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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-2116
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Armstrong World Industries, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-0366390
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 3001, Lancaster, Pennsylvania 17604
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 397-0611
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock ($1 par value) New York Stock Exchange, Inc.
Preferred Stock Purchase Rights Pacific Stock Exchange, Inc. (a)
9-3/4% Debentures Due 2008 Philadelphia Stock Exchange, Inc. (a)
(a) Common Stock and Preferred
Stock Purchase Rights only
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Common Stock of registrant held by non-
affiliates of the registrant based on the closing price ($60.25 per share) on
the New York Stock Exchange on February 9, 1996, was approximately $1.9 billion.
For the purposes of determining this amount only, registrant has defined
affiliates as including (a) the executive officers named in Item 10 of this 10-K
Report, (b) all directors of registrant, and (c) each shareholder that has
informed registrant by February 14, 1996, as having sole or shared voting power
over 5% or more of the outstanding Common Stock of registrant as of December 31,
1995.
This amount does not include the 5,421,998 shares of Series A ESOP Convertible
Preferred Stock as of December 31, 1995, which vote with the Common Stock as if
converted and have an aggregate liquidation preference of $258,900,404, held by
Mellon Bank, N.A., as Trustee of the Company's Employee Stock Ownership Plan.
As of February 9, 1996, the number of shares outstanding of registrant's Common
Stock was 37,108,552.
Documents Incorporated by Reference
Portions of the Proxy Statement dated March 18, 1996, relative to the
April 29, 1996, annual meeting of the shareholders of registrant (the "Company's
1996 Proxy Statement") have been incorporated by reference into Part III of this
Form 10-K Report.
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PART I
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Item 1. Business
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Armstrong World Industries, Inc. is a Pennsylvania corporation incorporated in
1891. The Company is a manufacturer of interior furnishings, including floor
coverings, and building products which are sold primarily for use in the
furnishing, refurbishing, repair, modernization and construction of residential,
commercial and institutional buildings. It also manufactures various industrial
and other products. In late 1995, Armstrong sold its furniture business and
combined its ceramic tile business with Dal-Tile International Inc. ("Dal-
Tile"), retaining a minority equity interest in the combined company. Unless
the context indicates otherwise, the term "Company" means Armstrong World
Industries, Inc. and its consolidated subsidiaries.
Industry Segments
The company's businesses include four reportable segments: floor coverings,
building products, industry products and ceramic tile.
<TABLE>
<CAPTION>
at December 31 (millions) 1995 1994 1993
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<S> <C> <C> <C>
Net trade sales:
Floor coverings $1,053.9 $1,063.5 $ 980.6
Building products 682.2 630.0 586.7
Industry products 348.8 312.2 297.7
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Total net sales $2,084.9 $2,005.7 $1,865.0
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Operating income (loss): (Note 1)
Floor coverings $ 145.0 $ 189.6 $ 156.6
Building products 92.2 86.8 18.8
Industry products 9.3 41.2 27.2
Ceramic tile (Note 2) (168.4) 0.8 (44.3)
Unallocated corporate expense (34.0) (23.8) (59.8)
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Total operating income $ 44.1 $ 294.6 $ 98.5
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Depreciation and amortization:
Floor coverings $ 47.9 $ 49.2 $ 48.2
Building products 36.8 34.5 34.1
Industry products 19.3 17.6 14.6
Corporate 5.6 5.6 5.2
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Total depreciation
and amortization $ 109.6 $ 106.9 $ 102.1
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Capital additions: (Note 3)
Floor coverings $ 77.3 $ 56.7 $ 39.7
Building products 49.2 31.5 24.2
Industry products 45.0 22.6 22.1
Corporate 6.3 3.0 1.8
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Total capital additions $ 177.8 $ 113.8 $ 87.8
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Identifiable assets:
Floor coverings $ 583.2 $ 575.7 $ 541.2
Building products 513.5 478.1 483.0
Industry products 301.8 234.8 207.9
Ceramic tile 135.8 270.5 251.9
Discontinued business -- 182.1 175.4
Corporate 615.5 398.2 185.4
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Total assets $2,149.8 $2,139.4 $1,844.8
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<CAPTION>
Note 1:
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Restructuring charges in
operating income (millions) 1995 1994 1993
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<S> <C> <C> <C>
Floor coverings $ 25.0 -- $ 8.4
Building products 6.3 -- 13.7
Industry products 31.4 -- 12.9
Ceramic tile -- -- 19.3
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Unallocated corporate expense 9.1 -- 35.0
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Total restructuring charges
in operating income $ 71.8 -- $ 89.3
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</TABLE>
Note 2: 1995 operating income includes a $177.2 million loss due to the ceramic
tile business combination.
Note 3: 1995 capital additions for industry segments include property, plant and
equipment from acquisitions of $15.6 million.
DISCONTINUED OPERATIONS
On December 29, 1995, the company sold the stock of its furniture subsidiary,
Thomasville Furniture Industries, Inc., to INTERCO Incorporated for $331.2
million. INTERCO assumed $8.0 million of Thomasville interest-bearing debt. The
company recorded a gain of $83.9 million after tax on the sale. Certain
liabilities related to terminated benefit plans of approximately $11.3 million
were retained by the company. Thomasville and its subsidiaries recorded sales of
approximately $550.2 million in 1995, $526.8 million in 1994 and $449.7 million
in 1993.
Operating statement categories, except where otherwise indicated, have been
restated to exclude the effects of this discontinued business.
EQUITY EARNINGS FROM AFFILIATES
On December 29, 1995, the company entered into a business combination with Dal-
Tile International Inc. The transaction was accounted for at fair value and
involved the exchange of $27.6 million and the stock of the ceramic tile
operations, consisting primarily of American Olean Tile Company, a wholly-owned
subsidiary, for ownership of 37% of the shares of Dal-Tile. The company's
investment in Dal-Tile exceeds the underlying equity in net assets by $123.9
million which will be amortized over a period of 30 years. The after-tax loss on
the transaction was $116.8 million.
Results from ceramic tile operations, which were previously reported on a
consolidated basis, were restated and included in "Equity Earnings from
Affiliates." Going forward, Armstrong's 37% ownership of the combined Dal-Tile
will be accounted for under the equity method. The summarized financial
information for ceramic tile operations is presented below.
<TABLE>
<CAPTION>
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(millions) 1995 1994 1993
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<S> <C> <C> <C>
Net sales $240.0 $220.2 $210.7
Operating income (loss)/1/ 8.8 .8 (44.3)
Assets/2/ 269.8 290.1 276.3
Liabilities/2/ 17.3 19.6 24.4
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</TABLE>
Note 1: Excludes 1995 loss of $177.2 million due to ceramic tile business
combination.
Note 2: 1995 balances were as of December 29, 1995, immediately prior to the
ceramic tile business combination.
Also included in equity earnings from affiliates are earnings from the 50%
interest in the WAVE joint venture with Worthington Industries. Previously these
earnings had been included in selling, general and administrative expenses.
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Narrative Description of Business
The Company manufactures and sells interior furnishings, including floor
coverings and building products, and makes and markets a variety of specialty
products for the building, automotive, textile, and other industries. The
Company's activities extend worldwide.
Floor Coverings
The Company is a prominent manufacturer of floor coverings for the interiors of
homes and commercial and institutional buildings, with a broad range of
resilient flooring together with adhesives, installation and maintenance
materials and accessories. Resilient flooring, in both sheet and tile form, is
made in a wide variety of types, designs, and colors. Included are types of
flooring that offer such features as ease of installation, reduced maintenance
(no-wax), and cushioning for greater underfoot comfort. Floor covering products
are sold to the commercial and residential market segments through wholesalers,
retailers, and contractors, and to the hotel/motel and manufactured homes
industries.
Building Products
A major producer of ceiling materials in the United States and abroad, the
Company markets both residential and architectural ceiling systems. Ceiling
materials for the home are offered in a variety of types and designs; most
provide noise reduction and incorporate Company-designed features intended to
permit ease of installation. These residential ceiling products are sold
through wholesalers and retailers. Architectural ceiling systems, designed for
use in shopping centers, offices, schools, hospitals, and other commercial and
institutional structures, are available in numerous colors, performance
characteristics and designs and offer characteristics such as acoustical
control, rated fire protection, and aesthetic appeal. Architectural ceiling
materials and accessories, along with acoustical wall panels, are sold by the
Company to ceiling systems contractors and to resale distributors. Grid
products are manufactured and sold through a joint venture with Worthington
Industries.
Industry Products
The Company, including a number of its subsidiaries, makes and sells a variety
of specialty products for the building, automotive, textile and other
industries. These products include flexible pipe insulation sold for use in
construction and in original equipment manufacture; gasket materials for new
equipment and replacement use in the automotive, farm equipment, appliance, and
other industries; textile mill supplies including cots and aprons sold to
equipment manufacturers and textile mills and adhesives. Industry products are
sold, depending on type and ultimate use, to original equipment manufacturers,
contractors, wholesalers, fabricators and end users. In 1995, the Company
announced its intention to discuss with potential buyers the possible sale of
its textile products operation.
Ceramic Tile
Ceramic tile for floors, walls and countertops, together with adhesives,
installation and maintenance materials and accessories are sold through home
centers and sales and service centers operated by Dal-Tile following a business
combination of the Company's ceramic tile operations with Dal-Tile in late 1995.
___________________________________
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The principal raw materials used in the manufacture of the Company's products
are synthetic resins, plasticizers, latex, mineral fibers and fillers, clays,
starches, perlite, and pigments and inks. In addition, the Company uses a wide
variety of other raw materials. Most raw materials are purchased from sources
outside of the Company. The Company also purchases significant amounts of
packaging materials for the containment and shipment of its various products.
During 1995, despite raw material cost increases, especially for plasticizers,
resins, and paper, adequate supplies of raw materials were available to all of
the Company's industry segments.
Customers' orders for the Company's products are mostly for immediate shipment.
Thus, in each industry segment, the Company has implemented inventory systems,
including its "just in time" inventory system, pursuant to which orders are
promptly filled out of inventory on hand or the product is manufactured to meet
the delivery date specified in the order. As a result, there historically has
been no material backlog in any industry segment.
The competitive position of the Company has been enhanced by patents on
products and processes developed or perfected within the Company or obtained
through acquisition. Although the Company considers that, in the aggregate, its
patents constitute a valuable asset, it does not regard any industry segment as
being materially dependent upon any single patent or any group of related
patents.
There is significant competition in all the industry segments in which the
Company does business. Competition in each industry segment includes numerous
active companies (domestic and foreign), with emphasis on price, product
performance and service. In addition, with the exception of industrial and
other products and services, product styling is a significant method of
competition in the Company's industry segments. Increasing domestic competition
from foreign producers is apparent in certain industry segments and actions
continue to be taken to meet this competition.
The Company invested $162.2 million in 1995, $113.8 million in 1994, and $87.8
million in 1993 for additions to its property, plant and equipment.
Research and development activities are important and necessary in assisting the
Company to carry on and improve its business. Principal research and
development functions include the development of new products and processes and
the improvement of existing products and processes.
The Company spent $56.2 million in 1995, $51.4 million in 1994, and $56.1
million in 1993 on research and development activities worldwide for the
continuing businesses.
ENVIRONMENTAL MATTERS
In 1995, the company incurred capital expenditures of approximately $1.9 million
for environmental compliance and control facilities and anticipates comparable
annual expenditures for those purposes for the years 1996 and 1997. The company
does not anticipate that it will incur significant capital expenditures in order
to meet the new requirements of the Clean Air Act of 1990 and the final
implementing regulations promulgated by various state agencies.
As with many industrial companies, Armstrong is involved in proceedings under
the Comprehensive Environmental Response, Compensation and Liability Act
("Superfund"), and similar state laws at approximately 16 sites. In most cases,
Armstrong is one of many potentially responsible parties ("PRPs") who have
voluntarily agreed to jointly fund the required investigation and remediation of
each site. With regard to some sites, however, Armstrong disputes the liability,
the proposed remedy or the proposed cost allocation. Armstrong is alleged to
have contributed a significant volume of waste material at a former municipal
landfill site in Volney, New York. There, Armstrong, along with the county and
other PRPs at the site, have voluntarily performed a supplemental study to
evaluate the USEPA's proposed remedy at the site. Discussions with the USEPA are
continuing regarding the appropriate remedy to be implemented. A former county
landfill site in Buckingham County, Virginia, is also alleged to have received
material from a former subsidiary, Thomasville Furniture Industries, Inc.
("Thomasville"). In September 1995, the USEPA ordered Thomasville to implement
the remedy identified in the September 1994, Record of Decision ("ROD"), the
cost of which has been estimated by Thomasville to be approximately $2.2
million. Pursuant to the terms of the company's December 29, 1995, sale of
Thomasville to INTERCO Incorporated, Armstrong has provided to the USEPA a
guarantee of the performance by Thomasville of the required remedial work and
has also entered into a cost-sharing agreement with INTERCO for future costs
relating to the site. Armstrong may also have rights of contribution or
reimbursement from other parties or coverage under applicable insurance
policies. The company is also remediating environmental contamination resulting
from past industrial activity at certain of its current plant sites.
Estimates of future liability are based on an evaluation of currently available
facts regarding each individual site and consider factors including existing
technology, presently enacted laws and regulations and prior company experience
in remediation of contaminated sites. Although current law imposes joint and
several liability on all parties at any Superfund site, Armstrong's contribution
to the remediation of these sites is expected to be limited by the number of
other companies also identified as potentially liable for site costs. As a
result, the company's estimated liability reflects only the company's expected
share. In determining the probability of contribution, the company considers the
solvency of the parties, whether responsibility is being disputed, the terms of
any existing agreements and experience regarding similar matters. The estimated
liabilities do not take into account any claims for recoveries from insurance or
third parties.
Reserves at December 31, 1995, were for potential environmental liabilities that
the company considers probable and for which a reasonable estimate of the
potential liability could be made. Where existing data is sufficient to estimate
the amount of the liability, that estimate has been used; where only a range of
probable liability is available and no amount within that range is more likely
than any other, the lower end of the range has been used. As a result, the
company has accrued, before agreed-to insurance coverage, $8.0 million to
reflect its estimated undiscounted liability for environmental remediation. As
assessments and remediation activities progress at each individual site, these
liabilities are reviewed to reflect additional information as it becomes
available.
Actual costs to be incurred at identified sites in the future may vary from the
estimates, given the inherent uncertainties in evaluating environmental
liabilities. Subject to the imprecision in estimating environmental remediation
costs, the company believes that any sum it may have to pay in connection with
environmental matters in excess of the amounts noted above would not have a
material adverse effect on its financial condition, liquidity or results of
operations.
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<PAGE>
As of December 31, 1995, the Company had approximately 10,820 active employees,
of whom approximately 3,615 are located outside the United States. Year-end
employment in 1995 was below the level at the end of 1994 primarily as the
result of the sale of the furniture business, the ceramic tile business
combination and various restructuring activities. About 65% of the Company's
approximately 4,380 hourly or salaried production and maintenance employees in
the United States are represented by labor unions.
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<PAGE>
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
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Geographic areas
at December 31 (millions) 1995 1994 1993
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<S> <C> <C> <C>
Net trade sales:
United States $1,346.3 $1,343.7 $1,250.3
Europe 558.7 483.4 456.6
Other foreign 179.9 178.6 158.1
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Interarea transfers:
United States 101.1 94.7 75.8
Europe 13.8 8.7 6.0
Other foreign 32.1 26.1 21.9
Eliminations (147.0) (129.5) (103.7)
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Total net sales $2,084.9 $2,005.7 $1,865.0
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Operating income:
United States $ 7.7 $ 235.5 $ 116.6
(See Note 2 on page 3)
Europe 62.6 75.3 31.7
Other foreign 7.8 7.6 10.0
Unallocated corporate expense (34.0) (23.8) (59.8)
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Total operating income $ 44.1 $ 294.6 $ 98.5
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Identifiable assets:
United States $1,044.5 $1,110.5 $1,074.1
Europe 406.7 376.5 347.0
Other foreign 83.4 72.6 63.2
Discontinued business -- 182.1 175.4
Corporate 615.5 398.2 185.4
Eliminations (0.3) (0.5) (0.3)
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Total assets $2,149.8 $2,139.4 $1,844.8
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</TABLE>
United States net trade sales include export sales to non-affiliated customers
of $30.8 million in 1995, $24.9 million in 1994 and $19.8 million in 1993.
"Europe" includes operations located primarily in England, France, Germany,
Italy, the Netherlands, Poland, Spain and Switzerland. Operations in Australia,
Canada, The People's Republic of China, Hong Kong, Indonesia, Japan, Korea,
Singapore and Thailand are in "Other foreign."
Transfers between geographic areas and commissions paid to affiliates marketing
exported products are accounted for by methods that approximate arm's-length
transactions, after considering the costs incurred by the selling company and
the return on assets employed of both the selling unit and the purchasing unit.
Operating income of a geographic area includes income accruing from sales to
affiliates.
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<PAGE>
The Company's foreign operations are subject to foreign government legislation
involving restrictions on investments (including transfers thereof), tariff
restrictions, personnel administration, and other actions by foreign
governments. In addition, consolidated earnings are subject to both U.S. and
foreign tax laws with respect to earnings of foreign subsidiaries, and to the
effects of currency fluctuations.
Item 2. Properties
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The Company produces and markets its products and services throughout the world,
operating 48 manufacturing plants in 12 countries; 25 of these plants are
located throughout the United States. Additionally, affiliates operate eight
plants in three countries.
Floor covering products and adhesives are produced at 18 plants with principal
manufacturing facilities located in Lancaster, Pennsylvania, and Stillwater,
Oklahoma. Building products are produced at 14 plants with principal facilities
in Macon, Georgia, the Florida-Alabama Gulf Coast area and Marietta,
Pennsylvania. Insulating materials, textile mill supplies, fiber gasket
materials and specialty papers and other products for industry are manufactured
at 16 plants with principal manufacturing facilities at Munster, Germany, and
Fulton, New York.
Numerous sales offices are leased worldwide, and leased facilities are utilized
to supplement the Company's owned warehousing facilities.
Productive capacity and extent of utilization of the Company's facilities are
difficult to quantify with certainty because in any one facility maximum
capacity and utilization varies periodically depending upon the product that is
being manufactured and individual facilities manufacture more than one type of
product. In this context, the Company estimates that the production facilities
in each of its industry segments were effectively utilized during 1995 at 80% to
90% of overall productive capacity in meeting market conditions. Remaining
productive capacity is sufficient to meet expected customer demands.
The Company believes its various facilities are adequate and suitable.
Additional incremental investments in plant facilities are being made as
appropriate to balance capacity with anticipated demand, improve quality and
service, and reduce costs.
Item 3. Legal Proceedings
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OVERVIEW OF ASBESTOS-RELATED LEGAL PROCEEDINGS - The full report on the
Asbestos-Related Litigation immediately follows this summary.
The Company is involved, as of December 31, 1995, in approximately 59,000
pending personal injury asbestos claims and lawsuits, and 32 pending claims and
lawsuits involving asbestos-containing products in buildings. The Company's
insurance carriers provide coverage for both types of claims. The personal
injury claims (but not property damage claims) are handled by the Center for
Claims Resolution (the "Center"). Personal injury claims in the federal courts
have been transferred by the Judicial Panel for Multidistrict Litigation to the
Eastern District of Pennsylvania for pretrial purposes. State court cases have
not been directly affected by the transfer. A settlement class action that
includes essentially all future personal injury claims against Center members
was filed on January 15, 1993, in the Eastern District of Pennsylvania. The
court has tentatively approved the settlement, although it will not become final
until certain issues, including insurance coverage for class members' claims,
are resolved, and appeals are exhausted, which could take several years.
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An Agreement Concerning Asbestos-Related Claims (the "Wellington Agreement")
provides for settlement of insurance coverage for personal injury claims with
certain primary carriers and excess carriers. Settlement agreements that
complement the Wellington Agreement have been signed with one primary carrier
and certain excess carriers. Litigation that was undertaken by the Company in
California for insurance coverage for asbestos-related personal injury and
property damage lawsuits and claims is now on appeal from favorable final
decisions of the trial court and the California Court of Appeal. The case has
been returned to the Court of Appeal by the California Supreme Court for
additional review in light of a recent favorable Supreme Court decision in
another case. This litigation did not encompass coverage for non-products
claims that is included in the Company's primary policies and certain excess
policies. This additional coverage is substantial and negotiations are underway
with several primary carriers. If non-products coverage issues are not resolved
through negotiation, the Company can pursue alternative dispute resolution
proceedings against the primary and certain excess carriers pursuant to the
Wellington Agreement.
The Company believes that an estimated $166 million in liability and defense
costs recorded on its balance sheet will be incurred to resolve approximately
59,000 asbestos-related personal injury claims against the Company as of
December 31, 1995. An insurance asset in the amount of $166 million recorded on
the balance sheet reflects the Company's belief in the availability of insurance
in this amount to cover the liability for these pending claims. The Company
also projects the maximum cost in the settlement class action as a reasonably
possible additional liability of $245 million for a ten-year period; a portion
of such additional projected liability may not be covered by the Company's
ultimately applicable insurance recovery. Although subject to uncertainties and
limitations, the Company also believes it is probable that substantially all of
the expenses and liability payments associated with the asbestos-related
property damage claims will be covered by insurance.
Even though uncertainties still remain as to the potential number of unasserted
claims, liability resulting therefrom, and the ultimate scope of its insurance
coverage, after consideration of the factors involved, including the Wellington
Agreement, the settlements with other insurance carriers, the results of the
trial phase and the intermediate appellate stage of the California insurance
coverage litigation, the remaining reserve, the establishment of the Center, the
proposed settlement class action, and its experience, the Company believes the
asbestos-related lawsuits and claims against the Company would not be material
either to the financial condition of the Company or to its liquidity, although
the net effect of any future liabilities recorded in excess of insurance assets
could be material to earnings in a future period.
The full report on the asbestos-related litigation is set forth below:
Asbestos-Related Litigation
The Company is one of many defendants in pending lawsuits and claims involving,
as of December 31, 1995, approximately 59,000 individuals alleging personal
injury from exposure to asbestos. Included in the above number are
approximately 12,800 lawsuits and claims from the approximately 87,000
individuals who have opted out of the settlement class action referred to below.
About 14,300 claims from purported settlement class members were received as of
December 31, 1995. Of those claims, many do not qualify at this time for
payment. (In late 1993, the Company revised its claims handling procedures to
provide for individual claim information to be supplied by the Center for Claims
Resolution (the "Center"), referred to below. It is expected that this process
will provide more current tracking of outstanding claims. The reconciliation
between the two systems continues. Claim numbers in this note have been
received from the Center and its consultants.)
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<PAGE>
Nearly all the personal injury suits and claims, except those claims covered by
the settlement class action, seek general and punitive damages arising from
alleged exposures, during various times, from World War II onward, to asbestos-
containing insulation products used, manufactured or sold by the companies
involved in the asbestos-related litigation. These claims against the Company
generally involve allegations of negligence, strict liability, breach of
warranty and conspiracy. The Company discontinued the sale of all asbestos-
containing insulation products in 1969. The claims generally allege that injury
may be determined many years (up to 40 years) after alleged exposure to asbestos
or asbestos-containing products. Nearly all suits name many defendants
(including both members of the Center and other companies), and over 100
different companies are reportedly involved. The Company believes that many
current plaintiffs are unimpaired. A few state and federal judges have
consolidated numbers of asbestos-related personal injury cases for trial, which
the Company has generally opposed as unfair. A large number of suits and claims
have either been put on inactive lists, settled, dismissed or otherwise
resolved, and the Company is generally involved in all stages of claims
resolution and litigation, including trials, and appeals. While the number of
pending cases reflects a decrease during the past year, neither the rate of
future dispositions nor the number of future potential unasserted claims can be
reasonably predicted at this time.
Attention has been given by various parties to securing a comprehensive
resolution of pending as well as potential future asbestos-related personal
injury claims. The Judicial Panel for Multidistrict Litigation ordered the
transfer of all pending federal cases to a single court, the Eastern District of
Pennsylvania in Philadelphia, for pretrial purposes. The Company has supported
such action. Some of these cases are periodically released for trial, although
the issue of punitive damages is retained by the Eastern District Court. State
court cases have not been directly affected by the transfer. The Court in the
Eastern District has been instrumental in having the parties resolve large
numbers of cases in various jurisdictions and has been receptive to different
approaches to the resolution of asbestos-related personal injury claims.
Settlement Class Action
A settlement class action that includes essentially all future asbestos-related
personal injury claims against members of the Center was filed in the Eastern
District of Pennsylvania, on January 15, 1993. The settlement class action is
designed to establish a non-litigation system for the resolution of essentially
all future asbestos-related personal injury claims against the Center members
including the Company. Other companies that are not Center members may be able
to join the class action later. The class action proposes a voluntary
settlement that offers a method for prompt compensation to claimants who were
occupationally exposed to asbestos if they meet certain exposure and medical
criteria. Compensation amounts are derived from historical settlement data.
Under limited circumstances and in limited numbers, qualifying claimants may
choose to arbitrate or litigate certain claims after their claims are processed
within the system. No punitive damages will be paid under the proposed
settlement. The settlement is designed to minimize transactional costs,
including attorneys fees, and to relieve the courts of the burden of handling
future claims. Each member of the Center has an obligation for its own fixed
share in this proposed settlement. The District Court has ruled that claimants
who neither filed a lawsuit against the members of the Center nor filed an
exclusion request form are subject to the class action. The class action does
not include claims deemed otherwise not covered by the class action settlement,
or claims for property damage. Annual case flow caps and compensation ranges
for each compensable medical category, including amounts paid even more promptly
under the simplified payment procedures, have been established for an initial
period of ten years. Case flow caps may be increased if they were substantially
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<PAGE>
exceeded during the previous five-year period. The case flow figures and annual
compensation levels are subject to renegotiation after the initial ten-year
period. On August 16, 1994, the Court tentatively approved the settlement, and
notification has been provided to class members. Approximately 87,000
individuals have opted out. The opt outs are not claims as such but rather are
reservations of rights to possibly bring claims in the future. The settlement
will become final only after certain issues, including issues related to
insurance coverage, are resolved and appeals are exhausted. This process could
take several years. The Center members have stated their intention to resolve
over a five-year period the personal injury claims that were pending when the
settlement class action was filed. A significant number of claims have been
finally or tentatively settled or are currently the subject of negotiations.
The Company is seeking agreement from its insurance carriers or a binding
judgment against them that the class action will not jeopardize existing
insurance coverage; the class action is contingent upon such an agreement or
judgment. With respect to carriers that do not agree, this matter will be
resolved either by alternative dispute resolution, in the case of carriers that
subscribed to the Wellington Agreement, or else by litigation.
The Company believes that the future claimants settlement class action will
receive final approval. However, the potential exists that an appellate court
will reject or modify the settlement class action or that the above-referenced
companion insurance action will not be successful.
Insurance Carriers/Wellington Agreement
The Company's insurance carriers provide defense and indemnity coverage for
asbestos-related personal injury claims. All of the Company's primary insurers
are paying for the defense of property damage claims. Three of the four
carriers are paying for the defense under an Interim Agreement pending the final
resolution of the coverage issues for property damage claims in the California
insurance litigation. The remaining carrier entered into a separate agreement
with the Company resolving coverage issues for both personal injury and property
damage claims.
Various insurance carriers provide products and nonproducts coverage for the
Company's asbestos-related personal injury claims and product coverage for
property damage claims. Certain policies providing products coverage for
personal injury claims have been exhausted. A list of the insurance carriers
that currently provide coverage or whose policies have made available or provide
personal injury, nonproducts or property damage coverages is as follows:
Reliance Insurance Company; Aetna Casualty and Surety Company; Liberty Mutual
Insurance Companies; Travelers Insurance Company; Fireman's Fund Insurance
Company; Insurance Company of North America; Lloyds of London; various London
market companies; Fidelity and Casualty Insurance Company; First State Insurance
Company; U.S. Fire Insurance Company; Home Insurance Company; Great American
Insurance Company; American Home Assurance Company and National Union Fire
Insurance Company (known as the AIG Companies); Central National Insurance
Company; Interstate Insurance Company; Puritan Insurance Company; and Commercial
Union Insurance Company. Midland Insurance Company, an excess carrier, that
insured the Company for $25 million of bodily injury products coverage, is
insolvent; the Company is pursuing claims with the state guaranty associations.
The gap in coverage created by the Midland Insurance Company insolvency will be
covered by other insurance. Certain companies in the London block of coverage
and certain carriers providing coverage at the excess level for property damage
claims only have also become insolvent. In addition, certain insurance carriers
that were not in the Company's California insurance litigation also provide
insurance for asbestos-related property damage claims.
-11-
<PAGE>
The Company along with 52 other companies (defendants in the asbestos-related
litigation and certain of their insurers) signed the 1985 Agreement Concerning
Asbestos-Related Claims (the "Wellington Agreement"). This Agreement provided
for a final settlement of nearly all disputes concerning insurance for asbestos-
related personal injury claims between the Company and three of its primary
insurers and seven of its excess insurers which subscribed to the Wellington
Agreement. The one primary insurer that did not sign the Wellington Agreement
had earlier entered into the Interim Agreement with the Company and had paid
into the Wellington Asbestos Claims Facility (the "Facility"). The Wellington
Agreement provides for those insurers to indemnify the Company up to the policy
limits for claims that trigger policies in the insurance coverage period, and
nearly all claims against the Company fall within the coverage period; both
defense and indemnity are paid under the policies and there are no deductibles
under the applicable Company policies. The Wellington Agreement addresses both
products and non-products insurance coverage. One of the Company's larger
excess insurance carriers entered into a settlement agreement in 1986 with the
Company under which payments also were made through the Facility and are now
being paid through the Center. Coverage for asbestos-related property damage
claims was not included in the settlement, and the agreement provides that
either party may reinstitute a lawsuit in the event the coverage issues for
property damage claims are not amicably resolved.
The Wellington Agreement also provided for the establishment of the Facility to
evaluate, settle, pay and defend all personal injury claims against member
companies. The insurance coverage designated by the Company for coverage in the
Facility consisted of all relevant insurance policies issued to the Company from
1942 through 1976. Liability payments and allocated expenses were allocated by
formula to each member, including the Company. The Facility, now dissolved, was
negatively impacted by concerns of certain members about their share of
liability payments and allocated expenses and by certain insurer concerns about
defense costs and Facility operating expenses.
Center for Claims Resolution
A new asbestos-related personal injury claims handling organization known as the
Center for Claims Resolution was created in October 1988 by Armstrong and 20
other companies, all of which were former members of the Facility. Insurance
carriers did not become members of the Center, although a number of carriers
signed an agreement to provide approximately 70% of the financial support for
the Center's operational costs during its first year of operation; they also are
represented ex officio on the Center's governing board. The Center adopted many
of the conceptual features of the Facility, and the members' insurers generally
provide coverage under the Wellington Agreement terms. The Center has operated
under a revised formula for shares of liability payments and defense costs and
has defended the members' interests and addressed the claims in a manner
consistent with the prompt, fair resolution of meritorious claims. In late
1991, the Center sharing formula was revised to provide that members will pay
only on claims in which the member is a named defendant. This change caused a
slight increase in the Company's share and subsequent share adjustments also
resulted in an increased liability share for the Company in certain areas. In
the settlement class action, each member will pay its own fixed share of every
claim.
A large share member earlier withdrew from the Center, and the allocated shares
of liability payments and defense costs of the Center were recalculated,
resulting in the remaining members' shares being increased. Under the class
action settlement resolution, if a member withdraws, the shares of remaining
members will not be increased. The Center members have reached an agreement
annually with the insurers relating to the continuing operation of the Center
and expect that the insurers will provide funding for the Center's operating
expenses for its eighth year of operation. The Center
-12-
<PAGE>
will continue to process pending claims as well as future claims in the
settlement class action.
An increase in the utilization of the Company's insurance also has occurred as a
result of the class action settlement and the commitment at the time to attempt
to resolve pending claims within five years. Aside from the class action
settlement, no forecast can be made for future years regarding either the rate
of claims, the rate of pending and future claims resolution by the Center, or
the rate of utilization of Company insurance. If the settlement class action is
finalized and all appeals are exhausted, projections of the rate of disposition
of future cases may be made.
Property Damage Litigation
The Company is also one of many defendants in a total of 32 pending lawsuits and
claims, including one class action, as of December 31, 1995, brought by public
and private building owners. These lawsuits and claims include allegations of
damage to buildings caused by asbestos-containing products and generally claim
compensatory and punitive damages and equitable relief, including reimbursement
of expenditures, for removal and replacement of such products. They appear to
be aimed at friable (easily crumbled) asbestos-containing products, although
allegations in some suits encompass all asbestos-containing products, including
allegations with respect to previously installed asbestos-containing resilient
flooring. Among the lawsuits that have been resolved are four class actions
that had been certified, each involving a distinct class of building owner:
public and private schools; Michigan state public and private schools; colleges
and universities, and private property owners who leased facilities to the
federal government. In three of these class actions, the courts have given
final approval and dismissed the actions with prejudice. In the college and
universities class action, a settlement has been reached with the class
representative and is subject to a fairness hearing. The Company vigorously
denies the validity of the allegations against it contained in these suits and
claims. Increasing defense costs, paid by the Company's insurance carriers
either under reservation or settlement arrangement, will be incurred. As a
consequence of the California insurance litigation discussed elsewhere in this
note, the Company believes that it is probable that costs of the property damage
litigation that are being paid by the Company's insurance carriers under
reservation of rights will not be subject to recoupment. These suits and claims
were not handled by the former Facility nor are they being handled by the
Center.
Certain co-defendant companies in the asbestos-related litigation have filed for
reorganization under Chapter 11 of the Federal Bankruptcy Code. As a
consequence, litigation against them (with several exceptions) has been stayed
or restricted. Due to the uncertainties involved, the long-term effect of these
proceedings on the litigation cannot be predicted.
California Insurance Coverage Lawsuit
The California trial court issued final decisions in various phases in the
insurance lawsuit including a decision that the trigger of coverage for personal
injury claims was continuous from exposure through death or filing of a claim.
The court also found that a triggered insurance policy should respond with full
indemnification up to exhaustion of the policy limits. The court concluded that
any defense obligation ceases upon exhaustion of policy limits. Although not as
comprehensive, another important decision in the trial established a favorable
defense and indemnity coverage result for asbestos-related property damage
claims; the final decision holds that, in the event the Company is held liable
for an underlying property damage claim, the Company would have coverage under
policies in effect during the period of installation and during any subsequent
period in which a release of fibers
-13-
<PAGE>
occurred. The California Court of Appeal has substantially upheld the trial
court. The insurance carriers petitioned the California Supreme Court to hear
the various asbestos-related personal injury and property damage coverage
issues. The California Supreme Court accepted review pending its review of
related issues in another case. It ruled in favor of the insured company in
that case, and then referred the Company's case back to the Court of Appeal for
further review in light of that decision. Based upon the trial court's
favorable final decisions, the favorable decision by the California Court of
Appeal, and a review of the coverage issues by its trial counsel, the Company
believes that it has a substantial legal basis for sustaining its right to
defense and indemnification. After concluding the last phase of the trial
against one of its primary carriers, which is also an excess carrier, the
Company and the carrier reached a settlement agreement on March 31, 1989. Under
the terms of the settlement agreement, coverage is provided for asbestos-related
bodily injury and property damage claims generally consistent with the interim
rulings of the California trial court and complementary to the Wellington
Agreement. The parties also agreed that a certain minimum and maximum
percentage of indemnity and allocated expenses incurred with respect to
asbestos-related personal injury claims would be deemed allocable to non-
products claims coverage and that the percentage amount would be negotiated
between the Company and the insurance carrier. These negotiations continue.
The Company also settled both asbestos-related personal injury and property
damage coverage issues with a small excess carrier and in 1991 settled those
same issues with a larger excess carrier. In these settlements, the Company and
the insurers agreed to abide by the final judgment of the trial court in the
California insurance litigation with respect to coverage for asbestos-related
claims. In 1994, the Company also settled coverage issues for asbestos-related
claims with a significant excess carrier.
Non-Products Insurance Coverage
Non-products insurance coverage is included in the Company's primary insurance
policies and certain excess policies for non-products claims. The settlement
agreement referenced above with one primary carrier included an amount for non-
products claims. Non-products claims include claims that may have arisen out of
exposure during installation of asbestos materials or before control of such
materials has been relinquished. Negotiations have been undertaken with the
Company's primary insurance carriers and are currently underway with several of
them to categorize the percentage of previously resolved and yet to be resolved
asbestos-related personal injury claims as non-products claims and to establish
the entitlement to such coverage. The additional coverage potentially available
to pay claims categorized as non-products is substantial, and at the primary
level, includes defense costs in addition to limits. No agreement has been
reached with the primary carriers on the amount of non-products coverage
attributable to claims that have been disposed of or the type of claims that
should be covered by non-products insurance. One primary carrier alleges that
it is no longer bound by the Wellington Agreement, and one primary carrier
seemingly takes the view that the Company verbally waived certain rights
regarding non-products coverage against that carrier at the time the Wellington
Agreement was signed. All the carriers presumably raise various reasons why
they should not pay their coverage obligations. The Company is entitled to
pursue alternative dispute resolution proceedings against the primary and
certain excess carriers to resolve the non-products coverage issues.
ACandS, Inc., a former subsidiary of the Company, has coverage rights under some
of the Company's insurance policies for certain insurance periods, and has
accessed such coverage on the same basis as the Company. It was a subscriber to
the Wellington Agreement, but is not a member of the Center. The Company and
ACandS, Inc., have negotiated a settlement agreement which
-14-
<PAGE>
reserves for ACandS, Inc. a certain amount of insurance from the joint policies
solely for its own use for asbestos-related claims.
Conclusions
Based upon the Company's experience with this litigation and the disputes with
its insurance carriers, a reserve was recorded in June 1983 to cover estimated
potential liability and settlement costs and legal and administrative costs not
covered under the Interim Agreement, cost of litigation against the Company's
insurance carriers, and other factors involved in the litigation that are
referred to herein about which uncertainties exist. As a result of the
Wellington Agreement, the reserve was earlier reduced for that portion
associated with pending personal injury suits and claims. As a result of the
March 31, 1989, settlement referenced above, the Company received $11.0 million,
of which approximately $4.4 million was credited to income with nearly all of
the balance being recorded as an increase to its reserve for potential
liabilities and other costs and uncertainties associated with the asbestos-
related litigation. Future costs of litigation against the Company's insurance
carriers and other legal costs indirectly related to the litigation will be
expensed outside the reserve.
The Company does not know how many claims will be filed against it in the
future, nor the details thereof or of pending suits not fully reviewed, nor the
expense and any liability that may ultimately result therefrom, nor does the
Company know whether the settlement class action will ultimately succeed, the
number of individuals who ultimately will be deemed to have opted out or who
could file claims outside the settlement class action, nor the annual claims
flow caps to be negotiated after the initial ten-year period for the settlement
class action or the compensation levels to be negotiated for such claims or the
scope of its non-products coverage ultimately deemed available or the ultimate
conclusion of the California insurance coverage litigation.
Subject to the uncertainties and limitations referred to in this note and based
upon its experience and other factors also referred to in this note, the Company
believes that the estimated $166 million in liability and defense costs recorded
on the balance sheet will be incurred to resolve an estimated 59,000 asbestos-
related personal injury claims pending against the Company as of December 31,
1995. These claims include those that were filed for the period from January 1,
1994, to January 24, 1994, and which were previously treated as potentially
included within the settlement class action, and those claims filed by claimants
who have been identified as having filed exclusion request forms to opt out of
the settlement class action. A ruling from the Court established January 24,
1994, as the date after which asbestos-related personal injury claims are
subject to the settlement class action. In addition to the currently estimated
pending claims and claims filed by those who have opted out of the settlement
class action, claims otherwise determined not to be subject to the settlement
class action will be resolved outside the settlement class action. The Company
does not know how many such claims ultimately may be filed by claimants who have
opted out of the class action or by claimants determined not to be subject to
the settlement class action.
An insurance asset in the amount of $166 million recorded on the balance sheet
reflects the Company's belief in the availability of insurance in this amount to
cover the liability in like amount referred to above. Such insurance has either
been agreed upon or is probable of recovery through negotiation, alternative
dispute resolution or litigation. The Company also notes that, based on maximum
mathematical projections covering a ten-year period from 1994 to 2004, its
estimated cost in the settlement class action reflects a reasonably possible
additional liability of $245 million. A portion of such additional liability
may not be covered by the Company's ultimately applicable insurance recovery.
However, the Company believes that any after-tax impact on the difference
between the aggregate of the estimated liability for pending
-15-
<PAGE>
cases and the estimated cost for the ten-year maximum mathematical projection,
and the probable insurance recovery, would not be material either to the
financial condition of the Company or to its liquidity, although it could be
material to earnings if it is determined in a future period to be appropriate to
record a reserve for this difference. The period in which such a reserve may be
recorded and the amount of any reserve that may be appropriate cannot be
determined at this time. Subject to the uncertainties and limitations referred
to elsewhere in this note and based upon its experience and other factors
referred to above, the Company believes it is probable that substantially all of
the expenses and any liability payments associated with the asbestos-related
property damage claims will be paid under an existing interim agreement, by
insurance coverage settlement agreements and through additional coverage
reasonably anticipated from the outcome of the insurance litigation.
