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, 2002
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 PLAN FOR HOURLY-PAID EMPLOYEES
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.
Item 1. Independent Auditors' Report 4
Item 2. Statements of Net Assets Available for Benefits 5
September 30, 2002 and 2001
Item 3. Statements of Changes in Net Assets Available for Benefits 6
Years ended September 30, 2002 and 2001
Notes to Financial Statements 7-13
Exhibits 14
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 PLAN FOR HOURLY-PAID
EMPLOYEES OF ARMSTRONG WORLD INDUSTRIES, INC.
March 24, 2003 By: /s/: Matthew J. Angello
---------------------------
Matthew J. Angello Chairman of the Retirement Committee
3
Item 1
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 Plan for Hourly-Paid Employees of Armstrong World
Industries, Inc. as of September 30, 2002 and 2001 and the related statements of
changes in net assets available for benefits for the years then ended. 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.
As discussed in Note 1 to the financial statements, on December 6, 2000,
Armstrong World Industries, Inc., the Plan's sponsor, filed a voluntary petition
for relief under Chapter 11 of the U.S. Bankruptcy Code in order to use the
court-supervised reorganization process to achieve a resolution of its asbestos
liability.
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 Plan for Hourly-Paid Employees of Armstrong World Industries, Inc. as of
September 30, 2002 and 2001 and the changes in net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
March 14, 2003
Philadelphia, Pennsylvania
4
Item 2
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets Available for Benefits
September 30, 2002 and 2001
September 30,
----------------------------
2002 2001
----------- -----------
Assets:
Investments in master trust:
Cash equivalents:
Fidelity Retirement Money Market Portfolio $1,285,046 $902,855
Shares of registered investment companies:
Fidelity Magellan Fund 8,592,075 11,483,915
Fidelity Low-Priced Stock Fund 557,279 423,584
Fidelity OTC Portfolio 2,164,037 2,289,230
Fidelity Asset Manager Fund 1,387,574 1,566,442
Fidelity Asset Manager: Income Fund 112,187 101,970
Fidelity Asset Manager: Growth Fund 914,506 1,101,686
Fidelity Overseas Fund 147,730 170,977
MSIF Trust Value Portfolio 152,264 185,428
MSIF Trust Mid Cap Value Portfolio 749,714 836,655
Spartan US Equity Index Fund 5,212,768 6,870,637
MSIF Global Value Equity Portfolio 135,876 191,294
Fixed income investment contracts:
Fidelity Interest Income Fund 46,376,129 44,649,881
Armstrong Common Stock 1,259,667 2,714,567
Participant loans 1,750,836 1,616,930
----------- -----------
Total investments 70,797,688 75,106,051
----------- -----------
Net assets available for benefits $70,797,688 $75,106,051
=========== ===========
See accompanying notes to the financial statements.
5
Item 3
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Net Assets Available for Benefits
Years Ended September 30, 2002 and 2001
Year Ended September 30,
-------------------------
2002 2001
----------- -----------
Additions to net assets attributed to:
Contributions $4,884,373 $5,052,363
Dividends 285,755 1,188,280
Interest on fixed income investments 2,542,282 2,695,801
Interest on loans 120,357 124,504
----------- -----------
Total additions 7,832,767 9,060,948
----------- -----------
Reduction in net assets attributed to:
Benefits paid to participants 5,457,618 5,934,994
Deemed distributions of participant loans 29,053 --
Net depreciation in fair value of investments 6,011,496 15,045,113
Transfers to other employee benefit plans 642,963 14,002
----------- -----------
Total reductions 12,141,130 20,994,109
----------- -----------
Net decrease (4,308,363) (11,933,161)
Net assets available for benefits:
Beginning of year 75,106,051 87,039,212
----------- -----------
End of year $70,797,688 $75,106,051
=========== ===========
See accompanying notes to the financial statements.
6
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements
(1) Plan Description
The Retirement Savings Plan for Hourly-Paid Employees of Armstrong World
Industries, Inc. ("the Plan") is a defined contribution plan established
for the purpose of providing eligible hourly-paid employees a means for
long-term savings intended for the accumulation of retirement income. On
December 6, 2000, Armstrong World Industries, Inc. ("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. Management does
not anticipate that Armstrong's bankruptcy filing will have an adverse
impact on the operations of the Plan. See Note 9 for further discussion of
Chapter 11 events.
