand.

Backstrand’s goal was to use the growth to date to increase profits. He emphasized not only marketing but also research, realizing that product innovation was essential for successful competition in the postwar period. He completed the building industry’s biggest research-and-development center. To help sell products in the home-remodeling market, in 1953 Armstrong built in Lancaster an “idea house” filled with Armstrong products, to be used as a showcase for dealers and customers. Creativity within the company was encouraged by giving special recognition and awards to employees who came up with ideas for new products and new processes. During the 1950s cork was largely replaced by chemicals and synthetics as the basis of the company’s products. By 1960 building materials accounted for 60% of sales, and industrial specialties and packaging were each 20% of sales. Backstrand improved the company’s accounting methods for measuring the profitability of various operations, establishing the concept of return on capital employed as a gauge of achievement. In 1962 Backstrand became chairman and Maurice J. Warnock was appointed president.

By the early 1960s Armstrong had extensive foreign operations, manufacturing textile-mill supplies in India and flooring in plants in Canada, Britain, and West Germany, as well as continuing to process cork in Spain. Warnock attempted to reduce the company’s strong dependency on the housing and construction markets by entering the consumer products field with a liquid wax with detergent that cleaned and polished floors at once. Successful at first, this move to enter the supermarket-oriented consumer market eventually failed to justify its invested capital and was discontinued. Otherwise, Warnock’s tenure as president was successful with new efficiencies in organization, improvement in flooring products, and continued growth in sales to $460 million in 1967. In 1966 and 1967 Armstrong entered the carpet business with the purchase of Brinton Carpets and E.&B. Carpet Mills. By the end of the 1960s, over one-third of Armstrong’s sales came from products developed by the company within the previous decade. Armstrong invariably promoted from within and, in accordance with this policy, Warnock was succeeded in 1968 by a flooring executive who had spent his entire adult life with the company, James H. Binns.

Binns’s tenure as president from 1968 to 1978 brought significant changes in the makeup and direction of the company, based on his belief that Armstrong’s future lay mainly in the interior-furnishings market, which was entering a boom period. In 1968 Armstrong acquired the furniture manufacturer, Thomasville Furniture Industries, and the furniture wholesaler, Knapp & Tubbs, although the latter company was sold in 1972. In 1969 Binns sold the line of cleansers, waxes, and polishes to Chemway Corporation and the extensive packaging operations to Kerr Glass Manufacturing Company. The insulation-contracting business was sold to its former employees. Altogether Binns sold off businesses with about $125 million in annual sales, about one-fourth of sales volume. By the early 1970s about 90% of sales were concentrated in building products and home furnishings, and about 10% in industrial products such as gaskets and textile-mill supplies. This ratio continued into the 1990s.

In 1978, Binns became chairman of the board, and Harry A. Jensen served as president and CEO until his retirement in 1983. Through the 1970s and much of the 1980s Armstrong continued to grow in the same directions. The production of linoleum was discontinued in 1974, but the company continued to develop new types of resilient flooring, among which Solarian no-wax flooring became a well-known brand name. In 1980 the corporate name was changed to Armstrong World Industries to reflect its growing international base of operations and the fact that it was no longer based on the cork business. Sales generally trended upward with some annual fluctuations due to changes in the building cycle, reaching $1 billion in 1977 and $2 billion in 1987. Earnings followed the same pattern with net income increasing from $66 million in 1979 to $187 million in 1989.

Between 1983 and 1988, Joseph L. Jones served as president and chairman. His successor, William W. Adams, oversaw a series of significant events in the late 1980s. In 1988 Armstrong entered the ceramic-tile business by acquiring American Olean Tile Company, adding about $200 million to 1989 sales. In December 1989 Armstrong completed the sale of its carpet division, abandoning that business which was not producing an adequate return on investment, thus reducing annual sales by about $300 million. In addition, in 1989 the company sold Applied Color Systems, a small digital color-processing-control business.

In July 1989 Armstrong learned that the Belzberg family of Canada had acquired 9.85% of its stock and had announced the intention of gaining control of the company and selling its furniture and industrial-products divisions. The Belzberg’s stock ownership increased in 1990 to 11.7%. In April 1990, Senate Bill 1310 of the Pennsylvania legislature, the strongest anti-takeover bill passed by any state, with support from Armstrong, became law. The bill provided for seizure of short-term profits in a failed takeover, limited voting rights of hostile shareholders, and guaranteed severance pay to employees who lost jobs because of a corporate takeover. A few days after passage of the law, the Belzbergs lost a proxy attempt at the company’s annual meeting, seating only one of four candidates for directors on the board. At the end of the next month, the Belzbergs sold their Armstrong stock at a loss of about $18 million. In June 1990, Armstrong and the Belzberg affiliates resolved the remaining issues between them by withdrawing lawsuits and counter-suits against each other.

In 1990 the company was still involved in litigation involving personal-injury suits and other claims based on asbestoscontaining insulation products, a business which was sold by Armstrong in 1969. The claims are being paid by insurance income under the Wellington Agreement on asbestos-related claims. In 1988, Armstrong and 20 other companies replaced the Wellington Asbestos Claims Facility with the Center for Claims Resolution, which is still in operation. Other cases brought by public school districts, private property owners, and others are still pending, as is a lawsuit filed with the U.S. Supreme Court by 29 states.

Armstrong has come a long way from a one-room cork shop to its present position as a leader in the international home-furnishings industry with an outstanding brand-name reputation. Its success has been characterized by strong, innovative leadership.

Principal Subsidiaries

American Olean Tile Company, Inc.; Armstrong Ventures, Inc.; Charles water Products, Inc.; Chemline Industries, Inc.; Design Ideas Incorporated; Thomasville Furniture Industries, Inc.; The W.W. Henry Company; Armstrong World Industries (H.K.) Limited (Hong Kong); Armstrong FSC, Ltd. (Bermuda); Armstrong (Japan) K.K.; Armstrong-Nylex Pty. Ltd. (Australia, 51%); Armstrong/Pat Davie (China) Limited (51%); Armstrong (Singapore) Pte. Ltd.; Armstrong World Industries Canada Ltd.; Armstrong World Industries—France, S.A.; Armstrong World Industries, G.m.b.H. (Germany); Armstrong World Industries Italia S.r.l. (Italy); Armstrong World Industries Ltd. (U.K.); Armstrong Europe Services (U.K.); Inarco Limited (India, 40%); Armstrong World Industries Pty. Ltd. (Australia); Armstrong World Industries, S.A. (Spain); Armstrong World Industries (Schweiz) A.G. (Switzerland); Armstrong World Industries (Thailand) Ltd.; ISO Holding, A.G. (Switzerland); Armstrong World Industries—A.C.I.B.V. (Netherlands); Armstrong World Industries—Pontarlier S.A. (France); Armstrong World Industries—Europacoustic (Belgium).