FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to _________
Commission file numbers 1-2116 and 333-32530
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
ARMSTRONG HOLDINGS, INC.
2500 Columbia Avenue Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office)
1
Page No.
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Item 1. Independent Auditors' Report 4
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Item 2. Statements of Net Assets Available for Benefits 5
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September 30, 2000 and 1999
Item 3. Statements of Changes in Net Assets Available for Benefits 6
----------------------------------------------------------
Years ended September 30, 2000 and 1999
Notes to Financial Statements 7-15
Schedule of Assets Held for Investment Purposes 16
Exhibits 17
---------
Consent of Independent Auditors
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the members
of the committee constituting the administrator which administers the plan have
duly caused this annual report to be signed by the undersigned hereunto duly
authorized.
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
March 28, 2001 By: /s/: Matthew J. Angello
----------------------------
Matthew J. Angello Vice-Chairman of the
Retirement Committee
3
Independent Auditors' Report
----------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We have audited the accompanying statements of net assets available for benefits
of the Retirement Savings and Stock Ownership Plan of Armstrong World
Industries, Inc. as of September 30, 2000 and 1999 and the related statements of
changes in net assets available for benefits for each of the years in the
two-year period ended September 30, 2000. These financial statements are the
responsibility of the plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Retirement
Savings and Stock Ownership Plan of Armstrong World Industries, Inc. as of
September 30, 2000 and 1999 and the changes in net assets available for benefits
for each of the years in the two-year period ended September 30, 2000, in
conformity with auditing principles generally accepted in the United States of
America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of September 30, 2000 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
March 26, 2001
Philadelphia, Pennsylvania
4
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statement of Net Assets Available for Benefits
September 30, 2000 and 1999
September 30,
-------------
2000 1999
---- ----
Assets:
Investments in master trust:
Cash equivalents:
Fidelity Retirement Money Market Portfolio $5,903,335 $6,260,193
Shares of registered investment companies:
Fidelity Magellan Fund 99,533,958 94,279,257
Fidelity Low-Priced Stock Fund 1,139,349 1,104,042
Fidelity OTC Portfolio 29,287,077 16,888,380
Fidelity Asset Manager Fund 7,494,869 6,575,650
Fidelity Asset Manager: Income Fund 2,405,225 2,745,807
Fidelity Asset Manager: Growth Fund 10,448,524 9,872,050
Fidelity Overseas Fund 1,754,028 687,156
MAS Value Portfolio 520,260 552,455
MAS Mid Cap Value Portfolio 3,933,053 2,603,629
Spartan US Equity Index Fund 66,151,241 66,781,827
Morgan Stanley Global Equity Portfolio 1,407,849 1,389,484
Fixed income investment contracts:
Fidelity Interest Income Fund 122,783,409 130,734,847
Armstrong Common Stock 4,936,531 9,389,002
Participant loans 3,827,934 4,536,463
--------- ---------
361,526,642 354,400,242
Investments in employee stock ownership funds:
Cash equivalents 1,243,824 1,329,085
Allocated Armstrong Common Stock 32,441,075 91,378,814
Unallocated Armstrong Common Stock 27,932,759 114,301,110
---------- -----------
61,617,658 207,009,009
Employer contributions receivable 303,982 3,397,035
Interest receivable 6,030 5,558
----- -----
Total assets 423,454,312 564,811,844
----------- -----------
Liabilities:
Guaranteed ESOP notes 142,158,150 167,435,150
Loans due plan sponsor 39,864,575 20,551,404
Accrued interest 3,688,334 4,302,958
--------- ---------
Total liabilities 185,711,059 192,289,512
----------- -----------
Net assets available for benefits $237,743,253 $372,522,332
============ ============
The accompanying notes are an integral part of these financial statements.