Even though uncertainties still remain as to the potential number of unasserted
claims, liability resulting therefrom, and the ultimate scope of its insurance
coverage, after consideration of the factors involved, including the Wellington
Agreement, the referenced settlements with other insurance carriers, the results
of the trial phase and the intermediate appellate stage of the California
insurance coverage litigation, the remaining reserve, the establishment of the
Center, the proposed settlement class action, and its experience, the Company
believes the asbestos-related lawsuits and claims against the Company would not
be material either to the financial condition of the Company or to its
liquidity, although as stated above, the net effect of any future liabilities
recorded in excess of insurance assets could be material to earnings in such
future period.
_______________________________
TINS Litigation
In 1984, suit was filed against the Company in the U. S. District Court for the
District of New Jersey (the "Court") by The Industry Network System, Inc.
(TINS), a producer of video magazines in cassette form, and Elliot Fineman, a
consultant (Fineman and The Industry Network System, Inc. v. Armstrong World
----------------------------------------------------------------
Industries, Inc., C.A. No. 84-3837 JWB). At trial, TINS claimed, among other
- --------------------------------------
things, that the Company had improperly interfered with a tentative contract
which TINS had with an independent distributor of the Company's flooring
products and further claimed that the Company used its alleged monopoly power in
resilient floor coverings to obtain a monopoly in the video magazine market for
floor covering retailers in violation of federal antitrust laws. The Company
denied all allegations. On April 19, 1991, the jury rendered a verdict in the
case, which as entered by the court in its order of judgment, awarded the
plaintiffs the alternative, after all post-trial motions and appeals were
completed, of either their total tort claim damages (including punitive
damages), certain pre-judgment interest, and post-judgment interest or their
trebled antitrust claim damages, post-judgment interest and attorneys fees. The
higher amount awarded to the plaintiffs as a result of these actions totaled
$224 million in tort claim damages and pre-judgment interest, including $200
million in punitive damages.
On June 20, 1991, the Court granted judgment for the Company notwithstanding the
jury's verdict, thereby overturning the jury's award of damages and dismissing
the plaintiffs' claims with prejudice. Furthermore, on June 25, 1991, the Court
ruled that, in the event of a successful appeal restoring the jury's verdict in
the case, the Company would be entitled to a new trial on the matter.
On October 28, 1992, the United States Court of Appeals for the Third Circuit
issued an opinion in Fineman v. Armstrong World Industries, Inc. (No. 91-
-------------------------------------------
-16-
<PAGE>
5613). The appeal was taken to the Court of Appeals from the two June 1991
orders of the United States District Court in the case. In its decision on the
plaintiff's appeal of these rulings, the Court of Appeals sustained the
U. S. District Court's decision granting the Company a new trial, but overturned
in certain respects the District Court's grant of judgment for the Company
notwithstanding the jury's verdict.
The Court of Appeals affirmed the trial judge's order granting Armstrong a new
trial on all claims of plaintiffs remaining after the appeal; affirmed the trial
judge's order granting judgment in favor of Armstrong on the alleged actual
monopolization claim; affirmed the trial judge's order granting judgment in
favor of Armstrong on the alleged attempt to monopolize claim; did not disturb
the District Court's order dismissing the alleged conspiracy to monopolize
claim; affirmed the trial judge's order dismissing all of Fineman's personal
claims, both tort and antitrust; and affirmed the trial judge's ruling that
plaintiffs could not recover the aggregate amount of all damages awarded by the
jury and instead must elect damages awarded on one legal theory. However, the
Third Circuit, contrary to Armstrong's arguments, reversed the trial judge's
judgment for Armstrong on TINS' claim for an alleged violation of Section 1 of
the Sherman Act; reversed the trial judge's judgment in favor of Armstrong on
TINS' claim for tortious interference; reversed the trial judge's judgment in
favor of Armstrong on TINS' claim for punitive damages; and reversed the trial
judge's ruling that had dismissed TINS' alleged breach of contract claim.
The Court of Appeals, in affirming the trial court's new trial order, agreed
that the trial court did not abuse its discretion in determining that the jury's
verdict was "clearly against the weight of the evidence" and that a new trial
was required due to the misconduct of plaintiffs' counsel.
The foregoing summary of the Third Circuit's opinion is qualified in its
entirety by reference thereto.
The Court of Appeals granted the Company's motion to stay return of the case to
the District Court pending the Company's Petition for Certiorari to the Supreme
Court appealing certain antitrust rulings of the Court of Appeals. The Company
was informed on February 22, 1993, that the Supreme Court denied its Petition.
After the case was remanded by the Third Circuit Court of Appeals in
Philadelphia to the U.S. District Court in Newark, New Jersey, a new trial
commenced on April 26, 1994. TINS claimed damages in the form of lost profits
ranging from approximately $17 million to approximately $56 million. Plaintiff
also claimed punitive damages in conjunction with its request for tort damages.
Other damages sought included reimbursement of attorneys' fees and interest,
including prejudgment interest.
On August 19, 1994, the jury returned a verdict in favor of the Company finding
that the Company had not caused damages to TINS. The court subsequently entered
judgment in the Company's favor based upon the verdict. TINS' motion for a new
trial based upon alleged inaccurate jury instructions and alleged improper
evidentiary rulings during the trial was denied and TINS filed an appeal with
the U.S. Court of Appeals for the Third Circuit. On October 11, 1995, the case
was argued before a panel of the U.S. Court of Appeals for the Third Circuit,
and on October 20, 1995, the court issued a Judgment Order affirming the 1994
District Court verdict in favor of the Company. On November 2, 1995, TINS filed
a Petition for Rehearing by the same panel which was denied on December 5, 1995.
On January 24, 1996, TINS filed a motion seeking further appellate review by the
Circuit Court; that motion has been denied.
_____________________________
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<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
Executive Officers of the Registrant
- -------------------------------------
The information appearing in Item 10 hereof under the caption "Executive
Officers of the Registrant" is incorporated by reference herein.
PART II
-------
Item 5. Market for the Registrant's Common Stock and Related Security Holder
- -----------------------------------------------------------------------------
Matters
-------
The Company's Common Stock is traded on the New York Stock Exchange, Inc., the
Philadelphia Stock Exchange, Inc., and the Pacific Stock Exchange, Inc. As of
February 9, 1996, there were approximately 7,120 holders of record of the
Company's Common Stock.
<TABLE>
<CAPTION>
Quarterly financial information (millions except for per-share data) First Second Third Fourth Total year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995* Net sales $502.2 $536.0 $549.0 $497.7 $2,084.9
Gross profit 166.7 177.9 184.6 146.0 675.2
Earnings (loss) from continuing businesses 26.5 47.4 14.4 (74.7) 13.6
Net earnings 34.4 52.7 19.4 16.8 123.3
Per share of common stock:**
Primary: Earnings (loss) from continuing businesses 0.61 1.17 0.29 (2.09) (0.02)
Net earnings 0.82 1.31 0.42 0.35 2.90
Fully diluted: Earnings (loss) from continuing businesses 0.57 1.05 0.28 (2.09) (0.02)
Net earnings 0.75 1.18 0.40 0.34 2.67
Dividends per share of common stock 0.32 0.36 0.36 0.36 1.40
Price range of common stock -- low 38 3/8 43 50 1/4 52 7/8 38 3/8
Price range of common stock -- high 48 1/2 52 60 1/2 64 1/8 64 1/8
- ----------------------------------------------------------------------------------------------------------------------------------
1994* Net sales $461.1 $508.6 $525.6 $510.4 $2,005.7
Gross profit 153.9 180.6 190.9 154.8 680.2
Earnings from continuing businesses 42.5 48.7 56.6 39.4 187.2
Net earnings 48.0 53.3 61.6 47.5 210.4
Per share of common stock:**
Primary: Earnings from continuing businesses 1.03 1.19 1.41 0.93 4.60
Net earnings 1.17 1.31 1.54 1.17 5.22
Fully diluted: Earnings from continuing businesses 0.93 1.07 1.25 0.85 4.10
Net earnings 1.06 1.18 1.37 1.04 4.64
Dividends per share of common stock 0.30 0.32 0.32 0.32 1.26
Price range of common stock -- low 49 3/8 43 3/8 43 36 36
Price range of common stock -- high 57 1/2 57 1/4 53 7/8 46 5/8 57 1/2
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</TABLE>
* 1994 and the first, second and third quarters of 1995 have been restated for
the results of the discontinued business and formation of the ceramic tile
business combination.
**The sum of the quarterly earnings per-share data does not always equal the
total year amounts due to changes in the average shares outstanding and, for
fully diluted data, the exclusion of the antidilutive effect in certain
quarters.
-18-
<PAGE>
Item 6. Selected Financial Data
- ---------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in millions except for per-share data)
For year 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 2,084.9 2,005.7 1,865.0 1,912.0 1,828.7 1,865.3 1,832.7 1,790.7 1,608.7 1,295.0
Cost of goods sold 1,409.7 1,325.5 1,286.5 1,378.4 1,316.6 1,315.5 1,273.3 1,253.7 1,112.0 889.2
Total selling, general and
administrative expenses 397.1 388.1 347.8 296.9 341.1 340.6 303.8 309.0 288.8 240.3
Equity (earnings) loss
from affiliates (15.0) (2.5) 42.9 107.8 38.4 0.6 9.1 3.5 -- --
Restructuring charges 71.8 -- 89.3 160.8 12.5 6.8 5.9 -- -- --
Loss from ceramic tile
business formation/(gain)
from sales of woodlands 177.2 -- -- -- -- (60.4) (9.5) (1.9) -- --
Operating income (loss) 44.1 294.6 98.5 (31.9) 120.1 262.2 250.1 226.4 207.9 165.5
Interest expense 34.0 28.3 38.0 41.6 45.8 37.5 40.5 25.8 11.5 5.4
Other expense (income), net 1.9 0.5 (6.1) (7.2) (8.5) 19.7 (5.7) (13.1) (4.3) (3.1)
Earnings (loss) from
continuing businesses
before income taxes 8.2 265.8 66.6 (66.3) 82.8 205.0 215.3 213.7 200.7 163.2
Income taxes (5.4) 78.6 17.6 (2.9) 32.7 69.5 74.6 79.4 82.2 70.0
Earnings (loss) from
continuing businesses 13.6 187.2 49.0 (63.4) 50.1 135.5 140.7 134.3 118.5 93.2
As a percentage of sales 0.7% 9.3% 2.6% -3.3% 2.7% 7.3% 7.7% 7.5% 7.4% 7.2%
As a percentage of average
monthly assets (a) .9% 12.7% 3.4% -4.1% 3.3% 9.4% 11.1% 11.2% 11.3% 10.8%
Earnings (loss) from
continuing businesses
applicable to common stock (b) (0.7) 173.1 35.1 (77.2) 30.7 116.0 131.0 133.9 118.0 92.8
Per common share -- primary (0.02) 4.60 0.93 (2.07) 0.83 2.98 2.88 2.90 2.50 1.93
Per common share --
fully diluted (c) (0.02) 4.10 0.92 (2.07) 0.83 2.74 2.76 2.90 2.50 1.93
Net earnings (loss) 123.3 210.4 63.5 (227.7) 48.2 141.0 187.6 162.7 150.4 122.4
As a percentage of sales 5.9% 10.5% 3.4% -11.9% 2.6% 7.6% 10.2% 9.1% 9.3% 9.4%
Net earnings (loss)
applicable to common
stock (b) 109.0 196.3 49.6 (241.5) 28.8 121.5 177.9 162.3 150.0 122.0
As a percentage of average
shareholders' equity 15.0% 31.3% 9.0% -33.9% 3.3% 13.0% 17.9% 17.0% 17.6% 16.0%
Per common share -- primary 2.90 5.22 1.32 (6.49) 0.77 3.12 3.92 3.51 3.18 2.54
Per common share --
fully diluted (c) 2.67 4.64 1.26 (6.49) 0.77 2.86 3.72 3.51 3.18 2.54
Dividends declared per
share of common stock 1.40 1.26 1.20 1.20 1.19 1.135 1.045 0.975 0.885 0.7325
Purchases of property,
plant and equipment 162.2 113.8 87.8 98.6 116.9 160.2 200.9 163.2 156.7 119.1
Aggregate cost of acquisitions 20.7 -- -- 4.2 -- 16.1 -- 355.8 71.5 53.1
Total depreciation and
amortization 109.6 106.9 102.1 106.4 103.9 100.3 102.0 94.8 83.6 67.6
Average number of
employees -- continuing
businesses 11,365 11,612 12,413 13,448 13,714 14,017 14,056 14,224 14,036 12,953
Average number of common
shares outstanding 37.1 37.5 37.2 37.1 37.1 38.8 45.4 46.2 47.2 48.1
- -----------------------------------------------------------------------------------------------------------------------------------
Year-end position
Working capital--
continuing businesses 346.8 304.8 213.2 171.6 277.3 218.6 364.6 178.0 345.3 401.5
Net property, plant and equipment--
continuing businesses 878.2 807.9 786.0 810.0 855.2 837.2 760.3 743.3 674.1 534.7
Total assets 2,149.8 2,139.4 1,844.8 1,922.3 2,109.4 2,105.4 1,992.3 2,057.8 1,574.9 1,277.5
Long-term debt 188.3 237.2 256.8 266.6 301.4 233.2 181.3 185.9 67.7 58.8
Total debt as a percentage
of total capital (d) 38.5% 41.4% 52.2% 57.2% 46.9% 45.7% 36.1% 35.9% 22.8% 16.9%
Shareholders' equity 775.0 735.1 569.5 569.2 885.5 899.2 976.5 1,021.8 913.8 813.0
Book value per share of
common stock 19.83 18.97 14.71 14.87 23.55 24.07 23.04 21.86 19.53 16.85
Number of shareholders (e) (f) 7,084 7,473 7,963 8,611 8,896 9,110 9,322 10,355 9,418 9,621
Common shares outstanding 37.4 37.5 37.2 37.1 37.1 37.1 42.3 46.3 46.2 47.5
Market value per common share 62 38 1/2 53 1/4 31 7/8 29 1/4 25 37 1/4 35 32 1/4 29 7/8
===================================================================================================================================
</TABLE>
Notes:
(a) Assets exclude insurance for asbestos-related liabilities.
(b) After deducting preferred dividend requirements and adding the tax benefits
for unallocated shares.
(c) See italicized definition of fully diluted earnings per share on page 20.
(d) Total debt includes short-term debt, current installments of long-term
debt, long-term debt and ESOP loan guarantee. Total capital includes total
debt and total shareholders' equity.
(e) Includes one trustee who is the shareholder of record on behalf of
approximately 4,200 to 4,700 employees for years 1988 through 1995.
(f) Includes, for 1987 and 1986, a trustee who was the shareholder of record on
behalf of approximately 11,000 employees who obtained beneficial ownership
through the
Armstrong Stock Ownership Plan, which was terminated at the end of 1987.
Certain selected financial data above has been restated for the effects of the
discontinued business and formation of the ceramic tile business combination.
-19-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
---------------------
- --------------------------------------------------------------------------------
1995 COMPARED WITH 1994
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FINANCIAL CONDITION
As shown on the Consolidated Statements of Cash Flows (see page 21), net cash
provided by operating activities was sufficient to cover payment of dividends
and the investment in plant, property and equipment. The remaining cash,
combined with increases in short-term debt, cash proceeds from the exercised
stock options and sale of assets, was used to cover the repurchase of shares of
the company's common stock for the treasury, the increase in cash and cash
equivalents, acquisitions, reduction of long-term debt and purchase of computer
software. Acquisitions in 1995 included a gasket materials and specialty paper
manufacturing facility in New York and a metal ceilings production plant in
England.
In December, the company completed two major transactions. First, the company
sold its interests in Thomasville Furniture Industries, Inc., a wholly-owned
subsidiary, to INTERCO International Inc. The purchase price of $331.2 million
included INTERCO's assumption of approximately $8 million of Thomasville debt.
An after-tax gain of $83.9 million, or $1.96 per share on a fully diluted basis,
was recorded on the sale.
Second, the company entered into a business combination with Dal-Tile
International Inc. Armstrong exchanged $27.6 million and the stock of its
ceramic tile operations, consisting primarily of American Olean Tile Company, a
wholly-owned subsidiary, for 37% ownership of the combined company. The after-
tax loss on the transaction was $116.8 million, or $2.73 per share on a fully
diluted basis.
During the third quarter, the company sold the champagne cork business in Spain
and announced its intention to discuss with potential buyers the possible sale
of the textile products operation. The divestiture of the champagne cork
business does not have a significant impact on financial results.
These actions show the company's commitment to focus its efforts in its core
businesses and to divest businesses that do not earn in excess of their cost of
capital. The company will use the net proceeds from these transactions to expand
its core businesses internally (with capital expenditures to strengthen the
businesses) and externally (with acquisitions to expand their size and scope),
and to continue with its program of repurchasing shares of common stock.
In November 1994, the Board of Directors authorized the company to repurchase up
to 2.5 million shares of its common stock, either in the open market or in
negotiated transactions. During 1995, the company repurchased 782,110 shares
with a cash outlay of $40.6 million. Since the inception of the program, the
company has repurchased 1,052,110 shares with a total cash outlay of $51.1
million as of December 31, 1995.
Working capital was $346.8 million as of December 31, 1995, $42.0 million higher
than the $304.8 million recorded at year-end 1994. The increase in working
capital results primarily from the increase in cash resulting from the sale of
Thomasville and the increase in inventory levels. Partially offsetting the
working capital increase were higher levels of accrued expenses, primarily as a
result of accruals for restructuring actions and higher current installments on
long-term debt. The $30.9 million increase in inventories was the result of the
building of finished stock for anticipated service level requirements. Included
in these increases were approximately $8.0 million due to translation of foreign
currency receivables and inventories to U.S. dollars at higher exchange rates.
The 1995 year-end ratio of current assets to current liabilities of 1.92 to 1 as
of December 31, 1995, remained unchanged when compared with last year.
Long-term debt, excluding the company's guarantee of the ESOP loan, was reduced
by $48.9 million in 1995. At December 31, 1995, long-term debt of $188.3 million
represented 14.9% of total capital compared with 18.9% at the end of 1994. The
1995 and 1994 year-end ratio of total debt (including the company's guarantee of
the ESOP loan) as a percent of total capital was 38.5% and 41.4%, respectively.
In February 1995, Armstrong arranged a $200 million, five-year revolving line of
credit with 10 banks. The line of credit is for general corporate purposes,
including use as a backstop for commercial paper notes. This replaced $245
million of short-term bilateral lines of credit with eight banks.
Should a need develop for additional financing, it is management's opinion that
the company has sufficient financial strength to warrant the required support
from lending institutions and capital markets.
The company is involved in significant asbestos-related litigation which is
described more fully on pages 21 and which should be read in connection with
this discussion and analysis. The company does not know how many claims will be
filed against it in the future, nor the details thereof or of pending suits not
fully reviewed, nor the expense and any liability that may ultimately result
therefrom, nor does the company know whether the settlement class action will
ultimately succeed, the number of individuals who will ultimately be deemed to
have opted out or who could file claims outside the settlement class action, nor
the annual claims caps to be negotiated after the initial 10-year period for the
settlement class action or the compensation levels to be negotiated for such
claims, nor the scope of its nonproducts coverage ultimately deemed available or
the ultimate conclusion of the California insurance coverage litigation. Subject
to the foregoing and based upon its experience and other factors also referred
to above, the company believes that the estimated $166 million in liability and
defense costs recorded on the 1995 balance sheet will be incurred to resolve an
estimated 59,000 asbestos-related personal injury claims pending against the
company as of December 31, 1995. These claims include those that were filed for
the period from January 1, 1994, to January 24, 1994, and which were previously
treated as potentially included within the settlement class action, and those
claims filed by claimants who have been identified as having filed exclusion
request forms to opt out of the settlement class action. A ruling from the Court
established January 24, 1994, as the date after which any asbestos-related
personal injury claims filed by non-opt-out claimants against the company or
other members of the Center for Claims Resolution are subject to the settlement
class action. In addition to the currently estimated pending claims and any
claims filed by individuals deemed to have opted out of the settlement class
action, any claims otherwise determined not to be subject to the settlement
class action will be resolved outside the settlement class action. The company
does not know how many such claims ultimately may be filed by claimants deemed
to have opted out of the class action or by claimants otherwise determined not
to be subject to the settlement class action.
An insurance asset in the amount of $166 million recorded on the 1995 balance
sheet reflects the company's belief in the availability of insurance in this
amount to cover the liability in like amount referred to above. Such insurance
has either been agreed upon or is probable of recovery through negotiation,
alternative dispute resolution or litigation. The company also notes that, based
on maximum mathematical projections covering a 10-year period from 1994 to 2004,
its estimated cost in the settlement class action reflects a reasonably possible
additional liability of $245 million. A portion of such additional liability may
not be covered by the company's ultimately applicable insurance recovery.
However, the company believes that any after-tax impact on the difference
between the aggregate of the estimated liability for pending cases and the
estimated cost for the 10-year maximum mathematical projection, and the probable
insurance recovery, would not be material either to the financial condition of
the company or to its liquidity, although it could be material to earnings if it
is determined in a future period to be appropriate to record a reserve for this
difference. The period in which such a reserve may be recorded and the amount of
any reserve that may be appropriate cannot be determined at this time. Subject
to the uncertainties and limitations referred to above and based upon its
experience and other factors, the company believes it is probable that
substantially all of the expenses and any liability payments associated with the
asbestos-related property damage claims will be paid under an existing interim
agreement, by insurance coverage settlement agreements and through additional
coverage reasonably anticipated from the outcome of the insurance litigation.
Even though uncertainties still remain as to the potential number of unasserted
claims, liability resulting therefrom and the ultimate scope of its insurance
coverage, after consideration of the factors involved, including the Wellington
Agreement, the referenced settlements with other insurance carriers, the results
of the trial phase and the intermediate appellate stage of the California
insurance coverage litigation, the remaining reserve, the establishment of the
Center, and the proposed settlement class action and its experience, the company
believes the asbestos-related lawsuits and claims against the company would not
be material either to the financial condition of the company or to its
liquidity, although as stated above, the net effect of any future liabilities
recorded in excess of insurance assets could be material to earnings in such
future period.
Reference is made to the litigation involving The Industry Network System, Inc.
(TINS), discussed on page 21. In 1994, the jury returned a verdict finding that
the company had not caused damages to TINS, and the court subsequently entered
judgment in the company's favor. TINS' motion for a new trial was denied. TINS
filed an appeal with the U.S. Court of Appeals for the Third Circuit which
issued a judgment in favor of the company. TINS' Petition for Rehearing by the
same panel was denied in December 1995. On January 24, 1996, TINS filed a motion
seeking further appellate review by the Circuit Court.
Reference is also made to environmental matters as discussed on page 21. The
company believes any sum it may have to pay in connection with environmental
matters in excess of amounts accrued would not have a material adverse affect on
its financial condition, liquidity or results of operations.
CONSOLIDATED RESULTS
Net sales of $2.08 billion on a continuing business basis were once again an
all-time sales record for any year in the company's history. These results were
4% higher than the $2.01 billion recorded in 1994. The growth was largely due to
increased sales in both the global, particularly European, non-residential and
U.S. home center market segments. In keeping with one of the company's four key
strategies, 1995 saw the introduction of new products. The resilient flooring
business announced new floor products, primarily for the residential segment, at
its convention in December. Building Products Operations introduced a new high
style, high performance ceiling line, called Ultima, targeted to the
nonresidential segment. New glazed wall and floor tile products were introduced
by the ceramic tile operations.
Earnings from continuing businesses before income taxes were $8.2 million, a
decrease from the $265.8 million in 1994. The earnings decline was attributable
to restructuring charges of $71.8 million and the loss of $177.2 million related
to the business combination of Armstrong's ceramic tile operations with Dal-Tile
International Inc.
Net earnings for the year were $123.3 million, compared with $210.4 million in
1994. Net earnings per share of common stock for 1995 were $2.90 on a primary
basis and $2.67 on a fully diluted basis. In 1994, net earnings per share of
common stock were $5.22 on a primary basis and $4.64 on a fully diluted basis.
1995's net earnings included $25.8 million of after-tax earnings from the
discontinued operations of Thomasville Furniture Industries, Inc., and $83.9
million of the after-tax gain from its sale. 1994's net earnings included $18.6
million in after-tax gains resulting from the resolution of tax audits, the sale
of its majority interest in a subsidiary and the reduction of the company's
estimated health care liability.
The company's level of performance in Economic Value Added (EVA) as measured by
return on capital was 14% in 1995, exceeding the company's 12% cost of capital.
Cost of goods sold in 1995 was 67.6% of sales, slightly higher than the 66.1%
recorded in 1994. This increase largely reflects start-up costs in the new
insulation products facility in Mebane, North Carolina, and the impact of
unfavorable sales mixes in residential flooring sales in North America. Included
in the 1994 cost of goods sold was a one-time gain of $12.2 million reflecting a
reduction in the company's estimated health care liability for employees on
long-term disability.
Selling, general and administrative (SG&A) costs in 1995 were 2.3% higher than
1994. The increased costs resulted from the translation of foreign currency
expenses to U.S. dollars at higher exchange rates. Excluding these adjustments,
expenses would have decreased by 1%.
Results for 1995 included restructuring charges of $71.8 million before tax or
$46.4 million after tax, or $1.09 per share on a fully diluted basis. In the
first quarter of 1995, the company announced plans to close a plant in
Braintree, Massachusetts. The before-tax restructuring charge of $15.6 million
includes costs accrued for the elimination of about 223 salaried and hourly
employee positions, for the obsolescence of equipment and for other costs to be
incurred after operations cease. Cash outlays will be about one-third of the
total charges with the majority of the cash outlay occurring in early 1996. The
plant ceased operations on February 1, 1996.
In the third quarter, the company recorded a restructuring charge of $56.2
million before tax or $36.5 million after tax related to the company's ongoing
efforts to streamline the organization and enable the businesses to be the best-
cost suppliers in their markets. The restructuring charges primarily relate to
severance and early retirement incentives for approximately 670 employees, half
of whom are hourly and the other half are salaried. Nearly 40% of the $56.2
million charge was related to the North American resilient flooring business,
while another 40% was related to the European Operations, primarily in its
industry products and building products segments. The balance was related to
corporate and other operating segments. The charges are estimated to be evenly
split between cash payments throughout 1996 and noncash charges, primarily to
cover retirement-related expenses. It is anticipated that ongoing cost
reductions and productivity improvements should permit recovery of these charges
in less than two years.
The company's interest expense increased due to higher debt levels during the
year and charges related to deferred compensation plans.
Armstrong's effective tax rate for 1995, excluding the tax benefit on the loss
related to the ceramic tile business combination, was 30.6% compared with a
29.6% rate in 1994.
GEOGRAPHIC AREA RESULTS
UNITED STATES
Sales increased slightly while operating income decreased when compared with
1994. Higher sales levels were generated through the national home center and
mass merchandiser channels, but lower levels were returned by the professionally
installed resilient flooring segment. Sales price increases occurred in most of
the U.S. businesses; however, operating income was impacted by the loss on the
ceramic tile business combination, restructuring charges, higher raw material
prices and start-up costs of the North Carolina insulation products facility.
1994 operating income included a one-time gain through the reduction in the
company's estimated health care liability for employees on long-term disability.
Export sales of Armstrong products to trade customers increased $5.9 million, or
23.7%, compared with 1994.
An organizational effectiveness study to review the company's staff support
activities will be completed in first-quarter 1996 and implemented by late 1996.
EUROPE
During 1995, economic conditions continued to improve and helped Armstrong's
end-use markets. For the year, sales increased 15.6%. All the company's European
businesses recorded year-to-year sales increases with the building products
segment being the most significant. Operating income decreased by nearly 17%,
impacted by restructuring charges. Partially offsetting these charges was
improved productivity -- much of it related to restructuring actions taken in
1993. The results in the European insulation products business continued to be
adversely affected by competitive pricing. An organizational effectiveness study
was completed in 1995 to align the staff with the global business units.
OTHER FOREIGN
Sales in 1995 increased slightly when compared with 1994, assisted by an
increase in building products sales in China. Operating income also increased
slightly, but reflected continued competitive pricing and higher expenses needed
to expand to China and other Far East markets. The company continues to extend
its investments in the Pacific area with the start of construction of a building
products manufacturing facility in Shanghai, China, to take advantage of this
area's market opportunity.
INDUSTRY SEGMENT RESULTS
FLOOR COVERINGS
The floor coverings segment sales decreased less than 1% from 1994. Higher home
center and nonresidental sales volume was offset by lower sales in U.S.
professionally installed residential sheet flooring. Operating income decreased
23.5% compared with 1994. Operating income included a restructuring charge of
$25.0 million, 90% of which related to elimination of employee positions in
North America. Operating income was favorably impacted by expense reductions and
higher selling prices, introduced early in 1995, that partially offset higher,
but downward trending, raw material prices. European sales growth and
profitability remained strong in this segment, with both hitting record levels.
Capital expenditures in this segment increased by $20.6 million and were
directed toward modernization of equipment, manufacturing capacity and operating
efficiencies.
Outlook
The company expects sales throughout the home center channels to remain strong
despite the current overall weakness in the retail market segments. In this
channel, The Home Depot, Lowes and Menard Inc. are important customers of our
resilient floor products. Lower or stabilized raw material prices and operating
efficiencies gained through restructuring activities should be positive factors
on operating income. Floor Products Operations has introduced a new brand
strategy targeted at three distinct market opportunities. The Armstrong and
Solarian brands will be used for sheet and tile floors at the "good" and
"better" price points while the new VIOS brand is an innovative line of upscale
sheet flooring products in the "best" category. Also recently introduced is the
Quest Program, offering independent flooring specialty retailers incentives to
strengthen their relationship with Armstrong. The second part of this program is
a unique display and merchandising system designed especially for that market.
Early results from these programs have shown order rates beyond initial high
expectations. In late 1995, the company announced that it was entering a
strategic alliance with the F. Egger Company of Austria to manufacture and
market laminate flooring products. Laminate flooring is made of decorative
melamine laminate compressed with a wood-based product and kraft paper for
balance. The European area has an aggressive sales plan for Eastern Europe and
Russia while Western and Central Europe will be target opportunities for growth
in sales of commercial sheet flooring. The W.W. Henry Company, a wholly-owned
subsidiary, has also focused its efforts on customer service through the
updating of its installation and adhesives products and packaging.
BUILDING PRODUCTS
The announcement in October that Building Products Operations was the first
building materials manufacturer and marketer to win a Malcolm Baldrige National
Quality Award demonstrates Building Products commitment to business excellence.
All geographic areas in the building products segment contributed to the 8%
sales increase with about one-third of the increase due to the translation of
foreign currencies to a weaker U.S. dollar. The European and Pacific areas
continued to show the strongest growth. Sales were assisted by the worldwide
introduction of Ultima, a high performance, high style ceiling.
Operating income of $92.2 million included a restructuring charge of $6.3
million mainly related to administrative functions in the European operations.
Sales growth, primarily in the worldwide commercial markets, higher selling
prices and continuing cost reduction efforts were positive factors on operating
income. WAVE, the grid system joint venture with Worthington Industries, has
been highly successful in both North America and Europe and is delivering an
excellent rate of return. Capital expenditures in this segment, which increased
by $17.7 million, are directed at increasing capacity through productivity
improvements.
Outlook
This segment continues to expect sales increases in the Pacific area and is
investing in the area with the construction of a building products manufacturing
facility in the People's Republic of China with plant completion scheduled in
late 1996. The company expects that the introduction of additional RH90 ceiling
products in early 1996 will continue to build the momentum in Europe and Asia.
The company has entered the European metal ceilings business with the
acquisition, in late 1995, of the metal ceiling production and marketing
business from Cape PLC of England.
INDUSTRY PRODUCTS
The industry products segment's sales grew by almost 12%, but the weaker U.S.
dollar accounted for two-thirds of the increase. Operating income, which
decreased significantly, includes a $31.4 million restructuring charge related
to the closing of the Braintree, Massachusetts, plant and elimination of
employee positions in Europe. Operating income for insulation products, the
largest business in this segment, was essentially flat year-on-year with gains
on translations of foreign currencies to U.S. dollars offset by the
restructuring charges. Also adversely affecting operating income was the need to
meet competitive European pricing and the start-up costs of $6.1 million for the
new Mebane, North Carolina, insulation products plant. In 1995, the Gasket and
Specialty Paper Operations became the first U.S. producer of soft gasket
material to obtain an ISO 9001 registration. Gasket and specialty paper products
sales increased from 1994 because of the acquisition in March of a gasket and
specialty paper manufacturing facility in Beaver Falls, New York. However,
operating income was impacted by lower automotive and diesel market sales and
higher raw material costs. Effective in 1996, this business will be a wholly-
owned subsidiary company, Armstrong Industrial Specialties, Inc. In the third
quarter, the company divested the champagne cork business in Spain. The textile
products business is still generating a modest operating loss, but lower than
the amount recorded in 1994.
Outlook
This business segment is using its technical advantage and attractive pricing to
enhance its market position. In early 1996, the Mebane insulation products plant
will begin operations. This plant provides a lower cost structure and logistical
advancements over the Braintree facility. These improvements, along with the
introduction of new products, are part of management's strategy for the
expansion of this business's global markets. Sales in Europe, the largest
geographic area in terms of sales, have been increasing during 1995 and the
trend is expected to continue. Early in 1996, Armstrong Industrial Specialties,
Inc., will distribute gasket materials through a new tiered system to service
customers of all sizes. In the third quarter of 1995, the company announced its
decision to discuss with potential buyers the possible sale of the textile
products operation.
CERAMIC TILE
In December 1995, the company entered into a business combination with Dal-Tile
International Inc. to strengthen its position in the worldwide market. The
before-tax loss from this business combination was $177.2 million.
Excluding this loss, the ceramic tile segment's operating income improved
significantly over 1994 aided by new product offerings including glazed floor
and wall tile products targeted at opening price points.
Outlook
Armstrong retains a 37% interest in the new Dal-Tile International Inc. entity.
The company expects this business combination to result in improved levels of
customer service through the more efficient use of the manufacturing and
distribution resources of both companies. The synergies of the combination
should improve profitability in this segment. However, the amount and timing of
these synergies are dependent on the integration of the two businesses.
- --------------------------------------------------------------------------------
1994 COMPARED WITH 1993
- --------------------------------------------------------------------------------
Results for 1994 and 1993 have been restated to reflect changes due to the
discontinued business and ceramic tile business combination.
FINANCIAL CONDITION
As shown on the Consolidated Statement of Cash Flows (see page 21), net cash
provided by operating activities in 1994 was $305.2 million, which was more than
sufficient to cover working capital requirements; payment of dividends; the
payment for restructuring activities and the investment in property, plant and
equipment. The remaining cash, including proceeds from stock options exercised
and the cash proceeds from the sale of assets and the company's majority
investment in BEGA/US, Inc., was used to reduce debt by $95.3 million and to
repurchase shares of the company's common stock for the treasury.
Working capital was $304.8 million as of December 31, 1994, $91.6 million higher
than the $213.2 million at year-end 1993. The primary reasons for the increase
in working capital were the $73.8 million repayment of short-term debt and the
$24.3 million increase in accounts receivable resulting from higher sales
levels. Modest increases in other assets including inventories and lower levels
of income taxes payable also increased working capital by $21.2 million.
Partially offsetting the increase were higher levels of accounts payable and
accrued expenses totaling $27.7 million.
The company's 1994 year-end ratio of current assets to current liabilities was
1.92 to 1 compared with a ratio of 1.55 to 1 reported in 1993. The major reason
for the ratio increase was the $73.8 million reduction of short-term debt.
Long-term debt, excluding the company's guarantee of the ESOP loan, was reduced
by $19.6 million in 1994. At year-end 1994, long-term debt of $237.2 million
represented 18.9% of total capital compared with 21.6% at the end of 1993. The
1994 and 1993 year-end ratio of total debt as a percent of total capital was
41.4% and 52.2%, respectively.
During the first quarter of 1994, the company terminated, prior to maturity, a
notional amount $25 million interest rate swap and, in the second quarter of
1994, a notional amount $15 million interest rate swap matured. During the
fourth quarter of 1993, the company terminated, prior to maturity, two notional
amount $50 million interest rate swaps and foreign currency swaps of French
francs 182.4 million and Belgian francs 270 million. The company's management of
foreign currency and interest rate exposures resulted in a loss of $1.7 million
in 1994 compared with a gain in 1993 of $1.9 million. As of December 31, 1994,
the company had no outstanding interest rate or currency swaps.
CONSOLIDATED RESULTS
Record net sales in 1994 of $2.01 billion were 8% higher than the 1993 sales of
$1.87 billion. Armstrong's U.S. residential markets reflected continued strength
in 1994, while European area economic conditions improved in 1994 causing a
rebound in sales opportunity. On a worldwide basis, the commercial and
institutional end-use market segments also improved, favorably affecting sales
opportunity. Armstrong took advantage of this opportunity and increased sales in
nearly every one of its businesses. The introduction of new products, primarily
for the residential market segments, also helped to increase sales in 1994.
Record net earnings were $210.4 million compared with net earnings of $63.5
million in 1993. The 1993 earnings included restructuring charges of $53.6
million after tax. Net earnings per common share were $5.22 on a primary basis
and $4.64 on a fully diluted basis compared with $1.32 and $1.26, respectively,
for 1993.
Armstrong's measure of return on average monthly assets was 12.7% for 1994
compared with 3.4% for 1993. Average monthly assets exclude the insurance for
asbestos-related liabilities. The return on common shareholders' equity in 1994
was 31.3% compared with 9.0% in 1993.
Cost of goods sold as a percent of sales was 66.1% for the year, the lowest
level for more than a quarter of a century, which compares favorably to 1993's
cost of goods sold of 69.0%. The continuing reduction in cost of goods sold
reflects the positive influence of the prior two years' restructuring programs,
productivity improvement in all our businesses, sales price increases in a
number of our businesses, some product mix improvement and the introduction of
new products, primarily in our residential businesses. During 1994, $12.2
million of the $14.6 million before-tax gain from a reduction in Armstrong's
health care liability for employees on long-term disability also lowered the
cost of goods sold. The reduction resulted from actions taken by the company to
qualify these employees for primary coverage under Medicare.
Selling, general and administrative expenses represent 19.3% of sales, up from
the 18.6% reported for 1993 with overall expenses increasing 4.8% when comparing
1994 with those of 1993. Higher costs for the use of consultants in improving
the company's global competitiveness and for special incentive awards to
motivate superior performance were partially offset by the previously mentioned
gain from the reduction in the health care liability and a gain from the sale of
Armstrong's majority interest in BEGA/US, Inc.
No restructuring charges were recorded in 1994. However, 1993 results included
$89.3 million before tax of restructuring charges associated with Armstrong
initiatives to enhance its global competitiveness. These costs were primarily
associated with eliminating approximately 950 employee positions in the U.S. and
Europe. More than half of the amounts accrued at the end of 1993 were used with
much of the remaining accrual to be utilized in 1995.
Interest expense was significantly reduced in 1994 compared with 1993 and was
the result of lower debt levels.
The effective tax rate for 1994 was 30.9% compared with 30.0% in 1993. The
current year tax rate was helped by a gain from the reversal of previously
accrued tax expense following resolution of the company's 1988, 1989 and 1990
tax audits, the positive effect of tax benefits related to taxes on foreign
income and state income taxes through the realization of previously unrecognized
deferred tax assets and lower withholding taxes on foreign dividends. In
addition, the company utilized excess foreign tax credits during 1994. The 1993
tax rate reflected the company's higher use of foreign tax credits, reductions
of deferred taxes resulting from some countries lowering their statutory tax
rates and lower foreign tax rates, which more than offset the 1% increase in the
U.S. statutory tax rate.
GEOGRAPHIC AREA RESULTS
UNITED STATES
Sales increased by more than 7% while operating income was more than doubled
when compared with 1993. The primary end-use market segments -- residential,
which reflected continued strength from the prior year, and commercial/
institutional which became stronger during 1994 -- had a positive effect on this
area. Even though interest rates were raised six times during 1994, they had
very little effect on 1994's results. During 1994, both single family housing
starts and sales of existing single family homes rose close to 5%.
Nonresidential new construction grew at a rate of over 8% in 1994. The long-term
effect of higher interest rates may slow future sales growth in these market
segments.
Higher sales occurred primarily in the floor coverings segment. As in past
years, higher sales levels continued through the national home centers and mass
merchandisers channel. New product introductions for the residential end-use
markets also provided additional sales.
While the higher sales levels were a key factor, the significant restructuring
actions of the past two years also played a major part in increasing operating
income mainly in the building products segment and the ceramic tile segment.
Sales price increases occurred in most of the U.S. businesses and had a positive
effect on operating income.