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 - On February 19, 2002, the Plan was amended
effective April 1, 2002 to allow participants to contribute from 1% to
40% of pretax compensation as deferred compensation, as permitted under
Section 401(k) of the Internal Revenue Code. Prior to April 1, 2002,
participants could contribute from 1% to 15% of pretax compensation. On
June 25, 2002, the Plan was amended effective January 1, 2003 to allow
participants who are age 50 or older to make "catch-up" contributions,
subject to the annual limits on catch-up contributions specified in 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. On June 25,
2002, the Plan was amended to expand the permissible sources of
rollover contributions beginning January 1, 2003 to include qualified
annuity contracts, tax-deferred annuity plans, governmental deferred
compensation plans, and individual retirement arrangements.
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 in 1989 and
1990, depending upon the participant's work location. No new
contributions are being made to this account.
Participants have an immediate 100% vested interest with respect to their
contributions and are fully vested with regard to any previously made
matching Armstrong contributions.
(2) 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.
7
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(b) Investments in Master Trust
The money market portfolio is stated at cost, which approximates fair
value. The interest income fund is partially 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 (which approximates fair value).
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. Interest income on participant
loans is recorded when paid.
Deemed distributions occur when active participants default on their
loans. Their loans are in default due to failure to make the required
repayments or their loans mature and have not been repaid in full.
(c) Expenses
All legal, accounting and administrative expenses associated with Plan
operations are paid by Armstrong.
(3) Investments in Master Trust
Assets are held in a Master Trust administered by Fidelity Management Trust
Co., as Trustee, and are segregated into fourteen investment options.
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 - Prior to May 15, 2001, contributions to
this fund were invested in the general accounts of insurance companies
and were credited at contracted interest rates. Invested principal and
accumulated interest amounts were guaranteed against loss by the
insurance company. Crediting interest rates were reset periodically
during the plan year. At September 30, 2002, the interest rates ranged
between 3.25% and 6.82%. At September 30, 2001, the interest rates
ranged between 4.22% and 10.62%. The average yields at September 30,
2002 and September 30, 2001 were 4.98% and 7.31%, respectively.
Beginning May 15, 2001, contributions to this fund are invested in the
Fidelity Managed Income Portfolio II (MIPII) fund. Fidelity is
transferring all existing participant monies in the Interest Income
Fund to the MIPII fund as contracts mature or are liquidated. This
action was completed on January 2, 2003, and the name of the fund
changed to Fidelity MIPII. MIPII is a commingled pool of the Fidelity
Group Trust for 401(k) plans and is comprised of high-quality fixed
income investment contracts.
8
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
6. MSIF Global Value Equity Portfolio - This fund invests in a
diversified selection of stocks throughout the world. 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, 2002 and 2001
were 933,032 and 994,347, 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. As of
December 19, 2000, the Plan was amended to eliminate this investment
option effective with contributions made on or after December 27, 2000
and transfers processed on or after January 1, 2001.
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. 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. MSIF Trust 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. MSIF Trust 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 to Plan
participants in accordance with established loan provision guidelines. At
September 30, 2002, the interest rates ranged between 4.75% and 9.50%. At
September 30, 2001, the interest rates ranged between 6.50% and 9.50%.
On June 25, 2002, the Plan was amended to add the Fidelity Equity Income Fund,
the Fidelity Intermediate Bond Fund, and the Fidelity Freedom Funds as
investment options effective January 1, 2003. In addition, the Asset Manager
Funds will no longer be offered with respect to contributions made or transfers
requested on or after January 1, 2003. Any election on January 1, 2003 to invest
in one of the Asset Manager Funds and any balances in the Asset Manager Funds as
of December 31, 2003 will be transferred to a corresponding Fidelity Freedom
Fund.
