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Armstrong Re-Energizes Local Charitable Giving

BY Tim Mekeel
by Tim Mekeel on 6/10/02.

With two young children at home and a wife who works the night shift, Mike Campion had been struggling to find a way to do some volunteer work.

After some serious schedule-juggling, he was able to donate his time and talent this spring to help renovate the basement of Harb-Adult's downtown building.

"It was bugging me that I hadn't been able to do this before," said Campion, an electrician at Armstrong World Industries.

But his sense of satisfaction grew considerably when he learned that he could increase his impact without installing another light switch.

The company's charitable affiliate -- the Armstrong Foundation -- has launched a program that matches employee contributions of time and money to charity with cash donations.

It's among a host of changes intended to localize, individualize and stabilize the non-profit foundation, which has seen its assets dwindle by nearly two-thirds over the past five years.

"This makes it all the better, because (Harb-Adult) is getting more than the time I put in," said Campion, a team leader at Armstrong who was among eight company volunteers on the project.

"I thought, this is great. I took advantage of it right away."

Created by the Lancaster-based company in 1985, the Armstrong Foundation began distributing funds to charities in 1986. Since then, the foundation has donated more than $20 million.

But in the late 1990s, the foundation -- a leading source of funds for Lancaster County non-profit groups -- began giving a far greater percentage of its total donations to national charities.

At the same time, the foundation's earnings on its stock market investments plunged. That, and other factors, rapidly eroded its assets and weakened its ability to give, foundation documents show.

Now Armstrong is reversing those trends, at the direction of CEO Michael D. Lockhart.

The foundation is giving more of its dollars to charities in the communities where Armstrong has plants, not national organizations.

It's also giving employees more say in how the foundation distributes the $2 million or so it disperses annually.

That's good news for the 40-some charities here that get foundation funds, including colleges, fire companies, museums and schools, as well as social-service agencies.

It's also good news for other charities that haven't gotten foundation dollars recently, such as Harb-Adult, but now will -- because Armstrong employees say so.

Ultimately, though, it's good news for the tens of thousands of countians who benefit from the services provided by the charities.

"The renovations alone are fantastic," said Jay Kiralfy, executive director of Harb-Adult. "For money to come along too, it's icing on the cake. This is wonderful."

Armstrong makes vinyl floors, wood floors, ceilings and wood cabinets. It's striving to reposition and revitalize those core businesses. And the same is true of its charitable foundation.

Starting this year, if an Armstrong employee donates at least 36 hours of service in a year to a charity, the foundation will give that charity $250, if the employee and charity ask.

At Harb-Adult, for instance, five of the eight Armstrong volunteers spent enough hours -- installing company-donated flooring, ceiling tiles and grid, cabinets and electrical materials -- to qualify for the foundation match.

So their labor not only helped convert the basement into the "Armstrong Activities Center," where life-skill classes, recreational activities and meetings will be held.

Their efforts also will generate an extra $1,250 for the charity. It represents the first foundation donation to Harb-Adult since 1998, according to Kiralfy.

Here's another new way that employees can direct foundation dollars -- the foundation will match an employee's cash donations of up to $250 to a charity. Again, the employee and charity just have to ask for it.

There are several other fresh conduits that will funnel more foundation dollars into the communities where Armstrong operates.

This year, for the first time, the foundation is dividing $135,000 among the company's 28 plants in the United States, letting each plant give its portion to the charity or charities of its choosing in its community.

In addition, the foundation, which already makes donations to the local United Ways in towns where it has vinyl flooring or ceiling plants, will begin doing so in 14 towns where it has wood flooring or cabinet plants.

The cumulative effect of these initiatives is this: a greater share of foundation dollars will go to local charities and a smaller share to national groups.

Armstrong forecasts that donations to charities in Lancaster and in other communities where Armstrong has plants will jump to 92 percent of all foundation giving this year, up from 67 percent in 2001.

Conversely, national charities will receive only 8 percent of all foundation giving in 2002, down from 33 percent last year and 41 percent in 2000.

"It's Mike's philosophy to support the communities where our employees work," said Armstrong vice president Deb Miller, who also serves as foundation president and a member of its board.

Those are encouraging words for charities in Lancaster County, where 41 organizations last year received $867,000 from the foundation. Coincidentally, that was 41 percent of the foundation's total giving.

The shift toward local giving can be measured by the comparing the flow of dollars to different types of recipients as well.

Community organizations will receive 71 percent of the foundation's dollars this year, up from 50 percent in 2001.

These organizations include social-service agencies, museums, fire departments, ambulance associations and civic groups.

Education will account for 25 percent, the same as in 2001, in the form of foundation scholarships, matches of employee gifts to colleges, and donations to local primary and secondary schools.

But U.S. business-advocacy groups will get only 4 percent, down from 25 percent in 2001.

As soon as multi-year commitments made in the past are fulfilled, these national business-advocacy groups, such as Citizens for a Sound Economy and the Hardwood Forestry Fund, will get zero, said Miller.

The organization that gets the most Armstrong Foundation money always has been the United Way of Lancaster County. Last year, it got $537,000, the foundation's tax return shows.

Likewise, the biggest contributor to the United Way is the foundation.

"The size of that gift is an endorsement of their ability to make the right local decisions," said Miller, commending local United Way president Susan Eckert and her staff.

"We have faith in Susan and that organization. We want to support them," said Miller. "They're out in the community. They know who is deserving."

Coupled with contributions from employees, Armstrong provides more than $1 million annually to the local United Way, which raised $9.1 million last year to support 51 programs and services.

Eckert lauded the foundation's decision to redirect its dollars.

"We ask our employees to make key business decisions for us. Shouldn't we listen to their philanthropic decisions as well? This is another form of employee empowerment," she said.