Export sales of Armstrong products to trade customers increased $5.1 million, or
over 25%, compared with 1993.
EUROPE
During mid-1994, economic conditions began to improve and helped Armstrong's
end-use markets. For the year, sales increased nearly 6% and operating income
improved by 138%. All the company's European businesses recorded year-to-year
sales increases. Operating income was helped significantly by improved
productivity -- much of it related to restructuring actions taken in 1992 and
1993. The results in the European insulation products business were adversely
affected by increased competitive pricing and higher than usual obsolescence of
equipment.
OTHER FOREIGN
Sales in 1994 reversed a four-year declining trend and increased by 13% compared
with 1993. Operating income declined by $2.4 million, or 24%, reflecting the
competitive pricing and higher expenses needed to penetrate the Chinese and
other Far East markets and a shift in product mix towards lower margin commodity
products.
INDUSTRY SEGMENT RESULTS
FLOOR COVERINGS
Worldwide sales were 8% higher in 1994, with operating income increasing by 21%
from 1993 levels. The 1993 operating income included $8.4 million of
restructuring charges.
The resilient flooring portion of the segment recorded strong sales growth in
both North America and Europe. The U.S. resilient flooring business continued to
benefit in 1994 from higher sales of existing homes, new residential
construction and continued strength in the commercial construction and
remodeling market segments. This was accomplished even in light of the numerous
interest rate increases throughout 1994. Successful new product introductions in
the second half of 1994 helped to improve sales.
The major restructuring actions of the past two years, primarily in
manufacturing, some sales price increases, some unit volume increases and the
continued development of the residential business were key factors for this
turnaround. In the resilient flooring portion of the segment, operating income
improvement was the result of higher sales volume, some sales price increases
and manufacturing productivity improvements. Offsetting some of the effects of
these positive items were higher raw material costs that became more notable in
the second half of the year. Sales prices were increased as of January 1995 to
offset the rise in raw material prices.
Capital expenditures increased 43% over those of 1993. The expenditures continue
to be concentrated on improving manufacturing productivity, increasing capacity
and developing business systems.
BUILDING PRODUCTS
During 1994, commercial and institutional end-use market segments continued to
provide more opportunity. Sales grew more than 7% with North American sales
growing faster than those of the European area. The Pacific area recorded the
highest percentage growth with new business in China being a factor.
Operating income, excluding the effects of restructuring charges in 1993,
recorded the fastest growth of any segment -- up 167% over 1993. While higher
sales levels and sales price increases had a positive impact on operating
income, the prior two years' restructuring actions dramatically reduced
manufacturing costs and had the most significant impact on results.
Capital expenditures were increased about one-third over those of the past two
years and were directed at higher productivity levels and improving capacity.
1994 expenditures were about the same as depreciation levels.
INDUSTRY PRODUCTS
Sales increased by 5% while operating income improved only 3% when the 1993
restructuring charges of nearly $13 million are excluded. This segment is highly
influenced by its European orientation and the rebound in that area's economies
that started in the second half of 1994.
The insulation business, the largest portion of this segment, recorded sales
growth of about 5% while operating income was slightly higher than 1993. During
1994, this business lowered sales prices to meet intense European competition,
recorded higher than usual obsolescence of equipment and incurred some start-up
costs for its new manufacturing facility in Panyu, China.
The gasket materials business grew sales by 18% and pushed operating income 32%
higher. This business was favorably affected by the strong automotive markets in
1994.
The textile mill supply business saw its 1994 sales decline by 4% due to soft
end-use markets worldwide and strong competitive pressures. A small operating
loss was recorded for 1994 as this business continues to reengineer its
operations.
Capital expenditures were slightly higher in 1994 than 1993, but continue to
exceed depreciation. A significant portion of the expenditures were in the
insulation products business.
CERAMIC TILE
The ceramic tile segment recorded sales increases in both the commercial and
residential parts of the business with the residential part reflecting the
highest growth.
Ceramic tile recorded a significant operating loss in 1993 that was reversed in
1994 with a small operating income primarily generated through reduction of
production costs.
-20-
<PAGE>
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
- ----------------------------------------------------------------------------------------------------------------------
Millions except for per-share data Years ended December 31 1995 1994* 1993*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,084.9 $2,005.7 $1,865.0
Cost of goods sold 1,409.7 1,325.5 1,286.5
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 675.2 680.2 578.5
Selling, general and administrative expenses 397.1 388.1 347.8
Equity (earnings) loss from affiliates (15.0) (2.5) 42.9
Restructuring charges 71.8 -- 89.3
Loss from ceramic tile business combination 177.2 -- --
- ----------------------------------------------------------------------------------------------------------------------
Operating income 44.1 294.6 98.5
Interest expense 34.0 28.3 38.0
Other expense (income), net 1.9 0.5 (6.1)
- ----------------------------------------------------------------------------------------------------------------------
Earnings from continuing businesses before income taxes 8.2 265.8 66.6
Income taxes (5.4) 78.6 17.6
- ----------------------------------------------------------------------------------------------------------------------
Earnings from continuing businesses 13.6 187.2 49.0
- ----------------------------------------------------------------------------------------------------------------------
Discontinued business:
Earnings from operations of Thomasville Furniture Industries, Inc.
(less income taxes of $13.9 in 1995, $15.5 in 1994, $9.6 in 1993) 25.8 23.2 14.5
Gain on disposal of discontinued business
(less income taxes of $53.4) 83.9 -- --
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 123.3 $ 210.4 $ 63.5
- -------------------------------------------------------------------------------=======================================
Dividends paid on Series A convertible preferred stock 18.8 19.0 19.2
Tax benefit on dividends paid on unallocated preferred shares 4.5 4.9 5.3
- ----------------------------------------------------------------------------------------------------------------------
Net earnings applicable to common stock $ 109.0 $ 196.3 $ 49.6
- -------------------------------------------------------------------------------=======================================
Per share of common stock:
Primary:
Earnings (loss) from continuing businesses (See note on page 21.) $ (0.02) $ 4.60 $ 0.93
Earnings from discontinued business 0.68 0.62 0.39
Gain on sale of discontinued business 2.24 -- --
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 2.90 $ 5.22 $ 1.32
- -------------------------------------------------------------------------------=======================================
Fully diluted:
Earnings (loss) from continuing businesses (See note on page 21.) $ (0.02) $ 4.10 $ 0.92
Earnings from discontinued business 0.60 0.54 0.34
Gain on sale of discontinued business 1.96 -- --
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 2.67 $ 4.64 $ 1.26
- -------------------------------------------------------------------------------=======================================
</TABLE>
*Restated for the effects of the discontinued business and formation of the
ceramic tile business combination.
The Notes to Consolidated Financial Statements, page 21 is an integral
part of these statements.
<TABLE>
CONSOLIDATED BALANCE SHEET
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Millions except for numbers of shares and per-share data As of December 31 1995 1994*
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 256.9 $ 12.0
Accounts and notes receivable
(less allowance for discounts and losses: 1995--$29.0; 1994--$27.0) 217.9 218.9
Inventories 195.5 164.6
Income tax benefits 26.9 35.9
Net assets of discontinued business -- 182.1
Other current assets 25.5 21.6
- -------------------------------------------------------------------------------------------------------------------
Total current assets 722.7 635.1
- -------------------------------------------------------------------------------------------------------------------
Property, plant and equipment
(less accumulated depreciation and amortization: 1995--$975.9; 1994--$902.4) 878.2 807.9
Insurance for asbestos-related liabilities 166.0 198.0
Investment in affiliates 162.1 293.9
Other noncurrent assets 220.8 204.5
- -------------------------------------------------------------------------------------------------------------------
Total assets $2,149.8 $2,139.4
- --------------------------------------------------------------------------------------------=======================
Liabilities and shareholders' equity
Current liabilities:
Short-term debt 22.0 17.9
Current installments of long-term debt 40.1 19.5
Accounts payable and accrued expenses 297.4 270.4
Income taxes 16.4 22.5
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 375.9 330.3
- -------------------------------------------------------------------------------------------------------------------
Long-term debt 188.3 237.2
Employee Stock Ownership Plan (ESOP) loan guarantee 234.7 245.5
Deferred income taxes 16.5 32.1
Postretirement and postemployment benefit liabilities 242.8 242.5
Asbestos-related liabilities 166.0 198.0
Other long-term liabilities 140.6 110.1
Minority interest in subsidiaries 10.0 8.6
- -------------------------------------------------------------------------------------------------------------------
Total noncurrent liabilities 998.9 1,074.0
- -------------------------------------------------------------------------------------------------------------------
Shareholders' equity:
Class A preferred stock. Authorized 20 million shares;
issued 5,654,450 shares of Series A convertible preferred
stock; outstanding: 1995--5,421,998 shares; 1994--5,478,416 shares;
retired: 1995--232,452 shares; 1994--176,034 shares 258.9 261.6
Common stock, $1 par value per share.
Authorized 200 million shares; issued 51,878,910 shares 51.9 51.9
Capital in excess of par value 49.3 39.3
Reduction for ESOP loan guarantee (225.1) (233.9)
Retained earnings 1,133.8 1,076.8
Foreign currency translation 18.0 8.3
- -------------------------------------------------------------------------------------------------------------------
1,286.8 1,204.0
- -------------------------------------------------------------------------------------------------------------------
Less common stock in treasury, at cost:
1995--15,014,098 shares; 1994--14,602,132 shares 511.8 468.9
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 775.0 735.1
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $2,149.8 $2,139.4
- --------------------------------------------------------------------------------------------=======================
</TABLE>
*Restated for the effects of the discontinued business and formation of the
ceramic tile business combination.
The Notes to Consolidated Financial Statements, page 21 is an integral
part of these statements.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Millions Years ended December 31 1995 1994* 1993*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 123.3 $ 210.4 $ 63.5
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization excluding furniture and ceramic tile 109.6 106.9 102.1
Depreciation and amortization for furniture and ceramic tile 26.5 26.5 27.9
Deferred income taxes (8.7) 14.6 (1.3)
Gain on sale of discontinued businesses (83.9) -- --
Loss on ceramic tile business combination net of taxes 116.8 -- --
Loss from restructuring activities 71.8 -- 89.3
Restructuring payments (18.3) (20.2) (38.7)
(Increase) decrease in net assets of discontinued business 2.3 (4.4) (4.4)
Changes in operating assets and liabilities net of
effect of discontinued business, restructuring and dispositions:
(Increase) decrease in receivables 4.9 (20.3) 18.1
(Increase) decrease in inventories (26.3) 1.8 23.4
(Increase) decrease in other current assets 9.1 (2.2) 13.1
(Increase) in investment in affiliates (5.1) (11.9) (2.0)
(Increase) in other noncurrent assets (31.9) (21.2) (36.1)
Increase (decrease) in accounts payable and accrued expenses (35.9) 37.1 16.3
Increase (decrease) in income taxes payable (8.2) (10.1) 11.3
Increase (decrease) in other long-term liabilities 21.1 (5.5) 20.2
Other, net 2.9 3.7 (8.6)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 270.0 305.2 294.1
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property, plant and equipment excluding furniture and
ceramic tile (162.2) (113.8) (87.8)
Purchases of property, plant and equipment for furniture and ceramic tile (23.9) (34.5) (29.8)
Investment in computer software (10.9) (4.3) (2.9)
Proceeds from sale of land, facilities and discontinued businesses 342.6 12.8 10.3
Acquisitions (20.7) -- --
Investment in ceramic tile business combination (27.6) -- --
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 97.3 (139.8) (110.2)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in short-term debt 3.2 (89.6) (114.9)
Reduction of long-term debt (20.1) (5.7) (9.2)
Cash dividends paid (70.8) (66.2) (63.8)
Purchase of common stock for the treasury (41.3) (10.6) (0.1)
Proceeds from exercised stock options 7.0 8.4 4.9
Other, net (0.6) (0.8) (7.6)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (122.6) (164.5) (190.7)
- ----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 0.2 2.0 0.7
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents $ 244.9 $ 2.9 $ (6.1)
- -------------------------------------------------------------------------------=======================================
Cash and cash equivalents at beginning of year $ 12.0 $ 9.1 $ 15.2
- -------------------------------------------------------------------------------=======================================
Cash and cash equivalents at end of year $ 256.9 $ 12.0 $ 9.1
- -------------------------------------------------------------------------------=======================================
Supplemental cash flow information
Interest paid $ 29.6 $ 31.9 $ 33.8
Income taxes paid $ 76.9 $ 62.0 $ 15.8
- -------------------------------------------------------------------------------=======================================
</TABLE>
*Restated for the effects of the discontinued business and formation of the
ceramic tile business combination.
The Notes to Consolidated Financial Statements, page 21 is an integral
part of these statements.
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Millions except for per-share data Years ended December 31 1995 1994* 1993*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A convertible preferred stock:
Balance at beginning of year $ 261.6 $ 263.9 $ 266.4
Shares retired 2.7 2.3 2.5
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 258.9 $ 261.6 $ 263.9
- ----------------------------------------------------------------------------------------------------------------------
Common stock, $1 par value:
Balance at beginning and end of year $ 51.9 $ 51.9 $ 51.9
- ----------------------------------------------------------------------------------------------------------------------
Capital in excess of par value:
Balance at beginning of year $ 39.3 $ 29.7 $ 26.1
Stock issuances 10.0 9.6 3.6
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 49.3 $ 39.3 $ 29.7
- ----------------------------------------------------------------------------------------------------------------------
Reduction for ESOP loan guarantee:
Balance at beginning of year $ (233.9) $ (241.8) $ (249.2)
Principal paid 10.7 8.4 6.3
Accrued compensation (1.9) (.5) 1.1
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ (225.1) $ (233.9) $ (241.8)
- ----------------------------------------------------------------------------------------------------------------------
Retained earnings:
Balance at beginning of year $1,076.8 $ 927.7 $ 922.7
Net earnings for year 123.3 210.4 63.5
Tax benefit on dividends paid on unallocated preferred shares 4.5 4.9 5.3
- ----------------------------------------------------------------------------------------------------------------------
Total $1,204.6 $1,143.0 $ 991.5
- ----------------------------------------------------------------------------------------------------------------------
Less dividends:
Preferred stock
$3.462 per share $ 18.8 $ 19.0 $ 19.2
Common stock
$1.40 per share in 1995; 52.0
$1.26 per share in 1994; 47.2
$1.20 per share in 1993; 44.6
Total dividends $ 70.8 $ 66.2 $ 63.8
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year $1,133.8 $1,076.8 $ 927.7
- ----------------------------------------------------------------------------------------------------------------------
Foreign currency translation:
Balance at beginning of year $ 8.3 $ (3.4) $ 8.6
Translation adjustments and hedging activities 10.9 11.7 (12.5)
Allocated income taxes (1.2) -- .5
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 18.0 $ 8.3 $ (3.4)
- ----------------------------------------------------------------------------------------------------------------------
Less treasury stock at cost:
Balance at beginning of year $ 468.9 $ 458.5 $ 457.3
Stock purchases 41.3 10.6 .1
Stock issuance activity, net 1.6 (.2) 1.1
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 511.8 $ 468.9 $ 458.5
- ----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity $ 775.0 $ 735.1 $ 569.5
- -------------------------------------------------------------------------------=======================================
</TABLE>
The Notes to Consolidated Financial Statements, page 21 is an integral
part of these statements.
- --------------------------------------------------------------------------------
Notes To Consolidated Financial Statements
- --------------------------------------------------------------------------------
The consolidated financial statements and accompanying data in this report
include the accounts of the parent Armstrong World Industries, Inc., and its
domestic and foreign subsidiaries. These financial statements are prepared in
accordance with generally accepted accounting principles and include management
estimates and judgments, where appropriate. Actual results may differ from these
estimates. All significant intercompany transactions have been eliminated from
the consolidated statements. Prior years have been restated to reflect changes
due to the discontinued business and ceramic tile business combination as
described on page 21.
To assist in understanding this financial review, the accounting policies and
principles used are printed in italics.
- --------------------------------------------------------------------------------
Nature of Operations
- --------------------------------------------------------------------------------
The floor coverings segment includes resilient flooring, adhesives, installation
and maintenance materials and accessories sold to U.S. commercial and
residential segments through wholesalers, retailers and contractors. The
Corporate Retail Accounts division provides marketing services to home centers
which have become an important part of the company's business. To improve
logistical cost-effectiveness, 15 independent regional distribution centers are
being established to service these customers. To reduce interchannel conflict,
segmented resilient flooring products have been introduced to allow exclusive
sales in these different markets. Raw materials, especially plasticizers and
resins, are a significant cost of resilient flooring products. The company has
no influence on and is subject to cost changes in the worldwide market of these
materials.
The building products segment manufactures both residential and architectural
ceiling systems. Grid products, manufactured and sold through the joint venture
with Worthington Industries (WAVE), have become a more important part of this
business worldwide. Earnings from this joint venture are included in this
segment's operating income. The major sales activity in this segment is in
architectural ceiling systems for commercial and institutional structures which
are sold to contractors and resale distributors worldwide, with European sales
having a significant impact. Ceiling systems for the residential home segment
are sold through wholesalers and retailers, mainly in the United States. During
1995, the business experienced raw material price increases which recently have
shown signs of softening.
The industry products segment makes a variety of specialty products for the
building, automotive, textile and other industries worldwide. The majority of
sales in this segment are flexible pipe insulation used in construction and in
original equipment manufacturers. These sales are primarily in Europe, with
Germany having the largest concentration due to its regulatory requirements. The
major product costs for insulation are raw materials and labor. Strong
competition exists in insulation since there are minimal barriers to entry into
this market. Gasket materials are sold for new and replacement use in the
automotive, construction and farm equipment, appliance, small engine and
compressor industries. The automotive and diesel build rates are the most
sensitive market drivers for these products. This business also supplies backing
for Armstrong's resilient flooring products. Other products in the industry
products segment are textile mill supplies, including cots and aprons sold to
equipment manufacturers and textile mills, and adhesives. In 1995, the company
announced its intentions to discuss with potential buyers the possible sale of
the textile products operation.
The ceramic tile products segment, reported in previous years with the floor
coverings segment, includes ceramic tile sold through home centers and sales
service centers. Ceramic tile products face significant competition from foreign
suppliers. This segment's results are reported as "Equity Earnings from
Affiliates" (see page 21) and are included in operating income.
INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Industry segments
at December 31 (millions) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net trade sales:
Floor coverings $1,053.9 $1,063.5 $ 980.6
Building products 682.2 630.0 586.7
Industry products 348.8 312.2 297.7
- ------------------------------------------------------------------------------
Total net sales $2,084.9 $2,005.7 $1,865.0
- ------------------------------------------------==============================
Operating income (loss): (Note 1)
Floor coverings $ 145.0 $ 189.6 $ 156.6
Building products 92.2 86.8 18.8
Industry products 9.3 41.2 27.2
Ceramic tile (Note 2) (168.4) 0.8 (44.3)
Unallocated corporate expense (34.0) (23.8) (59.8)
- ------------------------------------------------------------------------------
Total operating income $ 44.1 $ 294.6 $ 98.5
- ------------------------------------------------==============================
Depreciation and amortization:
Floor coverings $ 47.9 $ 49.2 $ 48.2
Building products 36.8 34.5 34.1
Industry products 19.3 17.6 14.6
Corporate 5.6 5.6 5.2
- ------------------------------------------------------------------------------
Total depreciation
and amortization $ 109.6 $ 106.9 $ 102.1
- ------------------------------------------------==============================
Capital additions: (Note 3)
Floor coverings $ 77.3 $ 56.7 $ 39.7
Building products 49.2 31.5 24.2
Industry products 45.0 22.6 22.1
Corporate 6.3 3.0 1.8
- ------------------------------------------------------------------------------
Total capital additions $ 177.8 $ 113.8 $ 87.8
- ------------------------------------------------==============================
Identifiable assets:
Floor coverings $ 583.2 $ 575.7 $ 541.2
Building products 513.5 478.1 483.0
Industry products 301.8 234.8 207.9
Ceramic tile 135.8 270.5 251.9
Discontinued business -- 182.1 175.4
Corporate 615.5 398.2 185.4
- ------------------------------------------------------------------------------
Total assets $2,149.8 $2,139.4 $1,844.8
- ------------------------------------------------==============================
<CAPTION>
Note 1:
- ------------------------------------------------------------------------------
Restructuring charges in
operating income (millions) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Floor coverings $ 25.0 -- $ 8.4
Building products 6.3 -- 13.7
Industry products 31.4 -- 12.9
Ceramic tile -- -- 19.3
- ------------------------------------------------------------------------------
Unallocated corporate expense 9.1 -- 35.0
- ------------------------------------------------------------------------------
Total restructuring charges
in operating income $ 71.8 -- $ 89.3
- ------------------------------------------------==============================
</TABLE>
Note 2: 1995 operating income includes a $177.2 million loss due to the ceramic
tile business combination.
Note 3: 1995 capital additions for industry segments include property, plant and
equipment from acquisitions of $15.6 million.
GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Geographic areas
at December 31 (millions) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net trade sales:
United States $1,346.3 $1,343.7 $1,250.3
Europe 558.7 483.4 456.6
Other foreign 179.9 178.6 158.1
- -----------------------------------------------------------------------------
Interarea transfers:
United States 101.1 94.7 75.8
Europe 13.8 8.7 6.0
Other foreign 32.1 26.1 21.9
Eliminations (147.0) (129.5) (103.7)
- -----------------------------------------------------------------------------
Total net sales $2,084.9 $2,005.7 $1,865.0
- -----------------------------------------------==============================
Operating income:
United States $ 7.7 $ 235.5 $ 116.6
(See Note 2 on page 21)
Europe 62.6 75.3 31.7
Other foreign 7.8 7.6 10.0
Unallocated corporate expense (34.0) (23.8) (59.8)
- -----------------------------------------------------------------------------
Total operating income $ 44.1 $ 294.6 $ 98.5
- -----------------------------------------------==============================
Identifiable assets:
United States $1,044.5 $1,110.5 $1,074.1
Europe 406.7 376.5 347.0
Other foreign 83.4 72.6 63.2
Discontinued business -- 182.1 175.4
Corporate 615.5 398.2 185.4
Eliminations (0.3) (0.5) (0.3)
- -----------------------------------------------------------------------------
Total assets $2,149.8 $2,139.4 $1,844.8
- -----------------------------------------------==============================
</TABLE>
United States net trade sales include export sales to non-affiliated customers
of $30.8 million in 1995, $24.9 million in 1994 and $19.8 million in 1993.
"Europe" includes operations located primarily in England, France, Germany,
Italy, the Netherlands, Poland, Spain and Switzerland. Operations in Australia,
Canada, The People's Republic of China, Hong Kong, Indonesia, Japan, Korea,
Singapore and Thailand are in "Other foreign."
Transfers between geographic areas and commissions paid to affiliates marketing
exported products are accounted for by methods that approximate arm's-length
transactions, after considering the costs incurred by the selling company and
the return on assets employed of both the selling unit and the purchasing unit.
Operating income of a geographic area includes income accruing from sales to
affiliates.
- -------------------------------------------------------------------------------
OPERATING STATEMENT ITEMS
- -------------------------------------------------------------------------------
DISCONTINUED OPERATIONS
On December 29, 1995, the company sold the stock of its furniture subsidiary,
Thomasville Furniture Industries, Inc., to INTERCO Incorporated for $331.2
million. INTERCO assumed $8.0 million of Thomasville interest-bearing debt. The
company recorded a gain of $83.9 million after tax on the sale. Certain
liabilities related to terminated benefit plans of approximately $11.3 million
were retained by the company. Thomasville and its subsidiaries recorded sales of
approximately $550.2 million in 1995, $526.8 million in 1994 and $449.7 million
in 1993.
Operating statement categories, except where otherwise indicated, have been
restated to exclude the effects of this discontinued business.
EQUITY EARNINGS FROM AFFILIATES
On December, 29, 1995, the company entered into a business combination with Dal-
Tile International Inc. The transaction was accounted for at fair value and
involved the exchange of $27.6 million and the stock of the ceramic tile
operations, consisting primarily of American Olean Tile Company, a wholly-owned
subsidiary, for ownership of 37% of the shares of Dal-Tile. The company's
investment in Dal-Tile exceeds the underlying equity in net assets by $123.9
million which will be amortized over a period of 30 years. The after-tax loss on
the transaction was $116.8 million.
Results from ceramic tile operations, which were previously reported on a
consolidated basis, were restated and included in "Equity Earnings from
Affiliates." Going forward, Armstrong's 37% ownership of the combined Dal-Tile
will be accounted for under the equity method. The summarized financial
information for ceramic tile operations is presented below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
(millions) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $240.0 $220.2 $210.7
Operating income (loss)/1/ 8.8 .8 (44.3)
Assets/2/ 269.8 290.1 276.3
Liabilities/2/ 17.3 19.6 24.4
- ------------------------------------------------------------------------------
</TABLE>
Note 1: Excludes 1995 loss of $177.2 million due to ceramic tile business
combination.
Note 2: 1995 balances were as of December 29, 1995, immediately prior to the
ceramic tile business combination.
Also included in equity earnings from affiliates are earnings from the 50%
interest in the WAVE joint venture with Worthington Industries. Previously these
earnings had been included in selling, general and administrative expenses.
NET SALES
Net sales in 1995 totaled $2,084.9 million, 3.9% above the 1994 total of
$2,005.7 million. 1994 sales were 7.5% above the 1993 total of $1,865.0 million.
The amounts reported as net sales are the total sales billed during the year
less the sales value of goods returned, trade discounts and customers'
allowances and freight costs incurred in delivering products to customers.
EARNINGS FROM CONTINUED BUSINESSES
Earnings from continuing businesses were $13.6 million in 1995 compared with
$187.2 million in 1994 and $49.0 million in 1993. 1995 earnings included the
$116.8 million after-tax loss for the ceramic tile business combination
mentioned above. Included in the earnings for 1995 and 1993 were after-tax
restructuring charges of $46.4 million and $59.6 million, respectively.
NET EARNINGS
Net earnings were $123.3 million for 1995 compared with earnings of $210.4
million and $63.5 million for years 1994 and 1993 respectively.
EARNINGS PER COMMON SHARE
Earnings per common share are presented on the Consolidated Statements of
Earnings on page 20.
Primary earnings (loss) per share for "Earnings (loss) from continuing
businesses" and for "Net earnings" are determined by dividing the earnings
(loss), after deducting preferred dividends (net of tax benefits on unallocated
shares), by the average number of common shares outstanding and shares issuable
under stock options, if dilutive.
Fully diluted earnings (loss) per share include the shares of common stock
outstanding and the adjustments to common shares and earnings (loss) required to
portray the convertible preferred shares on an "if converted" basis unless the
effect is antidilutive.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs were $56.2 million in 1995, $51.4 million in 1994
and $56.1 million in 1993.
ADVERTISING COSTS
Advertising costs were $20.2 million in 1995, $23.5 million in 1994 and $25.1
million in 1993.
The company's practice is to expense the costs of advertising as they are
incurred.
MAINTENANCE AND REPAIR COSTS
Maintenance and repair costs were $106.5 million in 1995, $104.3 million in 1994
and $102.9 million in 1993.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization amounted to $109.6 million in 1995, $106.9 million
in 1994 and $102.1 million in 1993.
These amounts include amortization of intangible assets
of $6.4 million in 1995, $5.8 million in 1994 and $5.8 million in 1993.
Depreciation charges for financial reporting purposes are determined generally
on the straight-line basis at rates calculated to provide for the retirement of
assets at the end of their useful lives. Accelerated depreciation is generally
used for tax purposes. When assets are disposed of or retired, their costs and
related depreciation are removed from the books, and any resulting gains or
losses are reflected in "Selling, general and administrative expenses."
Intangibles are amortized over periods ranging from 2 to 40 years.
RESTRUCTURING CHARGES
Restructuring charges amounted to $71.8 million in 1995 and $89.3 million in
1993.
In the first quarter of 1995, the company announced a planned closing of an
Industry Products manufacturing plant located in Braintree, Massachusetts. This
plant phased out operations in early 1996. Accordingly, there was a nonrecurring
charge to the first-quarter 1995 financial results of $15.6 million before tax.
The charge was primarily related to severance pay and pension costs accrued for
the elimination of about 223 salaried and hourly employee positions. Cash
outlays will be about one third of the total charges with the majority of the
cash outlay occurring in early 1996.
In the third quarter of 1995, the company recorded a $56.2 million charge before
tax for restructuring resulting from the company's ongoing efforts to streamline
the organization and enhance operating efficiencies. The restructuring charges
primarily relate to severance and early retirement incentives for approximately
670 employees, half of whom are hourly and half are salaried. Nearly 40% of the
charge was related to the North American resilient flooring business, while
another 40% was related to European Operations. The balance was related to
corporate and other operating segments. The charges are estimated to be evenly
split between cash payments throughout 1996 and noncash charges, primarily to
cover retirement-related expenses. It is anticipated that ongoing cost
reductions and productivity improvements should permit recovery of these charges
in less than two years.
Actual severance payments charged against the restructuring reserves for 1995
totaled $15.5 million. These charges relate to the elimination of approximately
300 positions during 1995. Also, an additional 300 positions were eliminated
during 1995 through special retirement incentives.
The 1993 charges were primarily the result of severance payments and special
retirement incentives associated with the elimination of employee positions. At
the end of 1995, $15.6 million related to this liability remained in the
reserve.
<TABLE>
<CAPTION>
OTHER EXPENSE (INCOME), NET
- ------------------------------------------------------------------
(millions) 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Interest and dividend income $(3.3) $(3.7) $(7.5)
Foreign exchange, net loss 2.6 2.6 .5
Postretirement liability
transition obligation 1.6 -- --
Minority interest 0.6 1.8 2.1
Other 0.4 (0.2) (1.2)
- ------------------------------------------------------------------
Total $ 1.9 $ 0.5 $(6.1)
- ---------------------------------------===========================
</TABLE>
EMPLOYEE COMPENSATION
Employee compensation and average number of employees are presented in the table
below. Restructuring charges for severance costs and early retirement incentives
and all data related to furniture and ceramic tile segments have been excluded.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Employee compensation
cost summary (millions) 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Wages and salaries $519.4 $516.5 $488.6
Payroll taxes 55.5 48.5 49.5
Pension credits (11.3) (13.2) (6.9)
Insurance and other benefit costs 51.0 37.4 54.2
- ------------------------------------------------------------------
Total $614.6 $589.2 $585.4
- ---------------------------------------===========================
Average number of employees 11,365 11,612 12,413
- ------------------------------------------------------------------
</TABLE>
PENSION COSTS
The company and a number of its subsidiaries have pension plans covering
substantially all employees. Benefits from the principal plan are based on the
employee's compensation and years of service.
Generally, the company's practice is to fund the actuarially determined current
service costs and the amounts necessary to amortize prior service obligations
over periods ranging up to 30 years, but not in excess of the full funding
limitation.
Funding requirements, in accordance with provisions of the Internal Revenue
Code, are determined independently of expense using an expected long-term rate
of return on assets of 8.67%. The company's principal plan was subject to the
full funding limitation in 1995, 1994 and 1993, and the company made no
contribution to that plan in any of these years. Contributions of $0.8 million
in 1993 were made to defined-benefit plans of company subsidiaries. No
contributions were made in 1995 and 1994.
The total pension cost or credit from all plans is presented in the table below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Total pension
(credit) cost (millions) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. defined-benefit plans:
Net pension credit $ (26.5) $ (29.1) $ (19.2)
Early retirement incentives 28.7 -- 38.0
Net curtailment gain (1.2) -- --
- -------------------------------------------------------------------------------
Defined contribution plans 4.2 4.3 4.4
- -------------------------------------------------------------------------------
Net pension cost of non-U.S.
defined-benefit plans 8.1 8.6 6.1
- -------------------------------------------------------------------------------
Other funded and unfunded
pension costs 4.1 3.0 1.8
- -------------------------------------------------------------------------------
Total pension (credit) cost $ 17.4 $ (13.2) $ 31.1
- ---------------------------------------------------============================
</TABLE>
In 1995, the company recognized a $1.6 million curtailment gain from the sale of
its furniture subsidiary and a $0.4 million curtailment loss from the ceramic
tile business combination.
The net credit for U.S. defined-benefit pension plans is presented in the table
below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Net credit for U.S. defined-benefit
pension plans (millions) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumptions:
Discount rate 8.00% 7.00% 7.25%
Rate of increase in future
compensation levels 5.25% 4.75% 4.75%
Expected long-term rate of
return on assets 8.75% 8.25% 8.25%
- -------------------------------------------------------------------------------
Actual (return) loss on assets $(406.7) $ 93.6 $(230.1)
Less amount deferred 313.0 (182.5) 152.3
- -------------------------------------------------------------------------------
Expected return on assets $ (93.7) $ (88.9) $ (77.8)
Net amortization and other (9.3) (9.5) (7.0)
Service cost -- benefits earned
during the year 16.7 17.9 17.3
Interest on the projected benefit
obligation 59.8 51.4 48.3
- -------------------------------------------------------------------------------
Net pension credit $ (26.5) $ (29.1) $ (19.2)
- ---------------------------------------------------============================
</TABLE>
The company has defined-contribution pension plans for eligible employees at
certain of its U.S. subsidiaries, such as the Employee Stock Ownership Plan
(ESOP) described on page 21. The costs of all such plans totaled $4.2
million in 1995, $4.3 million in 1994 and $4.4 million in 1993.
The funded status of the company's U.S. defined-benefit pension plans is
presented in the following table.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Funded status of U.S. defined-benefit
pension plans (millions) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Assumptions:
Discount rate 7.00% 8.00%
Compensation rate 4.25% 5.25%
- ------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $ (726.7) $ (657.7)
- ------------------------------------------------------------------------------
Accumulated benefit obligation $ (802.4) $ (700.6)
- -------------------------------------------------------------------------------
Projected benefit obligation for
services rendered to date $ (901.2) $ (774.8)
- ------------------------------------------------------------------------------
Plan assets at fair value $1,446.6 $1,099.1
- ------------------------------------------------------------------------------
Plan assets in excess of projected
benefit obligation $ 545.4 $ 324.3
Unrecognized transition asset (40.3) (46.6)
Unrecognized prior service cost 81.8 102.8
Unrecognized net gain -- experience
different from assumptions (491.8) (285.4)
Provision for restructuring charges (9.9) (8.9)
- ------------------------------------------------------------------------------
Prepaid pension cost $ 85.2 $ 86.2
- ------------------------------------------------------========================
</TABLE>
The plan assets, stated at estimated fair value as of December 31, are primarily
listed stocks, bonds and investments with a major insurance company.
The company has pension plans covering employees in a number of foreign
countries that utilize assumptions that are consistent with, but not identical
to, those of the U.S. plans.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Net cost for non-U.S. defined-benefit
pension plans (millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Actual (return) loss on assets $ (11.2) $ 1.8 $(14.3)
Less amount deferred 5.9 (6.1) 8.0
- --------------------------------------------------------------------------------
Expected return on assets $ (5.3) $ (4.3) $ (6.3)
Net amortization and other .4 .6 .5
Service cost -- benefits earned
during the year 4.9 5.2 5.2
Interest on the projected benefit
obligation 8.1 7.1 6.7
- --------------------------------------------------------------------------------
Net pension cost $ 8.1 $ 8.6 $ 6.1
- ----------------------------------------------------============================
</TABLE>
The following table presents the funded status of the non-U.S. defined-benefit
pension plans at December 31.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Funded status of non-U.S. defined-benefit
pension plans (millions) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(103.0) $(87.1)
- --------------------------------------------------------------------------------
Accumulated benefit obligation $(107.6) $(91.5)
- --------------------------------------------------------------------------------
Projected benefit obligation for services
rendered to date $(115.8) $(99.5)
- --------------------------------------------------------------------------------
Plan assets at fair value 71.4 58.0
- --------------------------------------------------------------------------------
Projected benefit obligation greater than
plan assets $ (44.4) $(41.5)
Unrecognized transition obligation 3.3 3.2
Unrecognized prior service cost 3.4 3.5
Unrecognized net gain -- experience
different from assumptions (13.4) (9.5)
Adjustment required to recognize
minimum liability (.4) (.4)
- --------------------------------------------------------------------------------
Accrued pension cost $ (51.5) $(44.7)
- --------------------------------------------------------------==================
</TABLE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS
The company has plans that provide for medical and life insurance benefits to
certain eligible employees, worldwide, when they retire from active service. The
company funds these benefit costs primarily on a pay-as-you-go basis, with the
retiree paying a portion of the cost for health care benefits through
deductibles and contributions.
The company announced in 1989 - 90 a 15-year phaseout of its cost of health care
benefits for certain future retirees. These future retirees include parent
company nonunion employees and some union employees. Shares of ESOP convertible
preferred stock are scheduled to be allocated to these employees, based on
employee age and years to expected retirement. In addition, they may enroll in a
voluntary portion of the ESOP to purchase additional shares.
Total retiree health care and life insurance expense was $19.1 million in 1995,
$18.7 million in 1994 and $18.5 million in 1993.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Periodic postretirement
benefit costs (millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Assumptions:
Discount rate 8.25% 7.75% 8.25%
Rate of increase in future
compensation levels 5.25% 4.75% 4.75%
- --------------------------------------------------------------------------------
Service cost of benefits earned
during the year $ 2.8 $ 3.0 $ 3.0
- --------------------------------------------------------------------------------
Interest cost on accumulated
postretirement benefit obligation 17.1 16.5 16.3
- --------------------------------------------------------------------------------
Amortization of prior service credit (.8) (.8) (.8)
- --------------------------------------------------------------------------------
Periodic postretirement benefit cost $ 19.1 $ 18.7 $ 18.5
- ------------------------------------------------------==========================
</TABLE>
The following table sets forth the status of the company's postretirement
benefit plans at December 31.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Status of postretirement
benefit plans (millions) 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Assumptions:
Discount rate 7.00% 8.25%
Compensation rate 4.25% 5.25%
- ------------------------------------------------------------------------
Retirees $161.5 $141.2
Fully eligible active plan participants 17.2 27.8
Other active plan participants 67.9 39.5
- ------------------------------------------------------------------------
Total accumulated postretirement
benefit obligation (APBO) $246.6 $208.5
- ------------------------------------------------------------------------
Unrecognized prior service credit 7.3 8.1
Unrecognized net loss (40.7) (6.9)
- ------------------------------------------------------------------------
Accrued postretirement benefit cost $213.2 $209.7
- ------------------------------------------------------==================
</TABLE>
The assumed health care cost trend rate used to measure the APBO was 12% in
1994, decreasing 1% per year to an ultimate rate of 6% by the year 2000. The
health care cost trend rate assumption has a significant effect on the amounts
reported. To illustrate, if the health care cost trend rate assumptions were
increased by 1%, the APBO as of December 31, 1995, would be increased by $22.9
million. The effect of this change on the total of service and interest costs
for 1995 would be an increase of $2.3 million.
The company provides certain postemployment benefits to former or inactive
employees and their dependents during the period following employment but before
retirement.
In 1995, the company recorded a postemployment benefit expense of $3.2 million,
which included a $4.1 million credit from the transfer of the payment
responsibility for certain disability benefits to the company's defined-benefit
pension plan. In 1994, the company recorded a postemployment benefit credit of
$12.2 million, which included a $14.6 million gain related to the qualification
in 1994 of long-term disabled employees for primary medical coverage under
Medicare. The company recorded $4.0 million of postemployment benefit expense in
1993.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
In 1989, Armstrong established an ESOP that borrowed $270 million from banks and
insurance companies, repayable over 15 years and guaranteed by the company. The
ESOP used the proceeds to purchase 5,654,450 shares of a new series of
convertible preferred stock issued by the company. The number of preferred
shares released for allocation to participant accounts is based on the
proportion of principal and interest paid to the total amount of debt service
remaining to be paid over the life of the borrowings. Through December 31, 1995,
the ESOP allocated to participants 1,940,004 shares and retired 232,452 shares.
The preferred stock has a minimum conversion value of $47.75 per share with an
annual dividend of $3.462.
The ESOP currently covers parent company nonunion employees, some union
employees and those employees of major domestic subsidiaries.
The company's guarantee of the ESOP loan has been recorded as a long-term
obligation and as a reduction of shareholders' equity on its consolidated
balance sheet.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Details of ESOP debt service
payments (millions) 1995 1994 1993
- -----------------------------------------------------------
<S> <C> <C> <C>
Preferred dividends paid $18.8 $19.0 $19.2
Employee contributions 6.7 6.2 5.9
Company contributions 6.2 4.9 3.5
- -----------------------------------------------------------
Debt service payments made
by ESOP trustee $31.7 $30.1 $28.6
- --------------------------------===========================
</TABLE>
The company recorded costs for the ESOP, utilizing the 80% of the shares
allocated method, of $3.5 million in 1995, $3.6 million in 1994 and $3.7 million
in 1993. Costs for all years continue to be offset by savings from changes to
company-sponsored health care benefits and elimination of a contribution-
matching feature in the company-sponsored voluntary retirement savings plan.
TAXES
Taxes totaled $71.7 million in 1995, $150.4 million in 1994 and $89.6 million in
1993.