5
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statement of Changes in Net Assets Available for Benefits
Years Ended September 30, 2000 and 1999
Year Ended September 30,
------------------------
2000 1999
---- ----
Additions to net assets attributed to:
Employee contributions $19,030,119 $19,773,862
Employer contributions 13,582,859 15,005,805
---------- ----------
32,612,978 34,779,667
Dividends 24,586,821 22,884,904
Interest 7,827,032 8,241,647
Realized gain on investments 9,438,878 8,347,716
--------- ---------
41,852,731 39,474,267
---------- ----------
Total additions 74,465,709 74,253,934
---------- ----------
Reduction in net assets attributed to:
Benefits paid to participants 37,075,307 33,877,602
Interest expense 13,541,861 15,531,463
Unrealized depreciation of investments 151,108,227 13,288,300
Transfers to other employee benefit plans 7,519,393 310,051
--------- -------
Total reductions 209,244,788 63,007,416
----------- ----------
Net increase (decrease) (134,779,079) 11,246,518
Net assets available for benefits:
Beginning of year 372,522,332 361,275,814
----------- -----------
End of year $237,743,253 $372,522,332
============ ============
The accompanying notes are an integral part of these financial statements.
6
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation
---------------------
The accompanying financial statements have been prepared on the
accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from estimates
recorded. Certain prior year amounts have been reclassified to conform
to the current presentation.
(b) Investments in Master Trust
---------------------------
The money market portfolio is stated at cost, which approximates fair
value. The interest income fund is comprised of guaranteed interest
rate contracts within the Master Trust which are fully benefit
responsive; and therefore are reflected at contract value plus
credited interest in the financial statements. The value of the
participant loans represents the unpaid principal of employee loans.
The value of all other investments is based on quoted market price.
Securities transactions are recognized on the settlement date (the
date on which payment for a buy or sell order is made or received),
since adjustment to a trade-date basis would not be material. Dividend
income is recorded on the ex-dividend date.
Realized gains and losses on investments are determined by the average
cost method.
Employee Stock Ownership Funds
------------------------------
Investments in the Employee Stock Ownership Funds represent shares of
Armstrong common stock valued at quoted market price. Cash equivalents
are stated at cost, which approximates fair value.
(c) Expenses
--------
All legal, accounting and administrative expenses associated with Plan
operations are paid by Armstrong World Industries, Inc. ("Armstrong")
(2) Plan Description
----------------
The Retirement Savings and Stock Ownership Plan of Armstrong World
Industries, Inc. ("the Plan") is a defined-contribution plan established
for the purpose of providing participants a means for long-term savings
intended for the accumulation of retirement income in addition to that
provided under other retirement plans maintained for the benefit of
employees. The Plan is comprised of two parts--Retirement Savings Plan and
Employee Stock Ownership Plan (ESOP). Each part has its own set of
participant accounts and investment funds.
7
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(a) Retirement Savings
------------------
Separate balances are maintained for contributions made by or on
behalf of a participant. The balances in each fund reflect the
participants' contributions together with dividends, interest, other
income, and realized and unrealized gains and losses allocated
thereon.
Each participant may have up to five accounts that make up the
participant's total balance:
Sheltered account - Participants may contribute from 1% to 15% of
-----------------
before-tax compensation as deferred compensation, as permitted
under Section 401(k) of the Internal Revenue Code.
Standard account - Participants may contribute from 1% to 10% of
----------------
after-tax compensation.
Rollover account - Participants may invest any untaxed amounts
----------------
rolled over from another tax-qualified, employer-sponsored plan.
Tax-deductible account (MIRA) - This account holds any
----------------------------
contributions made to the Plan before January 1, 1987. No new
contributions can be made to this account.
Old Match account - This account holds any amount contributed by
-----------------
Armstrong before matching contributions were discontinued. No new
contributions are being made to this account.
Participants have an immediate 100 percent vested interest with
respect to their contributions and are fully vested with regard to any
previously made matching Armstrong contributions.
(b) Stock Ownership
---------------
The ESOP portion of the Plan has three accounts maintained for each
member for contributions and allocations of shares of Armstrong common
stock from the Unallocated Armstrong Common Stock Fund.
Participants who elect to reduce their before-tax compensation in
amounts ranging from one percent to six percent have these
contributions credited to an Exchange Account. Contributions to the
Exchange Account are invested in Armstrong common stock. The Plan
matches a portion of the contributions made to the Exchange Account
with additional shares of Armstrong common stock. The matching amounts
are recorded in participants' Match Accounts. The match percentage,
either 50% or 75%, is determined by the closing stock price on the
last day of the allocation period. For the allocation periods ended in
December 1998, June 1999, December 1999, and June 2000 there was a 50%
fixed match on employee Exchange Account contributions.