9
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
The following table presents the estimated fair values of the investments in
securities of the Master Trust at September 30, 2002 and 2001:
Investment September 30, 2002 September 30, 2001
---------- ------------------ ------------------
Spartan US Equity Index Fund $ 5,212,768 $ 6,870,637
Fidelity Magellan Fund 8,592,075 11,483,915
Fidelity Low-Priced Stock Fund 557,279 423,584
Fidelity Retirement Money Market Portfolio 1,285,046 902,855
Fidelity Interest Income Fund 46,376,129 44,649,881
MSIF Global Value Equity Portfolio 135,876 191,294
Armstrong Common Stock 1,259,667 2,714,567
Fidelity Overseas Fund 147,730 170,977
Fidelity OTC Portfolio 2,164,037 2,289,230
Fidelity Asset Manager Fund 1,387,574 1,566,442
Fidelity Asset Manager: Income Fund 112,187 101,970
Fidelity Asset Manager: Growth Fund 914,506 1,101,686
MSIF Trust Mid Cap Value Portfolio 749,714 836,655
MSIF Trust Value Portfolio 152,264 185,428
Participant Loans 1,750,836 1,616,930
----------- -----------
$70,797,688 $75,106,051
=========== ===========
The amounts of net depreciation in fair value of investments in securities of
the Master Trust for the years ended September 30, 2002 and 2001 are presented
below:
Investment 2002 2001
---------- ------------ --------------
Spartan US Equity Index Fund $(1,481,997) $ (2,663,155)
Fidelity Magellan Fund (2,444,865) (4,928,378)
Fidelity Low-Priced Stock Fund (6,426) (10,122)
MSIF Global Value Equity Portfolio (31,673) (32,683)
Armstrong Common Stock (1,196,399) (2,557,417)
Fidelity Overseas Fund (24,084) (116,090)
Fidelity OTC Portfolio (200,601) (3,418,341)
Fidelity Asset Manager Fund (189,410) (445,323)
Fidelity Asset Manager: Income Fund (5,906) (9,128)
Fidelity Asset Manager: Growth Fund (177,555) (499,049)
MSIF Trust Mid Cap Value Portfolio (200,181) (359,336)
MSIF Trust Value Portfolio (52,399) (6,091)
------------- --------------
$(6,011,496) $ (15,045,113)
============= ==============
(4) Benefits
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.
10
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
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.
On June 25, 2002, the Plan was amended with respect to hardship withdrawals
made after December 31, 2002 to reduce the contribution suspension period
to a 6-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.
(5) 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 hereunder.
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.
(6) Eligibility
All hourly employees of Armstrong or any participating affiliated company
which adopts this plan are eligible to participate if bargained for by the
employees' collective bargaining unit. Eligible participants who leave
Armstrong and are later reemployed can resume participation in the Plan on
the date of rehire.
(7) Federal Income Taxes
The Internal Revenue Service issued its latest determination letter on
February 13, 1996, which stated that the Plan and its underlying trust
qualify under the applicable provisions of the Internal Revenue Code and
therefore are exempt from federal income taxes. The Plan has been amended
since receiving the determination letter. The Company filed for a new
determination letter with the Internal Revenue Service on August 28, 2002,
but has not yet received a response. In the opinion of the Plan
administrator and the Plan's qualified tax adviser, the Plan is currently
designed and being operated in compliance with the applicable requirements
of the Internal Revenue Code. Therefore, they believe that the Plan is
qualified and the related trust is tax-exempt.
(8) 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 and Stock Ownership
Plan of Armstrong World Industries, Inc., the Bonus Replacement Retirement
Plan of Armstrong World Industries, Inc., the Armstrong Wood Products
Salaried Employees' Profit Sharing Plan, the Armstrong Wood Products
Non-Union Hourly Employees 401(k) Plan, the Hartco Flooring Co. Retirement
Savings Plan, the Hartco Flooring Co. Bargaining Employees' Retirement
Savings Plan, and the Robbins Hardwood Flooring, Inc. Employees' 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, 2002 and 2001:
11
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
September 30, 2002 September 30, 2001
------------------------------- ------------------------------
Cost Fair Value Cost Fair Value
-------------- ------------- ------------- -------------
Cash equivalents $ 16,510,231 $ 16,510,231 $ 14,645,669 $ 14,645,669
Armstrong Common Stock 25,269,658 2,905,155 26,915,537 6,368,209
Registered investment companies 204,702,712 164,805,422 202,308,085 199,406,910
Fixed income investment contracts 176,543,179 176,543,179 167,338,355 167,338,355
Participant loans 6,163,258 6,163,258 5,692,396 5,692,396
-------------- ------------- ------------- ------------
Total investments in Master Trust $ 429,189,038 $ 366,927,245 $ 416,900,042 $393,451,539
============== ============= ============= ============
Plan's interest in Master Trust $ 86,502,543 $ 70,797,688 $ 85,343,388 $ 75,106,051
Plan's percentage in Master Trust 20.2% 19.3% 20.5% 19.1%
During 2002 and 2001, the Master Trust's investments (including investments
bought, sold, and held during the year) depreciated in value as follows:
2002 2001
------------- ------------
Net (depreciation) in Master Trust ($41,014,128) ($98,225,088)
Allocated net (depreciation) in Master Trust ($6,011,496) ($15,045,113)
During 2002 and 2001, interest and dividends in the Master Trust were as
follows:
2002 2001
------------- -------------
Interest and dividends in Master Trust $12,841,359 $21,020,196
Allocated interest and dividends from investment in Master Trust $ 2,948,394 $ 4,008,585
All of the above information was certified as complete and accurate by the
trustee at September 30, 2002 and 2001 and for the years then ended.