Deferred tax assets and liabilities are recognized using enacted tax rates for
the expected future tax consequences of events that have been recognized in the
financial statements or tax returns. The tax benefit for dividends paid on
unallocated shares of stock held by the ESOP is recognized in shareholders'
equity (see page 21).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Details of taxes (millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings (loss) from continuing businesses before income taxes:
Domestic $(28.7) $262.7 $ 61.6
Foreign 68.0 52.1 29.3
Eliminations (31.1) (49.0) (24.3)
- --------------------------------------------------------------------------------
Total $ 8.2 $265.8 $ 66.6
- --------------------------------------------------------------------------------
Income tax provision (benefit):
Current:
Federal $(19.7) $ 12.8 $ 15.5
Foreign 23.4 25.9 10.6
State (0.2) 5.0 3.7
- --------------------------------------------------------------------------------
Total current 3.5 43.7 29.8
- --------------------------------------------------------------------------------
Deferred:
Federal (6.2) 41.4 (11.0)
Foreign (2.7) (2.2) (1.2)
State -- (4.3) --
- --------------------------------------------------------------------------------
Total deferred (8.9) 34.9 (12.2)
- --------------------------------------------------------------------------------
Total income taxes (5.4) 78.6 17.6
Payroll taxes 61.5 54.8 55.8
Property, franchise and capital
stock taxes 15.6 17.0 16.2
- --------------------------------------------------------------------------------
Total taxes $ 71.7 $150.4 $ 89.6
- ------------------------------------------------------==========================
</TABLE>
At December 31, 1995, unremitted earnings of subsidiaries outside the United
States were $135.6 million (at current balance sheet exchange rates) on which no
U.S. taxes have been provided. If such earnings were to be remitted without
offsetting tax credits in the United States, withholding taxes would be $12.5
million. The company's intention, however, is to permanently reinvest those
earnings or to repatriate them only when it is tax effective to do so.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Reconciliation to
U.S. statutory tax rate (millions) 1995 1994 1993
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Tax expense at statutory rate $ 2.9 $93.0 $23.3
State income taxes -- (1.5) 1.2
(Benefit) on ESOP dividend (2.1) (1.7) (1.4)
(Benefit) on foreign and
foreign-source income (7.7) (1.4) (8.0)
Utilization of excess foreign
tax credit -- (5.4) --
Reversal of prior year provisions -- (6.5) --
Other items 0.1 2.1 0.9
Restructuring charges (0.2) -- 1.6
Loss from ceramic tile business
combination 1.6 -- --
- ----------------------------------------------------------------------
Tax (benefit) expense at effective rate $(5.4) $78.6 $17.6
- -------------------------------------------===========================
</TABLE>
- ----------------------------------------------------------------------
BALANCE SHEET ITEMS
- ----------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased to $256.9 million at the end of 1995 from
$12.0 million at the end of 1994. Operating and other factors associated with
the increase in cash and cash equivalents are detailed in the Consolidated
Statements of Cash Flows on page 21.
Short-term investments, substantially all of which have maturities of three
months or less when purchased, are considered to be cash equivalents and are
carried at cost or less, generally approximating market value.
RECEIVABLES
Receivables decreased $1.0 million in 1995. Lower sales in the last quarter of
1995, when compared with 1994, more than offset the $4.9 million effect of
translating foreign currency receivables to U.S. dollars at higher exchange
rates.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Accounts and notes
receivable (millions) 1995 1994
- ------------------------------------------------------------
<S> <C> <C>
Customers' receivables $213.4 $216.3
Customers' notes 21.3 19.3
Miscellaneous receivables 12.2 10.3
- ------------------------------------------------------------
246.9 245.9
- ------------------------------------------------------------
Less allowance for discounts and losses 29.0 27.0
- ------------------------------------------------------------
Net $217.9 $218.9
- -------------------------------------------=================
</TABLE>
Generally, the company sells its products to select, preapproved groups of
customers which include flooring and building material distributors, ceiling
systems contractors, regional and national mass merchandisers, home centers and
original equipment manufacturers. The businesses of these customers are directly
affected by changes in economic and market conditions. The company considers
these factors and the financial condition of each customer when establishing its
allowance for losses from doubtful accounts.
The carrying amount of the receivables approximates fair value because of the
short maturity of these items.
Trade receivables are recorded in gross billed amounts as of date of shipment.
Provision is made for estimated applicable discounts and losses.
INVENTORIES
Inventories were $30.9 million higher at the end of 1995. The higher inventory
levels were primarily due to increasing inventory levels for insulation products
in order to ensure customer service while starting up new production facilities
at Mebane, North Carolina, and the softening of sales in the floor industry
segment. The translation of foreign currency inventories to U.S. dollars at
higher exchange rates increased inventories by $3.1 million.
Approximately 51% in 1995 and 49% in 1994 of the company's total inventory was
valued on a LIFO (last-in, first-out) basis. Such inventory values were lower
than would have been reported on a total FIFO (first-in, first-out) basis, by
$62.4 million at the end of 1995 and $55.5 million at year-end 1994.
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Inventories (millions) 1995 1994
- -----------------------------------------------------------
<S> <C> <C>
Finished goods $119.9 $103.1
Goods in process 24.0 22.9
Raw materials and supplies 51.6 38.6
- -----------------------------------------------------------
Total $195.5 $164.6
- ----------------------------------------===================
</TABLE>
Inventories are valued at the lower of cost or market. Approximately 90 percent
of 1995's domestic inventories are valued using the LIFO method. Other
inventories are generally determined on a FIFO method.
INCOME TAX BENEFITS
Income tax benefits were $26.9 million in 1995 and $35.9 million in 1994. Of
these amounts, deferred tax benefits were $26.4 million in 1995 and $31.7
million in 1994.
OTHER CURRENT ASSETS
Other current assets were $25.5 million in 1995, an increase of $3.9 million
from the $21.6 million in 1994.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Property, plant and equipment
- ------------------------------------------------------------------
(millions) 1995 1994
- ------------------------------------------------------------------
<S> <C> <C>
Land $ 25.6 $ 20.5
Buildings 390.6 375.5
Machinery and equipment 1,313.7 1,238.1
Construction in progress 124.2 76.2
- ------------------------------------------------------------------
1,854.1 1,710.3
- ------------------------------------------------------------------
Less accumulated depreciation
and amortization 975.9 902.4
- ------------------------------------------------------------------
Net $ 878.2 $ 807.9
- --------------------------------------------======================
</TABLE>
The $143.8 million increase in gross book value to $1,854.1 million at the end
of 1995 included $177.8 million for capital additions and acquisitions and a
$61.2 million reduction from sales, retirements, dispositions and other changes.
Also, because of translating foreign currency property, plant and equipment into
U.S. dollars at higher exchange rates, 1995 gross book value was higher by $27.2
million and net book value increased by $12.9 million.
The unexpended cost of approved capital appropriations amounted to $169.5
million at year-end 1995, substantially all of which is scheduled to be expended
during 1996.
Property, plant and equipment values are stated at acquisition cost, with
accumulated depreciation and amortization deducted to arrive at net book value.
The Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," is
effective for fiscal years beginning after December 15, 1995. The adoption of
this standard will not have a material impact on the company.
INSURANCE FOR ASBESTOS-RELATED LIABILITIES
Insurance for asbestos-related liabilities was $166.0 million reflecting the
company's belief in the ultimate availability of insurance in an amount to cover
the estimated potential liability of a like amount (see page 21). Such insurance
has either been agreed upon or is probable of recovery through negotiation,
alternative dispute resolution or litigation. See discussion on page 21.
<TABLE>
<CAPTION>
Other noncurrent assets
- -------------------------------------------------------
(millions) 1995 1994
- --------------------------------------------------------
<S> <C> <C>
Goodwill and other intangibles $ 50.2 $ 43.4
Pension-related assets 108.4 106.7
Other 62.2 54.4
- --------------------------------------------------------
Total $220.8 $204.5
- ---------------------------------------=================
</TABLE>
Other noncurrent assets increased $16.3 million in 1995. Goodwill and other
intangibles increased $6.8 million reflecting higher spending levels in computer
software systems and acquired intangibles from acquisitions. The $7.8 million
increase in the "Other" category was primarily attributed to higher paid-up
insurance policy asset values.
Noncurrent assets are carried at cost or less or under the equity method of
accounting.
INVESTMENTS IN AFFILIATES
Investments in affiliates were $162.1 million in 1995, a decrease of $131.8
million, reflecting the ceramic tile business combination with Dal-Tile
International Inc. whereby the company acquired a 37% interest in Dal-Tile in
exchange for the stock of the company's ceramic tile operations and $27.6
million in cash. Also included in investments in affiliates is the 50% interest
in the WAVE joint venture.
<TABLE>
<CAPTION>
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- -----------------------------------------------------
(millions) 1995 1994
- -----------------------------------------------------
<S> <C> <C>
Payables, trade and other $168.3 $147.0
Employment costs 51.2 68.7
Restructuring costs 40.1 18.7
Other 37.8 36.0
- -----------------------------------------------------
Total $297.4 $270.4
- ------------------------------------=================
</TABLE>
The carrying amount of accounts payable and accrued expenses approximates fair
value because of the short maturity of these items.
<TABLE>
<CAPTION>
INCOME TAXES
- ------------------------------------------
(millions) 1995 1994
- ------------------------------------------
<S> <C> <C>
Payable--current $15.0 $21.4
Deferred--current 1.4 1.1
- ------------------------------------------
Total $16.4 $22.5
- --------------------------================
</TABLE>
The tax effects of principal temporary differences between the carrying amounts
of assets and liabilities and their tax bases are summarized in the following
table.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Deferred income taxes (millions) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Postretirement and postemployment benefits $ (82.6) $ (95.0)
Restructuring benefits (13.4) (14.7)
Asbestos-related liabilities (58.1) (69.3)
Alternative minimum tax credit -- (5.3)
Other (64.6) (77.8)
- --------------------------------------------------------------------------------
Net deferred assets $(218.7) $(262.1)
- --------------------------------------------------------------------------------
Accumulated depreciation $ 90.7 $ 106.5
Pension costs 35.8 33.1
Insurance for asbestos-related liabilities 58.1 69.3
Other 25.6 54.7
- --------------------------------------------------------------------------------
Total deferred income tax liabilities $ 210.2 $263.6
- --------------------------------------------------------------------------------
Net deferred income tax liabilities (assets) $ (8.5) $ 1.5
- --------------------------------------------------------------------------------
Less net income tax (benefits)--current (25.0) (30.6)
Less net income tax (benefits)--noncurrent -- --
Deferred income taxes -- long term $ 16.5 $ 32.1
- -------------------------------------------------------------===================
<CAPTION>
DEBT
- --------------------------------------------------------------------------------
Average Average
year-end year-end
interest interest
(millions) 1995 rate 1994 rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-term debt:
Commercial paper $ -- -- $ 3.2 6.00%
Foreign banks 22.0 7.27% 14.7 7.20%
- --------------------------------------------------------------------------------
Total short-term debt $ 22.0 7.27% $ 17.9 6.99%
- --------------------------------------------------------------------------------
Long-term debt:
93/4% debentures
due 2008 $125.0 9.75% $125.0 9.75%
Medium-term notes
8.5 - 9% due
1996 - 2001 92.8 8.74% 111.8 8.75%
Industrial
development bond 8.5 5.35% 17.7 5.66%
Other 2.1 12.29% 2.2 12.25%
- --------------------------------------------------------------------------------
Total long-term debt $228.4 9.20% $256.7 9.05%
- --------------------------------------------------------------------------------
Less current installments 40.1 8.50% 19.5 8.80%
- --------------------------------------------------------------------------------
Net long-term debt $188.3 9.35% $237.2 9.07%
- -----------------------------------------=======================================
<CAPTION>
- --------------------------------------------------------------------------------
Scheduled amortization of long-term debt (millions)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $13.7 2000 $18.1
1998 13.5 2001 7.5
1999 --
- --------------------------------------------------------------------------------
</TABLE>
The December 31, 1995, carrying amounts of short-term debt and current
installments of long-term debt approximate fair value because of the short
maturity of these items.
The estimated fair value of net long-term debt was $234.9 million and $247.2
million at December 31, 1995 and 1994, respectively. The fair value estimates of
long-term debt were based upon quotes from major financial institutions, taking
into consideration current rates offered to the company for debt of the same
remaining maturities.
The 93/4% debentures and the medium-term notes are not redeemable until maturity
and have no sinking-fund requirements.
The industrial development bond matures in 2004 with a variable interest rate
that is reset weekly.
Other debt includes an $18.6 million zero-coupon note due in 2013 that had a
carrying value of $1.9 million at December 31, 1995.
In February 1995, Armstrong arranged a $200 million five-year revolving line of
credit with 10 banks for general corporate purposes. In addition, the company's
foreign subsidiaries have approximately $154.0 million of unused short-term
lines of credit available from banks. The domestic credit lines are subject to
an annual commitment fee.
The company can borrow from its banks generally at rates approximating the
lowest available to commercial borrowers and can issue short-term commercial
paper notes supported by the lines of credit.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS
The company selectively uses foreign currency forward and option contracts to
offset the effects of exchange rate changes on cash flow exposures denominated
in foreign currencies. These exposures include firm or anticipated intercompany
trade accounts, royalties, service fees, dividends, intercompany loans and third
party sales or payments. The primary exposures are denominated in European
currencies and the Canadian dollar. The company normally hedges cash flow
exposures up to one year. The company's foreign currency cash flow exposures,
net hedge and unhedged exposures at December 31, 1995, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Foreign currency
exposure (millions)/1/ Gross Net hedge Unhedged
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Canadian dollar $ 30.0 $15.3 $14.7
Italian lira to French franc 23.0 10.2 12.8
French franc 22.4 22.4 --
German mark 15.0 7.9 7.1
Irish pound to British pound 8.9 -- 8.9
Spanish peseta to French franc 8.0 4.0 4.0
Other 24.0 2.5 21.5
- --------------------------------------------------------------------------------
Total $131.3 $62.3 $69.0
- -----------------------------------------------------===========================
</TABLE>
Note 1: The currencies shown are in relation to the U.S. dollar, except as
indicated.
Realized and unrealized gains and losses on contracts that are used to offset
the effects of exchange rate changes on foreign currency cash flows are normally
marked to market and recognized in statements of operations. The foreign
currency options consist primarily of purchased options that are designated as
effective hedges and are deferred and included in income as part of the
underlying transactions.
Realized and unrealized gains and losses on foreign currency contracts used to
hedge intercompany transactions of a long-term investment nature are included in
the foreign currency translation component of shareholders' equity.
The company's foreign currency forward and option contracts by currency at
December 31, 1995, were as follows. All of the contracts mature within 11
months.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Foreign currency
contracts (millions)/1/ Forward contracts Option contracts
- --------------------------------------------------------------------------------
Sold Bought Sold Bought
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canadian dollar $ 8.2 $ -- -- $ 7.1
Italian lira to French franc 10.2 -- -- --
French franc 10.4 -- -- 12.0
German mark 29.1 21.2 -- --
Spanish peseta to
French franc -- -- -- 4.0
Other 9.3 6.8 -- --
- --------------------------------------------------------------------------------
Total $67.2 $28.0 -- $23.1
- --------------------------------------==========================================
</TABLE>
Note 1: The currencies shown are in relation to the U.S. dollar, except as
indicated, and are converted at year-end market exchange rates.
The company selectively enters into interest rate swap agreements to reduce the
impact of interest rate changes on its debt. The interest rate swap agreements
involve exchanges of fixed or floating rate interest payments without the
exchange of the underlying notional amounts. The notional amounts of such
agreements are used to measure the interest to be paid or received and do not
represent the amount of exposure to loss.
In 1987, the company entered into a seven-year notional $15 million interest
rate swap whereby the company paid interest at the 30-day U.S. commercial paper
rate and received interest at a fixed rate of 10.22%. The swap matured in 1994.
In 1987, the company entered into one 5-year and two 7-year currency interest
rate swaps whereby the company exchanged a total of U.S. $86.3 million for
German marks 90 million, French francs 182.4 million and Belgian francs 270
million to hedge net investment in foreign subsidiaries. The agreements provided
for the company to make fixed interest rate payments of 5.37% for the German
mark swap, 8.88% for the French franc swap and 7.8% for the Belgian franc swap
while receiving interest at the 30-day U.S. commercial paper rate. The swaps
hedged net investment in foreign subsidiaries until 1992, at which time they
were redesignated to hedge foreign currency cash flow exposures. Upon
redesignation, the swaps were marked to market through income. The German mark
swap matured in 1992. The two remaining swaps were terminated prior to maturity
in 1993 due to the appreciation of the foreign currencies and a pretax loss of
$0.7 million was recognized in other income and expense.
In 1992, the company entered into two 3-year notional amount $50 million
interest rate swaps, whereby the company paid interest at the six-month London
Interbank Offered Rate (LIBOR) in arrears and received interest at an average
fixed rate of 6.6%. The swaps were terminated prior to maturity in 1993 due to
rising interest rates and a pretax gain of $2.5 million was recognized in
income.
In 1993, the company entered into a five-year notional amount $25 million
interest rate swap, whereby the company paid interest at the six-month LIBOR and
received interest at a fixed rate of 5.575%. The swap was terminated in 1994 due
to rising interest rates and a pretax loss of $0.1 million was recognized in
income.
The company had no interest rate hedging agreements on December 31, 1995.
The foreign currency hedges and the swap agreements are straightforward "plain
vanilla" contracts that have no imbedded options or other terms that involve a
higher level of complexity or risk. The company does not hold or issue financial
instruments for trading purposes.
The realized and unrealized gains and losses relating to the company's
management of foreign currency and interest rate exposures are shown below on a
disaggregated basis for the years ended December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Foreign currency
--------------------------------- Interest
Exposure Net rate
Gain (loss) (millions) effect Contracts/1/ effect/2/ swaps
- --------------------------------------------------------------------------
Year 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income statement:
Realized $(1.1) $(2.4) $(3.5) $ --
Unrealized 0.2 0.3 0.5 --
On balance sheet:
Realized 4.4 (4.2) 0.2 --
Unrealized (0.1) 0.2 0.1 --
Off balance sheet -- -- -- --
Total $ 3.4 $(6.1) $(2.7) $ --
- --------------------------------==========================================
Year 1994
- --------------------------------------------------------------------------
Income statement:
Realized $ (.7) $(2.5) $(3.2) $ .2
Unrealized -- .4 .4 --
On balance sheet:
Realized 2.1 (5.8) (3.7) --
Unrealized 4.8 (.2) 4.6 --
Off balance sheet -- -- -- --
Total $ 6.2 $(8.1) $(1.9) $ .2
- --------------------------------==========================================
Year 1993
- --------------------------------------------------------------------------
Income statement:
Realized $ (.8) $(2.8) $(3.6) $7.0
Unrealized -- (.9) (.9) --
On balance sheet:
Realized -- -- -- --
Unrealized (1.2) .2 (1.0) --
Off balance sheet -- -- -- .4
Total $(2.0) $(3.5) $(5.5) $7.4
- --------------------------------==========================================
</TABLE>
Note 1: The company borrows centrally and enters into foreign currency
intercompany transactions of a long-term investment nature with foreign
subsidiaries. These are fully hedged. Accordingly, gains and losses on these
transactions are fully offset by losses and gains from the related foreign
exchange contracts.
Note 2: Excludes the offsetting effect of interest rate differentials on
underlying intercompany transactions being hedged of $0.1 million in 1995, $0.6
million in 1994 and $0.5 million in 1993.
The company continually monitors the market risk of its foreign currency and
interest rate contracts by marking the positions to market. The counterparties
to these instruments are major international financial institutions and exposure
to any one counterparty is limited. The company uses commercial rating agencies
to evaluate the credit quality of the counterparties, and the company does not
anticipate a loss resulting from any credit risk of these institutions.
As of December 31, 1995, the company had provided $150.8 million in standby
letters of credit and financial guarantees. The company does not normally
provide collateral or other security to support these instruments.
OTHER LONG-TERM LIABILITIES
Other long-term liabilities were $140.6 million in 1995, an increase of $30.5
million from $110.1 million in 1994. Increases of $10.0 million for pension-
related liabilities, $9.4 million for deferred compensation and $7.8 million for
idle leases (resulting from 1995 restructuring actions) were the primary causes
for the increase. Also included in other long-term liabilities were amounts for
workers' compensation, vacation accrual, a reserve for estimated environmental-
remediation liabilities (see "Environmental Matters" on this page) and a reserve
for the estimated potential liability primarily associated with claims pending
in the company's asbestos-related litigation.
Based upon the company's experience with the asbestos-related litigation--as
well as the Wellington Agreement, other settlement agreements with certain of
the company's insurance carriers and an earlier interim agreement with several
primary carriers--a residual reserve amount of $4.7 million is intended to
cover potential liability and settlement costs that are not covered by
insurance, legal and administrative costs not covered under the agreements and
certain other factors that have been involved in the litigation about which
uncertainties exist. Future costs of litigation against the company's insurance
carriers and other legal costs indirectly related to the litigation, expected to
be modest, will be expensed outside the reserve. Amounts, primarily insurance
litigation costs, estimated to be payable within one year are included under
current liabilities.
This reserve does not address any unanticipated reduction in expected insurance
coverage that might result in the future related to pending lawsuits and claims
nor any potential shortfall in such coverage for claims that are subject to the
settlement class action referred to on pages 21.
The fair value of other long-term liabilities was estimated to be $128.9 million
at December 31, 1995, and $104.4 million at December 31, 1994, using a
discounted cash flow approach at discount rates of 5.8% in 1995 and 7.9%
in 1994.
ASBESTOS-RELATED LIABILITIES
Asbestos-related liabilities of $166.0 million represent the estimated potential
liability and defense cost to resolve approximately 59,000 personal injury
claims pending against the company as of December 31, 1995. The company has
recorded an insurance asset (see page 21) in the amount of $166.0 million for
coverage of these claims. See discussion on page 21.
ENVIRONMENTAL MATTERS
In 1995, the company incurred capital expenditures of approximately $1.9 million
for environmental compliance and control facilities and anticipates comparable
annual expenditures for those purposes for the years 1996 and 1997. The company
does not anticipate that it will incur significant capital expenditures in order
to meet the new requirements of the Clean Air Act of 1990 and the final
implementing regulations promulgated by various state agencies.
As with many industrial companies, Armstrong is involved in proceedings under
the Comprehensive Environmental Response, Compensation and Liability Act
("Superfund"), and similar state laws at approximately 16 sites. In most cases,
Armstrong is one of many potentially responsible parties ("PRPs") who have
voluntarily agreed to jointly fund the required investigation and remediation of
each site. With regard to some sites, however, Armstrong disputes the liability,
the proposed remedy or the proposed cost allocation. Armstrong is alleged to
have contributed a significant volume of waste material at a former municipal
landfill site in Volney, New York. There, Armstrong, along with the county and
other PRPs at the site, have voluntarily performed a supplemental study to
evaluate the USEPA's proposed remedy at the site. Discussions with the USEPA are
continuing regarding the appropriate remedy to be implemented. A former county
landfill site in Buckingham County, Virginia, is also alleged to have received
material from a former subsidiary, Thomasville Furniture Industries, Inc.
("Thomasville"). In September 1995, the USEPA ordered Thomasville to implement
the remedy identified in the September 1994, Record of Decision ("ROD"), the
cost of which has been estimated by Thomasville to be approximately $2.2
million. Pursuant to the terms of the company's December 29, 1995, sale of
Thomasville to INTERCO Incorporated, Armstrong has provided to the USEPA a
guarantee of the performance by Thomasville of the required remedial work and
has also entered into a cost-sharing agreement with INTERCO for future costs
relating to the site. Armstrong may also have rights of contribution or
reimbursement from other parties or coverage under applicable insurance
policies. The company is also remediating environmental contamination resulting
from past industrial activity at certain of its current plant sites.
Estimates of future liability are based on an evaluation of currently available
facts regarding each individual site and consider factors including existing
technology, presently enacted laws and regulations and prior company experience
in remediation of contaminated sites. Although current law imposes joint and
several liability on all parties at any Superfund site, Armstrong's contribution
to the remediation of these sites is expected to be limited by the number of
other companies also identified as potentially liable for site costs. As a
result, the company's estimated liability reflects only the company's expected
share. In determining the probability of contribution, the company considers the
solvency of the parties, whether responsibility is being disputed, the terms of
any existing agreements and experience regarding similar matters. The estimated
liabilities do not take into account any claims for recoveries from insurance or
third parties.
Reserves at December 31, 1995, were for potential environmental liabilities that
the company considers probable and for which a reasonable estimate of the
potential liability could be made. Where existing data is sufficient to estimate
the amount of the liability, that estimate has been used; where only a range of
probable liability is available and no amount within that range is more likely
than any other, the lower end of the range has been used. As a result, the
company has accrued, before agreed-to insurance coverage, $8.0 million to
reflect its estimated undiscounted liability for environmental remediation. As
assessments and remediation activities progress at each individual site, these
liabilities are reviewed to reflect additional information as it becomes
available.
Actual costs to be incurred at identified sites in the future may vary from the
estimates, given the inherent uncertainties in evaluating environmental
liabilities. Subject to the imprecision in estimating environmental remediation
costs, the company believes that any sum it may have to pay in connection with
environmental matters in excess of the amounts noted above would not have a
material adverse effect on its financial condition, liquidity or results of
operations.
STOCK OPTIONS
The 1993 Long-Term Stock Incentive Plan, approved by the shareholders in April
1993, replaces the 1984 Long-Term Stock Option Plan for Key Employees. No
further options will be issued under the 1984 Plan.
Awards under the 1993 Long-Term Stock Incentive Plan may be in the form of stock
options, stock appreciation rights in conjunction with stock options,
performance restricted shares and restricted stock awards. No more than
4,300,000 shares of common stock may be issued under the Plan, and no more than
430,000 shares of common stock may be awarded in the form of restricted stock
awards. The Plan extends to April 25, 2003. Pre-1993 grants made under
predecessor plans will be governed under the provisions of those plans. At
December 31, 1995, there were 2,838,862 shares available for grant under the
1993 Plan.
Options are granted to purchase shares at prices not less than the closing
market price of the shares on the dates the options were granted and expire 10
years from the date of grant. The average share price of all options exercised
was $33.48 in 1995, $31.20 in 1994 and $27.41 in 1993.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Changes in option shares outstanding
(thousands except for share price) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Option shares at beginning of year 1,612.1 1,708.4 1,730.7
Options granted 642.8 247.1 245.1
- ------------------------------------------------------------------------
2,254.9 1,955.5 1,975.8
- ------------------------------------------------------------------------
Less: Option shares exercised 390.9 323.1 182.2
Stock appreciation rights
exercised 11.5 8.5 14.0
Options canceled 10.9 11.8 71.2
- ------------------------------------------------------------------------
413.3 343.4 267.4
- ------------------------------------------------------------------------
Option shares at end of year 1,841.6 1,612.1 1,708.4
- ---------------------------------------=================================
Average share price of options $ 43.00 $ 36.82 $ 33.20
Option shares exercisable
at end of year 1,196.7 1,367.1 1,464.2
- ------------------------------------------------------------------------
</TABLE>
The Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," is effective beginning in 1996. Under SFAS No. 123,
employers are encouraged to recognize compensation expense based on the
estimated fair value of employee stock options and other equity instruments at
the date the instruments are granted. However, the statement allows companies to
continue to use the intrinsic value based method under APB Opinion 25, which in
most cases, does not result in a charge to earnings. For 1995, the fair value
based method would have resulted in a charge to earnings of approximately $2
million. The company plans to adopt the additional detailed disclosure
requirements of SFAS No. 123 in 1996.
PERFORMANCE RESTRICTED SHARES
Performance restricted shares issuable under the 1993 Long-Term Stock Incentive
Plan entitle certain key executive employees to earn shares of Armstrong's
common stock, only if the total return of Armstrong stock meets certain
predetermined performance measures during a three-year performance period. At
the end of the performance period, common stock awarded will generally carry an
additional four-year restriction period whereby the shares will be held in
custody by the company until the expiration or termination of the restriction.
Compensation expense will be charged to earnings over the period in which the
restrictions lapse. At the end of 1995, there were 156,510 performance
restricted shares outstanding, with 9,111 accumulated dividend equivalent shares
outstanding. Potential future common stock awards will fall in the range of
210,835 to 491,863 shares of Armstrong common stock. Common stock awards issued
in February 1996, based on the performance period ended December 1995, were
210,835 shares.
RESTRICTED STOCK AWARDS
Restricted stock awards can be used for the purposes of recruitment, special
recognition and retention of key employees. Awards for 76,400 shares of
restricted stock were granted during 1995. At the end of 1995, there were
168,351 restricted shares of common stock outstanding with 2,646 accumulated
dividend equivalent shares.
TREASURY SHARES
Treasury shares changes for 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Years ended
December 31 (thousands) 1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Common shares
Balance at beginning of year 14,602.1 14,656.5 14,750.6
Stock purchases/(1)/ 795.7 272.4 2.4
Stock issuance activity, net (383.7) (326.8) (96.5)
- ------------------------------------------------------------------
Balance at end of year 15,014.1 14,602.1 14,656.5
- ----------------------------------================================
</TABLE>
/(1)/Includes small unsolicited buybacks of shares, shares received under share
tax withholding transactions and open market block purchases of stock through
brokers.
In November 1994, the Board of Directors authorized the company to repurchase up
to 2.5 million shares of its common stock, either in the open market or in
negotiated transactions. During 1995, the company repurchased 782,110 shares
under this program with a cash outlay of $40.6 million. Since the inception of
the program, the company has repurchased 1,052,110 shares with a total cash
outlay of $51.1 million as of December 31, 1995.
PREFERRED STOCK PURCHASE RIGHTS PLAN
In 1986, the Board of Directors declared a distribution of one right for each
share of the company's common stock outstanding on and after March 21, 1986.
Following the two-for-one stock split later in 1986, one-half of one right
attaches to each share of common stock outstanding. In general, the rights
become exercisable at $175 per right for a fractional share of a new series of
Class A preferred stock (which will differ from the Series A Convertible
Preferred Stock issued to the Employee Stock Ownership Plan described on page
21) 10 days after a person or group either acquires beneficial ownership of
shares representing 20% or more of the voting power of the company or announces
a tender or exchange offer that could result in such person or group
beneficially owning shares representing 28% or more of the voting power of the
company. If thereafter any person or group becomes the beneficial owner of 28%
or more of the voting power of the company or if the company is the surviving
company in a merger with a person or group that owns 20% or more of the voting
power of the company, then each owner of a right (other than such 20%
stockholder) would be entitled to purchase shares of common stock having a value
equal to twice the exercise price of the right. Should the company be acquired
in a merger or other business combination, or sell 50% or more of its assets or
earnings power, each right would entitle the holder to purchase, at the exercise
price, common shares of the acquirer having a value of twice the exercise price
of the right. The exercise price was determined on the basis of the Board's view
of the long-term value of the company's common stock. The rights have no voting
power nor do they entitle a holder to receive dividends. At the company's
option, the rights are redeemable prior to becoming exercisable at five cents
per right. The rights expire on March 21, 1996. The Preferred Stock Purchase
Rights Plan has been renewed for a further 10-year period with essentially the
same terms and at an exercise price of $300 per right.
LITIGATION AND RELATED MATTERS
ASBESTOS-RELATED LITIGATION
The company is one of many defendants in pending lawsuits and claims involving,
as of December 31, 1995, approximately 59,000 individuals alleging personal
injury from exposure to asbestos-containing products. Included in the above
number are approximately 12,800 lawsuits and claims from the approximately
87,000 individuals who have opted out of the settlement class action referred to
below. About 14,300 claims from purported class members have been received as of
December 31, 1995. Nearly all the pending personal injury suits and claims seek
compensatory damages and except for those claims covered by the settlement class
action, seek punitive damages arising from alleged exposures to asbestos-
containing insulation products used, manufactured or sold by the company. The
company discontinued the sale of all asbestos-containing insulation products in
1969. Although a large number of suits and claims pending in prior years have
been resolved, neither the rate of future dispositions nor the number of future
potential unasserted claims can be reasonably predicted.
The Judicial Panel for Multidistrict Litigation ordered the transfer of all
pending federal cases to the Eastern District Court in Philadelphia for pretrial
purposes. Periodically some of those cases are released for trial. Pending state
court cases have not been directly affected by the transfer. A few state judges
have consolidated numbers of asbestos-related personal injury cases for trial, a
process the company generally opposes as being unfair.
SETTLEMENT CLASS ACTION
A settlement class action which includes essentially all future asbestos-related
personal injury claims against members of the Center for Claims Resolution
("Center") referred to below was filed in Philadelphia on January 15, 1993, in
the Eastern District of Pennsylvania. The settlement class action is designed to
establish a nonlitigation system for the resolution of essentially all future
asbestos-related personal injury claims against the Center members including
this company. Other companies that are not Center members may be able to join
the class action later. The class action proposes a voluntary settlement that
offers a method for prompt compensation to claimants who were occupationally
exposed to asbestos if they meet certain exposure and medical criteria.
Compensation amounts are derived from historical settlement data. Under limited
circumstances and in limited numbers, qualifying claimants may choose to
arbitrate or litigate certain claims after their claims are processed within the
system. No punitive damages will be paid under the proposed settlement. The
settlement is designed to minimize transactional costs, including attorneys'
fees, and to relieve the courts of the burden of handling future asbestos-
related personal injury claims. Each member of the Center has an obligation for
its own fixed share in this proposed settlement. The Court has ruled that
claimants who neither filed a lawsuit against Center members nor filed an
exclusion request form are subject to the class action. The class action does
not include claims deemed otherwise not covered by the class action settlement
or claims for property damage. Annual case flow caps and compensation ranges for
each compensable medical category including amounts paid even more promptly
under the simplified payment procedures have been established for an initial
period of 10 years. Case flow caps may be increased if they were substantially
exceeded during the previous five-year period. The case flow figures and annual
compensation levels are subject to renegotiation after the initial 10-year
period. On August 16, 1994, the Court tentatively approved the settlement. The
opt outs from the settlement class action are not claims as such but rather are
reservation of rights to possibly bring claims in the future. The settlement
will become final only after certain issues, including issues related to
insurance coverage, are resolved and appeals are exhausted. This process could
take up to several years. The Center members have stated their intention to
resolve over a five-year period the personal injury claims that were pending
when the settlement class action was filed. A significant number of these
pending claims have been finally or tentatively settled with a number of the
plaintiffs' counsel.
The company is seeking agreement from its insurance carriers or a binding
judgment against them that the class action will not jeopardize existing
insurance coverage; and the class action is contingent upon such an agreement or
judgment. With respect to carriers that do not agree, this matter will be
resolved either by alternative dispute resolution, in the case of the insurance
carriers that subscribed to the Wellington Agreement referred to below, or else
by litigation.
INSURANCE SETTLEMENTS
The pending personal injury lawsuits and claims against the company are being
paid by insurance proceeds under the 1985 Agreement Concerning Asbestos-Related
Claims (the "Wellington Agreement") and by insurance proceeds from other
insurance settlements noted below. A new claims handling organization, known as
the Center for Claims Resolution, was created in October 1988 by Armstrong and
20 other companies to replace the Wellington Asbestos Claims Facility (the
"Facility"), which has since been dissolved. Generally, the dissolution of the
Facility does not essentially affect the company's overall Wellington Agreement
insurance settlement. That settlement provided for a final resolution of nearly
all disputes concerning insurance for asbestos-related personal injury claims as
between the company and three of its primary insurers and eight of its excess
insurers. The one primary carrier that did not sign the Wellington Agreement
paid into the Wellington Facility and settled with the company in March 1989
nearly all outstanding issues relating to insurance coverage for asbestos-
related personal injury and property damage claims. In addition, one of the
company's large excess-insurance carriers entered into a settlement agreement in
1986 with the company under which payments for personal injury claims were made
through the Wellington Facility, and this carrier continues to make payments for
such claims through the Center for Claims Resolution. Other excess-insurance
carriers also have entered into settlement agreements with the company which
complement Wellington including a settlement in 1994 that was entered into with
a significant excess carrier. ACandS, Inc., a former subsidiary of the company,
which for certain insurance periods has coverage rights under some company
insurance policies, subscribed to the Wellington Agreement but did not become a
member of the Center for Claims Resolution.
One excess carrier (providing $25 million of insurance coverage) and certain
companies in an excess carrier's block of coverage (involving several million
dollars of coverage) have become insolvent. Certain carriers providing excess
level coverage solely for property damage claims also have become insolvent. The
several million dollars of coverage referred to has been paid by company
reserves. The $25 million insolvency gap is being covered by other available
insurance coverage. The company and ACandS, Inc., have negotiated a settlement
agreement which reserves for ACandS, Inc., a certain amount of insurance from
joint policies solely for its use in the payment of costs associated with the
asbestos-related personal injury and property damage claims.
CENTER FOR CLAIMS RESOLUTION
The Center operates under a concept of allocated shares of liability payments
and defense costs for its members based primarily on historical experience, and
it defends the members' interests and addresses pending and future claims in a
manner consistent with the prompt, fair resolution of meritorious claims. In
late 1991, the Center sharing formula was revised to provide that members will
pay only on claims in which the member is a named defendant. At that time, this
change caused a slight increase in the company's share. Subsequent share
adjustments by the Center have resulted in an increased liability share for the
company in certain areas. As to future claims resolved under the settlement
class action, the company has agreed to a percentage of each resolution payment.
Although the Center members and their participating insurers were not obligated
beyond one year, the insurance companies are expected to commit to the
continuous operation of the Center for an eighth year and to the funding of the
Center's operating expenses. With the filing of the settlement class action, the
Center will continue to process pending claims and will handle the program for
processing future asbestos-related personal injury claims if the class action
settlement is finally approved by the courts. No forecast can be made for future
years regarding either the rate of pending and future claims resolution by the
Center or the rate of utilization of company insurance.
PROPERTY DAMAGE LITIGATION
The company is also one of many defendants in a total of 32 pending lawsuits and
claims, including class actions, as of December 31, 1995, brought by public and
private building owners. These lawsuits and claims include allegations of damage
to buildings caused by asbestos-containing products and generally claim
compensatory and punitive damages and equitable relief, including reimbursement
of expenditures, for removal and replacement of such products. These suits and
claims appear to be aimed at friable (easily crumbled) asbestos-containing
products although allegations in some suits encompass other asbestos-containing
products, including allegations with respect to previously installed asbestos-
containing resilient flooring. The company vigorously denies the validity of the
allegations against it contained in these suits and claims. Increasing defense
costs, paid by the company's insurance carriers either under reservation or
settlement arrangement, will be incurred. These suits and claims are not
encompassed within the Wellington Agreement nor are they being handled by the
Center for Claims Resolution.
INSURANCE COVERAGE SUIT
In 1989, Armstrong concluded the trial phase of a lawsuit in California state
court to resolve disputes concerning certain of its insurance carriers'
obligations with respect to personal injury and property damage liability
coverage, including defense costs, for alleged personal injury and property
damage asbestos-related lawsuits and claims. The Court issued final decisions
generally in the company's favor, and the carriers appealed. The California
Court of Appeal substantially upheld the trial court's final decisions, and the
insurance carriers petitioned the California Supreme Court to hear the asbestos-
related personal injury and property damage coverage issues. The California
Supreme Court accepted review pending its review of related issues in another
California case. The California Supreme Court ruled favorably to the insured
company on the issues in that other case and recently referred the company's
case to the Court of Appeal for further review. Since the company's 1994
settlement with a significant excess carrier, only one excess carrier providing
products coverage for personal injury claims remains in the personal injury
coverage litigation. Based upon the trial court's favorable final decisions in
important phases of the trial relating to coverage for asbestos-related personal
injury and property damage lawsuits and claims, including the favorable decision
by the California Court of Appeal, and a review of the coverage issues by its
counsel, the company believes it has a substantial legal basis for sustaining
its right to defense and indemnification. For the same reasons, the company also
believes that it is probable that claims by the several primary carriers for
recoupment of defense expenses in the property damage litigation, which the
carriers also appealed, will ultimately not be successful.
NONPRODUCTS INSURANCE COVERAGE
Nonproducts insurance coverage is included in the company's primary insurance
policies and certain excess policies for nonproducts claims. Nonproducts claims
include claims that may have arisen out of exposure during installation of
asbestos materials or before control of such materials has been relinquished.
Negotiations are currently underway with several of the company's primary
carriers to resolve the nonproducts coverage issues and to establish entitlement
to and the amount of such coverage. The additional coverage potentially
available to pay claims categorized as nonproducts is substantial and, at the
primary level, includes defense costs in addition to indemnity limits. The
company is entitled to pursue alternative dispute resolution proceedings against
the primary and certain excess carriers to resolve the nonproducts coverage
issues.