Eligible participants also receive shares of Armstrong common stock in
their Equity Account. The Equity Account is intended to provide a
source of funds to replace certain retiree medical benefits which were
phased out in conjunction with the adoption of the ESOP.
Participants have an immediate 100 percent vested interest in the full
value of their Exchange Account. Interest in the Equity and Match
Accounts vest after five years of service.
8
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(3) Investments in Master Trust
---------------------------
(a) Retirement Savings Funds
------------------------
Assets are held in a Master Trust administered by Fidelity Management
Trust Co., as Trustee, and are segregated into fourteen investment
options. The Plan participates in fourteen investment alternatives.
The following is a brief description of the investment funds to which
Plan participants may elect to allocate their contributions.
Participants should refer to fund prospectuses for more complete
information regarding the investment funds.
1. Spartan US Equity Index Fund - This fund is principally a
portfolio of common stocks constructed and maintained with the
objective of providing investment results which approximate the
overall performance of the common stocks included in the Standard
& Poor's Composite Index of 500 stocks.
2. Fidelity Magellan Fund - This fund invests in common stocks of
companies having substantial growth prospects as determined by
independent investment managers.
3. Fidelity Low-Priced Stock Fund - This fund seeks capital
appreciation through investments primarily in U.S. and foreign
low-priced stocks that may be undervalued, overlooked or out of
favor.
4. Fidelity Retirement Money Market Portfolio - This fund invests in
short-term (less than one year maturity) fixed income instruments
such as U.S. Treasury Bills, bank certificates of deposit, and
high grade commercial paper.
5. Fidelity Interest Income Fund - Contributions to this fund are
invested in the general accounts of insurance companies and are
credited at contracted interest rates. Invested principal and
accumulated interest amounts are guaranteed against loss by the
insurance company. Crediting interest rates are reset
periodically during the plan year. At September 30, 2000, the
interest rates ranged between 4.73% and 7.58%. At September 30,
1999, the interest rates ranged between 4.73% and 7.88%. The
average yields for the plan at September 30, 2000 and September
30, 1999, were 6.25% and 5.91%, respectively.
6. Morgan Stanley Global Equity Portfolio - This fund invests in a
diversified selection of stocks throughout the world, after a
detailed analysis by local country investment experts. It seeks
to increase the value of the investment over the long term
through growth of capital.
7. Armstrong Common Stock - Amounts invested in this fund, along
with dividend earnings thereon, are invested in Armstrong common
stock. Common stock shares held by the fund at September 30, 2000
and 1999 were 413,514 and 208,932, respectively. On May 1, 2000,
Armstrong Holdings, Inc. acquired the stock of Armstrong World
Industries, Inc. An indirect holding in Armstrong World
Industries, Inc. makes up substantially all of the assets of
Armstrong Holdings, Inc.
8. Fidelity Overseas Fund - This fund invests in securities of
issuers whose principal business activities are outside the U.S.
Investments may include common stock and securities convertible
into common stock, as well as debt instruments.
9
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
9. Fidelity OTC Portfolio - This fund invests in securities traded
in the over-the-counter securities market with the objective of
maximizing capital appreciation. Over-the-counter securities
include common and preferred stocks, securities convertible into
common stock, warrants, and debt instruments.
10. Fidelity Asset Manager Fund - This is an asset allocation fund
which invests in a portfolio of stocks, bonds, and short-term
instruments. The fund has a balanced investment strategy with a
goal of high total return with reduced risk over the long term.
11. Fidelity Asset Manager: Income Fund - This is an asset allocation
fund which invests in a diversified portfolio of stocks, bonds,
and short-term instruments. The fund has an investment strategy
focusing on bonds and short-term instruments to achieve a high
level of current income and capital preservation.