(9) Chapter 11 Reorganization of Armstrong
Plan of Reorganization
On November 4, 2002, Armstrong filed a Plan of Reorganization with the
United States Bankruptcy Court for the District of Delaware ("the Court")
and on March 14, 2003, Armstrong filed its First Amended Plan of
Reorganization and selected exhibits (as so amended, it is referred to in
this report as the "POR"). Implementation of the POR and the treatment of
claims and interests as provided therein is subject to confirmation of the
POR in accordance with the provisions of the Bankruptcy Code. Therefore, the
timing and terms of resolution of the Chapter 11 Case remain uncertain.
Disclosure Statement
On December 20, 2002, a proposed disclosure statement with respect to the
POR was filed with the Court. On December 26, 2002, Armstrong filed
projected financial information with the Court as Exhibit C to the
disclosure statement. On March 14, 2003, Armstrong filed an amended
Disclosure Statement with the Court (as so amended, it is referred to in
this report as the "Disclosure Statement"). The discussions of the POR and
Disclosure Statement in this report are qualified by reference to the full
text of those documents as filed with the Court and filed for reference
purposes with the Securities and Exchange Commission. The POR and Disclosure
Statement are available at www.armstrongplan.com, where additional
information will be posted as it becomes available.
12
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
Consideration to be Distributed under the POR (unaudited)
Under the POR, the existing equity interests in Armstrong will be cancelled.
The POR provides for the potential distribution, with respect to existing
equity, of warrants to purchase shares of reorganized Armstrong (the
"Warrants"). The terms of the Warrants would all be measured from the
effective date of the POR. The Warrants would constitute 5% of the common
stock of reorganized Armstrong on a fully diluted basis, would have a 7-year
exercisable term, and would contain an exercise price equal to 125% of the
per share equity value of reorganized Armstrong. The Warrants are estimated
to have a value on the effective date of the POR of approximately $40
million to $50 million. Armstrong's shareholders will have no actual vote on
the POR. If the POR is implemented, the only value that will be retained by
Armstrong shareholders is the potential to receive their ratable share of
the Warrants if Armstrong's Plan of Liquidation (see discussion below) is
approved. If the shareholders and Board of Directors of Armstrong do not
approve Armstrong's Plan of Liquidation, Armstrong will not receive any
Warrants to distribute to its shareholders.
Armstrong Holdings, Inc's Plan of Liquidation
In connection with the consummation of the POR, the existing equity
interests in Armstrong will be cancelled, and the common stock of
reorganized Armstrong will be held principally by Armstrong's unsecured
creditors and the Asbestos Personal Injury Trust. The POR contemplates that
Armstrong Holdings, Inc. ("AHI") will propose to its shareholders that it
adopt a plan for winding up and dissolving itself. The POR provides that, in
order for AHI to receive the Warrants, the shareholders and Board of
Directors of AHI must approve AHI's Plan of Liquidation within one year
after the occurrence of the effective date under the POR. If such approval
is not obtained, the holder of Armstrong's existing equity interest will not
receive the Warrants. The POR provides that reorganized Armstrong will pay
any costs and expenses incurred in connection with AHI's Plan of
Liquidation. More information regarding the contemplated dissolution and
winding up of AHI will be made available to AHI shareholders in the future.
(10) Subsequent Events
As a result of filing the POR on November 4, 2002, the New York Stock
Exchange stopped trading on the Exchange of the common stock of Armstrong
(traded under the ticker symbol "ACK"). Armstrong's common stock has resumed
trading in the over-the-counter (OTC) Bulletin Board under the ticker symbol
"ACKHQ."
Effective December 20, 2002, the Armstrong Wood Products Non-Union Hourly
Employees 401(k) Plan and the Hartco Flooring Co. Bargaining Employees'
Retirement Savings Plan were merged into the Plan. Portions of the Hartco
Flooring Co. Retirement Savings Plan and the Robbins Hardwood Flooring, Inc.
Employees' Retirement Savings Plan were also merged into the Plan.
13