CONCLUSIONS
The company does not know how many claims will be filed against it in the
future, nor the details thereof or of pending suits not fully reviewed, nor the
expense and any liability that may ultimately result therefrom, nor does the
company know whether the settlement class action will ultimately succeed, the
number of individuals who ultimately will be deemed to have opted out or who
could file claims outside the settlement class action, nor the annual claims
caps to be negotiated after the initial 10-year period for the settlement class
action or the compensation levels to be negotiated for such claims, nor the
scope of its nonproducts coverage ultimately deemed available or the ultimate
conclusion of the California insurance coverage litigation. Subject to the
foregoing and based upon its experience and other factors also referred to
above, the company believes that the estimated $166 million in liability and
defense costs recorded on the 1995 balance sheet will be incurred to resolve an
estimated 59,000 asbestos-related personal injury claims pending against the
company as of December 31, 1995. These claims include claims that were filed for
the period from January 1, 1994, to January 24, 1994, and which were previously
treated as potentially included within the settlement class action, and those
claims filed by claimants who have been identified as having filed exclusion
request forms to opt out of the settlement class action. A ruling from the Court
established January 24, 1994, as the date after which any asbestos-related
personal injury claims filed by non-opt-out claimants against the company or
other members of the Center are subject to the settlement class action. In
addition to the currently estimated pending claims and any claims filed by
individuals deemed to have opted out of the settlement class action, any claims
otherwise determined not to be subject to the settlement class action will be
resolved outside the settlement class action. The company does not know how many
such claims ultimately may be filed by claimants deemed to have opted out of
the class action or by claimants otherwise determined not to be subject to the
settlement class action.
An insurance asset in the amount of $166 million recorded on the 1995 balance
sheet reflects the company's belief in the availability of insurance in this
amount to cover the liability in like amount referred to above. Such insurance
has either been agreed upon or is probable of recovery through negotiation,
alternative dispute resolution or litigation. The company also notes that, based
on maximum mathematical projections covering a 10-year period from 1994 to 2004,
its estimated cost in the settlement class action reflects a reasonably possible
additional liability of $245 million. A portion of such additional liability may
not be covered by the company's ultimately applicable insurance recovery.
However, the company believes that any after-tax impact on the difference
between the aggregate of the estimated liability for pending cases and the
estimated cost for the 10-year maximum mathematical projection, and the probable
insurance recovery, would not be material either to the financial condition of
the company or to its liquidity, although it could be material to earnings if it
is determined in a future period to be appropriate to record a reserve for this
difference. The period in which such a reserve may be recorded and the amount of
any reserve that may be appropriate cannot be determined at this time. Subject
to the uncertainties and limitations referred to above and based upon its
experience and other factors, the company believes it is probable that
substantially all of the expenses and any liability payments associated with the
asbestos-related property damage claims will be paid under an existing interim
agreement, by insurance coverage settlement agreements and through additional
coverage reasonably anticipated from the outcome of the insurance litigation.
Even though uncertainties still remain as to the potential number of unasserted
claims, liability resulting therefrom and the ultimate scope of its insurance
coverage, after consideration of the factors involved, including the Wellington
Agreement, the referenced settlements with other insurance carriers, the results
of the trial phase and the intermediate appellate stage of the California
insurance coverage litigation, the remaining reserve, the establishment of the
Center, the settlement class action, and its experience, the company believes
the asbestos-related lawsuits and claims against the company would not be
material either to the financial condition of the company or to its liquidity,
although as stated above, the net effect of any future liabilities recorded in
excess of insurance assets could be material to earnings in such future period.
Additional details concerning this litigation are set forth in the company's
Form 10K available to any shareholder upon request.
TINS LITIGATION
In October 1992, the U.S. Court of Appeals for the Third Circuit issued its
decision in a lawsuit brought by The Industry Network System, Inc. (TINS), and
its founder, Elliot Fineman. The plaintiffs alleged that in 1984 Armstrong had
engaged in antitrust and tort law violations and breach of contract which
damaged TINS' ability to do business. The Court of Appeals sustained the U.S.
District Court's decision that the April 1991 jury verdict against Armstrong in
the amount of $224 million including $200 million in punitive damages should be
vacated, and that there should be a new trial on all claims remaining after the
appeal. The Court of Appeals sustained the District Court ruling that the jury's
verdict had reflected prejudice and passion due to the improper conduct of
plaintiffs' counsel and was clearly contrary to the weight of the evidence. The
Court of Appeals affirmed or did not disturb the trial court's order dismissing
all of TINS' claims under Section 2 of the Sherman Act for alleged conspiracy,
monopolization and attempt to monopolize and dismissing all of Mr. Fineman's
personal claims. These claims were not the subject of a new trial. However, the
Court of Appeals reversed the trial court's directed verdict for Armstrong on
TINS' claim under Section 1 of the Sherman Act, reversed the summary judgment in
Armstrong's favor on TINS' claim for breach of contract based on a 1984
settlement agreement, and reversed the judgment n.o.v. for Armstrong on TINS'
tortious interference and related punitive damage claims. These claims were the
subject of a new trial.
A second trial of the TINS' litigation began on April 26, 1994, in the Newark,
New Jersey, District Court. TINS asked for damages in a range of $17 to $56
million. A jury found that Armstrong had breached its contract with TINS and had
interfered with TINS' contractual business relationship with an Armstrong
wholesaler but that Armstrong's conduct did not damage TINS and awarded no
compensatory or nominal money damages. Following oral argument on November 14,
1994, TINS' motion for a partial or complete new trial was denied by the
District Court and TINS filed an appeal with the U.S. Court of Appeals for the
Third Circuit. On October 11, 1995, the case was argued before a panel of the
U.S. Court of Appeals for the Third Circuit, and on October 20, 1995, the Court
issued a Judgment Order affirming the 1994 District Court verdict in favor of
the company. On November 2, 1995, TINS filed a Petition for Rehearing by the
same panel which was denied on December 5, 1995. On January 24, 1996, TINS filed
a motion seeking further appellate review by the Circuit Court.
<TABLE>
<CAPTION>
Quarterly financial information (millions except for per-share data) First Second Third Fourth Total year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995* Net sales $502.2 $536.0 $549.0 $497.7 $2,084.9
Gross profit 166.7 177.9 184.6 146.0 675.2
Earnings (loss) from continuing businesses 26.5 47.4 14.4 (74.7) 13.6
Net earnings 34.4 52.7 19.4 16.8 123.3
Per share of common stock:**
Primary: Earnings (loss) from continuing businesses 0.61 1.17 0.29 (2.09) (0.02)
Net earnings 0.82 1.31 0.42 0.35 2.90
Fully diluted: Earnings (loss) from continuing businesses 0.57 1.05 0.28 (2.09) (0.02)
Net earnings 0.75 1.18 0.40 0.34 2.67
Dividends per share of common stock 0.32 0.36 0.36 0.36 1.40
Price range of common stock--low 38 3/8 43 50 1/4 52 7/8 38 3/8
Price range of common stock--high 48 1/2 52 60 1/2 64 1/8 64 1/8
- ----------------------------------------------------------------------------------------------------------------------------------
1994* Net sales $461.1 $508.6 $525.6 $510.4 $2,005.7
Gross profit 153.9 180.6 190.9 154.8 680.2
Earnings from continuing businesses 42.5 48.7 56.6 39.4 187.2
Net earnings 48.0 53.3 61.6 47.5 210.4
Per share of common stock:**
Primary: Earnings from continuing businesses 1.03 1.19 1.41 0.93 4.60
Net earnings 1.17 1.31 1.54 1.17 5.22
Fully diluted: Earnings from continuing businesses 0.93 1.07 1.25 0.85 4.10
Net earnings 1.06 1.18 1.37 1.04 4.64
Dividends per share of common stock 0.30 0.32 0.32 0.32 1.26
Price range of common stock--low 49 3/8 43 3/8 43 36 36
Price range of common stock--high 57 1/2 57 1/4 53 7/8 46 5/8 57 1/2
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 1994 and the first, second and third quarters of 1995 have been restated for
the results of the discontinued business and formation of the ceramic tile
business combination.
**The sum of the quarterly earnings per-share data does not always equal the
total year amounts due to changes in the average shares outstanding and, for
fully diluted data, the exclusion of the antidilutive effect in certain
quarters.
FOURTH QUARTER 1995 COMPARED WITH FOURTH QUARTER 1994
Sales from continuing businesses of $497.7 million decreased 2.5% from the
$510.4 million recorded in 1994 primarily due to the continued weakness in U.S.
residential end-use markets. Sales within North America decreased by 2.6%. The
European area continued its growth with a sales increase of 3.3%, about three
fifths of which was due to the translation of foreign currencies to weaker U.S.
dollar.
The loss from continuing businesses was $74.7 million, or $2.09 per share on
both a primary and fully diluted basis, compared with net earnings of $39.4
million in fourth quarter 1994. Fourth-quarter 1994 earnings per share from
continuing businesses were $0.93 on a primary basis and $0.85 on a fully diluted
basis.
Included in the 1995 loss from continuing businesses is an after-tax loss
of $116.8 million ($2.73 per share on a fully diluted basis) related to the
combination of Armstrong's ceramic tile business with Dal-Tile International
Inc. Armstrong received 37% of the combined Dal-Tile stock in exchange for its
ceramic tile operations and $27.6 million in cash.
The loss from continuing businesses resulted from the loss on the business com-
bination, decreased sales volume and higher cost of goods sold. Cost of goods
sold, when expressed as a percent of sales, increased to 70.6% from the 69.7% of
1994's fourth quarter. This increase reflects the start-up costs for the new
insulation products plant in Mebane, North Carolina, and unfavorable mixes in
U.S. residential flooring sales. Also impacting operating income was lower
unallocated corporate expense due to decreased incentive pay and consulting
expenses.
Operating income decreased in all segments except building products. Operating
income in the floor coverings segment was $35.1 million compared with $41.1
million in 1994. In the resilient flooring part of this segment, operating
income was lower mainly due to decreased sales levels in higher margin,
professionally installed residential sheet products. Worldwide building products
fourth-quarter operating income was $19.8 million compared with 1994 fourth-
quarter income of $16.9 million. This increase was aided by higher sales in
Europe which more than offset the North American activity which flattened with
general economic weakness. Industry products operating income of $5.7 million
declined when compared with the $8.3 million for the similar period in 1994. The
1995 fourth-quarter results were impacted by plant start-up costs and the need
to meet competitive selling prices.
The 1995 fourth-quarter effective tax rate on the loss was 40.1% compared with
23.1% on last year's fourth-quarter earnings. Excluding the tax benefit on the
loss related to the ceramic tile business combination, the 1995 effective tax
rate was 29.7%. Last year's low effective tax rate included tax benefits
related to foreign and state income tax expense that were reduced as a result of
realization of previously unrecognized deferred tax assets and lower withholding
taxes on foreign dividends.
In December 1995, the company sold the stock of Thomasville Furniture
Industries, Inc., to INTERCO Incorporated. As a result of the sale, an after-tax
gain of $83.9 million, or $2.24 per share on primary basis and $1.96 on a fully
diluted basis, was recorded. The fourth-quarter earnings from this discontinued
business were $7.5 million in 1995, or $0.20 per share on a primary basis and
$0.18 on a fully diluted basis. 1994 fourth-quarter Thomasville earnings were
$8.1 million, or $0.22 per share on primary basis and $0.19 on a fully diluted
basis.
Net earnings were $16.8 million in 1995 compared with $47.5 million in 1994. Net
earnings per common share were $0.35 on a primary basis and $0.34 on a fully
diluted basis in the 1995 quarter, compared with 1994's $1.17 on a primary
basis and $1.04 on a fully diluted basis.
-21-
<PAGE>
Independent auditors' report
The Board of Directors and Shareholders,
Armstrong World Industries, Inc.:
We have audited the consolidated financial statements of Armstrong World
Industries, Inc. and its subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the related supplementary information on depreciation rates and
schedule listed in the accompanying index. These consolidated financial
statements and supplementary information and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and supplementary information and schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Armstrong
World Industries, Inc. and subsidiaries at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion the related supplementary
information and schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects, the
information set forth therein.
KPMG PEAT MARWICK LLP
Philadelphia, PA
February 16, 1996
-22-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Directors of the Registrant
- ---------------------------
The information appearing in the tabulation in the section captioned "Election
of Directors" on pages 1-5 of the Company's 1996 Proxy Statement is incorporated
by reference herein.
Executive Officers of the Registrant
- ------------------------------------
George A. Lorch* -- Age 54; Chairman of the Board since April 25, 1994; and
President (Chief Executive Officer) since September 7, 1993; Executive Vice
President 1988-1993.
E. Allen Deaver* -- Age 60; Executive Vice President since March 1, 1988.
Henry A. Bradshaw -- Age 60; President, Worldwide Building Products Operations
since November 22, 1994; Group Vice President, Worldwide Building Products
Operations, 1993-1994; Group Vice President, Building Products Operations, 1990-
1993.
Stephen E. Stockwell -- Age 50; President, Corporate Retail Accounts Division
since November 22, 1994; Vice President, Corporate Retail Accounts July 1, 1994,
through November 22, 1994; General Manager, Residential Sales, Floor Division
January 26, 1994 through July 1, 1994; Field Sales Manager, Floor Division,
1988-1994.
Ulrich J. Weimer -- Age 51; President, Armstrong Insulation Products since
February 1, 1996; Geschaftsfuhrer, Armstrong World Industries G.m.b.H. since
December 11, 1995; General Manager, Worldwide Insulation Products Operations
February 1, 1993 through June 1, 1995; General Manager, Worldwide Insulation,
Armstrong Europe Services, August 1, 1991 through January 31, 1993; General
Manager, Industry Products Operations, Armstrong Europe Services, January 1,
1991 through July 31, 1991.
Douglas L. Boles -- Age 38; Senior Vice President, Human Resources since March
1, 1996; and the following positions with PepsiCo (Consumer Products): Vice
President of Human Resources, Pepsi Foods International Europe Group (U.K.) June
1995-February 1996; Vice President of Human Resources, Walkers Snack Foods
(U.K.) March 1994-June 1995; Vice President of Human Resources, Snack Ventures
Europe (Netherlands) September 1992-March 1994; Vice President of Human
Resources, PepsiCola International, Latin America Division (Brazil) October
1989-September 1992.
Larry A. Pulkrabek -- Age 56; Senior Vice President, Secretary and General
Counsel since February 1, 1990.
Frank A. Riddick, III -- Age 39; Senior Vice President, Finance and Chief
Financial Officer since April 1995; and the following positions with FMC
Corporation, Chicago, IL (chemicals, machinery): Controller May 1993-March
1995; Treasurer December 1990-May 1993.
David J. Feight -- Age 53; Vice President and Director of Business Development
since May 1, 1994; Team Leader PATH process 1993-1994; General Manager Sales and
Marketing, Building Products Operations 1988-1993.
-23-
<PAGE>
Stephen C. Hendrix -- Age 55; Treasurer since January 25, 1993; and the
following positions with SmithKline Beecham Corporation (Pharmaceuticals,
Consumer Products): Vice President and Treasurer, 1989-1991.
Bruce A. Leech, Jr. -- Age 53; Controller since February 1, 1990.
All information presented above is current as of March 1, 1996. The term of
office for each Executive Officer in his present capacity is one year, and each
such Executive Officer will serve until reelected or until a successor is
elected at the annual meeting of directors which follows the annual
shareholders' meeting. Each Executive Officer has been employed by the Company
in excess of five continuous years with the exception of Messrs. Boles, Hendrix
and Riddick. Members of the Executive Committee of the Board of Directors as of
March 1, 1996, are designated by an asterisk(*) following each of their names.
The Executive Committee consists of those Executive Officers who serve as
Directors.
Item 11. Executive Compensation
- --------------------------------
The information appearing in the sections captioned "Directors' Compensation" on
pages 5-6 and "Compensation Committee Interlocks and Insider Participation,"
"Executive Officers' Compensation," (other than the information contained under
the subcaption "Performance Graph") and "Retirement Income Plan Benefits," on
pages 11-16 of the Company's 1996 Proxy Statement is incorporated by reference
herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
The information appearing in the sections captioned "Stock Ownership of Certain
Beneficial Owners" on page 17 and "Directors' and Executive Officers' Security
Ownership" on page 7 of the Company's 1996 Proxy Statement is incorporated by
reference herein.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Not applicable.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
The financial statements and schedules filed as a part of this Annual Report on
Form 10-K are listed in the "Index to Financial Statements and Schedules" on
page 29.
-24-
<PAGE>
a. The following exhibits are filed as a part of this Annual Report on
Form 10-K:
Exhibits
- --------
No. 3(a) Registrant's By-laws, as amended effective February 27,
1995, are incorporated by reference herein from registrant's
1994 Annual Report on Form 10-K wherein they appear as
Exhibit 3(a).
No. 3(b) Registrant's restated Articles of Incorporation, as amended,
are incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein they appear as Exhibit
3(b).
No. 4(a) Registrant's Rights Agreement effective as of March 21,
1996, between the registrant and Chemical Mellon Shareholder
Services, L.L.C., as Rights Agent, relating to the
registrant's Preferred Stock Purchase Rights is incorporated
by reference herein from registrant's registration statement
on Form 8-A/A wherein it appeared as Exhibit 1.
No. 4(b) Registrant's Employee Stock Ownership Plan ("Share In
Success Plan") as amended, is incorporated by reference
herein from the registrant's 1992 Annual Report on Form 10-K
wherein it appears as Exhibit 4(b).
No. 4(c) Copy of Indenture, dated as of March 15, 1988, between the
registrant and Morgan Guaranty Trust Company of New York, as
Trustee, as to which The First National Bank of Chicago is
successor trustee.
No. 4(d) Registrant's Supplemental Indenture dated as of October 19,
1990, between the registrant and The First National Bank of
Chicago, as Trustee, is incorporated by reference herein
from registrant's 1994 Annual Report on Form 10-K wherein it
appears as Exhibit 4(d).
No. 10(i)(a) Agreement Concerning Asbestos-Related Claims dated June 19,
1985, (the "Wellington Agreement") among the registrant and
other companies is incorporated by reference herein from the
registrant's 1993 Annual Report on Form 10-K wherein it
appears as Exhibit 10(i)(a).
No. 10(i)(b) Producer Agreement concerning Center for Claims Resolution
dated September 23, 1988, among the registrant and other
companies as amended, is incorporated herein by reference
from the registrant's 1992 Annual Report on Form 10-K
wherein it appears as Exhibit 10(i)(b).
No. 10(i)(c) Credit Agreement between the registrant, certain banks
listed therein, and Morgan Guaranty Trust Company of New
York, as Agent, dated as of February 7, 1995, providing for
a $200,000,000 credit facility, is incorporated by reference
herein from registrant's 1994 Annual Report on Form 10-K
wherein it appears as Exhibit 10(i)(c).
-25-
<PAGE>
No. 10(iii)(a) Copy of registrant's Long-Term Stock Option Plan for Key
Employees, as amended. *
No. 10(iii)(b) Registrant's Deferred Compensation Plan for Nonemployee
Directors, as amended, is incorporated by reference herein
from registrant's 1994 Annual Report on Form 10-K wherein it
appears as Exhibit 10(iii)(b). *
No. 10(iii)(c) Registrant's Directors' Retirement Income Plan, as amended,
is incorporated by reference herein from the registrant's
1992 Annual Report on Form 10-K wherein it appears as
Exhibit 10(iii)(d). *
No. 10(iii)(d) Registrant's Management Achievement Plan for Key Executives,
as amended, is incorporated by reference herein from
registrant's 1994 Annual Report on Form 10-K wherein it
appears as Exhibit 10(iii)(d). *
No. 10(iii)(e) Registrant's Retirement Benefit Equity Plan (formerly known
as the Excess Benefit Plan), as amended, is incorporated by
reference herein from the registrant's 1992 Annual Report on
Form 10-K wherein it appears as Exhibit 10(iii)(f). *
No. 10(iii)(f) Armstrong Deferred Compensation Plan, as amended, is
incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein it appears as Exhibit
10(iii)(f). *
No. 10(iii)(g) Registrant's Employment Protection Plan for Salaried
Employees of Armstrong World Industries, Inc., as amended,
is incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein it appears as Exhibit
10(iii)(g). *
No. 10(iii)(h) Registrant's Restricted Stock Plan For Nonemployee Directors
is incorporated by reference herein from the Company's 1995
Proxy Statement wherein it appears as Exhibit A. *
No. 10(iii)(i) Registrant's Severance Pay Plan for Salaried Employees, is
incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein it appears as Exhibit
10(iii)(i). *
No. 10(iii)(j) Registrant's 1993 Long-Term Stock Incentive Plan is
incorporated by reference herein from the registrant's 1993
Proxy Statement wherein it appears as Exhibit A.*
No. 11 A statement regarding computation of per share earnings on
both primary and fully diluted bases is set forth in the
Financial Statement Schedules on pages 30 of this Annual
Report on Form 10-K.
No. 21 List of the registrant's domestic and foreign subsidiaries.
No. 24 Consent of Independent Auditors.
No. 25 Powers of Attorney and authorizing resolutions.
-26-
<PAGE>
No. 27 Financial Data Statement
No. 28(ii)(a) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Retirement Savings Plan For
Salaried Employees of Armstrong World Industries, Inc. is
herewith filed with the Commission.
No. 28(ii)(b) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Retirement Savings Plan For
Hourly-Paid Employees of Armstrong World Industries, Inc. is
herewith filed with the Commission.
No. 28(ii)(c) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Retirement Savings Plan For
Hourly-Paid Employees of Thomasville Furniture, Inc. is
herewith filed with the Commission.
No. 28(ii)(d) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Armstrong World Industries, Inc.
Employee Stock Ownership Plan ("Share In Success Plan") is
herewith filed with the Commission.
No. 28(ii)(e) Copy of Annual Report on American Olean Tile Company, Inc.
Savings Plan for Production & Maintenance Employees for the
fiscal year ended September 30, 1995, is herewith filed with
the Commission.
No. 28(ii)(f) Copy of Annual Report on American Olean Tile Company, Inc.
Savings Plan for Salaried Employees for the fiscal year
ended September 30, 1995, is herewith filed with the
Commission.
* Compensatory Plan
-27-
<PAGE>
b. During the last quarter of 1995, no reports on Form 8-K were filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARMSTRONG WORLD INDUSTRIES, INC.
--------------------------------
(Registrant)
By /s/ George A. Lorch
-----------------------------
Chairman
Date March 25, 1996
---------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Directors and Principal Officers of the registrant:
George A. Lorch Chairman and President (Principal Executive
Officer)
Frank A. Riddick, III Senior Vice President, Finance
(Principal Financial Officer)
Bruce A. Leech, Jr. Controller
(Principal Accounting Officer)
H. Jesse Arnelle Director
Van C. Campbell Director
E. Allen Deaver Director
Ursula F. Fairbairn Director By /s/George A. Lorch
Michael C. Jensen Director ----------------------
James E. Marley Director (George A. Lorch as
Robert F. Patton Director attorney-in-fact and
J. Phillip Samper Director on his own behalf)
Jerre L. Stead Director
As of March 25, 1996
-28-
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC. AND SUBSIDIARIES
Index to Financial Statements and Schedules
The following consolidated financial statements and Financial Review are filed
as part of this Annual Report on Form 10-K:
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Earnings for the Years Ended December 31,
1995, 1994, and 1993
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994, and 1993
Consolidated Statements of Shareholders Equity for the Years Ended December
31, 1995, 1994, and 1993
The following additional financial data should be read in conjunction with the
financial statements. Schedules not included with this additional data have
been omitted because they are not applicable or the required information is
presented in the financial statements or the financial review.
Additional Financial Data Page No.
------------------------- --------
Supplementary information to financial
review
Computation for Primary Earnings 30
per Share
Computation for Fully Diluted 31
Earnings per Share
Depreciation Rates 32
Schedule II - Valuation and Qualifying Reserves 33
-29-
<PAGE>
Computation for Primary Earnings Per Share
for Years ended December 31
(Amounts in millions except for per-share data)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Common Stock and Common Stock Equivalents
- -----------------------------------------
Average number of common shares outstanding
including shares issuable under stock options 37.6 37.6 37.7
==== ==== ====
Earnings Per Share from Continuing
- ----------------------------------
Businesses
----------
Earnings from continuing businesses $ 13.6 $187.2 $ 49.0
Less:
Dividend requirement on Series A convertible
preferred stock 18.8 19.0 19.2
Plus:
Tax benefit on dividends paid on unallocated
preferred shares 4.5 4.9 5.3
------ ------ ------
Earnings (loss) from continuing businesses $ (.7) $173.1 $ 35.1
====== ====== ======
Earnings (loss) from continuing businesses
per share of common stock $ (.02) $ 4.60 $ .93
====== ====== ======
Net Earnings Per Share
- ----------------------
Net earnings $123.3 $210.4 $ 63.5
Less:
Dividend requirement on Series A convertible
preferred stock 18.8 19.0 19.2
Plus:
Tax benefit on dividends applicable to
unallocated preferred shares 4.5 4.9 5.3
------ ------ ------
Net earnings application to common stock $109.0 $196.3 $ 49.6
====== ====== ======
Net earnings per share of common stock $ 2.90 $ 5.22 $ 1.32
====== ====== ======
</TABLE>
-30-
<PAGE>
Computation for Fully Diluted Earnings Per Share
for Years ended December 31
(Amounts in millions except for per-share data)
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Common Stock and Common Stock Equivalents
- -----------------------------------------
Average number of common shares outstanding
including shares issuable under stock options 37.6 37.6 37.7
Average number of common shares issuable under
the Employee Stock Ownership Plan 5.4 5.8 5.6
------ ------ ------
Average number of common and common equivalent
shares outstanding 43.0 43.4 43.3
====== ====== ======
Pro Forma Adjustment to Earnings from
- -------------------------------------
Continuing Businesses
---------------------
Earnings from continuing businesses before
pro forma adjustments $ 13.6 $187.2 $49.0
Less:
Increased contribution to the Employee Stock
Ownership Plan assuming conversion of
preferred shares to common 7.3 7.9 8.2
Net reduction in tax benefits assuming
conversion of the Employee Stock Ownership
Plan preferred shares to common 1.2 1.0 0.9
------ ------ ------
Pro forma earnings from continuing businesses $ 5.1 $178.3 $ 39.9
====== ====== ======
Fully diluted earnings (loss) per share
from continuing businesses (a)$ (.02) $ 4.10 $ 0.92
====== ====== ======
Pro Forma Adjustment to Net Earnings
- ------------------------------------
Net earnings as reported $123.3 $210.4 $ 63.5
Less:
Increased contribution to the Employee Stock
Ownership Plan assuming conversion of
preferred shares to common 7.3 7.9 8.2
Net reduction in tax benefits assuming conversion
of the Employee Stock Ownership Plan
preferred shares to common 1.2 1.0 0.9
------ ------ ------
Pro forma net earnings $114.8 $201.5 $ 54.4
====== ====== ======
Fully diluted net earnings per share $ 2.67 $ 4.64 $ 1.26
====== ====== ======
</TABLE>
(a) Fully diluted earnings (loss) per share from continuing businesses for 1995
was antidilutive.
-31-
<PAGE>
DEPRECIATION RATES
For Years Ended December 31
The approximate average effective rates of depreciation are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
% % %
<S> <C> <C> <C>
Domestic companies:
Buildings 3.3 3.3 3.3
Machinery and Equipment 6.2 6.3 6.6
Foreign companies:
Buildings 3.8 3.3 3.2
Machinery and Equipment 8.5 9.5 8.0
</TABLE>
-32-
<PAGE>
SCHEDULE II
-----------
Valuation and Qualifying Reserves of Accounts Receivable
--------------------------------------------------------
For Years Ended December 31
---------------------------
(amounts in millions)
<TABLE>
<CAPTION>
Provision for Losses 1995 1994 1993
- -------------------- ---- ---- ----
<S> <C> <C> <C>
Balance at Beginning of Year $ 9.7 $11.1 $ 8.6
Additions Charged to Earnings $ 2.9 $ 4.0 $ 8.4
Deductions $ 3.9 $ 5.4 $ 5.9
Balance at End of Year $ 8.7 $ 9.7 $11.1
- -----------------------------------------------------------------------------
Provision for Discounts
- -----------------------
Balance at Beginning of Year $17.3 $14.0 $13.9
Additions Charged to Earnings $82.2 $77.7 $69.6
Deductions $79.2 $74.4 $69.5
Balance at End of Year $20.3 $17.3 $14.0
- -----------------------------------------------------------------------------
Provision for Discounts and Losses
- ----------------------------------
Balance at Beginning of Year $27.0 $25.1 $22.5
Additions Charged to Earnings $85.1 $81.7 $78.0
Deductions $83.1 $79.8 $75.4
Balance at End of Year $29.0 $27.0 $25.1
</TABLE>
-33-
<PAGE>
EXHIBIT INDEX
Exhibits
- --------
No. 3(a) Registrant's By-laws, as amended effective February 27,
1995, are incorporated by reference herein from registrant's
1994 Annual Report on Form 10-K wherein they appear as
Exhibit 3(a).
No. 3(b) Registrant's restated Articles of Incorporation, as amended,
are incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein they appear as Exhibit
3(b).
No. 4(a) Registrant's Rights Agreement effective as of March 21,
1996, between the registrant and Chemical Mellon Shareholder
Services, L.L.C., as Rights Agent, relating to the
registrant's Preferred Stock Purchase Rights is incorporated
by reference herein from registrant's registration statement
on Form 8-A/A where it appeared as Exhibit 1.
No. 4(b) Registrant's Employee Stock Ownership Plan ("Share In
Success Plan") as amended, is incorporated by reference
herein from the registrant's 1992 Annual Report on Form 10-K
wherein it appears as Exhibit 4(b).
No. 4(c) Copy of Indenture, dated as of March 15, 1988, between the
registrant and Morgan Guaranty Trust Company of New York, as
Trustee, as to which The First National Bank of Chicago is
successor trustee.
No. 4(d) Registrant's Supplemental Indenture dated as of October 19,
1990, between the registrant and The First National Bank of
Chicago, as Trustee, is incorporated by reference herein
from registrant's 1994 Annual Report on Form 10-K wherein it
appears as Exhibit 4(d).
No. 10(i)(a) Agreement Concerning Asbestos-Related Claims dated June 19,
1985, (the "Wellington Agreement") among the registrant and
other companies is incorporated by reference herein from the
registrant's 1993 Annual Report on Form 10-K wherein it
appears as Exhibit 10(i)(a).
No. 10(i)(b) Producer Agreement concerning Center for Claims Resolution
dated September 23, 1988, among the registrant and other
companies as amended, is incorporated herein by reference
from the registrant's 1992 Annual Report on Form 10-K
wherein it appears as Exhibit 10(i)(b).
No. 10(i)(c) Credit Agreement between the registrant, certain banks
listed therein, and Morgan Guaranty Trust Company of New
York, as Agent, dated as of February 7, 1995, providing for
a $200,000,000 credit facility, is incorporated by reference
herein from registrant's 1994 Annual Report on Form 10-K
wherein it appears as Exhibit 10(i)(c).
-34-
<PAGE>
No. 10(iii)(a) Copy of registrant's Long-Term Stock Option Plan for Key
Employees, as amended. *
No. 10(iii)(b) Registrant's Deferred Compensation Plan for Nonemployee
Directors, as amended, is incorporated by reference herein
from registrant's 1994 Annual Report on Form 10-K wherein it
appears as Exhibit 10(iii)(b). *
No. 10(iii)(c) Registrant's Directors' Retirement Income Plan, as amended,
is incorporated by reference herein from the registrant's
1992 Annual Report on Form 10-K wherein it appears as
Exhibit 10(iii)(d). *
No. 10(iii)(d) Registrant's Management Achievement Plan for Key Executives,
as amended, is incorporated by reference herein from
registrant's 1994 Annual Report on Form 10-K wherein it
appears as Exhibit 10(iii)(d). *
No. 10(iii)(e) Registrant's Retirement Benefit Equity Plan (formerly known
as the Excess Benefit Plan), as amended, is incorporated by
reference herein from the registrant's 1992 Annual Report on
Form 10-K wherein it appears as Exhibit 10(iii)(f). *
No. 10(iii)(f) Armstrong Deferred Compensation Plan, as amended, is
incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein it appears as Exhibit
10(iii)(f). *
No. 10(iii)(g) Registrant's Employment Protection Plan for Salaried
Employees of Armstrong World Industries, Inc., as amended,
is incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein it appears as Exhibit
10(iii)(g). *
No. 10(iii)(h) Registrant's Restricted Stock Plan For Nonemployee Directors
is incorporated by reference herein from the Company's 1995
Proxy Statement wherein it appears as Exhibit A. *
No. 10(iii)(i) Registrant's Severance Pay Plan for Salaried Employees, is
incorporated by reference herein from registrant's 1994
Annual Report on Form 10-K wherein it appears as Exhibit
10(iii)(i). *
No. 10(iii)(j) Registrant's 1993 Long-Term Stock Incentive Plan is
incorporated by reference herein from the registrant's 1993
Proxy Statement wherein it appears as Exhibit A.*
No. 11 A statement regarding computation of per share earnings on
both primary and fully diluted bases is set forth in the
Financial Statement Schedules on page 30 of this Annual
Report on Form 10-K.
No. 21 List of the registrant's domestic and foreign subsidiaries.
No. 24 Consent of Independent Auditors.
No. 25 Powers of Attorney and authorizing resolutions.
-35-
<PAGE>
No. 27 Financial Data Statement
No. 28(ii)(a) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Retirement Savings Plan For
Salaried Employees of Armstrong World Industries, Inc. is
herewith filed with the Commission.
No. 28(ii)(b) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Retirement Savings Plan For
Hourly-Paid Employees of Armstrong World Industries, Inc. is
herewith filed with the Commission.
No. 28(ii)(c) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Retirement Savings Plan For
Hourly-Paid Employees of Thomasville Furniture, Inc. is
herewith filed with the Commission.
No. 28(ii)(d) Copy of Annual Report on Form 11-K for the fiscal year ended
September 30, 1995, for the Armstrong World Industries, Inc.
Employee Stock Ownership Plan ("Share In Success Plan") is
herewith filed with the Commission.
No. 28(ii)(e) Copy of Annual Report on American Olean Tile Company, Inc.
Savings Plan for Production & Maintenance Employees for the
fiscal year ended September 30, 1995, is herewith filed with
the Commission.
No. 28(ii)(f) Copy of Annual Report on American Olean Tile Company, Inc.
Savings Plan for Salaried Employees for the fiscal year
ended September 30, 1995, is herewith filed with the
Commission.
* Compensatory Plan
-36-
<PAGE>
__________________________________________________
ARMSTRONG WORLD INDUSTRIES, INC.
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Trustee
_______________
INDENTURE
Dated as of March 15, 1988
_______________
Debt Securities
__________________________________________________
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
--------------------------------
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture dated as of March 15, 1988/1/
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C>
(S) 310(a)(1) ........... 609
(a)(2) ........... 609
(a)(3) ........... Not Applicable
(a)(4) ........... Not Applicable
(b) ........... 608
610
(S) 311(a) ........... 613(a)
(b) ........... 613(b)
(b)(2) ........... 703(a)(2)
703(b)
(S) 312(a) ........... 701
702(a)
(b) ........... 702(b)
(c) ........... 702(c)
(S) 313(a) ........... 703(a)
(b) ........... 703(b)
(c) ........... 703(a)
703(b)
(d) ........... 703(c)
(S) 314(a) ........... 704
(b) ........... Not Applicable
(c)(1) ........... 102
(c)(2) ........... 102
(c)(3) ........... Not Applicable
(d) ........... Not Applicable
(e) ........... 102
(S) 315(a) ........... 601(a)
(b) ........... 602
703(a)(6)
(c) ........... 601(b)
(d) ........... 601(c)
(d)(1) ........... 601(a)(1)
(d)(2) ........... 601(c)(2)
(d)(3) ........... 601(c)(3)
(e) ........... 514
(S) 316(a) ........... 101
(a)(1)(A) ........... 502
512
(a)(1)(B) ........... 513
(a)(2) ........... Not Applicable
(b) ........... 508
(S) 317(a)(1) ...... .... 503
(a)(2) ........... 504
(b) ........... 1003
(S) 318(a) ........... 107
</TABLE>
- -----------------
/1/ This reconciliation and tie shall note, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS/2/
PAGE
----
Parties........................................................................1
Recitals of the Company........................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions......................................................1
Act..............................................................2
Attributable Debt................................................2
Authenticating Agent.............................................2
Authorized Newspaper.............................................2
Board of Directors...............................................2
Board Resolution.................................................2
Business Day.....................................................2
Commission.......................................................3
Company..........................................................3
Company Request or Company Order.................................3
Consolidated Net Tangible Assets.................................3
Corporate Trust Office...........................................3
Corporation......................................................3
Debt.............................................................3
Defaulted Interest...............................................3
Event of Default.................................................3
Government Obligations...........................................3
Holder...........................................................4
Indenture........................................................4
interest.........................................................4
Interest Payment Date............................................4
Lien.............................................................4
Maturity.........................................................4
Officers' Certificate............................................4
Opinion of Counsel...............................................4
Original Issue Discount Security.................................4
Outstanding......................................................4
Paying Agent.....................................................5
Person...........................................................5
Place of Payment.................................................5
_______________
/2/ This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-i-
<PAGE>
Predecessor Security.............................................5
Principal Property...............................................6
Redemption Date..................................................6
Redemption Price.................................................6
Regular Record Date..............................................6
Responsible Officer..............................................6
Restricted Subsidiary............................................6
Sale and Leaseback Transaction...................................6
Securities.......................................................6
Security Register and Security Registrar.........................6
Special Record Date..............................................7
Stated Maturity..................................................7
Subsidiary.......................................................7
Trustee..........................................................7
Trust Indenture Act..............................................7
Vice President...................................................7
SECTION 102. Compliance Certificates and Opinions.............................7
SECTION 103. Form of Documents Delivered to Trustee...........................8
SECTION 104. Acts of Holders..................................................8
SECTION 105. Notices, Etc., to Trustee and Company............................9
SECTION 106. Notice to Holders; Waiver........................................9
SECTION 107. Conflict With Trust Indenture Act...............................10
SECTION 108. Effect of Headings and Table of Contents........................10
SECTION 109. Successors and Assigns..........................................10
SECTION 110. Separability Clause.............................................10
SECTION 111. Benefits of Indenture...........................................10
SECTION 112. Governing Law...................................................10
SECTION 113. Legal Holidays..................................................11
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.................................................11
SECTION 202. Form of Trustee's Certificate of Authentication.................11
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series............................12
SECTION 302. Denominations...................................................14
SECTION 303. Execution, Authentication, Delivery and Dating..................14
SECTION 304. Temporary Securities............................................15
-ii-
<PAGE>
SECTION 305. Registration; Registration of Transfer and Exchange.............16
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities................17
SECTION 307. Payment of Interest; Interest Rights Preserved..................18
SECTION 308. Persons Deemed Owners...........................................19
SECTION 309. Cancellation....................................................19
SECTION 310. Computation of Interest.........................................19
SECTION 311. Automated Issuance System.......................................19
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.........................21
SECTION 402. Application of Trust Money......................................22
SECTION 403. Defeasance Upon Deposit of Moneys or Government Obligations.....22
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default...............................................24
SECTION 502. Acceleration of Maturity; Rescission and Annulment..............25
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee 26
SECTION 504. Trustee May File Proofs of Claim................................27
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.....28
SECTION 506. Application of Money Collected..................................28
SECTION 507. Limitation on Suits.............................................28
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest....................................................29
SECTION 509. Restoration of Rights and Remedies..............................29
SECTION 510. Rights and Remedies Cumulative..................................29
SECTION 511. Delay or Omission Not Waiver....................................30
SECTION 512. Control by Holders..............................................30
SECTION 513. Waiver of Past Defaults.........................................30
SECTION 514. Undertaking for Costs...........................................31
SECTION 515. Waiver of Stay or Extension Laws................................31
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.............................31
SECTION 602. Notice of Defaults..............................................33
SECTION 603. Certain Rights of Trustee.......................................33
SECTION 604. Not Responsible for Recitals or Issuance of Securities..........34
-iii-
<PAGE>
SECTION 605. May Hold Securities.............................................34
SECTION 606. Money Held in Trust.............................................34
SECTION 607. Compensation and Reimbursement..................................34
SECTION 608. Disqualification; Conflicting Interests.........................35
(a) Elimination of Conflicting Interest or Resignation..........35
(b) Notice of Failure to Eliminate Conflicting Interest or
Resign......................................................35
(c) "Conflicting Interest" Defined..............................35
(d) Definitions of Certain Terms Used in This Section...........38
(e) Calculation of Percentages of Securities....................39
SECTION 609. Corporate Trustee Required; Eligibility.........................40
SECTION 610. Resignation and Removal; Appointment of Successor...............41
SECTION 611. Acceptance of Appointment by Successor..........................42
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.....43
SECTION 613. Preferential Collection of Claims Against Company...............43
(a) Segregation and Apportionment of Certain Collections by
Trustee; Certain Exceptions.................................43
(b) Certain Creditor Relationships Excluded From Segregation
and Apportionment...........................................45
(c) Definitions of Certain Terms Used in This Section...........46
SECTION 614. Authenticating Agents...........................................47
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.......49
SECTION 702. Preservation of Information; Communications to Holders..........49
SECTION 703. Reports by Trustee..............................................50
SECTION 704. Reports by Company..............................................51
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms............52
SECTION 802. Successor Corporation Substituted...............................53
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders..............53
SECTION 902. Supplemental Indentures With Consent of Holders.................54
SECTION 903. Execution of Supplemental Indentures............................55
-iv-
<PAGE>
SECTION 904. Effect of Supplemental Indentures...............................56
SECTION 905. Conformity With Trust Indenture Act.............................56
SECTION 906. Reference in Securities to Supplemental Indentures..............56
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest......................56
SECTION 1002. Maintenance of Office or Agency.................................56
SECTION 1003. Money for Payment of Securities to be Held in Trust.............57
SECTION 1004. Statement as to Compliance......................................58
SECTION 1005. Limitation on Liens.............................................58
SECTION 1006. Limitation on Sale and Leaseback Transactions...................60
SECTION 1007. Corporate Existence.............................................61
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article........................................61
SECTION 1102. Election to Redeem; Notice to Trustee...........................62
SECTION 1103 Selection by Trustee of Securities to be Redeemed...............62
SECTION 1104. Notice of Redemption............................................62
SECTION 1105. Deposit of Redemption Price.....................................63
SECTION 1106. Securities Payable on Redemption Date...........................63
SECTION 1107. Securities Redeemed in Part.....................................64
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article........................................64
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities...........64
SECTION 1203. Redemption of Securities for Sinking Fund.......................64
ARTICLE THIRTEEN
REPURCHASE OF SECURITIES BY COMPANY UPON TRIGGERING EVENT
SECTION 1301. Right to Require Repurchase.....................................65
SECTION 1302. Notice; Method of Exercising Repurchase Right...................65
SECTION 1303. Certain Definitions.............................................66
-v-
<PAGE>
SIGNATURES AND SEALS..........................................................70
ACKNOWLEDGMENTS...............................................................71
<PAGE>
INDENTURE, dated as of March 15, 1988, between ARMSTRONG WORLD INDUSTRIES,
INC., a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania (herein called the "Company"), having its principal
office at 55 West Liberty Street, Lancaster, Pennsylvania 17604, and Morgan
Guaranty Trust Company of New York, a corporation duly organized and existing
under the laws of the State of New York, as Trustee hereunder (herein called the
"Trustee"), having its principal corporate trust office at 30 West Broadway, New
York, New York 10015.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
-----------
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust Indenture
Act, either directly or by reference therein, have the meanings assigned to
them therein;
(3) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles,
and, except as otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are generally
accepted at the date of such computation; and
<PAGE>
(4) the words, "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Four, Article Six and Article
Thirteen, are defined in those Articles.