12. Fidelity Asset Manager: Growth Fund - This is an asset allocation
fund invested in a diversified mix of stocks, bonds, and
short-term instruments. The fund's investment strategy is an
aggressive one emphasizing stocks with the goal of maximum total
return over the long term.
13. MAS Mid Cap Value Portfolio - This fund invests in undervalued
common stocks of mid-sized companies with a strong potential for
increase in share price. It seeks to provide above-average
long-term returns.
14. MAS Value Portfolio - This fund seeks to provide above average
long-term returns by investing mostly in common stocks of large
companies that are considered undervalued.
Participant loans represent the unpaid principal balances of loans made by
Plan participants in accordance with established loan provision guidelines.
The following table presents the cost and estimated fair values of the
investments in securities of the Master Trust at September 30, 2000 and
1999:
September 30, 2000 September 30, 1999
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
Spartan US Equity Index Fund $31,484,347 $66,151,241 $33,366,637 $66,781,827
Fidelity Magellan Fund 64,330,330 99,533,958 63,218,189 94,279,257
Fidelity Low-Priced Stock Fund 1,245,060 1,139,349 1,277,167 1,104,042
Fidelity Retirement Money Market Portfolio 5,903,335 5,903,335 6,260,193 6,260,193
Fidelity Interest Income Fund 122,783,409 122,783,409 130,734,847 130,734,847
Morgan Stanley Global Equity Portfolio 1,615,085 1,407,849 1,461,196 1,389,484
Armstrong Common Stock 13,567,354 4,936,531 9,432,051 9,389,002
Fidelity Overseas Fund 1,795,013 1,754,028 621,668 687,156
Fidelity OTC Portfolio 23,502,042 29,287,077 12,650,977 16,888,380
Fidelity Asset Manager Fund 6,701,296 7,494,869 6,419,335 6,575,650
Fidelity Asset Manager: Income Fund 2,349,147 2,405,225 2,694,986 2,745,807
Fidelity Asset Manager: Growth Fund 8,803,204 10,448,524 8,723,512 9,872,050
MAS Mid Cap Value Portfolio 3,411,543 3,933,053 2,528,421 2,603,629
MAS Value Portfolio 640,932 520,260 713,422 552,455
Participant loans 3,827,934 3,827,934 4,536,463 4,536,463
--------- --------- --------- ---------
$291,960,031 $361,526,642 $284,639,064 $354,400,242
============ ============ ============ ============
10
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
The amounts of realized gain (loss) on investments in securities of the
Master Trust for the years ended September 30, 2000 and 1999 are presented
below:
Aggregate Aggregate Realized
2000 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
Spartan US Equity Index Fund $14,686,180 $8,372,340 $6,313,840
Fidelity Magellan Fund 16,009,985 10,996,590 5,013,395
Fidelity Low-Priced Stock Fund 525,811 571,013 (45,202)
Morgan Stanley Global Equity Portfolio 466,681 520,227 (53,546)
Armstrong Common Stock 8,467,302 9,141,524 (674,222)
Fidelity Overseas Fund 402,420 363,012 39,408
Fidelity OTC Portfolio 5,414,601 3,785,200 1,629,401
Fidelity Asset Manager Fund 1,099,660 1,032,503 67,157
Fidelity Asset Manager: Income Fund 721,606 710,618 10,988
Fidelity Asset Manager: Growth Fund 1,804,247 1,605,335 198,912
MAS Mid Cap Value Portfolio 662,169 626,808 35,361
MAS Value Portfolio 220,591 279,160 (58,569)
------- ------- --------
$50,481,253 $38,004,330 $12,476,923
=========== =========== ===========
Aggregate Aggregate Realized
1999 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
Spartan US Equity Index Fund $9,073,848 $5,088,537 $3,985,311
Fidelity Magellan Fund 10,302,447 7,012,404 3,290,043
Fidelity Low-Priced Stock Fund 216,502 251,067 (34,565)
Morgan Stanley Global Equity Portfolio 303,663 318,334 (14,671)
Armstrong Common Stock 1,929,159 1,549,559 379,600
Fidelity Overseas Fund 101,370 99,668 1,702
Fidelity OTC Portfolio 1,951,437 1,645,180 306,257
Fidelity Asset Manager Fund 1,355,569 1,304,187 51,382
Fidelity Asset Manager: Income Fund 775,716 776,098 (382)
Fidelity Asset Manager: Growth Fund 2,330,060 2,061,562 268,498
MAS Mid Cap Value Portfolio 720,145 761,593 (41,448)
MAS Value Portfolio 257,353 295,579 (38,226)
------- ------- --------
$29,317,269 $21,163,768 $8,153,501
=========== =========== ==========
(b) Stock Ownership Funds
---------------------
According to the terms of the trust agreement between Mellon Bank, N.A.