Though the mix of foundation donations is changing, Armstrong officials said, the total amount of foundation donations is stabilizing after two years of decline.

The foundation this year expects give $2.1 million, equal to the 2001 sum, but down 25 percent from a high of $2.8 million in 1999 and the least since 1997, foundation tax returns show.

The level of giving to charities in Lancaster County fell as well, down 36 percent to $867,000 from 1999's $1.3 million.

The number of county recipients slid 41 percent, coincidentally to 41 organizations, from 70 in 1999, the tax returns show.

"I don't look at it as a decline," said Miller. The amount of donations by the foundation in 1999 was "an aberration. Now we've returned to our normal level of giving."

Miller pointed out that Lancaster County has about a fourth of Armstrong's U.S. work force, yet the county gets far more than a fourth of the foundation's total donations.

And that share is rising, she added. Lancaster County organizations received 40 percent of all foundation donations in 2001; that share will rise to 48 percent this year, she said.

While Armstrong is focusing the foundation's donations on communities where it has plants, such as Lancaster County, the company also is strengthening the foundation's finances and efficiency.

Armstrong is pumping $2 million into the foundation's assets this year, the first such injection since the company contributed $1.5 million to the foundation in 1994.

(Armstrong, which is in bankruptcy reorganization, does not need U.S. Bankruptcy Court approval of the move, because it's considered part of the ordinary course of business, said Miller.)

The move comes after the foundation's assets fell from an all-time high of $13.8 million in 1997 to $5.0 million in 2001, a drop of 63 percent, the foundation tax returns show.

The foundation's assets plunged for a variety of reasons, partly by design but partly by accident, said Miller.

Armstrong's previous management had a different philosophy about charitable giving, preferring for tax reasons to have the company give directly to charity, not through a foundation.

So, Armstrong stopped injecting cash into the foundation. It stopped updating its instructions to the foundation's investment manager too. At the same time, it began giving more money away.

When Wall Street veered in new directions, the old instructions steered the foundation's portfolio of stocks and bonds into six-figure losses, the foundation's tax returns show.

(The dwindling value of the foundation's holdings did not stem from the nosedive in the price of Armstrong stock, which peaked in April 1998 at $90 and now trades at about $3.

("Not one nickel" of foundation money has ever been invested in Armstrong stock or bonds, said Miller, although government regulations would allow a small investment of that type.)

With no cash coming in to the foundation from the investment portfolio or Armstrong itself, and more donations going out, the amount of money left in the foundation -- i.e., its assets -- dwindled quickly.

But Armstrong's current management, led by Lockhart, who was hired in August 2000, feels the opposite way about the foundation.

Now the company is setting out to reinforce its foundation. Besides the cash infusion this year, Armstrong has resumed giving regular instructions to the foundation's investment manager, after a six-year hiatus.

The United Way's Eckert praised Armstrong for sticking with its foundation, noting that companies that give directly to charity can be tempted to skip donations during tough years.

Having a well-funded and well-managed foundation, though, leads to a more consistent level of charitable giving, no matter what kind of year the company has, said Eckert.

As Armstrong has taken steps to redirect the foundation's giving and rebuild its finances, the company also has acted in several ways to streamline and sharpen the foundation's operation.

Armstrong has named a foundation coordinator for the first time. It's Deb Brooks, a 20-year Armstrong employee who most recently was a senior administrative assistant in human resources.

To simplify the foundation's work, Armstrong this year created a separate Web site -- -- for it that provides foundation news, background information and a standard, online funding-application form.

In the past, applications for donations were submitted on paper. Sometimes they ran as thick as one inch, complete with attachments and the occasional video or brochures.

"Simpler, faster, better, together -- that's our new mission as a company. It applies to our work at the foundation too," said Brooks.

Here's who gets what from Armstrong Here's a list of the 41 Lancaster County recipients of money from the Armstrong Foundation during 2001.

This list was compiled by the New Era from the Armstrong Foundation's federal tax return:

United Way, $536,800

Habitat for Humanity, $50,000

Millersville University, $43,480

Lancaster Country Day School, $40,000

Thaddeus Stevens Foundation, $35,000

Salvation Army, $26,000

Lancaster Alliance, $25,000

Franklin & Marshall College, $13,713

Elizabethtown College, $11,625

Celebrate Lancaster! 2001, $10,000

Lancaster Campaign, $10,000

Linden Hall, $10,000

School District of Lancaster, $7,407

Lancaster Bible College, $5,490

Rocky Springs Carousel Assoc., $5,000

Lancaster Chamber Foundation, $5,000

American Cancer Society, $2,500

Leadership Lancaster, $2,500

Boy Scouts' Pa. Dutch Council, $2,500

Lancaster County Academy, $2,000

Maytown/E. Donegal Fire Co., $2,000

Heritage Center Museum, $2,000

Susquehanna Assoc. for the Blind, $2,000

W. Lancaster Fire Co. No. 1, $2,000

Lancaster Theological Seminary, $1,600

Hempfield Fire Co., $1,500

Neffsville Community Fire Co., $1,500

Lancaster Recreation Commission, $1,000

Janus School, $1,000

Hospice of Lancaster County, $1,000

Pioneer Fire Company, $1,000

Maytown/E. Donegal Ambulance Assoc., $1,000

Community Action Program, $1,000

Make-A-Wish Foundation, $1,000

West End Ambulance Assoc., $1,000

Marietta Ambulance Assoc., $500

Susquehanna Regional Police DARE program, $500

Eden Fire Co., $500

American Heart Assoc., $500

Rohrerstown Community Fire Co., $500

Pa. School of Art & Design, $350

TOTAL: $867,465