"Act", when used with respect to any Holder, has the meaning specified in
Section 104.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
as of any particular time, the present value (discounted at the rate of interest
implicit in the terms of the lease involved in such Sale and Leaseback
Transaction, as determined in good faith by the Company), of the obligation of
the lessee thereunder for net rental payments (excluding, however, any amounts
required to be paid by such lessee, whether or not designated as rent or
additional rent, on account of maintenance and repairs, services, insurance,
taxes, assessments, water rates and similar charges or any amounts required to
be paid by such lessee thereunder contingent upon monetary inflation or the
amount of sales, maintenance and repairs, insurance, taxes, assessments, water
rates or similar charges) during the remaining term of such lease (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Authenticating Agent" means any agent of the Trustee which at any time
shall be appointed and acting pursuant to the provisions of Section 614.
"Authorized Newspaper" means a newspaper of general circulation in the City
of New York, Borough of Manhattan, printed in the English language and
customarily published on each business day, whether or not published on
Saturdays, Sundays or holidays. Whenever successive weekly publications in an
Authorized Newspaper are authorized hereunder,) they may be made (unless
otherwise expressly provided herein) on the same or different days of the week
and in the same or in different Authorized Newspapers.
"Board of Directors" means the board of directors of the Company or the
executive committee or any other committee of that board duly authorized to act
for that board hereunder.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by or
pursuant to law, regulation or executive order to close.
-2-
<PAGE>
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, or, if at
any time after the execution of this instrument such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President,
any Vice President or its Treasurer, and by any Assistant Treasurer, its
Controller, any Assistant Controller, its Secretary or any Assistant Secretary,
and delivered to the Trustee.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (a) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles and (b) all current liabilities;
all as reflected in the Company's latest audited consolidated balance sheet
contained in the Company's most recent annual report to its stockholders under
Rule 14a-3 of the Securities Exchange Act of 1934, as amended, prior to the time
as of which "Consolidated Net Tangible Assets" shall be determined.
"Corporate Trust Office" means the office of the Trustee in New York, New
York, at which at any particular time its corporate trust business shall be
principally administered, which office at the date hereof is that indicated in
the introductory paragraph of this Indenture.
"Corporation" includes corporations, associations, companies and business
trusts.
"Debt" means indebtedness for borrowed money.
"Defaulted Interest" has the meaning specified in Section 307.
"Event of Default" has the meaning specified in Section 501.
"Government Obligations" means securities that are (i) direct obligations
of the United States of America or any foreign government of a sovereign state
for the payment of which its full faith and credit is pledged or (ii)
obligations of an entity controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such foreign government the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such foreign government, as the
case may be, which, in either case under clauses (i) or (ii) are not callable or
redeemable at the option of the issuer thereof, and shall also include a
depository receipt issued by a bank or trust company as custodian with respect
to any such government obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as required by law) such
custodian is
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<PAGE>
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the government obligation or the specific payment of interest on or principal of
the government obligation evidenced by such depository receipt.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof and shall
include the terms of particular series of Securities established as contemplated
by Section 301.
"interest", when used with respect to an original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Lien" shall mean any mortgage, pledge, security interest, lien or other
encumbrance.
"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President, any Vice President, or the Treasurer, and by the
Controller, the Secretary or any Assistant Treasurer, Assistant Controller or
Assistant Secretary, of the Company, and delivered to the Trustee. Each such
Officers' Certificate shall contain the statements provided in Section 102, if
applicable.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for or an employee of the Company. Each Opinion of Counsel shall contain the
statements provided in Section 102, if applicable.
"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
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<PAGE>
(ii) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the Holders of
such Securities; provided that, if such Securities are to be redeemed, notice
--------
of such redemption has been duly given pursuant to this Indenture or
provision therefor satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have been given any request,
demand, authorization, direction, notice, consent or waiver hereunder, the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding for such purposes shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon a
declaration of acceleration of the maturity thereof pursuant to Section 502, and
Securities owned by the Company or any other obligor upon the Securities or any
affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which a Responsible
Officer of the Trustee knows to be so owned shall be so disregarded. Securities
so owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any affiliate of the Company
or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means, except as provided in Article Six and Article Thirteen, any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of (and premium, if any) and
interest on the Securities of that series are payable as specified in accordance
with Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security, and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
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<PAGE>
"Principal Property" means any single manufacturing plant, research
laboratory or other similar facility located within the United States of America
(other than its territories and possessions) and owned by, or leased to, the
Company or any Restricted Subsidiary, the book value of the property, plant and
equipment of which (as shown, net of depreciation, on the books of the owner or
owners) is not less than 2% of Consolidated Net Tangible Assets at the end of
the most recent fiscal year of the Company, reflected in the latest audited
consolidated statement of financial position contained in the Company's most
recent annual report to its stockholders under Rule 14a-3 of the Securities
Exchange Act of 1934, as amended, except (a) any such plant or facility (i)
owned or leased jointly or in common with one or more Persons other than the
Company and its Subsidiaries, in which the interest of the Company and its
Restricted Subsidiaries does not exceed 50%, or (ii) which the Board of
Directors determines by Board Resolution in good faith is not of material
importance to the total business conducted, or assets owned, by the Company and
its Subsidiaries as an entirety, or (b) any portion of any such plant or
facility which the Board of Directors determines by Board Resolution in good
faith not to be of material importance to the use or operation thereof.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301, which date shall be the last day of the calendar
month preceding such Interest Payment Date if such Interest Payment Date is the
fifteenth day of the calendar month, and shall mean the fifteenth day of the
calendar month preceding such Interest Payment Date if such Interest Payment
Date is the first day of a calendar month, whether or not such day shall be a
Business Day.
"Responsible Officer", when used with respect to the Trustee, means any
officer of the Trustee assigned by the Trustee to administer its corporate trust
matters.
"Restricted Subsidiary" means any Subsidiary substantially all the property
of which is located, or substantially all of the business of which is carried
on, within the United States of America (other than its territories and
possessions) which shall at the time, directly or indirectly through one or more
Subsidiaries or in combination with one or more other Subsidiaries, own or be a
lessee of a Principal Property.
"Sale and Leaseback Transaction" has the meaning specified in Section 1006.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.
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<PAGE>
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means, except as provided in Article Thirteen, any corporation
of which the Company directly or indirectly owns or controls stock which under
ordinary circumstances (not dependent upon the happening of a contingency) has
voting power to elect a majority of the board of directors of such corporation.
"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended and
in force at the date as of which this instrument was executed, except as
provided in Section 905.
"Vice President", when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
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<PAGE>
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents,
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representation
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representation with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of
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<PAGE>
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
SECTION 105. Notices, Etc., to Trustee and Company.
-------------------------------------
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be made, given,
furnished or filed in writing to or with the Trustee at its Corporate Trust
Office and unless otherwise herein expressly provided, any such document
shall be deemed to be sufficiently made, given, furnished or filed upon its
receipt by a Responsible Officer of the Trustee, or
(2) the Company by the Trustee or by any Holder shall be sufficient for
every purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company addressed to
it at the address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing to
the Trustee by the Company, Attention: Secretary.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the
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Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 107. Conflict With Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
SECTION 112. Governing Law.
-------------
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York.
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<PAGE>
SECTION 113. Legal Holidays.
--------------
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, provided that no interest shall accrue for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
---------------
The Securities of each series shall be in substantially the form as shall
be established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, in each case with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture pursuant to Section 311 or otherwise, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. If the form of
Securities of any series is established by action taken pursuant to a Board
Resolution, a copy of an appropriate record of any such action taken shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of the initial
Securities of each series. Any such Board Resolution or record of such action
shall have attached thereto a true and correct copy of the form of Security
referred to therein approved by or pursuant to such Board Resolution.
The Trustee's certificates of authentication shall be in substantially the
form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
SECTION 202. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities of the series designated therein issued under
the within-mentioned Indenture,
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<PAGE>
[full name of Trustee]
as Trustee
By___________________________________
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
------------------------------------
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution or in one or more indentures
supplemental hereto, and set forth in an Officers' Certificate to the extent not
set forth in a Board Resolution or supplemental indenture prior to the initial
issuance of Securities of any series,
(1) the title of the Securities of the series (which shall distinguish the
Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of the
series which may be authenticated and delivered under this Indenture (except
for Securities authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Securities of the series pursuant to
Section 304, 305, 306, 906 or 1107);
(3) the date or dates on which the principal (and premium, if any) of the
Securities of the series is payable or the method of determination thereof;
(4) the rate or rates, or the method of determination thereof, at which
the Securities of the series shall bear interest, if any, the date or dates
from which such interest shall accrue, the Interest Payment Dates on which
such interest shall be payable and the Regular Record Date for the interest
payable on any Interest Payment Date;
(5) if other than such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public or private
debts, the coin or currency or currency unit in which payment of the
principal of, premium, if any, or interest on the Securities of the series
shall be payable;
(6) if the amount of payment of principal of, premium, if any, or interest
on the Securities of the series may be determined with reference to an index,
formula or other method based on a coin or currency or currency unit other
than that in
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which the Securities are stated to be payable, the manner in which such
amounts shall be determined;
(7) if the principal of, premium, if any, or interest on the Securities of
the series are to be payable, at the election of the Company or a holder
thereof, in a coin or currency or currency unit other than that in which the
Securities are stated to be payable, the period or periods within which, and
the terms and conditions upon which, such election may be made;
(8) the place or places where the principal of (and premium, if any) and
interest, if any, on the Securities of the series shall be payable and the
office or agency for the Securities of the series maintained by the Company
pursuant to Section 1002;
(9) the period or periods within which, the price or prices at which and
the terms and conditions upon which Securities of the series may be redeemed,
in whole or in part, at the option of the Company;
(10) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous provisions
or at the option of a Holder thereof and the period or periods within which,
the price or prices at which and the terms and conditions upon which
Securities of the series shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(11) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which the Securities of the series shall be
issuable;
(12) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;
(13) the application, if any, of Section 403;
(14) the application, if any, of Article 13;
(15) any deletions or modifications of or additions to the Events of
Default set forth in Section 501 or covenants of the Company set forth in
Article Ten pertaining to the Securities of the series;
(16) the form of the Securities of the series; and
(17) any other terms of the series (which terms shall not be inconsistent
with the provisions of this Indenture).
If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the
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<PAGE>
Secretary or an Assistant Secretary of the Company and delivered to the Trustee
at or prior to the initial issuance of Securities of such series.
Notwithstanding the foregoing, if the Board Resolution, action pursuant to
Board Resolution or indenture supplemental hereto establishing the terms of the
Securities of any series shall specify that the automated issuance system
described in Section 311 (or any other system, method or procedures for the
determination of terms of Securities of any series that are to be issued from
time to time) shall be available for the Securities of such series, any terms of
the Securities of such series shall be established in the manner provided for
pursuant to such system, method or procedures.
SECTION 302. Denominations.
-------------
The Securities of each series shall be issuable in registered form without
coupons in such denominations as shall be specified as contemplated by Section
301. In the absence of any such provisions with respect to the Securities of
any series, the Securities of such series shall be issuable in denominations of
$1,000 and any integral multiple thereof. Securities of each series shall be
numbered, lettered or otherwise distinguished in such manner or in accordance
with such plan as the officers of the Company executing the same may determine
with the approval of the Trustee.
SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its President, one of its Vice Presidents or its Treasurer, and by
its Secretary or one of its Assistant Secretaries or one of its Assistant
Treasurers, under its corporate seal or a facsimile thereof reproduced thereon
attested by its Secretary or one of its Assistant Secretaries. The signature of
any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of the Securities of such series, and the Trustee in
accordance with the Company Order shall either at one time or from time to time
pursuant to such instructions as may be described therein authenticate and
deliver the Securities of such series. In authenticating the Securities of such
series and accepting the additional responsibilities under this Indenture in
relation to the Securities of such series, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon:
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<PAGE>
(1) an Officers' Certificate complying with Section 102 and stating to the
best knowledge of the signers of such certificate that no Event of Default
with respect to any series of Securities shall have occurred and be
continuing; and
(2) an Opinion of Counsel complying with Section 102 and stating:
(a) the form of the Securities of such series have been established
in conformity with the provisions of this Indenture;
(b) the terms of the Securities of such series have been established
(or, when determined in the manner described in such opinion, will have
been established) in conformity with the provisions of this Indenture; and
(c) that the Securities of such series, when authenticated and
delivered by the Trustee and issued by the Company in the manner and
subject to any conditions specified in such Opinion of Counsel, will
constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability relating
to or affecting the enforcement of creditors' rights and to general equity
principles.
The Trustee shall have the right to decline to authenticate and deliver the
Securities of such series if the Trustee, being advised by counsel, determines
that such action may not lawfully be taken, would expose the Trustee to personal
liability to existing Holders or would add to the obligations and duties of the
Trustee hereunder in any material respect.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture.
SECTION 304. Temporary Securities.
--------------------
Pending the preparation of definitive Securities of any series, the Company
may execute, and upon compliance with Section 303 the Trustee shall authenticate
and deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
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<PAGE>
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations. Such
exchange shall be made by the Company at its expense and without any charge
therefor. Until so exchanged the temporary Securities of any series shall in
all respects be entitled to the same benefits under this Indenture as definitive
Securities of such series.
SECTION 305. Registration; Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept for each series of Securities at one of
the offices or agencies maintained pursuant to Section 1002 a register (the
register maintained in such office and in any other office or agency of the
Company in a Place of Payment being herein sometimes collectively referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of such Securities
and of transfers of such Securities, Said office or agency is hereby appointed
"Security Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security of any series
at the office or agency in a Place of Payment for that series, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of the same
series and of like tenor, of any authorized denominations and of a like
aggregate principal amount and Stated Maturity.
In no case shall there be more than one Security Register for a series of
Securities.
At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series and of like tenor, of any authorized
denominations and of a like aggregate principal amount and Stated Maturity, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed by the Holder thereof or
his attorney duly authorized in writing.
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No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening of
business 15 days before the day of selection of Securities of such series to be
redeemed and ending at the close of business on the day of the mailing of a
notice of redemption of Securities of such series so selected for redemption, or
(ii) to register the transfer of or exchange any Security selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest. At the option of
the Company, interest on the Securities of any series that bears interest may be
paid by mailing a check to the address of any Holder as such address shall
appear in the Securities Register.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in writing as
to the amount of Defaulted Interest proposed to be paid on each Security of
such series and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon the Trustee shall fix a Special Record
Date for the payment of such Defaulted Interest which shall be not more than
15 days and not less than 10 days prior to the date of the proposed payment
and not less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid, to
each Holder of Securities of such series at his address as it appears in the
Security Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to the
following clause (2).
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(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
---------------------
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
------------
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly canceled by the Trustee. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall be destroyed by the Trustee and
the Trustee shall deliver to the Company a certificate of destruction in respect
thereof.
SECTION 310. Computation of Interest.
-----------------------
Except as otherwise specified as contemplated by Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.
SECTION 311. Automated Issuance System.
-------------------------
If the Board Resolution, action pursuant to Board Resolution or
supplemental indenture hereto establishing the terms of the Securities of any
series shall specify that the automated issuance system described in Section 311
shall be available for the Securities of such series, all issuance instructions
for the Securities of such series may be given by an authorized
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representative of the Company named as such in an Officers' Certificate (an
"Authorized Representative") by telephone through computer timesharing entered
as prescribed in the user documentation provided by Morgan Guaranty Trust
Company of New York as the Company's issuing agent (the "Agent"), such computer
timesharing system being herein called the "MPI System" (or telephone or
facsimile transmission or other writing, if the MPI System is inoperative). All
instructions must be received by the Agent not later than 3:00 P.M. New York
City time on the Business Day next preceding the delivery date of each Security
and shall include with respect to each Security:
(1) name of the Holder;
(2) address of the Holder;
(3) taxpayer identifying number of the Holder;
(4) principal amount;
(5) maturity date;
(6) interest rate;
(7) delivery date; and
(8) amount to be received in payment.
Upon receipt of such instructions and following authentication of such
Securities, the Agent shall deliver such Securities to any placement agent
designated by the Company or its designated consignee, which delivery shall be
against receipt for payment in immediately available funds, as herein provided,
or as otherwise provided in such instructions. Although the Agent may be
instructed to deliver Securities against payment in immediately available funds,
delivery of the Securities, in accordance with the custom prevailing in the
market, will be made before actual receipt of payment. Therefore, once the
Agent has delivered Securities to any placement agent or its designated
consignee, the Company shall bear the risk that such placement agent or such
designated consignee fails to remit payment for the Securities or return same to
the Agent. Each delivery of Securities hereunder shall be subject to the rules
of the New York Clearing House in effect at the time of such delivery.
Telephone instructions given to the Agent will be electronically voice-recorded
by the Agent and such recording is hereby consented to. Should any discrepancy
develop with respect to such telephonic instructions, the instructions as
recorded and understood by the Agent will be deemed the controlling and proper
instructions, The Agent shall incur no liability to the Company in acting
hereunder upon telephonic or other instructions contemplated hereby which the
recipient thereof believed in good faith to have been given by an Authorized
Representative.
The MPI System timesharing services which may be utilized by the Company and the
Agent in the issuance of the Securities and maintenance of the Note Register are
furnished to the Agent by
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The Service Bureau Company, a division of Control Data Corporation ("SBC"). SBC
has granted permission to the Agent to allow its clients to use such timesharing
services, and in consideration for such permission, it is agreed that, if the
Company shall have elected to use the MPI System, such services will be supplied
to the Company "as is," without warranty by SBC or the Agent. The Company hereby
waives any claims it may have against SBC or the Agent arising out of such
timesharing services and agrees that the provisions of Sections 104, 603, 604
and 607 shall inure to the benefit of the Agent to the same extent that they
inure to the benefit of the Trustee.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount sufficient to pay and discharge the entire indebtedness
on such Securities not
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theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Sections 401 and 403 shall be held in
trust and applied by it, in accordance with the provisions of the Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
SECTION 403. Defeasance Upon Deposit of Moneys or Government Obligations.
-----------------------------------------------------------
To the extent made applicable to the Securities of any series by the terms
thereof established as contemplated in Section 301, at the Company's option,
either (a) the Company shall be deemed to have been Discharged (as defined
below) from its obligations with respect to the Securities of such series on the
91st day after the applicable conditions set forth below have been satisfied or
(b) the Company shall cease to be under any obligation to comply with any term,
provision or condition set forth in Sections 801, 802, 1005, 1006 and 1007 and
noncompliance with such Sections shall not give rise to any Event of Default
under Section 501(4), with respect to the Securities of such series at any time
after the applicable conditions set forth below have been satisfied:
(1) the Company shall have deposited or caused to be deposited irrevocably
with the Trustee or its agent as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the holders of the
Securities of such series (i) money in an amount, or (ii) Government
Obligations of the government in the currency of which the Securities of such
series are denominated which through the payment of interest and principal in
respect thereof in accordance with their terms will provide, not later than
the due date of any payment, money in an amount, or (iii) a combination of
(i) and (ii), sufficient, in the opinion (with respect to (ii) and (iii)) of
a
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nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge
each installment of principal (including mandatory sinking fund payments) of,
and interest on, the outstanding Securities of such series on the dates such
installments of interest or principal are due or to and including the
Redemption Date irrevocably designated by the Company pursuant to
subparagraph (5) hereof;
(2) if the Securities of such series are then listed on the New York Stock
Exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the exercise of the option under this Section 403
would not cause such Securities to be delisted;
(3) no Event of Default or event which with notice or lapse of time would
become an Event of Default under Section 501(l), (2), (3), (5) or (6) with
respect to the Securities of such series shall have occurred and be
continuing on the date of such deposit;
(4) the Company shall have delivered to the Trustee an opinion of counsel,
which opinion and counsel are satisfactory to the Trustee and its counsel, to
the effect that holders of the Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of the
exercise of the option under this Section 403 and will be subject to Federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised, and, in the
case of Securities being Discharged, and if the Trustee so requests, a
private letter ruling to that effect received from the United States Internal
Revenue Service or a revenue ruling pertaining to a comparable form of
transaction to that effect published by the United States Internal Revenue
Service, and
(5) if the Company has deposited or caused to be deposited money or
Government Obligations to pay or discharge the principal of (and premium, if
any) and interest on the Outstanding Securities of a series to and including
a Redemption Date pursuant to subparagraph (1) hereof, such Redemption Date
shall be irrevocable designated by a Board Resolution delivered to the
Trustee on or prior to the date of deposit of such money or Government
Obligations, and such Board Resolution shall be accompanied by an irrevocable
Company Request that the Trustee give notice of such redemption in the name
and at the expense of the Company not less than 30 nor more than 60 days
prior to such Redemption Date in accordance with Section 1104.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities of such series and to have satisfied all the obligations under this
Indenture relating to the Securities of such series (and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging the
same), except (A) the rights of holders of Securities of such series to receive,
from the trust fund described in clause (1) above, payment of the principal of
and the interest on such Securities when such payments are due; (B) the
Company's obligations, as the case may be,
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with respect to such Securities under Sections 305, 306, 1002 and 1003; and (C)
the rights, powers, trusts, duties and immunities of the Trustee hereunder.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
-----------------
"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body),
except to the extent such Event of Default is modified or deleted in respect of
the Securities of such series pursuant to Section 301(15):
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of (or premium, if any, on)
any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as due by
the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant of the Company
in this Indenture (other than a covenant or a default in whose performance or
whose breach is elsewhere in this Section specifically dealt with or which
has expressly been included in this Indenture solely for the benefit of a
series of Securities other than that series), and continuance of such default
or breach for a period of 60 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the Outstanding
Securities of that series a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(5) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other decree
or order unstayed and in effect for a period of 90 consecutive days; or
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(6) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or order
for relief in respect of the Company in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any applicable Federal or
State law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action; or
(7) any default by the Company in any payment of principal of or interest
on any obligation for money borrowed beyond any period of grace provided with
respect thereto and the aggregate obligations thereunder shall be $20,000,000
or more, or any default by the Company in the performance or observance of
any other agreement, term or condition contained in any agreement under which
such obligations aggregating $20,000,000 or more is created (or if any other
event of default thereunder or under any such agreement shall occur and be
continuing) and the effect of such event of default is to cause, or to permit
the holder or holders of such obligation (or a trustee on behalf of such
holder or holders) to cause, such obligation to become due prior to any
stated maturity; or
(8) any other Event of Default provided with respect to Securities of that
series in the terms thereof established pursuant to Section 301(15).
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default with respect to Securities of any series at the time
outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount (or, if the Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series established pursuant to
Section 301(12)) of all of the Securities of that series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable. At any time after such a
declaration of acceleration with respect to Securities of any series has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in principal amount of the Outstanding Securities of that series, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
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(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate or rates prescribed therefor
in such Securities,
(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in such
Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of that series, other
than the nonpayment of the principal of Securities of that series which has
become due solely by such declaration of acceleration, have been cured or
waived or provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee
---------------------------------------------------------------
The Company covenants that if
(1) default is made in the payment of any interest on any Security when
such interest becomes due and payable and such default continues for the
period of grace provided for with respect to such Security,
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof, and such default continues for
any period of grace provided for with respect to such Security, or
(3) default is made in the deposit of any sinking fund payment, when and
as due by the terms of a Security,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
or rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee and any predecessor Trustee, their agents and counsel.
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If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and any predecessor Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee and any predecessor Trustee, their agents and
counsel) and of the Holders allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee and any predecessor Trustee any amount due them for the
reasonable compensation, expenses, disbursements and advances of the Trustee and
any predecessor Trustee, their agents and counsel, and any other amounts due the
Trustee and any predecessor Trustee under Section 607.
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Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Securities.
-----------------------------------------------------------
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.
SECTION 506. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee and any predecessor
Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid for principal of
(and premium, if any) and interest on the Securities in respect of which or
for the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and payable
on such Securities for principal (and premium, if any) and interest,
respectively; and
THIRD: The balance, if any, to the Person or Persons entitled thereto.
SECTION 507. Limitation on Suits.
-------------------
No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) an Event of Default with respect to Securities of such series shall
have occurred and be continuing and such Holder has previously given written
notice to the Trustee of such continuing Event of Default;
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(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute any such proceeding; and.
(5) no direction inconsistent with such written request has been given to
the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatsoever by virtue of, or by availing of, any
provision of this Indenture (including without limitation the provisions of
Section 512) to affect, disturb or prejudice the rights of any other of such
Holders, or to obtain or to seek to obtain priority or preference over any other
of such Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
----------------------------------------------------------------
Interest.
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Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest on such Security on the Stated Maturity or Maturities expressed in such
Security (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
306, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted
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by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 511. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or any
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 512. Control by Holders.
------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the Securities of such series, provided that
--------
(1) such direction shall not be in conflict with any rule of law or with
this Indenture,
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
(3) subject to the provisions of Section 601, the Trustee shall have the
right to decline to follow any such direction if the Trustee in good faith
shall, by a Responsible Officer or Officers of the Trustee, determine that
the action so directed would involve the Trustee in personal liability or
would be unduly prejudicial to holders not joining in such direction.
SECTION 513. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of (premium, if any) or interest on
any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected,
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Upon any such waiver, such default shall cease to exist with respect to
such series, and any Event of Default with respect to such series arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities of any series, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of (or premium,
if any) or interest on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).
SECTION 515. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default with respect to the Securities of any
series has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture with respect to such
series, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that
------
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the
Outstanding Securities of any series, given pursuant to Section 512,
relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Securities of such series.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
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SECTION 602. Notice of Defaults.
------------------
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series, as their names and addresses appear in the
Security Register, notice of such default hereunder known to the Trustee, unless
such default shall have been cured or waived; provided, however, that, except in
-------- -------
the case of a default in the payment of the principal of (or premium, if any) or
interest on any Security of such series or in the payment of any sinking fund
installment with respect to Securities of such series, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders of Securities of such series; and
provided, further, that in the case of any default of the character specified in
- -------- -------
section 501(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence of an Event
of Default. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default with respect to Securities of such series.
SECTION 603. Certain Rights of Trustee.
-------------------------
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee
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reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture,
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
-------------------
The Trustee, any Paying Agent, any Security Registrar or any other agent of
the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal
with the Company with the same rights it would have if it were not Trustee,
Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
-------------------
Money held by the Trustee or any Paying Agent in trust hereunder need not
be segregated from other funds except to the extent required by law. The Trustee
or any Paying Agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
------------------------------
The Company agrees
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(1) to pay to the Trustee from time to time reasonable compensation for
all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except to the
extent any such expense, disbursement or advance is due to its negligence or
bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder and the
performance of its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense is due to its negligence or
bad faith.
The Company's obligations under this Section shall constitute additional
indebtedness hereunder and shall survive satisfaction and discharge of this
Indenture. As security for the performance of the obligations of the Company
under this Section the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of, premium, if any, or interest, if
any, on particular Securities. "Trustee" for purposes of this Section shall
include any predecessor Trustee, but the negligence or bad faith of any Trustee
shall not affect the Company's obligations to any other Trustee under this
Section.
SECTION 608. Disqualification; Conflicting Interests.
---------------------------------------
(a) If the Trustee has or shall acquire any conflicting interest, as
defined in this Section, with respect to the Securities of any series, it
shall, within 90 days after ascertaining that it has such conflicting
interest, either eliminate such conflicting interest or resign with respect
to the Securities of that series in the manner and with the effect
hereinafter specified in this Article.
(b) In the event that the Trustee shall fail to comply with the provisions
of Subsection (a) of this Section with respect to the Securities of any
series, the Trustee shall, within 10 days after the expiration of such 90-day
period, transmit by mail to all Holders of Securities of that series, as
their names and addresses appear in the Security Register, notice of such
failure.
(c) For the purposes of this Section, the Trustee shall be deemed to have
a conflicting interest with respect to the Securities of any series if
(1) the Trustee is trustee under this Indenture with respect to the
Outstanding Securities of any series other than that series or is trustee
under another indenture under which any other securities, or certificates
of interest or
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participation in any other securities, of the Company are outstanding,
unless such other indenture is a collateral trust indenture under which the
only collateral consists of Securities issued under this Indenture,
provided, however, that there shall be excluded from the operation of this
-------- -------
paragraph (i) the indenture dated as of May 15, 1971 under which the
Company's 8% Sinking Fund Debentures due May 15, 1996 are outstanding and
(ii) this Indenture with respect to the Securities of any series other than
that series or any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the
Company are outstanding, if
(i) this Indenture (with respect to the Securities of that series
and each other series for which the Trustee is trustee hereunder) and
such other indenture or indentures are wholly unsecured and such other
indenture or indentures are hereafter qualified under the Trust
Indenture Act, unless the Commission shall have found and declared by
order pursuant to Section 305(b) or Section 307(c) of the Trust
Indenture Act that differences exist between the provisions of this
Indenture with respect to Securities of that series and one or more
other series or the provisions of such other indenture or indentures
which are so likely to involve a material conflict of interest as to
make it necessary in the public interest or for the protection of
investors to disqualify the Trustee from acting as such under this
Indenture with respect to the Securities of that series and such other
series or under such other indenture or indentures, or
(ii) the Company shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon,
that trusteeship under this Indenture with respect to the Securities of
that series and such other series or such other indenture or indentures
is not so likely to involve a material conflict of interest as to make
it necessary in the public interest or for the protection of investors
to disqualify the Trustee from acting as such under this Indenture with
respect to the Securities of that series and such other series or under
such other indenture or indentures;
(2) the Trustee or any of its directors or executive officers is an
obligor upon the Securities or an underwriter for the Company;
(3) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with
the Company or an underwriter for the Company;
(4) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee or representative of the
Company, or of an underwriter (other than the Trustee itself) for the
Company who is currently engaged in the business of underwriting, except
that (i) one individual may be a
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director or an executive officer, or both, of the Trustee and a director or
an executive officer, or both, of the Company but may not be at the same
time an executive officer of both the Trustee and the Company; (ii) if and
so long as the number of directors of the Trustee in office is more than
nine, one additional individual may be a director or an executive officer,
or both, of the Trustee and a director of the Company; and (iii) the
Trustee may be designated by the Company or by any underwriter for the
Company to act in the capacity of transfer agent, registrar, custodian,
paying agent, fiscal agent, escrow agent or depositary, or in any other
similar capacity, or, subject to the provisions of paragraph (1) of this
Subsection, to act as trustee, whether under an indenture or otherwise;
(5) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Company or by any director, partner or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons; or
10% or more of the voting securities of the Trustee is beneficially owned
either by an underwriter for the Company or by any director, partner or
executive officer thereof, or is beneficially owned, collectively, by any
two or more such persons;
(6) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), (i) 5% or more of the voting securities, or 10% or
more of any other class of security, of the Company not including the
Securities issued under this Indenture and securities issued under any
other indenture under which the Trustee is also trustee, or (ii) 10% or
more of any class of security of an underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 5% or more of the voting securities of any person who,
to the knowledge of the Trustee, owns 10% or more of the voting securities
of, or controls directly or indirectly or is under direct or indirect
common control with, the Company;
(8) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
Subsection defined), 10% or more of any class of security of any person
who, to the knowledge of the Trustee, owns 50% or more of the voting
securities of the Company; or
(9) the Trustee owns, on May 15 in any calendar year, in the capacity
of executor, administrator, testamentary or inter vivos trustee, guardian,
committee or conservator, or in any other similar capacity, an aggregate of
25% or more of the voting securities, or of any class of security, of any
person, the beneficial ownership of a specified percentage of which would
have constituted a conflicting interest under paragraph (6), (7) or (8) of
this Subsection. As to any
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such securities of which the Trustee acquired ownership through becoming
executor, administrator or testamentary trustee of an estate which included
them, the provisions of the preceding sentence shall not apply, for a
period of two years from the date of such acquisition, to the extent that
such securities included in such estate do not exceed 25% of such voting
securities or 25% of any such class of security. Promptly after May 15 in
each calendar year, the Trustee shall make a check of its holdings of such
securities in any of the above-mentioned capacities as of such May 15. If
the Company fails to make payment in full of the principal of (or premium,
if any) or interest on any of the Securities when and as the same becomes
due and payable, and such failure continues for 30 days thereafter, the
Trustee shall make a prompt check of its holdings of such securities in any
of the above-mentioned capacities as of the date of the expiration of such
30-day period, and after such date, notwithstanding the foregoing
provisions of this paragraph, all such securities so held by the Trustee,
with sole or joint control over such securities vested in it, shall, but
only so long as such failure shall continue, be considered as though
beneficially owned by the Trustee for the purposes of paragraphs (6), (7)
and (8) of this Subsection.
The specification of percentages in paragraphs (5) to (9), inclusive, of
this Subsection shall not be construed as indicating that the ownership of such
percentages of the securities of a person is or is not necessary or sufficient
to constitute direct or indirect control for the purposes of paragraph (3) or
(7) of this Subsection.
For the purposes of paragraphs (6), (7), (8) and (9) of this Subsection
only, (i) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall not include
any note or other evidence of indebtedness issued to evidence an obligation to
repay moneys lent to a person by one or more banks, trust companies or banking
firms, or any certificate of interest or participation in any such note or
evidence of indebtedness; (ii) an obligation shall be deemed to be "in default"
when a default in payment of principal shall have continued for 30 days or more
and shall not have been cured; and (iii) the Trustee shall not be deemed to be
the owner or holder of (A) any security which it holds as collateral security,
as trustee or otherwise, for an obligation which is not in default as defined in
clause (ii) above, or (B) any security which it holds as collateral security
under this Indenture, irrespective of any default hereunder, or (C) any security
which it holds as agent for collection, or as custodian, escrow agent or
depositary, or in any similar representative capacity.
(d) For the purposes of this Section:
(1) The term "underwriter", when used with reference to the Company,
means every person who, within three years prior to the time as of which
the determination is made, has purchased from the Company with a view to,
or has offered or sold for the Company in connection with, the distribution
of any security of the Company outstanding at such time, or has
participated or has had a direct or indirect participation in any such
undertaking, or has participated or has had a participation in the direct
or indirect underwriting of any such undertaking, but such term shall not
include a person
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whose interest was limited to a commission from an underwriter or dealer
not in excess of the usual and customary distributors' or sellers'
commission.
(2) The term "director" means any director of a corporation or any
individual performing similar functions with respect to any organization,
whether incorporated or unincorporated.
(3) The term "Person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an
unincorporated organization or a government or political subdivision
thereof. As used in this paragraph, the term "trust" shall include only a
trust where the interest or interests of the beneficiary or beneficiaries
are evidenced by a security.
(4) The term "voting security" means any security presently entitling
the owner or holder thereof to vote in the direction or management of the
affairs of a person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or agent or agents
for the owner or holder of such security are presently entitled to vote in
the direction or management of the affairs of a person.
(5) The term "Company" means any obligor upon the Securities.
(6) The term "executive officer" means the president, every vice
president, every trust officer, the cashier, the secretary and the
treasurer of a corporation, and any individual customarily performing
similar functions with respect to any organization whether incorporated or
unincorporated, but shall not include the chairman of the board of
directors.
(e) The percentages of voting securities and other securities specified
in this Section shall be calculated in accordance with the following
provisions:
(1) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this Section (each of whom
is referred to as a "person" in this paragraph) means such amount of the
outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes
which the holders of all the outstanding voting securities of such person
are entitled to cast in the direction or management of the affairs of such
person.
(2) A specified percentage of a class of securities of a person means
such percentage of the aggregate amount of securities of the class
outstanding.
(3) The term "amount", when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of
shares if relating to capital shares and the number of units if relating to
any other kind of security.
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(4) The term "outstanding" means issued and not held by or for the
account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(i) securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(ii) securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation evidenced
by such other class of securities is not in default as to principal or
interest or otherwise;
(iii) securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(iv) securities held in escrow if placed in escrow by the issuer
thereof;
provided, however, that any voting securities of an issuer shall be deemed
-------- -------
outstanding if any person other than the issuer is entitled to exercise the
voting rights thereof.
(5) A security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, however, that, in
-------- -------
the case of secured evidences of indebtedness, all of which are issued
under a single indenture, differences in the interest rates or maturity
dates of various series thereof shall not be deemed sufficient to
constitute such series different classes and provided, further, that, in
-------- -------
the case of unsecured evidences of indebtedness, differences in the
interest rates or maturity dates thereof shall not be deemed sufficient to
constitute them securities of different classes, whether or not they are
issued under a single indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $100,000,000 subject to supervision or examination by Federal or
state authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
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SECTION 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the resigning Trustee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608(a) after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee for a series shall cease to be eligible under Section
609 and shall fail to resign after written request therefor by the Company or
by any Holder of Securities of such series, or
(3) the Trustee shall become incapable of acting or shall be adjudged a
bankrupt or insolvent or a receiver of the Trustee or of its property shall
be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conversation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees,
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and such successor Trustee or Trustees
shall comply with the applicable
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requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register, Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee
an instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder,
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the
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retiring Trustee, and (3) shall add to or change any of the provisions of this
indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Securities of that or those series to which the appointment
of such successor Trustee relates.