through January 31, 2000 and The Chase Manhattan Bank ("the Trustee")
beginning February 1, 2000, and Armstrong World Industries, Inc., the
Trustee manages a trust fund that has been created under the Plan and has
been granted authority to purchase and sell Armstrong common stock as is
necessary to administer the Plan in accordance with its terms.
At September 30, 2000, the investment in Armstrong common stock represents
5,057,494 shares, valued at a quoted market price of $11.9375. There are
2,717,577 shares held in the Allocated Armstrong Stock Fund and 2,339,917
shares held in the Unallocated Armstrong Stock Fund. During 2000, aggregate
proceeds on sales were $19,212,615, aggregate costs were $22,250,660, and
the realized loss was $3,038,045. Gains of $194,215 were realized during
1999.
11
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(4) Armstrong Contributions
-----------------------
Armstrong is obligated to make semi-annual contributions in cash or
Armstrong stock to the Stock Ownership Funds, on June 15 and December 15 of
each year, which when aggregated with all exchange contributions, dividends
received by the Trustee on the common stock held by the Trust, and trust
earnings, is at least equal to the amount necessary to enable the Trustee
to pay currently maturing obligations under the Guaranteed ESOP notes (Note
6). The contributions from Armstrong on December 15, 1999 and June 15, 2000
included 199,053 and 237,500 shares respectively of Armstrong common stock
contributed directly to allocated accounts.
(5) Employee ESOP Contributions and Dividends
-----------------------------------------
Employee ESOP contributions made during the year and dividends paid on
Allocated Armstrong Stock are initially deposited into the Fidelity
Retirement Money Market Portfolio until the next semi-annual allocation
date, at which time they are contributed to the ESOP. During the time in
the Fidelity Retirement Money Market Portfolio, these funds earn interest.
At September 30, 2000 and 1999, the amounts in the Fidelity Retirement
Money Market Portfolio to be contributed to the ESOP were $3,553,389 and
$3,609,424, respectively. Shares allocated to employees on December 15,
1999 and June 15, 2000 included 33,448 and 208,716 shares respectively of
Armstrong common stock that were purchased by the Trustee on the open
market using employee ESOP contributions.
(6) Guaranteed ESOP Notes and Loans Due Plan Sponsor
------------------------------------------------
The shares of Armstrong common stock held in the Plan's Stock Ownership
Accounts were purchased from Armstrong from the proceeds of the sale of
Guaranteed ESOP notes in a total principal amount of $270,000,000 in 1989.
Armstrong has guaranteed the payment of principal and interest on the
notes.
The notes must be repaid in semi-annual installments with interest per
annum at 8.35% on the Series A Guaranteed Serial ESOP Notes due 1989-2001
and 8.92% on the Series B Guaranteed Serial ESOP notes due 2001-2004. At
September 30, 2000, the Guaranteed ESOP notes for Series A and Series B
were $22,115,150 and $120,043,000, respectively. At September 30, 1999, the
Guaranteed ESOP notes for Series A and Series B were $47,392,150 and
$120,043,000, respectively. The scheduled amortization of the notes for the
next four plan years is as follows: 2001 - $22,115,150; 2002 - $34,442,000;
2003 - $39,816,000; 2004 - $45,785,000.
A refinancing loan from Armstrong is used to ensure that the number of
shares allocated during a semi-annual allocation period is equal to the sum
of participants' exchange, equity and match shares. At September 30, 2000,
there were 11 loans outstanding totaling $39,864,575. Of this total,
$12,467,408 is due on June 15, 2001, and the remainder is due at various
dates between 2006 and 2011. At September 30, 1999, there were nine loans
outstanding totaling $20,551,404.
