East Lampeter Township-based Armstrong Flooring Inc. on Thursday asked a Delaware bankruptcy court to allow it to throw out current union contracts and stop paying health and insurance benefits. – life for retirees.
Under the proposals, contracts with the United Steelworkers and the International Association of Machinists and Aerospace Workers would end when a sale is made, when Armstrong Flooring stops operating a plant or its funding ends, according to the first possibility.
Retiree benefits would end at the conclusion of the sale process if no buyer wanted to assume them. Unions and a committee of non-union pensioners, once formed, would retain the right to argue the case in court.
A lawyer for the unions could not be reached for comment, but the unions have until June 15 to file objections to the end of the contract.
Armstrong Flooring has requested a June 22 hearing on union contracts and retiree health and life insurance benefits. That falls on the same day as a hearing on the sale of its North American assets, including its Lancaster plant and distribution center. Bids are due June 14 and an auction, if required, is scheduled for June 16. Bids for the company’s assets in Australia and China are due June 23.
The petitions come as no surprise as the company indicated it would seek to end retiree benefits when it filed for Chapter 11 bankruptcy protection in May. In Thursday’s court filing, Armstrong Flooring described its ongoing discussions with unions, including allowing digital access to financial documents bidders received.
Armstrong Flooring owes about $318 million, including $160 million in long-term debt, and has filed for protection from lenders in bankruptcy. He has received court approval to sell his assets which he values at $517 million.
Armstrong Flooring is seeking to sell its North American, Chinese and Australian assets as going businesses, and bidders for each include going buyers. A going concern means that the business would continue to operate. The company has acknowledged that there may be bidders looking to liquidate its assets.
Armstrong Flooring operates seven manufacturing plants in three countries. Two plants are in Pennsylvania, one in the city of Lancaster and one in Beech Creek Township, Clinton County. There are factories in Illinois, Mississippi, Oklahoma and a factory in China and Australia. The factories in China and Australia are not part of the bankruptcy but are part of the sale.
Discussions with potential bidders
Armstrong Flooring, at the urging of unions, asked any bidder who planned to continue operations to describe the impact of their bid on workers and jobs.
In its motion Thursday, Armstrong Flooring said most potential bidders were looking to liquidate the company.
Since May 8, when Armstrong Flooring filed for bankruptcy, it has signed nondisclosure agreements with 28 new parties and received four preliminary proposals, two of which relate to its North American assets.
Armstrong Flooring said, based on discussions with potential bidders, that it was optimistic “about the terms of certain potential offers for certain facilities covered by debtors’ collective bargaining agreements.” He did not specify which facilities he was optimistic about.
The company has warned that the expressions of interest it has received so far, while encouraging, may not translate into actual qualified offers.
“Indeed, several parties that remain active in the sale process are not pursuing a pending offer,” Armstrong Flooring said in its court filing. A going concern means continuing to operate the business.
He said none of the potential bidders had indicated they would accept union contracts or retiree health and life insurance benefits.
If he doesn’t reject the contracts, any sale could be jeopardized and send the company into liquidation without changing the outcome for unionized employees, Armstrong Flooring argued.
Three union contracts
Armstrong Flooring is party to three union contracts covering approximately 277 of its 1,216 employees: a contract with United Steelworkers at its plant in Jackson, Mississippi; one with the International Association of Machinists and Aerospace Workers at the Lancaster plant; and one with United Steelworkers at its Lancaster plant.
The three-year contract with IAM at the Lancaster plant expires October 8, 2023. The contract with USW employees at Lancaster was ratified March 22 and expires February 8, 2025. The plant agreement of Jackson was ratified on April 11 and is in effect until October 3, 2025.
Armstrong Flooring has notified 606 workers in Pennsylvania, including its entire Lancaster County workforce, that they could be permanently laid off as early as June 17 as the company is bankrupt and plans to find a buyer.
Armstrong Flooring said its negotiations with unions in the last few years before the bankruptcy generally resulted in a reduction in the company’s monetary obligations to employees, including the elimination of nearly all inherited benefits from the collective bargaining agreement. .
“These negotiations have been consistent with the recent trend to reduce the economic burden of costly employee benefits,” Armstrong Flooring said in its court filing. “During this period, these negotiations with the unions resulted in, among other things, the elimination of the possibility for eligible retirees to participate in the company’s group health care plans and the closure of the company’s pension plans. to all participants and the freezing of benefits.”
Armstrong Flooring’s Retiree Health Program allows eligible participants under age 65 to enroll in the company’s self-funded Retiree Health Care Plan and, for unionized retirees only, subsidizes the cost of coverage . Under this program, the company pays a portion of the medical, prescription drug and dental claims of covered retirees as well as administration costs. Debtors pay these receivables on a weekly basis. There are 41 total participants in this program, including three non-union retirees.
Another program gives retirees age 65 and older who receive Medicare a refund they can use to purchase supplemental Medicare insurance at about $1,400 per family per year. There are approximately 1,529 members, including approximately 596 non-union retirees and their beneficiaries.
About 2,043 pensioners receive life insurance benefits.