(c) upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
-----------------------------------------------------------
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
-------------------------------------------------
(a) Subject to Subsection (b) of this Section, if the Trustee shall be or
shall become a creditor, directly or indirectly, secured or unsecured, of the
Company within four months prior to a default, as defined in Subsection (c) of
this Section, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities, as defined in
Subsection (c) of this Section:
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(1) an amount equal to any and all reductions in the amount due and owing
upon any claim as such creditor in respect of principal or interest, effected
after the beginning of such four months' period and valid as against the
Company and its other creditors, except any such reduction resulting from the
receipt or disposition of any property described in paragraph (2) of this
Subsection, or from the exercise of any right of set-off which the Trustee
could have exercised if a petition in bankruptcy had been filed by or against
the Company upon the date of such default; and
(2) all property received by the Trustee in respect of any claims as such
creditor, either as security therefor, or in satisfaction or composition
thereof, or otherwise, after the beginning of such four months' period, or an
amount equal to the proceeds of any such property, if disposed of, subject,
-------
however, to the rights if any, of the Company and its other creditors in such
-------
property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any such
claim by any Person (other than the Company) who is liable thereon, and (ii)
the proceeds of the bona fide sale of any such claim by the Trustee to a
third Person, and (iii) distributions made in cash, securities or other
property in respect of claims filed against the Company in Bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such four months' period;
(C) to realize, for its own account, but only to the extent of the claim
hereinafter mentioned, upon any property held by it as security for any such
claim, if such claim was created after the beginning of such four months'
period and such property was received as security therefor simultaneously
with the creation thereof, and if the Trustee shall sustain the burden of
proving that at the time such property was so received the Trustee had no
reasonable cause to believe that a default, as defined in Subsection (c) of
this Section, would occur within four months; or
(D) to receive payment on any claim referred to in paragraph (B) or (C),
against the release of any property held as security for such claim as
provided in paragraph (B) or (C), as the case may be, to the extent of the
fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such four months' period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any pre-existing
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
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If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned among the
Trustee, the Holders and the holders of other indenture securities in such
manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, the same percentage of their respective
claims, figured before crediting to the claim of the Trustee anything on account
of the receipt by it from the Company of the funds and property in such special
account and before crediting to the respective claims of the Trustee and the
Holders and the holders of other indenture securities dividends on claims filed
against the Company in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Federal Bankruptcy Act or applicable State law,
but after crediting thereon receipts on account of the indebtedness represented
by their respective claims from all sources other than from such dividends and
from the funds and property so held in such special account, As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or
proceedings for reorganization pursuant to the Federal Bankruptcy Act or
applicable State law, whether such distribution is made in cash, securities or
other property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceedings for reorganization is pending shall have
jurisdiction (i) to apportion among the Trustee, the Holders and the holders of
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee and the Holders and the holders of
other indenture securities with respect to their respective claims, in which
event it shall not be necessary to liquidate or to appraise the value of any
securities or other property held in such special account or as security for any
such claim, or to make a specific allocation of such distributions as between
the secured and unsecured portions of such claims, or otherwise to apply the
provisions of this paragraph as a mathematical formula.
Any Trustee which has resigned or been removed after the beginning of such
four months' period shall be subject to the provisions of this Subsection as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such four months' period, it shall be
subject to the provisions of this Subsection if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim, which would have given
rise to the obligation to account, if such Trustee had continued as Trustee,
occurred after the beginning of such four months' period; and
(ii) such receipt of property or reduction of claim occurred within four
months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection (a) of this
Section a creditor relationship arising from:
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(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Holders at the time and in the manner
provided in this Indenture;
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in Subsection (c) of this
Section;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; and
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as defined in Subsection (c) of
this Section.
(c) For the purposes of this Section only:
(1) the term "default" means any failure to make payment in full of the
principal of (or premium, if any) or interest on any of the Securities or
upon the other indenture securities when and as such principal or interest
becomes due and payable;
(2) the term "other indenture securities" means securities upon which
the Company is an obligor outstanding under any other indenture (i) under
which the Trustee is also trustee, (ii) which contains provisions
substantially similar to the provisions of this Section, and (iii) under
which a default exists at the time of the apportionment of the funds and
property held in such special account;
(3) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
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(4) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation;
(5) the term "Company" means any obligor upon the Securities; and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy Act or Title
11 of the United States Code,
SECTION 614. Authenticating Agents.
---------------------
There may be an Authenticating Agent or Authenticating Agents with respect
to one or more series of Securities appointed by the Trustee from time to time
with power to act on its behalf and subject to its direction in connection with
the authentication and delivery of Securities of such series issued upon
exchange, transfer or redemption thereof as fully to all intents and purposes as
though such Authenticating Agent had been expressly authorized to authenticate
and deliver Securities, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for all purposes as
though authenticated by the Trustee hereunder. For all purposes of this
Indenture (except in the case of original issuance of the Securities and the
issuance of Securities in replacement of lost, stolen, mutilated or destroyed
Securities), the authentication and delivery of Securities by an Authenticating
Agent appointed pursuant to the provisions of this Section shall be deemed to be
the authentication and delivery of such Securities "by the Trustee," and
whenever this Indenture provides (except in the case of original issuance of the
Securities and the issuance of Securities in replacement of lost, stolen,
mutilated or destroyed Securities) that "the Trustee shall authenticate and
deliver" Securities, such authentication and delivery by any Authenticating
Agent shall be deemed to be authentication and delivery by the Trustee. Any such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States of America or any State or the
District of Columbia, with a combined capital and surplus of at least ten
million dollars and authorized under such laws to act as an authenticating
agent, duly registered to act as such, if and to the extent required by
applicable law and subject to supervision or examination by Federal, State or
District of Columbia authority. If such corporation publishes reports of its
condition at least annually, pursuant to law or the requirements of such
authority, then for the purposes of this Section the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible to act as such in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect herein specified in this Section.
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Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible to act as such in
accordance with the provisions of this Section, without the execution or filing
of any paper or any further act on the part of the Trustee or the Authenticating
Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice or resignation or upon a termination, or in case at any time any
Authenticating Agent shall cease to be eligible to act as such in accordance
with the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent. Upon the appointment, at any time after the original
issuance of any of the Securities, of any successor, additional or new
Authenticating Agent, the Trustee shall give written notice of such appointment
to the Company and shall at the expense of the Company mail notice of such
appointment to all Holders of Securities of the series with respect to which
such Authenticating Agent will serve, as their names and addresses appear in the
Security Register. Any successor Authenticating Agent upon acceptance of its
appointment pursuant to the provisions of this Section shall become vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with like effect as if initially named as an Authenticating Agent herein. No
successor Authenticating Agent shall be appointed unless eligible to act as such
in accordance with the provisions of this Section.
Any Authenticating Agent by the acceptance of its appointment shall be
deemed to have represented to the Trustee that it is eligible for appointment as
Authenticating Agent under this Section and to have agreed with the Trustee
that: it will perform and carry out the duties of an Authenticating Agent as
herein set forth, including among other things the duties to authenticate and
deliver Securities when presented to it in connection with exchanges,
registrations of transfer or redemptions thereof; it will keep and maintain, and
furnish to the Trustee from time to time as requested by the Trustee,
appropriate records of all transactions carried out by it as Authenticating
Agent and will furnish the Trustee such other information and reports as the
Trustee may reasonably require; and it will notify the Trustee promptly if it
shall cease to be eligible to act as Authenticating Agent in accordance with the
provisions of this Section. Any Authenticating Agent by the acceptance of its
appointment shall be deemed to have agreed with the Trustee to indemnify the
Trustee against any loss, liability or expense incurred by the Trustee and to
defend any claim asserted against the Trustee by reason of any acts or failures
to act of such Authenticating Agent, but such Authenticating Agent shall have no
liability for any action taken by it in accordance with the specific written
direction of the Trustee.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation and expenses for its services (to the extent such
compensation is not
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paid by the Company), and the Trustee shall be entitled to
be reimbursed for such payments subject to the provisions of Section 607.
The provisions of Sections 104, 603, 604 and 607 shall inure to the benefit
of each Authenticating Agent to the same extent that they inure to the benefit
of the Trustee.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
---------------------------------------------------------
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than January 15 and July 15 in each year, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders of each series as of the preceding January 1 or July 1,
as the case may be, and
(b) at such other times as the Trustee may request in writing, within 30
days after the receipt by the Company of any such request, a list of similar
form and content, such list to be dated as of a date not more than 15 days prior
to the time such list is furnished;
notwithstanding the foregoing, so long as the Trustee is the Security
Registrar with respect to a particular series of Securities, no such list shall
be required to be furnished in respect of such series.
SECTION 702. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders of each series contained in the
most recent list furnished to the Trustee as provided in Section 701 and the
names and addresses of Holders of each series received by the Trustee in its
capacity as Security Registrar. The Trustee may destroy any list furnished to it
as provided in Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders of any series (herein referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Security of such series
for a period of at least six months preceding the date of such application, and
such application states that the applicants desire to communicate with other
Holders of such series with respect to their rights under this Indenture or
under such Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall,
within five business days after the receipt of such application, at its
election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 702(a), or
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(ii) inform such applicants as to the approximate number of Holders of
Securities of such series whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with Section
702(a), and as to the approximate cost of mailing to such Holders the form
of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder of Securities of such series whose name and address appear
in the information preserved at the time by the Trustee in accordance with
Section 702(a) a copy of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interest of the Holders of such series or would be in
violation of applicable law. Such written statement shall specify the basis of
such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 702(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 702(b).
SECTION 703. Reports by Trustee.
------------------
(a) on or before January 15 of each year commencing with the year 1989,
the Trustee shall transmit by mail to all Holders, as their names and addresses
appear in the Security Register, a brief report dated as of the preceding
November 15 with respect to:
(1) its eligibility under Section 609 and its qualifications under
Section 608, or in lieu thereof, if to the best of its knowledge it has
continued to be eligible and qualified under said Sections, a written
statement to such effect;
(2) the character and amount of any advances (and if the Trustee elects
so to state, the circumstances surrounding the making thereof) made by the
Trustee (as such) which remain unpaid on the date of such report, and for
the reimbursement of which it claims or may claim a lien or charge, prior
to that of the Securities, on any
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property or funds held or collected by it as Trustee, except that the
Trustee shall not be required (but may elect) to report such advances if
such advances so remaining unpaid aggregate not more than 1/2 of 1% of the
principal amount of the Securities Outstanding on the date of such report;
(3) the amount, interest rate and maturity date of all other
indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor
relationship arising in any manner described in Section 613(b)(2), (3), (4)
or (6);
(4) the property and funds, if any, physically in the possession of the
Trustee as such on the date of such report;
(5) any additional issue of Securities which the Trustee has not
previously reported; and
(6) any action taken by the Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Securities, except action in respect of a default,
notice of which has been or is to be withheld by the Trustee in accordance
with Section 602.
(b) The Trustee shall transmit by mail to all Holders, as their names
and addresses appear in the Security Register, a brief report with respect to
the character and amount of any advances (and if the Trustee elects so to state,
the circumstances surrounding the making thereof) made by the Trustee (as such)
since the date of the last report transmitted pursuant to Subsection (a) of this
Section (or if no such report has yet been so transmitted, since the date of
execution of this instrument) for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities, on property or funds
held or collected by it as Trustee and which it has not previously reported
pursuant to this Subsection, except that the Trustee shall not be required (but
may elect) to report such advances if such advances remaining unpaid at any time
aggregate 10% or less of the principal amount of the Securities Outstanding at
such time, such report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
------------------
The Company shall:
(1) file with the Trustee, within 15 days after the Company is required
to file the same with the Commission, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the
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Commission may from time to time by rules and regulations prescribe) which
the Company may be required to file with the Commission pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or,
if the Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall file with the Trustee
and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, in respect
of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (1) and (2) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into another
corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a corporation
organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Securities and
the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
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(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of Default, and
no event which, after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continuing;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Company or
such successor corporation or Person, as the case may be, shall take such
steps as shall be necessary effectively to secure the Securities equally
and ratably with (or prior to) all indebtedness secured thereby; and
(4) if a supplemental indenture is required in connection with such
transaction, the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and such supplemental
indenture comply with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied with.
SECTION 802. Successor Corporation Substituted.
---------------------------------
Upon any consolidation by the Company with or merger by the Company into
any other corporation or any conveyance, transfer or lease of the properties and
assets of the Company substantially as an entirety in accordance with Section
801, the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein, and thereafter, except in the
case of such lease, the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Securities and may be
liquidated and dissolved.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
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(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default with respect to all or any
series of the Securities (and, if such Event of Default is applicable to
less than all series of Securities specifying the series to which such
Event of Default is applicable); or
(4) to add to or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
--------
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is adversely affected by
such change in or elimination of such provision; or
(6) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(7) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Securities of one or more series
and to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of Section
611(b); or
(8) to amend any provision included herein in compliance with the Trust
Indenture Act so as to provide as required or permitted by any change in
the Trust Indenture Act; or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided such other provisions as
--------
may be made shall not adversely affect the interests of the Holders of
Securities of any series in any material respect.
SECTION 902. Supplemental Indentures With Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities
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of such series under this Indenture; provided, however, that no such
-------- -------
supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502, or change any Place of Payment where, or the coin or currency in
which, any Security or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such payment
on or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date), or
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section or Section 513, except
to increase any such percentage or to provide with respect to any
particular series the right to condition the effectiveness of any
supplemental indenture as to that series on the consent of the Holders of a
specified percentage of the aggregate principal amount of Outstanding
Securities of such series (which provision may be made pursuant to Section
301 without the consent of any Holder) or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected thereby,
provided, however, that this clause shall not be deemed to require the
-------- -------
consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section, or the deletion of this
proviso, in accordance with the requirements of Sections 611(b) and 901(7).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive
(in addition to the opinion which the Trustee is
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entitled to receive pursuant to Section 303), and (subject to Section 601) shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties,
immunities or liabilities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity With Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities of any series authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article may, and shall if required
by the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
------------------------------------------
The Company will duly and punctually pay the principal of (and premium, if
any) and interest on the Securities in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
-------------------------------
The Company will maintain an Office or agency in each Place of Payment for
each series of Securities where Securities of that series may be presented or
surrendered for payment, where Securities of that series may be surrendered for
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities of that series and this indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and of
any change in the location, of such office or agency. The Corporate Trust Office
of Morgan Guaranty Trust Company of New York shall be such agency in the City of
New York, New York, and the principal corporate trust office of each Paying
Agent, if any, with respect to a
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series of securities shall be such agency in the city where such office is
located unless in any case the Company shall maintain some other office or
agency for such purpose and give the Trustee written notice of the location
thereof. If at any time the Company shall fail to maintain such office or agency
in each Place of Payment or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee in the Borough of Manhattan,
City and State of New York, and the Company hereby appoints the Trustee as its
agent to receive all such presentations, surrenders, notices and demands.
SECTION 1003. Money for Payment of Securities to be Held in Trust.
---------------------------------------------------
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of such
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided, and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, prior to each due date of the principal of (and premium, if
any) or interest on any Securities, deposit with a Paying Agent a sum sufficient
to pay the principal, premium, if any, or interest so becoming due, such sum to
be held in trust for the benefit of the Persons entitled to such principal,
premium, if any, or interest, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities,
other than the Trustee, to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of such series) in the making of any such
payment of principal, premium, if any, or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent,
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such sums to be held by the Trustee upon the same trusts as those upon which
such sums were held by the Company or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest on any Security of any series and remaining unclaimed for three
years after such principal, premium, if any, or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in an Authorized Newspaper in
each Place of Payment, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Statement as to Compliance.
--------------------------
The Company will deliver to the Trustee, within 120 days after the end of
each fiscal year of the Company, a written statement signed by the Chairman of
the Board, the President, a Vice President or the Treasurer of the Company
stating that:
(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under his supervision; and
(2) to the best of his knowledge, based on such review, the Company
has fulfilled all its obligations under this Indenture throughout such
year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to him and the nature and
status thereof.
SECTION 1005. Limitation on Liens.
-------------------
(a) Except as otherwise provided in Subsection (b) of this Section, the
Company shall not, and shall not permit any Restricted Subsidiary to, issue,
assume or guarantee any Debt secured by a Lien upon any Principal Property of
the Company or of any Restricted Subsidiary or upon any shares of stock or Debt
of any Restricted Subsidiary (whether such Principal Property, shares of stock
or Debt are now owned or hereafter acquired) without in any such case
effectively providing concurrently with the issuance, assumption or guaranty of
any such Debt that the Securities (together with, if the Company shall so
determine, any other indebtedness of or guaranty by the Company or such
Restricted Subsidiary then existing or thereafter created which is not
subordinate to the Securities) shall be secured equally and ratably with (or, at
the option of the Company, prior to) such Debt, so long as such Debt shall be so
secured; provided, however, that nothing in this Section 1005 shall prevent,
-------- -------
restrict or apply to
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(and there shall be excluded from secured Debt in any computation under this
Section 1005) Debt secured by:
(1) Liens on property, shares of stock or indebtedness of any
corporation existing at the time such corporation becomes a Restricted
Subsidiary or arising thereafter (i) otherwise than in connection with the
borrowing of money arranged thereafter and (ii) pursuant to contractual
commitments entered into prior to and not in contemplation of such
corporation's becoming a Restricted Subsidiary;
(2) Liens on any property (including shares of stock or Debt)
existing at the time of acquisition thereof (including acquisition through
merger or consolidation) or securing the payment of all or any part of the
purchase price or construction cost thereof or securing any Debt incurred
prior to, at the time of or within 180 days after, the acquisition of such
property, shares of stock or Debt or the completion of any such
construction, whichever is later, for the purpose of financing all or any
part of the purchase price or construction cost thereof (provided such
Liens are limited to such property, improvements thereon and the land upon
which such property and improvements are located and any other property not
then constituting a Principal Property);
(3) Liens on any property to secure all or any part of the cost of
development, operation, construction, alteration, repair or improvement of
all or any part of such property, or to secure Debt incurred prior to, at
the time of or within 180 days after, the completion of such development,
operation, construction, alteration, repair or improvement, whichever is
later, for the purpose of financing all or any part of such cost (provided
such Liens are limited to such property, improvements thereon and the land
upon which such property and improvements are located and any other
property not then constituting a Principal Property);
(4) Liens which secure Debt owing by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary or by the Company to a
Restricted Subsidiary;
(5) Liens securing indebtedness of a corporation which becomes a
successor of the Company in accordance with the provisions of Article
Eight;
(6) Liens on property of the Company or a Restricted Subsidiary in
favor of the United States of America or any State thereof, or any
department agency or instrumentality or political subdivision of the United
States of America or any State thereof, or in favor of any other country or
any political subdivision thereof, to secure partial, progress, advance or
other payments pursuant to any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the
purchase price or the cost of construction of the property subject to such
Liens, or in favor of any trustee or mortgagee for the benefit of holders
of indebtedness of any such entity incurred for any such purpose;
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(7) Liens existing at March 15, 1988; and
(8) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
the foregoing clauses (1) to (7), inclusive, or of any Debt secured
thereby; provided that such extension, renewal or replacement Lien shall be
limited to all or any part of the same property that secured the Lien
extended, renewed or replaced (plus any improvements on such property) and
shall secure no larger amount of Debt than that existing at the time of
such extension, renewal or replacement.
(b) Notwithstanding the foregoing provisions of this Section 1005, the
Company and any one or more Restricted Subsidiaries may issue, assume or
guarantee Debt secured by a Lien which would otherwise be subject to the
foregoing restrictions if at the time it does so (the "Incurrence Time") the
aggregate amount of such Debt plus all other Debt of the Company and its
Restricted Subsidiaries secured by a Lien which would otherwise be subject to
the foregoing restrictions (not including Debt permitted to be secured under
clauses (1) through (8) above), plus the aggregate Attributable Debt (determined
as of the Incurrence Time) of Sale and Leaseback Transactions (other than Sale
and Leaseback Transactions permitted by Subsection (a) of Section 1006) entered
into after March 15, 1988 and in existence at the Incurrence Time (less the
aggregate amount of proceeds of such Sale and Leaseback Transactions which shall
have been applied in accordance with Subsection (c) of Section 1006), does not
exceed 10% of Consolidated Net Tangible Assets).
SECTION 1006. Limitation on Sale and Leaseback Transactions.
---------------------------------------------
The Company shall not itself, and shall not permit any Restricted
Subsidiary to, enter into any arrangements after March 15, 1988 with any bank,
insurance company or other lender or investor (other than the Company or another
Restricted Subsidiary) providing for the leasing as lessee by the Company or by
any such Restricted Subsidiary of any Principal Property (except a lease for a
temporary period not to exceed three years by the end of which it is intended
the use of such Principal Property by the lessee will be discontinued), which
was or is owned by the Company or a Restricted Subsidiary and which has been or
is to be sold or transferred by the Company or a Restricted Subsidiary, more
than 180 days after the completion of construction and commencement of full
operation thereof by the Company or such Restricted Subsidiary, to such lender
or investor or to any Person to whom funds have been or are to be advanced by
such lender or investor on the security of such Principal Property (herein
called a "Sale and Leaseback Transaction") unless:
(a) the Company or such Restricted Subsidiary would (at the time of
entering into such arrangement) be entitled pursuant to clauses (1) through
(8) of Subsection (a) of Section 1005, without equally and ratably securing
the Securities, to issue, assume or guarantee indebtedness secured by a
Lien on such Principal Property; or
(b) the Attributable Debt of the Company and its Restricted
Subsidiaries in respect of such Sale and Leaseback Transaction and all
other Sale and Leaseback Transactions entered into after March 15, 1988
(other than such Sale and Leaseback
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Transactions as are permitted by Subsections (a) or (c) of this Section
1006), plus the aggregate principal amount of Debt secured by Liens on
Principal Properties then outstanding (excluding any such Debt secured by
Liens covered in subdivisions (1) through (8) of Subsection (a) of Section
1005) which do not equally and ratably secure the Securities, would not
exceed 10% of Consolidated Net Tangible Assets; or
(c) the Company, within 180 days after the sale or transfer, applies
or causes a Restricted Subsidiary to apply an amount equal to the greater
of the net proceeds of such sale or transfer or fair market value of the
Principal Property so sold and leased back at the time of entering into
such Sale and Leaseback Transaction (in either case as determined by the
Board of Directors) to the retirement of Securities or other indebtedness
of the Company (other than indebtedness subordinated to the Securities) or
indebtedness of a Restricted Subsidiary, for money borrowed, having a
stated maturity more than 12 months from the date of such application or
which is extendible at the option of the obligor thereon to a date more
than 12 months from the date of such application, provided that the amount
to be so applied shall be reduced by (i) the principal amount of Securities
delivered within 180 days after such sale or transfer to the Trustee for
retirement and cancellation, and (ii) the principal amount of any such
indebtedness of the Company or a Restricted Subsidiary other than
Securities voluntarily retired by the Company or a Restricted Subsidiary
within 180 days after such sale or transfer. Notwithstanding the foregoing,
no retirement referred to in this subdivision (c) may be affected by
payment at Maturity.
Notwithstanding the foregoing, where the Company or any Restricted Subsidiary is
the lessee in any Sale and Leaseback Transaction, Attributable Debt shall not
include any Debt resulting from the guarantee by the Company or any other
Restricted Subsidiary of the lessee's obligation thereunder.
SECTION 1007. Corporate Existence.
-------------------
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
------------------------
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for Securities of any series)
in accordance with this Article.
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SECTION 1102. Election to Redeem; Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Securities shall be evidenced by
a Board Resolution. In case of any redemption at the election of the Company of
less than all the Securities of any series, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities of such series to be redeemed. In the case
of any redemption of Securities prior to the expiration of any restriction on
such redemption provided in the terms of such Securities or elsewhere in this
Indenture, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to be Redeemed.
-------------------------------------------------
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to the minimum authorized denomination for
Securities of that series or any integral multiple thereof) of the principal
amount of Securities of such series of a denomination larger than the minimum
authorized denomination for Securities of that series.
The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at his address appearing in the
Security Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
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(3) if less than all the Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Securities to be redeemed;
(4) that on the Redemption Date the Redemption Price plus the amount of
accrued interest, if any, will become due and payable upon each such Security
to be redeemed and, if applicable, that interest thereon will cease to accrue
on and after said date;
(5) the place or places where such Securities are to be surrendered for
payment of the Redemption Price; and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
---------------------------
At or prior to the opening of business on any Redemption Date, the Company
shall deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
Section 1003) an amount of money sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
-------------------------------------
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
-------- -------
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate prescribed therefor in the
Security.
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SECTION 1107. Securities Redeemed in Part.
---------------------------
Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and Stated Maturity of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 1202. Each sinking fund payment shall be applied to the redemption
of Securities of any series as provided for by the terms of Securities of such
series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to the Securities of such series required to be made pursuant to the terms of
such Securities as provided for by the terms of such series; provided that such
--------
Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
-----------------------------------------
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount
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of the next ensuing sinking fund payment for that series pursuant to the terms
of that series, the portion thereof, if any, which is to be satisfied by payment
of cash and the portion thereof, if any, which is to be satisfied by delivering
and crediting Securities of that series pursuant to Section 1202 and will also
deliver to the Trustee any Securities to be so delivered. Not less than 30 days
before each such sinking fund payment date the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in the manner
specified in Section 1103 and cause notice of the redemption thereof to be given
in the name of and at the expense of the Company in the manner provided in
Section 1104. Such notice having been duly given, the redemption of such
Securities shall be made upon the terms and in the manner stated in Section 1106
and 1107.
ARTICLE THIRTEEN
REPURCHASE OF SECURITIES BY COMPANY UPON TRIGGERING EVENT
SECTION 1301. Right to Require Repurchase.
---------------------------
If (a) this Article 13 is specified, as contemplated by Section 301, to be
applicable to Securities of any series and (b) at any time thereafter, the Board
of Directors or, in either of the circumstances described in clauses (i) and
(ii) below, a majority of the Disinterested Directors then in office, has by
resolution further determined in its sole and absolute discretion that this
Article 13 is applicable to the Securities of any such series (the "Board's
Further Determination") then upon the occurrence of a Triggering Event following
the Board's Further Determination or, if the Board's Further Determination
occurs after a Triggering Event, upon the Board's Further Determination, the
Holder of Securities of any such series shall have the right, at the Holder's
option, to require the Company to purchase, and upon the exercise of such right,
the Company shall purchase, all or any part of such Holder's Securities on the
date (the "Repurchase Date") that is 30 days after the date of the Triggering
Event or, if later, the date of the Board's Further Determination, at the
Redemption Price in effect on the Repurchase Date, plus accrued and unpaid
interest to the Repurchase Date. The Board's Further Determination shall only
require the concurrence of a majority of the Disinterested Directors then in
office in the event that: (i) such determination occurs on or after the time a
Person becomes an Acquiring Person, or (ii) such determination occurs on or
after the date of a change (resulting from a proxy or consent solicitation) in a
majority of the directors in office at the commencement of such solicitation if
any Person who is a participant in such solicitation has stated (or, if upon the
commencement of such solicitation, a majority of the Board of Directors of the
Company has determined in good faith) that such Person (or any of its Affiliates
or Associates) intends to take, or may consider taking, any action which would
result in such Person becoming an Acquiring Person or which would cause the
occurrence of a Triggering Event unless, concurrent with such solicitation, such
Person (or one or more of its Affiliates of Associates) is making a cash tender
offer pursuant to a Schedule 14D-1 (or any successor form) filed with the
Commission for all outstanding shares of Common Stock not beneficially owned by
such Person (or by its Affiliates or Associates).
SECTION 1302. Notice; Method of Exercising Repurchase Right.
---------------------------------------------
On or before the seventh day after the occurrence of a Triggering Event or
the Board's Further Determination, whichever is later, the Company, or at the
request of the
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Company, the Trustee (after receipt of an Officers' Certificate of the Company
stating that a Triggering Event has occurred and that the Board's Further
Determination has been made and evidenced by a Board Resolution) shall give
notice of the Triggering Event and the Board's Further Determination, and of the
repurchase right set forth herein arising as a result thereof, by first class
mail, postage prepaid, to each Holder of Securities of any such series at such
Holder's address appearing in the register of Securities. The Company shall also
cause a copy of such notice of a repurchase right to be published once, on or
before the fifteenth day after the occurrence of the Triggering Event or the
Board's Further Determination, whichever is later, in a newspaper of general
circulation in The City of New York.
Each notice of a repurchase right shall state:
(1) the Repurchase Date;
(2) the date by which the repurchase right must be exercised;
(3) the price at which the repurchase is to be made, if the repurchase
right is exercised; and
(4) a description of the procedure which a Holder must follow to exercise
a repurchase right.
No failure of the Company to give the foregoing notice shall limit any
Holder's right to exercise a repurchase right.
To exercise a repurchase right, a Holder shall deliver to the Company (or
an agent designated by the Company for such purpose in the notice referred to
above) on or before the thirtieth day after the Triggering Event or the Board's
Further Determination; whichever is later, (i) written notice of the Holder's
exercise of such right, which notice shall set forth the name of the Holder, the
principal amount of the Security or Securities (or portion of a Security) to be
repurchased, and a statement that the option to exercise the repurchased right
is being made thereby, and (ii) the Security with respect to which the
repurchase right is being exercised, duly endorsed for transfer to the Company.
Such written notice shall be irrevocable.
In the event that a repurchase right shall be exercised in accordance with
the terms hereof, the Company shall pay or cause to be paid the price payable
with respect to the Security or Securities as to which the repurchase right has
been exercised in cash to the Holder of such Security or Securities on the
Repurchase Date. In the event that a repurchase right is exercised with respect
to less than the entire principal amount of a surrendered Security, the Company
shall issue and the Trustee shall authenticate for the Holder a new Security
equal in principal amount to the unrepurchased portion of such surrendered
Security.
SECTION 1303. Certain Definitions.
-------------------
As used in this Article 13,
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(a) the term "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of outstanding shares of Voting Stock representing 20% or more
of the Voting Power, but shall not include the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan,
(b) the terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on March 15, 1988 (the "Exchange Act").
(c) a Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a Person
--------
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise of the Company's preferred stock purchase rights at
any time prior to the occurrence of a Triggering Event;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
--------
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to
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subparagraph (ii) of this paragraph (c)) or disposing of any voting
securities of the Company.
(d) the term "Disinterested Director" shall mean (i) any member of the
Board of Directors of the Company, while such person is a member of the Board,
who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative of an Acquiring Person or of any such Affiliate or
Associate, and was a member of the Board prior to the time that the Acquiring
Person became an Acquiring Person, or (ii) any person who subsequently becomes a
member of the Board to fill a vacancy created by an increase in the size of the
Board, while such person is a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, if such person's
nomination for election by the shareholders or election to the Board is
recommended or approved by a majority of the Disinterested Directors or (iii)
any successor of a Disinterested Director who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person or of any such Affiliate or
Associate, if such person's nomination for election by the shareholders or
election to the Board is recommended or approved by a majority of the
Disinterested Directors.
(e) the term "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(f) the term "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(g) the term "Triggering Event" shall mean the date on which:
(i) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after March 15, 1988, directly or indirectly,
shall merge into the Company or otherwise combine with the Company and the
Company shall be the continuing or surviving corporation of such merger or
combination and the Common Stock of the Company shall remain outstanding
and unchanged, or
(ii) any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan), alone or
together with its Affiliates and Associates, shall, at any time after March
15, 1988, become the Beneficial Owner of shares of Voting Stock
representing 28% or more of the Voting Power, or
(iii) following the first date of public announcement (which, for all
purposes hereof, shall include, without limitation, a report filed pursuant
to Section 13(d) under the Exchange Act) by the Company or an Acquiring
Person
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that an Acquiring Person has become such, directly or indirectly,
(x) the Company shall consolidate with, or merge with and into, any other
Person (other than a Subsidiary of the Company in a transaction that will
not diminish substantially or otherwise eliminate the benefits intended to
be afforded by this Article 13), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction that
will not diminish substantially or otherwise eliminate the benefits
intended to be afforded by this Article 13) shall consolidate with, or
merge with or into, the Company, and the Company shall be the continuing or
surviving corporation of such consolidation or merger and, in connection
with such consolidation or merger, all or part of the outstanding shares of
Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the
Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any Person or Persons (other than the Company or any
Subsidiary of the Company in one or more transactions each of which will
not diminish substantially or otherwise eliminate the benefits intended to
be afforded by this Article 13).
(h) the term "Voting Power" shall mean, at any particular point in time,
the total number of votes that all holders of the then outstanding shares of
capital stock of the Company would be entitled to cast in an annual election of
the directors of the Company, voting together as a single class.
(i) the term "Voting Stock" shall mean the Common Stock, par value $1.00
per share, of the Company and all other equity securities of the Company that
would entitle the holders thereof to cast votes in an election of directors of
the Company.
* * *
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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SIGNATURES AND SEALS
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written,
ATTEST: ARMSTRONG WORLD INDUSTRIES, INC.
/s/ David D. Wilson By /s/ Charles A. Walker, Jr.
- ----------------------------------- ------------------------------
(Corporate Seal)
ATTEST: MORGAN GUARANTY TRUST COMPANY OF NEW YORK
/s/ April Schmauder By /s/ John W. Cole
- ----------------------------------- ------------------------------
(Corporate Seal)
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<PAGE>
ACKNOWLEDGMENTS
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this day personally appeared,
Charles A. Walker, Jr., the Vice President of Armstrong World Industries, Inc.,
known to me to be the person whose name is subscribed to the above and foregoing
instrument of writing, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated,
and as the act and deed of said corporation; and, being by me duly sworn, did
depose and say that he resides at 151 Wilson Drive Lancaster, PA 17603, that he
is the Vice President of said corporation, that he knows the seal of said
corporation, that the seal affixed to said instrument is such corporate seal,
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 26 day of April, 1988.
Elizabeth R. Cava
-----------------------------------------------
Notary Public in and for New York, New York
My commission expires on: February 28, 1989
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, on this day personally appeared John
W. Cole, a Vice President, known to me to be the person whose name is subscribed
to the above and foregoing instrument of writing, and acknowledged to me that he
executed the same for the purposes and consideration therein expressed, in the
capacity therein stated, and as the act and deed of said corporation; and, being
by me duly sworn, did depose and say that he resides at Staten Island, NY, that
he is a Vice President of said corporation, that he knows the seal of said
corporation, that the seal affixed to said instrument is such corporate seal,
that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 26 day of April, 1988.
Beth Sweeney
-----------------------------------------------
Notary Public in and for New York, New York
My commission expires on: June 22, 1989
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LONG-TERM STOCK OPTION PLAN FOR KEY EMPLOYEES
Section 1. Purpose
The purpose of the Plan is to promote the long-term success of the Company
by providing a continuing long-term incentive for officers and key employees of
the Company and its subsidiaries. The Plan is designed to encourage a
stockholder view of the Company and to assist the building of a stock ownership
interest by the key executives whose superior performance is vital to the long-
term success of the Company.
Section 2. Administration
The Plan shall be administered by the Committee which shall consist of not
less than three directors of the Company, none of whom is eligible to
participate in the Plan, who shall be appointed and serve at the pleasure of the
Board of Directors. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by a majority of the Committee, shall be
deemed the acts of the Committee. Subject to the provisions of the Plan and to
directions by the Board of Directors, the Committee is authorized to adopt such
rules, regulations, and guidelines and to take such action in the administration
of the Plan as it shall deem proper.
Section 3. Participants
Officers and key employees of the Company and its subsidiaries (to the
extent permissible by law), including employee directors, shall be eligible to
participate in the Plan. Directors who are not otherwise officers or employees
of the Company or of a subsidiary shall not be eligible. The Committee shall in
its sole discretion from time to time select eligible persons as participants
and determine the extent and manner of their participation.
Section 4. Shares Subject to Plan
There is hereby reserved for the purposes of the Plan 1,000,000 shares of
Common Stock, which may be either authorized and unissued shares or treasury
shares. The number of shares reserved shall be subject to adjustment as
provided in Section 7 of the Plan. In the event that any option expires,
lapses, or otherwise terminates (except in the case of surrender of all or a
portion of an option upon the exercise of a stock appreciation right) prior to
being fully exercised, any unexercised shares covered by such option shall
remain available for the purposes of the Plan.
Section 5. Stock Options
5.1 - Grant of Options
The Committee may from time to time, subject to the provisions of the Plan,
grant options to officers and key employees to purchase shares of Common Stock.
Each option shall be evidenced by a written stock option agreement between the
Company and the participant to whom such option is granted, specifying the
number of shares of Common Stock that may be acquired by its exercise and
containing such terms and conditions consistent with the Plan as the Committee
shall determine.
<PAGE>
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5.2 - Types of Options
Options granted pursuant to the Plan may be either Incentive Stock Options
or Nonstatutory Stock Options. The Committee, in its discretion, shall
determine whether and to what extent options granted under the Plan shall be
designated as Incentive Stock Options, or as Nonstatutory Stock Options, and
such options shall be granted separately hereunder. The Committee, in its
discretion, also shall determine whether and to what extent options originally
designated as Incentive Stock Options may remain Incentive Stock Options
pursuant to paragraph (a) of Section 5.3 below, in the event of the acceleration
of the exercisability of any such option. The Committee, in its discretion, may
allow certain optionees holding unexercised Incentive Stock Options to convert
such options to Nonstatutory Stock Options.
5.3 - Option Requirements
Each option granted under the Plan shall be subject to the provisions of
the Plan, to any additional or more restrictive terms and conditions as may be
specified by the Committee in its discretion, and to the following:
(a) The Committee may not grant Incentive Stock Options to any participant
under schedules that would permit the initial exercise in any one
calendar year of Incentive Stock Options to purchase more than $100,000 of
Common Stock of the Company valued at Fair Market Value at the time of the
grant; provided, further, that in the event of any acceleration of the
exercisability of any Incentive Stock Options previously granted to a
participant, such accelerated options shall remain designated as
Incentive Stock Options pursuant to Section 5.2 above, but only to the
extent permitted by Section 422A(b)(7) of the Internal Revenue Code of
1986, as amended (hereinafter the "Code") and regulations thereunder.
(b) The price at which each share covered by the option may be acquired
shall be determined by the Committee at the time the option is granted
and shall not be less than the Fair Market Value of the stock on the
date the option is granted.
(c) No option shall be exercisable until eighteen months from the date of
grant of the option, except in the event of death or disability as set
forth in paragraph (h) below and except in the event of any Change in
Control as set forth in Section 7.3 below.
(d) No Incentive Stock Option granted prior to January 1, 1987, to a
participant who has previously been granted an Incentive Stock Option under
the Plan or under any other stock option plan of the Company or any parent
or subsidiaries may be exercised until after such earlier Incentive Stock
Option has been exercised in full or has expired by reason of lapse of
time. The grant or exercise of any Nonstatutory Option, and the grant or
exercise of any Incentive Stock Option granted after December 31, 1986,
shall not affect the sequence in which Incentive Stock Options granted
prior to 1987 may be exercised.
(e) No shares of stock may be acquired by exercise of an option after a maximum
of ten years from the date the option was granted.
(f) The option shall be exercisable by the participant only while an employee
of the Company or any of its subsidiaries, or within three months after the
participant ceases to be employed by any of such corporations, for any
reason other than retirement, Disability, or death.
<PAGE>
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(g) In the event of the retirement of the participant, commencing with the date
of retirement, and prior to its expiration date, an option must be
exercised during a period of three years (although an unexercised Incentive
Stock Option will cease to be treated as such and will become a
Nonstatutory Stock Option after three months). However, an Incentive Stock
Option granted prior to February 26, 1990 must be exercised within three
months commencing with the date of retirement.
(h) In the event of death of the participant, the option must be exercised
prior to its expiration and within eighteen months from the date of death.
In the event of the Disability of the participant, the option must be
exercised prior to its expiration and within twelve months from the date of
termination of employment due to such Disability. Each such option may be
exercised as to all or any portion thereof without regard to the limitation
contained in paragraph (c) of this Section.
(i) The option shall not be transferable by the participant otherwise than by
will or by the laws of descent and distribution. The option may be
exercised only during the participant's lifetime by the participant.
(j) The option may be exercised in whole or in part from time to time by
written request received by the Treasurer of the Company. The option price
of each share acquired pursuant to an option shall be paid in full at the
time of each exercise of the option either in cash, or in the discretion of
the Committee, by delivering to the Company shares of the Company's Common
Stock or any combination of such shares and cash, having an aggregate Fair
Market Value equal to the option price of the shares being acquired.
However, shares of the Company's Common Stock previously acquired by the
participant under the Plan or any other stock option plan of the Company
shall not be utilized for purposes of payment upon the exercise of an
option unless those shares have been owned by the participant for a twelve-
month period or such longer period as the Committee may determine.
(k) Exercise of an option in any manner shall result in a decrease in the
number of shares which thereafter may be available for the purposes of the
Plan by the number of shares as to which the option is exercised.
Section 5.4. Share Tax Withholding
At the discretion of the Committee, share tax withholding may be granted to
any participant with an outstanding Nonstatutory Stock Option granted prior to
November 25, 1991 and may be included as a term of any grant of any stock option
after that date. Share tax withholding shall entitle the participant to elect
to satisfy, in whole or in part, any withholding obligations in connection with
the exercise of a stock option by requesting that the Company either (i)
withhold shares of Common Stock otherwise issuable to the participant upon such
exercise or (ii) by accepting delivery of shares of Common Stock previously
owned by participant. In either case, the Fair Market Value of such shares of
Common Stock will generally be determined on the date of exercise. Shares of
Common Stock previously acquired by the participant under the Plan or any other
stock option plan of the Company shall not be utilized for satisfaction of any
withholding obligation upon the exercise of an option unless those shares have
been owned by the participant for a twelve-month period or such longer period as
the Committee may determine. Notwithstanding any other provision hereof to the
contrary, the Committee, in its sole discretion, may at any time suspend,
terminate, or disallow any or all entitlements to share tax withholding
previously granted or extended to any participant.
Section 6. Stock Appreciation Rights
<PAGE>
-4-
(a) The Committee may, in its discretion, grant stock appreciation rights in
connection with all or any part of an option granted under the Plan. Any
stock appreciation rights granted in connection with an option shall be
governed by the terms of the option agreement and the Plan. Stock
appreciation rights shall not be transferable or assignable separately from
the options to which they relate. Stock appreciation rights shall be
exercisable only when the Fair Market Value of the shares subject thereto
exceeds the option price of the related option and to the extent that the
option to which they relate is exercisable.
