Armstrong World Industries rearranges the gym…

Instead of nibbling on chocolates or checking out the President’s Day sales last weekend, the footnoted staff settled in at our computers with a nice long list of SEC filings.

While the second pot of coffee brewed, we found this 8-K that Armstrong World Industries, Inc. (AWI) filed at 4:39 p.m. last Friday. Armstrong, which is based in Lancaster, PA, designs and manufactures cabinets, floors, and ceiling products.

The company’s announcement and press release, which got published in forms such as this one, makes an upcoming executive transition sound like a typical changing of the guard.

Armstrong announced that CEO, president, and chairman of the board Michael D. Lockhart would leave his posts on February 28, 2010. Newly-elected board chairman James O—Connor praised Lockhart for his past service of nearly a decade and noted that the company is doing well and has a strong leadership team. O—Connor explained the change as follows: —The Board and Mike agreed that this was the right time to look for new leadership to take the Company into its next phase of growth.

However, a closer reading of the filing reveals some interesting details about Lockhart’s departure that didn’t make their way into the press release. For example, in the Separation Agreement and Release, we learn that in the near future Lockhart will receive more than $10.9 million to satisfy the company’s obligations under the Change of Control Agreement; $78,525.64 for unused vacation time; $65,333 for outplacement services; and another $1.54 million for his 2009 bonus.

Then, a few paragraphs down, after saying that Lockhart can purchase his company laptop for its current fair market value, there’s this odd little provision:

—The Company acknowledges that the Executive is entitled to the return of all fitness equipment that he personally paid for in the Company’s gymnasium. This equipment will be removed from the gymnasium and delivered to a location designated by the Executive in Lancaster, Pennsylvania at the expense of the Company.

While the big story here, of course, is the payout of more than $12.6 million either to Lockhart or on his behalf, the negotiations over the return and delivery of the gym equipment seemed curious and quite possibly the first time we’ve seen gym equipment wind up in a severance agreement. It also underscores the point that when it comes to SEC filings and human behavior, there’s always bound to be a few surprises.


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