The sources of cash used to repay the Plan's debt are employee
contributions, employer contributions, and dividends on unallocated shares.
See Note 13.
None of the Plan's assets have been pledged as collateral for the
Guaranteed ESOP Notes or the Loans due to Armstrong.
12
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(7) Benefits
--------
(a) Retirement Savings Accounts
---------------------------
Under terms of the Plan, a participant (or a beneficiary) is eligible
for benefits upon retirement, termination of employment, or death
before retirement. Disbursement of the total amount credited to a
participant's account is payable (i) in a lump sum or (ii) in the case
of retirement, in such other manner as requested by the participant
and approved by the Plan Administrator.
In addition, an active employee may elect to withdraw all or any part
of his account attributable to after-tax contributions. Before
reaching age 59 1/2, an active employee may withdraw his pretax
contributions from the Sheltered Account, provided he can demonstrate
financial hardship. Such employee shall be ineligible to make
contributions for a 12-month period. An active employee may elect to
withdraw all or any portion of his account balance in the
Tax-Deductible (MIRA) and Rollover Accounts.
Under the rules of the Plan, the participant may borrow up to the
lessor of 50% of his balance or $50,000. The money borrowed must come
from the Sheltered, Rollover, or Standard Accounts. The amount of the
loan is transferred to a Loan Reserve pledged as security for the loan
and is evidenced by a promissory note payable to the Plan. Interest
rates are determined periodically by the Retirement Committee in
accordance with prevailing interest rates. The loans are reflected in
the Loan Portfolio investment fund. Loan repayments are made by
payroll deductions or in a manner agreed to by the employee and the
Plan Administrator.
(b) Stock Ownership Accounts
------------------------
Upon death or any other separation from service from Armstrong,
participants are entitled to receive a distribution of their vested
account balances. Distributions are in the form of a lump sum cash
payment or, upon request, Armstrong common stock.
(8) Obligation for Benefits
-----------------------
All the funds of the Plan are held by investing institutions appointed by
Armstrong under a trust agreement or investment contract. Benefits under
the Plan are payable only out of these funds. Armstrong has no legal
obligation to make any direct payment of benefits accrued under the Plan.
Except as may be provided in an investment contract, neither Armstrong nor
any investing institution guarantees the funds of the Plan against any loss
or depreciation or guarantees the payment of any benefit thereunder.
Although Armstrong has not expressed any intent to terminate the Plan, it
may do so at any time. In case of termination or partial termination, the
total amount in each employee's account will be distributed as the Plan
Administrator directs.
(9) Eligibility
-----------
All employees of Armstrong or of any participating affiliated Armstrong are
eligible to participate in the Plan except for foreign nationals, leased
employees, and those employees in a collective bargaining unit unless the
collective bargaining agent for that unit agrees to coverage under the
Plan.
Eligible participants, who leave Armstrong and are later reemployed, can
resume participation in the Plan on the date of rehire.
(10) Diversification
---------------
Effective January 1, 1997, Plan participants who meet certain age and
service requirements were granted the ability to diversify specified
portions of their ESOP account balances in any combination of the other
investment funds available for Retirement Savings Account balances, except
for the Fidelity Retirement Money Market Portfolio.
13
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(11) Federal Income Taxes
--------------------
By a letter dated April 21, 1998, the Internal Revenue Service has
determined and informed the Armstrong that the Plan qualifies under the
applicable provisions of the Internal Revenue Code and is therefore exempt
from federal income taxes.
(12) Master Trust Agreement
----------------------
Effective October 1, 1990, the Plan established a Master Trust Agreement
with Fidelity Management Trust Company. Under the Master Trust Agreement,
the Plan assets held by Fidelity Management Trust Company are commingled
and invested with the assets of the Retirement Savings Plan for Hourly-Paid
Employees of Armstrong World Industries, Inc., the Bonus Replacement
Retirement Plan of Armstrong World Industries, Inc., the Triangle Pacific
Corp. Salaried Employees' Profit Sharing Plan, the Triangle Pacific Corp.
Non-union Hourly 401(k) Plan, the Robbins Hardwood Flooring Inc. Employees'
Retirement Savings Plan, the Hartco Flooring Co. Bargaining Employees
Retirement Savings Plan, and the Hartco Flooring Co. Retirement Savings
Plan. Separate accounting for each plan under the Master Trust Agreement is
provided by Fidelity Management Trust Company. The Plan has an undivided
interest in the assets of this trust, and ownership is represented by
proportionate dollar interest. The following summarizes the financial
information of the Master Trust at September 30, 2000 and 1999:
September 30, 2000 September 30, 1999
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
Cash equivalents $15,477,286 $15,477,286 $16,666,634 $16,666,634
Armstrong Common Stock 26,493,157 10,181,553 17,595,364 17,254,222
Registered investment companies 202,786,119 297,113,053 185,579,655 270,579,930
Fixed income investment contracts 166,384,012 166,384,012 178,879,174 178,879,174
Participant loans 6,140,006 6,140,006 7,386,076 7,386,076
--------- --------- --------- ---------
Total investments in Master Trust $417,280,580 $495,295,910 $406,106,903 $490,766,036
============ ============ ============ ============
Plan's interest in Master Trust $291,960,031 $361,526,642 $284,639,064 $354,400,242
Plan's percentage in Master Trust 70.0% 73.0% 70.1% 72.2%
During 2000 and 1999, the Master Trust's investments (including investments
bought, sold, and held during the year) appreciated in value as follows:
2000 1999
---- ----
Net appreciation in Master Trust $9,258,013 $42,827,180
Allocated net appreciation in Master Trust $12,282,354 $34,424,744
During 2000 and 1999, interest and dividends were as follows:
2000 1999
---- ----
Interest and dividends in Master Trust $32,031,519 $33,770,761
Allocated interest and dividends from
Investment in Master Trust $22,804,637 $21,954,068
All of the above information was certified as complete and accurate by the
trustee at September 30, 2000 and 1999 and for the years then ended.
14
(13) Subsequent Events
-----------------
On November 22, 2000, Armstrong failed to repay $50 million in commercial
paper that was due. As a result, the remaining ESOP bond principal balance
of $142.2 million became immediately payable along with a $15.5 million
interest and tax penalty. Additionally, the December 2000 ESOP debt service
payment was not made by either the Plan or by Armstrong.
As of November 30, 2000 the Plan was amended such that all employee
contributions made to the ESOP subsequent to the June 2000 allocation would
be contributed to the Retirement Savings portion of the Plan and invested
in funds selected by each participant. The employer contributions made in
December 2000 were made in cash and were also invested in funds selected by
each participant. Dividends held by the Trustee related to the unallocated
shares were transferred to the Retirement Savings portion of the Plan in
partial satisfaction of the employer match. Future employee and employer
contributions to the ESOP were suspended, and a Company cash match of 50%
of employee Sheltered Account contributions up to 6% was added to the
Retirement Savings portion of the Plan, effective as soon as
administratively possible.
On December 6, 2000, Armstrong filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code in Wilmington, DE in order to use
the court-supervised reorganization process to achieve a resolution of its
asbestos liability. On December 6, 2000, Armstrong filed a motion with the
bankruptcy court to allow Armstrong to continue making contributions to the
Plan. The motion was approved by the court. Management does not anticipate
that Armstrong's bankruptcy filing will have an adverse impact on the
operations of the Plan.
As of December 19, 2000 the Plan was amended to allow all participants,
regardless of age and vested status, to fully diversify their ESOP
accounts. The amendment also eliminated the Armstrong Common Stock Fund as
an investment option effective with contributions made on or after December
27, 2000 and transfers processed on or after January 1, 2001.
15
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Schedule of Assets Held for Investment Purposes
September 30, 2000
Description of Investment Cost Fair Value
--------------------------------------------------------------------------------
Unallocated Armstrong Common Stock $111,731,037 $27,932,759
Allocated Armstrong Common Stock $110,389,215 $32,441,075
Investments in Master Trust $291,960,031 $361,526,642
16