(b) Stock appreciation rights shall permit the participant, upon exercise of
such rights, to surrender the related option, or any portion thereof, and
to receive, without payment to the Company (except for applicable
withholding taxes), an amount equal to the excess of the Fair Market Value,
on the date of such exercise, of the stock covered by such option or
portion thereof over the option price of such stock as provided in such
option. Such amount shall be paid in shares of Common Stock valued at Fair
Market Value on the date of exercise. No fractional shares shall be issued
as a result of exercising a stock appreciation right. In the Committee's
sole discretion, share tax withholding, as described and limited by Section
5.4 hereof, may be awarded to or otherwise considered a term of any stock
appreciation right whenever granted.
(c) Upon the exercise of a stock appreciation right and surrender of the
related option, or portion thereof, such option, to the extent surrendered,
shall be terminated, and the shares covered by the option so surrendered
shall no longer be available for purposes of the Plan.
Section 7. General Provisions
7.1 - Definitions
The capitalized terms as used in the Plan shall have the meanings set forth
in this Section 7.1.
(a) Committee - Committee appointed pursuant to Section 2 to administer the
Plan.
(b) Common Stock - Common Stock of the Company of the par value of $1.00 per
share.
(c) Company - Armstrong World Industries, Inc.
(d) Disability - Total and permanent disability within the meaning of Section
22(e)(3) of the Code.
(e) Fair Market Value - The closing price of the Common Stock on the New York
Stock Exchange (Composite Tape) on the applicable date or, if no sales were
made on such date, on the next preceding date on which sales of the Common
Stock were made.
<PAGE>
-5-
(f) Incentive Stock Options - Stock options meeting the qualifications for
incentive stock options under Section 422A of the Code.
(g) Nonstatutory Stock Options - Stock options which are not Incentive Stock
Options.
(h) Plan - The Long Term Stock Option Plan for Key Employees as set forth
herein.
7.2 - Adjustment in Numbers of Shares and Option Prices
The number of shares specified in Section 4 to be reserved for the pur-
poses of the Plan, the number of shares subject to any option granted under the
Plan, the option price specified in any such option, and the class of shares to
be sold under options shall be adjusted by the Board of Directors at such times
and in such amounts as the Board, in its discretion, may determine to be
appropriate to give effect to any subdivision or combination of the outstanding
Common Stock into a greater or lesser number of shares, stock dividend,
reclassification of shares, reorganization, merger, consolidation, exchange of
shares, or other change in the capitalization or organization of the Company.
If the Common Stock shall be changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation, there shall be substituted for the shares covered by each
outstanding option under the Plan, the number and kinds of shares of stock or
other securities which would have been substituted therefor if such shares had
been outstanding on the date fixed for determining the shareholders entitled to
receive such changed or substituted stock or other securities.
7.3 - Option Exercise Acceleration
In the event of any Change in Control as such term is defined in
Section 1.01 of the Employment Protection Plan for Salaried Employees as then in
effect, the exercise period set forth in Section 5.3(c) shall be reduced to six
months. Any prior option granted under this Plan shall have the benefit of this
Section.
7.4 - No Right to Employment
Nothing contained in the Plan, nor in any option granted pursuant to the
Plan, shall confer upon any participant any right with respect to continuance of
employment by the Company or its subsidiaries, nor interfere in any way with the
right of the Company or its subsidiaries to terminate the employment or change
the compensation of any employee at any time.
7.5 - Compliance with Government Regulations
The Company shall not be required to issue or deliver shares or make
payments upon any option or related stock appreciation right granted under the
Plan prior to complying with the requirements of any governmental authority in
connection with the authorization, issuance, or sale of such shares.
7.6 - Amendment and Discontinuance
The Board of Directors may alter, suspend, or discontinue the Plan,
provided that no such action shall affect or impair rights already granted to a
participant without that person's consent, and provided further, that except as
provided in Section 7.2, no action of the Board of Directors may increase the
number of shares subject to the Plan or reduce the option price below Fair
Market Value on the date of grant, materially modify the requirements for
participant eligibility, or increase the term of any option beyond the maximum
<PAGE>
-6-
term permitted by the Plan. Except with respect to matters as to which amend-
ments are prohibited by this Section, the Board of Directors is authorized and
directed to make such amendments to the Plan or to the agreements entered into
under the Plan as may be necessary to make Incentive Stock Options granted under
the Plan qualify for most favorable Federal tax treatment accorded to stock
options by the Code as the same may be amended from time to time.
7.7 - Effective Date and Duration of Plan
The Plan shall become effective immediately upon the approval and adoption
thereof at the annual meeting of the stockholders on April 30, 1984. All
options granted under the Plan must be granted within ten years from its
adoption date by the stockholders of the Company. Any options outstanding ten
years after the adoption of the Plan may be exercised within the periods
prescribed under or pursuant to the Plan.
Revised 5/8/92
<PAGE>
EXHIBIT NO. 21
(as of January 1996)
<TABLE>
<CAPTION>
Jurisdiction of
Domestic Subsidiaries Incorporation
- --------------------- ---------------
<S> <C>
ArmStar (50%-owned unincorporated affiliate)
Armstrong Cork Finance Corporation Delaware
Armstrong Enterprises, Inc. Vermont
Armstrong Industrial Specialties, Inc. Pennsylvania
Armstrong Industrial Specialties International, Inc. Nevada
Armstrong Realty Group, Inc. Pennsylvania
Armstrong Ventures, Inc. Delaware
Armstrong World Industries Asia, Inc. Nevada
Armstrong World Industries (Delaware) Inc. Delaware
Armstrong World Industries Latin America, Inc. Nevada
A W I (NEVADA), INC. Nevada
Charleswater Products, Inc. Delaware
Chemline Industries, Inc. Delaware
IWF, Inc. Nevada
I.W. Insurance Company Vermont
The W. W. Henry Company California
The Worthington Armstrong Venture (50%-owned unincorporated
affiliate)
Foreign Subsidiaries
- --------------------
Alphacoustic (UK) Ltd. England
Armstrong-ABC Co., Ltd. Japan
Armstrong Architectural Products S.L. Spain
Armstrong Building Products England
Armstrong Building Products B.V. Netherlands
Armstrong Building Products G.m.b.H. Germany
Armstrong Cork (Ireland) Limited Ireland
Armstrong Europa G.m.b.H. Germany
Armstrong Europe Services England
Armstrong Floor Products Europe G.m.b.H. Germany
Armstrong Floor Products Europe Ltd. England
Armstrong Floor Products Europe Sarl. France
Armstrong FSC, Ltd. Bermuda
Armstrong Insulation (Panyu) Co. Ltd. People's Republic of China
Armstrong Insulation Products England
Armstrong Insulation Products A.G. Switzerland
Armstrong Insulation Products Benelux, S.A. Belgium
Armstrong Insulation Products S.A. Spain
Armstrong Insulation Products Sp. zo.o. Poland
Armstrong Insulation Rus. Russia
Armstrong (Japan) K.K. Japan
Armstrong Metal Ceilings Ltd. England
Armstrong-Nylex Pty. Ltd. Australia
Armstrong (Singapore) Pte. Ltd. Singapore
Armstrong World Industries - A.C.I. B.V. Netherlands
Armstrong World Industries Canada Ltd. Canada
Armstrong World Industries (China) Ltd. People's Republic of China
Armstrong World Industries de Mexico, S.A. de C.V. Mexico
Armstrong World Industries - France, S.A. France
Armstrong World Industries, G.m.b.H. Germany
Armstrong World Industries (H.K.) Limited Hong Kong
Armstrong World Industries Italia S.r.l. Italy
Armstrong World Industries Korea, Ltd. Korea
Armstrong World Industries Ltd. England
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Armstrong World Industries - Pontarlier S.A. France
Armstrong World Industries Pty. Ltd. Australia
Armstrong World Industries (Thailand) Ltd. Thailand
Inarco Limited (50%-owned affiliate) India
ISA Co., Ltd. (25%-owned affiliate) Japan
ISO Holding, A.G. Switzerland
Liberty Commercial Services Ltd. Bermuda
Recubrimientos Interceramic S.A. de C.V. Mexico
(49%-owned affiliate)
Worthington Armstrong Metal Products Co. (Shanghai) Ltd. People's Republic of China
Worthington Armstrong Venture Europe S.A. (owned by WAVE) France
</TABLE>
<PAGE>
Exhibit No. 24
Consent of Independent Auditors
-------------------------------
The Board of Directors
Armstrong World Industries, Inc.:
We consent to incorporation by reference in Registration Statement No. 33-38837
on Form S-3 and the Registration Statement Nos. 2-50942, 2-77936, 2-91890,
33-18996, 33-60070, 33-18998, 33-29768 and 33-60070 on Form S-8 of Armstrong
World Industries, Inc. of our report dated February 16, 1996, relating to the
consolidated balance sheets of Armstrong World Industries, Inc., and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of earnings, cash flows and shareholders' equity and related
supplementary information on depreciation rates and schedule for each of the
years in the three-year period ended December 31, 1995, which report is included
herein.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
March 21, 1996
<PAGE>
Exhibit No. 25
POWER OF ATTORNEY
-----------------
Re: 1995 Annual Report on Form 10-K -
I, James E. Marley, as a Director of Armstrong World Industries, Inc., do
hereby constitute and appoint, GEORGE A. LORCH or, in the case of his absence or
inability to act as such, E. ALLEN DEAVER, my agent, to sign in my name and in
my behalf the Company's Annual Report on Form 10-K for the year ended December
31, 1995, and any amendments thereto, to be filed by the Company with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, with the same effect as if such signature were made by me personally.
/s/ James E. Marley
--------------------------------------
James E. Marley
Dated February 27, 1996
-------------------
<PAGE>
- 2 -
(Exhibit No. 25)
All powers of attorney required to be filed are substantially identical in all
material respects. Therefore, in accordance with SEC Regulation 229.601(a)
Instruction 2, only the foregoing copy is being included except, however, that
the manually signed copy filed with the Securities and Exchange Commission
includes a complete set of powers of attorney.
All powers of attorney differ only from the form of the foregoing in that they
are executed by the following parties in the capacities indicated on or about
February 26, 1996, and the power by E. Allen Deaver appoints George A. Lorch
only as his agent:
Frank A. Riddick, III Senior Vice-President, Finance, and
Treasurer
(Principal Financial Officer)
Bruce A. Leech, Jr. Controller
(Principal Accounting Officer)
H. Jesse Arnelle Director
Van C. Campbell Director
E. Allen Deaver Director
Ursula F. Fairbairn Director
Michael C. Jensen Director
James E. Marley Director
Robert F. Patton Director
J. Phillip Samper Director
Jerre L. Stead Director
<PAGE>
- 3 -
(Exhibit No. 25)
I, L. A. Pulkrabek, Senior Vice-President and Secretary of Armstrong World
Industries, Inc., a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, do hereby certify that, at a meeting of the Board
of Directors of said corporation duly held on the 27th day of February, 1995, at
which a quorum was present and acting throughout, the following resolutions were
adopted and are now in full force and effect:
RESOLVED That the 1995 annual report on Form 10-K in the form
presented to this meeting has been reviewed by the Board of Directors; and
the execution thereof on behalf of the Company by George A. Lorch or E.
Allen Deaver, with such changes therein and additions or deletions thereto
as either of them and the legal counsel to the Company may approve, and the
filing thereof with the Securities and Exchange Commission after being so
executed by the requisite number of directors personally or by their
respective attorneys-in-fact, are hereby authorized.
FURTHER RESOLVED That the execution of the 1995 annual report on
Form 10-K by George A. Lorch, Bruce A. Leech, Jr. and Frank A. Riddick,
III, personally or by their respective attorneys-in-fact, as principal
executive officer, principal accounting officer, and principal financial
officer, respectively, of the Company, is hereby authorized.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said corporation
this 13th day of March, 1996.
/s/ L. A. Pulkrabek
------------------------------------
Sr. Vice President & Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's Unaudited Consolidated Financial Statements as of and for
December 31, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 12
<SECURITIES> 245
<RECEIVABLES> 247
<ALLOWANCES> 29
<INVENTORY> 196
<CURRENT-ASSETS> 723
<PP&E> 1,854
<DEPRECIATION> 976
<TOTAL-ASSETS> 2,150
<CURRENT-LIABILITIES> 376
<BONDS> 0
<COMMON> 101
0
259
<OTHER-SE> 415
<TOTAL-LIABILITY-AND-EQUITY> 2,150
<SALES> 2,085
<TOTAL-REVENUES> 2,085
<CGS> 1,410
<TOTAL-COSTS> 2,041
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 8
<INCOME-TAX> (5)
<INCOME-CONTINUING> 14
<DISCONTINUED> 110
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123
<EPS-PRIMARY> 2.90
<EPS-DILUTED> 2.67
</TABLE>
<PAGE>
Exhibit No. 28(ii)(a)
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, 1995
---------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 1-2116
-------------------------------------------------------
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
Page No.
-------
Item 1. Statements of Net Assets 4
------------------------
September 30, 1995 and 1994
Item 2. Statements of Changes in Plan Equity 5-7
------------------------------------
(a) Year ended September 30, 1995
(b) Year ended September 30, 1994
(c) Year ended September 30, 1993
Notes to Financial Statements 8-11
- -----------------------------
Item 3. Independent Auditors' Report 12
----------------------------
Exhibits
- --------
24. Consent of Independent Auditors
- 2 -
<PAGE>
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 SALARIED
EMPLOYEES OF ARMSTRONG WORLD INDUSTRIES, INC.
March 25, 1996 By: /s/ E. Allen Deaver
---------------------------------------
E. Allen Deaver
Chairman of the Retirement Committee
- 3 -
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets
September 30, 1995 and 1994
1995
<TABLE>
<CAPTION>
Money "OTC" Asset Asset Mgr.
Commingled Specialized Market Fixed Income Armstrong Portfolio Manager Income
Equity Fund Equity Fund Fund Fund Stock Fund Fd. Fund Fund
----------- ----------- ---------- ------------ ---------- ---------- ---------- ----------
Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $26,008,895 $53,822,126 $2,863,787 $119,173,404 $9,957,012 $3,998,454 $4,171,934 $1,465,384
----------- ----------- ---------- ------------ ---------- ---------- ---------- ----------
Total assets $26,008,895 $53,822,126 $2,863,787 $119,173,404 $9,957,012 $3,998,454 $4,171,934 $1,465,384
----------- ----------- ---------- ------------ ---------- ---------- ---------- ----------
Plan equity $26,008,895 $53,822,126 $2,863,787 $119,173,404 $9,957,012 $3,998,454 $4,171,934 $1,465,384
=========== =========== ========== ============ ========== ========== ========== ==========
<CAPTION>
Asset Mgr. Loan
Growth Portfolio
Fund Fund Total
---------- ---------- ------------
Assets:
<S> <C> <C> <C>
Investments in master trust
at fair value (note 3) $5,380,158 $3,408,962 $230,250,116
---------- ---------- ------------
Total assets $5,380,158 $3,408,962 $230,250,116
---------- ---------- ------------
Plan equity $5,380,158 $3,408,962 $230,250,116
========== ========== ============
</TABLE>
1994
<TABLE>
<CAPTION>
Money "OTC" Asset Asset Mgr.
Commingled Specialized Market Fixed Income Armstrong Portfolio Manager Income
Equity Fund Equity Fund Fund Fund Stock Fund Fd. Fund Fund
----------- ----------- ---------- ------------ ---------- ---------- ---------- ----------
Assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $20,074,514 $40,885,939 $2,364,783 $108,691,987 $7,203,780 $2,199,833 $3,488,114 $1,766,979
----------- ----------- ---------- ------------ ---------- ---------- ---------- ----------
Total assets $20,074,514 $40,885,939 $2,364,783 $108,691,987 $7,203,780 $2,199,833 $3,488,114 $1,766,979
----------- ----------- ---------- ------------ ---------- ---------- ---------- ----------
Plan equity $20,074,514 $40,885,939 $2,364,783 $108,691,987 $7,203,780 $2,199,833 $3,488,114 $1,766,979
=========== =========== ========== ============ ========== ========== ========== ==========
<CAPTION>
Asset Mgr. Loan
Growth Portfolio
Fund Fund Total
---------- ---------- ------------
Assets:
<S> <C> <C> <C>
Investments in master trust
at fair value (note 3) $4,767,677 $3,159,183 $194,602,789
---------- ---------- ------------
Total assets $4,767,677 $3,159,183 $194,602,789
---------- ---------- ------------
Plan equity $4,767,677 $3,159,183 $194,602,789
========== ========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity
Years Ended September 30, 1995, 1994, and 1993
1995
<TABLE>
<CAPTION>
"OTC" Asset
Commingled Specialized Money Fixed Income Armstrong Portfolio Manager
Equity Fund Equity Fund Market Fund Fund Stock Fund Fd. Fund
------------ ------------ ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, $20,074,514 $40,885,939 $2,364,783 $108,691,987 $7,203,780 $2,199,833 $3,488,114
1994 ----------- ----------- ---------- ------------ ---------- ---------- ----------
Increases in plan equity:
Contributions 1,190,525 3,475,590 215,540 4,790,964 295,226 375,257 358,667
Dividends 587,101 199,906 138,766 -- 245,705 96,677 135,937
Interest 33,291 67,892 8,112 7,591,186 12,946 6,544 6,061
Realized gain(loss) on
investments (note 3) 662,728 1,499,516 -- -- 217,271 98,150 (41,279)
Unrealized appreciation
of investments 4,621,828 13,524,954 -- -- 2,038,938 795,420 282,885
Transfers (to) from other
employee benefit plans
of Armstrong World
Industries, Inc. (9,748) 158,001 6,943 58,530 25,829 41,124 (3,017)
Loan activity, net (222,751) (15,988) (10,923) 40,829 31,056 36,106 (29,030)
----------- ----------- ---------- ------------ ---------- ---------- ----------
6,862,974 18,909,871 358,438 12,481,509 2,866,971 1,449,278 710,224
----------- ----------- ---------- ------------ ---------- ---------- ----------
Decreases in plan equity:
Benefits paid (note 4) (1,149,156) (1,965,434) (121,127) (5,546,200) (207,166) (323,260) (100,933)
Interfund transfers, net 220,563 (4,008,250) 261,693 3,546,108 93,427 672,603 74,529
----------- ----------- ---------- ------------ ---------- ---------- ----------
(928,593) (5,973,684) 140,566 (2,000,092) (113,739) 349,343 (26,404)
----------- ----------- ---------- ------------ ---------- ---------- ----------
Plan equity at September
30, 1995 $26,008,895 $53,822,126 $2,863,787 $119,173,404 $9,957,012 $3,998,454 $4,171,934
=========== =========== ========== ============ ========== ========== ==========
<CAPTION>
Loan
Asset Mgr. Asset Mgr. Portfolio
Income Fund Growth Fund Fund Total
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Plan equity at October 1,
1994 $1,766,979 $4,767,677 $3,159,183 $194,602,789
---------- ---------- ---------- ------------
Increases in plan equity:
Contributions 101,319 722,517 -- 11,525,605
Dividends 66,120 131,133 -- 1,601,345
Interest 1,980 10,696 -- 7,738,708
Realized gain(loss) on
investments (note 3) (21,983) (21,443) -- 2,392,960
Unrealized appreciation
of investments 120,617 400,690 -- 21,785,332
Transfers (to) from other
employee benefit plans
of Armstrong World
Industries, Inc. -- -- 44,668 322,330
Loan activity, net (41,574) 7,164 205,111 --
---------- ---------- ---------- ------------
226,479 1,250,757 249,779 45,366,280
---------- ---------- ---------- ------------
Decreases in plan equity:
Benefits paid (note 4) (140,007) (165,670) -- (9,718,953)
Interfund transfers, net (388,067) (472,606) -- --
---------- ---------- ---------- ------------
(528,074) (638,276) -- (9,718,953)
---------- ---------- ---------- ------------
Plan equity at September
30, 1995 $1,465,384 $5,380,158 $3,408,962 $230,250,116
========== ========== ========== ============
</TABLE>
See accompanying notes to financial statements.
(Continued)
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
1994
<TABLE>
<CAPTION>
"OTC" Asset
Commingled Specialized Money Fixed Income Armstrong Portfolio Manager
Equity Fund Equity Fund Market Fund Fund Stock Fund Fd. Fund
------------ ------------ ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan equity at October 1,
1993 $21,907,057 $38,103,999 $2,664,691 $110,188,428 $7,121,870 $1,601,565 $ 297,227
----------- ----------- ---------- ------------ ---------- ---------- ----------
Increases in plan equity:
Contributions 1,090,512 3,079,493 152,506 3,385,978 200,709 233,587 266,340
Dividends 765,667 3,849,084 81,375 -- 201,625 101,625 153,211
Interest 41,595 76,371 12,314 7,807,669 5,530 6,767 6,495
Realized gain(loss) on
investments (note 3) 874,833 464,049 -- -- 247,166 (17,970) (10,039)
Transfers (to) from other
employee benefit plans
of Armstrong World
Industries, Inc. 863 9,604 11,437 (19,965) 11,126 4,568 --
Loan activity, net (21,731) 169,552 9,773 135,007 15,947 52,702 4,329
----------- ----------- ---------- ------------ ---------- ---------- ----------
2,751,739 7,648,153 267,405 11,308,689 682,103 381,279 420,336
----------- ----------- ---------- ------------ ---------- ---------- ----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of
investments (931,592) (4,829,281) -- -- 52,533 (86,928) (162,610)
Benefits paid (note 4) (644,466) (1,497,530) (108,573) (5,927,743) (189,656) (60,685) (189,598)
Interfund transfers, net (3,008,224) 1,460,598 (458,740) (6,877,387) (463,070) 364,602 3,122,759
----------- ----------- ---------- ------------ ---------- ---------- ----------
(4,584,282) (4,866,213) (567,313) (12,805,130) (600,193) 216,989 2,770,551
----------- ----------- ---------- ------------ ---------- ---------- ----------
Plan equity at September
30, 1994 $20,074,514 $40,885,939 $2,364,783 $108,691,987 $7,203,780 $2,199,833 $3,488,114
=========== =========== ========== ============ ========== ========== ==========
<CAPTION>
Loan
Asset Mgr. Asset Mgr. Portfolio
Income Fund Growth Fund Fund Total
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Plan equity at October 1,
1993 $ 85,542 $ 94,578 $3,512,435 $185,577,392
---------- ---------- ---------- ------------
Increases in plan equity:
Contributions 90,079 536,559 -- 9,035,763
Dividends 89,541 111,463 -- 5,353,591
Interest 3,131 10,971 -- 7,970,843
Realized gain(loss) on
investments (note 3) (23,524) (15,473) -- 1,519,042
Transfers (to) from other
employee benefit plans
of Armstrong World
Industries, Inc. -- 1,120 (8,145) 10,608
Loan activity, net (68,420) 47,948 (345,107) --
---------- ---------- ---------- ------------
90,807 692,588 (353,252) 23,889,847
---------- ---------- ---------- ------------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of
investments (68,890) (82,171) -- (6,108,939)
Benefits paid (note 4) (61,703) (75,557) -- (8,755,511)
Interfund transfers, net 1,721,223 4,138,239 -- --
---------- ---------- ---------- ------------
1,590,630 3,980,511 -- (14,864,450)
---------- ---------- ---------- ------------
Plan equity at September
30, 1994 $1,766,979 $4,767,677 $3,159,183 $194,602,789
========== ========== ========== ============
</TABLE>
See accompanying notes to financial statements.
(Continued)
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
1993
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong "OTC" Asset
Equity Fund Equity Fund Market Fund Fund Stock Fund Portfolio Fd. Manager Fund
------------ ------------ ----------- ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan equity at October 1,
1992 $19,886,879 $27,493,135 $2,800,063 $103,489,554 $4,960,888 $ -- $ --
----------- ----------- ---------- ------------ ---------- ---------- --------
Increases in plan equity:
Contributions 1,384,117 2,551,576 171,760 4,044,086 164,903 230,659 1,055
Dividends 679,115 3,697,160 83,909 -- 203,773 122,231 458
Interest 60,943 80,967 27,305 8,412,031 5,793 4,072 19
Realized gain(loss) on
investments (note 3) 573,187 319,808 -- -- (23,113) (363) --
Unrealized appreciation
(depreciation) of
investments 1,269,718 4,787,209 -- -- 2,081,543 (19,487) 205
Transfers (to) from other
employee benefit plans
of Armstrong World
Industries, Inc. (9,500) (96,958) (7,156) 259,981 7,437 (11,638) --
Loan activity, net (183,935) (57,356) (6,215) 181,848 16,858 23,420 128
----------- ----------- ---------- ------------ ---------- ---------- --------
3,773,645 11,282,406 269,603 12,897,946 2,457,194 348,894 1,865
----------- ----------- ---------- ------------ ---------- ---------- --------
Decreases in plan equity:
Benefits paid (note 4) (719,211) (1,188,862) (249,513) (5,282,177) (162,630) -- --
Interfund transfers, net (1,034,256) 517,320 (155,462) (916,895) (133,582) 1,252,671 295,362
----------- ----------- ---------- ------------ ---------- ---------- --------
(1,753,467) (671,542) (404,975) (6,199,072) (296,212) 1,252,671 295,362
----------- ----------- ---------- ------------ ---------- ---------- --------
Plan equity at September
30, 1993 $21,907,057 $38,103,999 $2,664,691 $110,188,428 $7,121,870 $1,601,565 $297,227
=========== =========== ========== ============ ========== ========== =========
<CAPTION>
Loan
Asset Mgr. Asset Mgr. Portfolio
Income Fund Growth Fund Fund Total
------------ ------------- ----------- -------------
<C> <C> <C> <C>
Plan equity at October 1,
1992 $ -- $ -- $3,547,189 $162,177,708
------- ------- ---------- ------------
Increases in plan equity:
Contributions 770 2,970 -- 8,551,896
Dividends -- -- -- 4,786,646
Interest 20 22 -- 8,591,172
Realized gain(loss) on
investments (note 3) -- -- -- 869,519
Unrealized appreciation
(depreciation) of
investments 595 825 -- 8,120,608
Transfers (to) from other
employee benefit plans
of Armstrong World
Industries, Inc. -- -- (59,707) 82,459
Loan activity, net 124 175 24,953 --
--- --- ------ ------------
1,509 3,992 (34,754) 31,002,300
------- ------- ---------- ------------
Decreases in plan equity:
Benefits paid (note 4) -- (223) -- (7,602,616)
Interfund transfers, net 84,033 90,809 -- --
------- ------- ---------- ------------
84,033 90,586 -- (7,602,616)
------- ------- ---------- ------------
Plan equity at September
30, 1993 $85,542 $94,578 $3,512,435 $185,577,392
========= ========= ========== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
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.
(b) Investments in Master Trust
---------------------------
The fair value of the commingled equity, specialized equity, over-the-
counter portfolio, and Asset Manager funds is based on the underlying
market value of the investments. The money market fund is stated at
cost which approximates fair value. The fixed income fund is stated at
the value of the underlying investment contracts which represents
contributions plus interest at the contract rate, less benefits paid.
The value of the Armstrong stock fund is based on quoted market price.
The value of the loan portfolio fund represents the unpaid principal
of employee loans.
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.
(c) Expenses
---------
All legal, accounting and administrative expenses associated with Plan
operations are paid by the Company.
(2) Plan Description
----------------
The Plan was established on August 1, 1983, under the name the Savings
Investment Plan for Salaried Employees of Armstrong World Industries, Inc.
On November 30, 1987, the Board of Directors of Armstrong amended the Plan
effective February 1, 1988, to permit investments by participants in an
Armstrong Common Stock Fund and to change its name to the Retirement
Savings Plan for Salaried Employees of Armstrong World Industries, Inc.
During the Plan year ended September 30, 1993, four investment options were
added to the Plan. Effective January 1, 1993, an over-the-counter portfolio
mutual fund was made available for participant investment and, effective
September 1, 1993, three Asset Manager mutual funds became investment
options.
The plan is a defined contribution plan established for the purpose of
providing to eligible salaried employees of Armstrong World Industries,
Inc. (the Company) 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.
Participants may elect to make contributions to the Plan in each of the
following methods:
1. Up to 15% of their before-tax compensation, as deferred compensation as
permitted under Section 401(k) of the Internal Revenue Code.
2. Up to 10% of their after-tax compensation.
Separate accounts are maintained for contributions made by or on behalf of
a participant. The accounts in each fund reflect the participants'
contributions together with dividends, interest, other income, and realized
and unrealized gains and losses allocated thereon.
Participants have an immediate 100 percent vested interest with respect to
their contributions and are fully vested with regard to any previously made
matching company contributions.
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(3) Investments in Master Trust
---------------------------
Assets are held in a Master Trust administered by Fidelity Management Trust
Co., as Trustee, and are segregated into nine investment options: a
commingled equity mutual fund (Fidelity U.S. Equity Index Portfolio), a
specialized equity mutual fund (Fidelity Magellan), a money market mutual
fund (Fidelity Return Money Market Portfolio), three Asset Manager mutual
funds, an over-the-counter mutual fund (OTC Portfolio Fund), a fixed income
fund, and an Armstrong stock fund. The Plan utilizes the Trustee and
associated investment managers to direct investment activity. The Plan
participates in all nine investment alternatives.
The following is a description of the investment funds to which Plan
participants can elect to allocate their contributions.
1. Commingled Equity 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. At
September 30, 1995, there were 1,375 active participants in this investment
fund.
2. Specialized Equity Fund - This fund invests in common stocks of companies
having substantial growth prospects as determined by independent investment
managers. At September 30, 1995, there were 2,148 active participants in
this investment fund.
3. Money Market Fund - 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. At September 30,
1995, there were 436 active participants in this investment fund.
4. Fixed Income Fund - Contributions to this fund are invested in the general
accounts of insurance companies and are credited at contracted interest
rates. At September 30, 1995, the interest rates ranged between 5.69% and
9.00%. Invested principal and accumulated interest amounts are guaranteed
against loss by the insurance company. At September 30, 1995, there were
3,247 active participants in this investment fund.
5. Armstrong Stock Fund - Amounts invested in this fund, along with dividend
earnings thereon, are invested in Armstrong common stock. At September 30,
1995, there were 2,075 active participants in this investment fund. Common
stock shares held by the fund at September 30, 1995 and 1994 were 179,406
and 166,081, respectively.
6. OTC Portfolio Fund - 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. At September 30, 1995, there were 372 active participants in
this investment fund.
7. Asset Manager Fund - 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. At September 30, 1995, there were 331 active participants in
this investment fund.
8. Asset Manager Income Fund - An asset allocation fund which invests in a
diversified portfolio of stocks, bonds, and short-term instruments. The
fund has a conservative investment strategy focusing on bonds and short-
term instruments to achieve a high level of current income and capital
preservation. At September 30, 1995, there were 105 active participants in
this investment fund.
9. Asset Manager Growth Fund - 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. At September 30, 1995, there
were 459 active participants in this investment fund.
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
10. Loan Portfolio Fund - The amount in this fund represents the unpaid
principal balances of loans made by Plan participants in accordance with
established loan provision guidelines. At September 30, 1995, there were
713 loans outstanding.
The following table presents the cost and fair values of the investments in
securities of the Master Trust at September 30, 1995 and 1994:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Commingled equity $ 17,189,451 $ 26,008,895 $ 15,876,898 $ 20,074,514
Specialized equity 36,976,683 53,822,126 37,565,450 40,885,939
Money market 2,863,787 2,863,787 2,364,783 2,364,783
Fixed income 119,173,404 119,173,404 108,691,987 108,691,987
Armstrong stock 6,686,934 9,957,012 5,972,640 7,203,780
OTC portfolio 3,309,449 3,998,454 2,306,248 2,199,833
Asset manager 4,051,454 4,171,934 3,650,519 3,488,114
Asset manager income 1,413,062 1,465,384 1,835,274 1,766,979
Asset manager growth 5,060,814 5,380,158 4,849,023 4,767,677
Loan portfolio 3,408,962 3,408,962 3,159,183 3,159,183
------------ ------------ ------------ ------------
$200,134,000 $230,250,116 $186,272,005 $194,602,789
============ ============ ============ ============
</TABLE>
The amounts of realized gain (loss) on investments in securities of the Master
Trust for the years ended September 30, 1995, 1994, and 1993 are presented
below:
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
1995 --------- --------- --------
---- Proceeds Cost Gain (Loss)
-------- ---- -----------
<S> <C> <C> <C>
Commingled equity $ 2,529,266 $ 1,866,538 $ 662,728
Specialized equity 8,283,037 6,783,521 1,499,516
Armstrong stock 925,502 708,231 217,271
OTC portfolio 773,079 674,929 98,150
Asset manager 1,252,539 1,293,818 (41,279)
Asset manager income 982,479 1,004,462 (21,983)
Asset manager growth 1,575,135 1,596,578 (21,443)
----------- ----------- ----------
$16,321,037 $13,928,077 $2,392,960
=========== =========== ==========
<CAPTION>
1994
----
Commingled equity $ 4,197,432 $ 3,322,599 $ 874,833
Specialized equity 4,209,579 3,745,530 464,049
Armstrong stock 827,356 580,190 247,166
OTC portfolio 506,960 524,930 (17,970)
Asset manager 428,433 438,472 (10,039)
Asset manager income 987,917 1,011,441 (23,524)
Asset manager growth 473,242 488,715 (15,473)
----------- ----------- ----------
$11,630,919 $10,111,877 $1,519,042
=========== =========== ==========
</TABLE>
<PAGE>
RETIREMENT SAVINGS PLAN FOR SALARIED EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
<TABLE>
<CAPTION>
1993 Aggregate Aggregate Realized
---- --------- --------- --------
Proceeds Cost Gain (Loss)
-------- ---- -----------
<S> <C> <C> <C>
Commingled equity $3,120,551 $2,547,364 $573,187
Specialized equity 3,914,772 3,594,964 319,808
Armstrong stock 432,085 455,198 (23,113)
OTC portfolio 604,721 605,084 (363)
---------- ---------- ---------
$8,072,129 $7,202,610 $869,519
========== ========== =========
</TABLE>
(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. In addition, a participant may elect to withdraw all or any
part of his account attributable to his contributions.
If the amount of a withdrawal exceeds the amount of contributions made by
the participant and not previously withdrawn, the participant shall be
ineligible to make contributions for a specified period, except that a
participant may elect to withdraw all or any portion of his account
attributable to tax deductible contributions.
Under the rules of the Plan, the participant may borrow up to 90 percent of
his account, other than amounts attributable to tax deductible
contributions or amounts invested in the Armstrong Stock Fund, with the
approval of the Plan Administrator. 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 Savings Plan 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
the Company under a trust agreement or investment contract. Benefits under
the Plan are payable only out of these funds. The Company 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 the Company
nor any investing institution guarantees the funds of the Plan against any
loss or depreciation or guarantees the payment of any benefit hereunder.
Although the Company 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) Federal Income Taxes
----------------------
By a letter dated February 13, 1996, the Internal Revenue Service has
determined and informed the Company that the Plan qualifies under the
applicable provisions of the Internal Revenue Code and is therefore exempt
from federal income taxes.
(7) Subsequent Event
----------------
Plan participants include salaried employees of Thomasville Furniture
Industries, Inc. On December 29, 1995, Armstrong World Industries, Inc.,
sold Thomasville Furniture to INTERCO Incorporated. The agreement of sale
requires INTERCO to establish a savings plan for Thomasville employees
comparable to those it maintains for its other employees. The anticipated
start-up date of the successor plan is April 1, 1996. The salaried
Thomasville participants of the Plan have been allowed to make
contributions to the Plan through March 31, 1996, at which time they will
be given the option to transfer their account balances to the INTERCO plan.
<PAGE>
Independent Auditors' Report
----------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We have audited the accompanying statements of net assets of the Retirement
Savings Plan for Salaried Employees of Armstrong World Industries, Inc. as of
September 30, 1995 and 1994 and the related statements of changes in plan equity
for each of the years in the three-year period ended September 30, 1995. 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 generally accepted auditing
standards. 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 financial position of the Retirement Savings Plan for
Salaried Employees of Armstrong World Industries, Inc. as of September 30, 1995
and 1994 and the changes in its plan equity for each of the years in the three-
year period ended September 30, 1995, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements
of net assets and the statements of changes in plan equity is presented for
purposes of additional analysis rather than to present the net assets and
changes in plan equity of each fund. The fund information 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.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 26, 1996
<PAGE>
EXHIBIT INDEX
24 Consent of Independent Auditors
<PAGE>
Consent of Independent Auditors
-------------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We consent to incorporation by reference in the Registration Statement No. 33-
18996 on Form S-8 of Armstrong World Industries, Inc. of our report dated
February 26, 1996, relating to the statements of net assets of the Retirement
Savings Plan for Salaried Employees of Armstrong World Industries, Inc. as of
September 30, 1995 and 1994 and the related statements of changes in plan equity
for each of the years in the three-year period ended September 30, 1995, which
report is included herein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 21, 1996
<PAGE>
Exhibit No. 28(ii)(b)
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, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 1-2116
-------------------------------------------------------
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
Page No.
-------
Item 1. Statements of Net Assets 4
------------------------
September 30, 1995 and 1994
Item 2. Statements of Changes in Plan Equity 5-7
------------------------------------
(a) Year ended September 30, 1995
(b) Year ended September 30, 1994
(c) Year ended September 30, 1993
Notes to Financial Statements 8-11
- -----------------------------
Item 3. Independent Auditors' Report 12
----------------------------
Exhibits
- --------
24. Consent of Independent Auditors
- 2 -
<PAGE>
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 25, 1996 By:/s/ E. Allen Deaver
--------------------------------------
E. Allen Deaver
Chairman of the Retirement Committee
- 3 -
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets
September 30, 1995 and 1994
1995
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $5,767,464 $11,315,817 $540,741 $52,340,946 $10,507,047
---------- ----------- -------- ----------- -----------
Total assets $5,767,464 $11,315,817 $540,741 $52,340,946 $10,507,047
---------- ----------- -------- ----------- -----------
Plan equity $5,767,464 $11,315,817 $540,741 $52,340,946 $10,507,047
========== =========== ======== =========== ===========
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $657,654 $850,760 $103,847 $733,731 $2,381,480 $85,199,487
---------- ----------- -------- ----------- ----------- -----------
Total assets $657,654 $850,760 $103,847 $733,731 $2,381,480 $85,199,487
---------- ----------- -------- ----------- ----------- -----------
Plan equity $657,654 $850,760 $103,847 $733,731 $2,381,480 $85,199,487
========== =========== ======== =========== =========== ===========
</TABLE>
1994
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $4,339,507 $8,048,324 $388,854 $46,899,355 $7,897,890
---------- ----------- -------- ----------- -----------
Total assets $4,339,507 $8,048,324 $388,854 $46,899,355 $7,897,890
---------- ----------- -------- ----------- -----------
Plan equity $4,339,507 $8,048,324 $388,854 $46,899,355 $7,897,890
========== =========== ======== =========== ===========
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $451,130 $665,191 $79,890 $813,150 $1,899,989 $71,483,280
---------- ----------- -------- ----------- ----------- -----------
Total assets $451,130 $665,191 $79,890 $813,150 $1,899,989 $71,483,280
---------- ----------- -------- ----------- ----------- -----------
Plan equity $451,130 $665,191 $79,890 $813,150 $1,899,989 $71,483,280
========== =========== ======== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity
Years Ended September 30, 1995, 1994, and 1993
1995
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
---------- ----------- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1994 $4,339,507 $8,048,324 $388,854 $46,899,355 $7,897,890
---------- ----------- -------- ----------- ----------
Increases in plan equity:
Contributions 397,587 1,247,900 127,916 4,594,075 672,227
Dividends 129,522 40,507 31,863 -- 253,220
Interest 8,584 21,711 2,991 3,359,315 22,584
Realized gain (loss) on
investments (note 3) 106,949 301,571 -- -- 215,259
Unrealized appreciation of
investments 1,056,790 2,752,180 -- -- 2,087,260
Loan activity, net (70,980) (114,131) (16,042) (296,146) (1,984)
---------- ----------- -------- ----------- ----------
1,628,452 4,249,738 146,728 7,657,244 3,248,566
---------- ----------- -------- ----------- ----------
Decreases in plan equity:
Benefits paid (note 4) (231,803) (365,203) (25,866) (3,342,132) (302,964)
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. (9,970) (34,962) (1,150) (43,507) (6,126)
Interfund transfers, net 41,278 (582,080) 32,175 1,169,986 (330,319)
---------- ----------- -------- ----------- ----------
(200,495) (982,245) 5,159 (2,215,653) (639,409)
---------- ----------- -------- ----------- ----------
Plan equity at September 30, 1995 $5,767,464 $11,315,817 $540,741 $52,340,946 $10,507,047
========== =========== ======== =========== ===========
<CAPTION>
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1994 $451,130 $665,191 $ 79,890 $ 813,150 $1,899,989 $71,483,280
-------- -------- -------- --------- ---------- -----------
Increases in plan equity:
Contributions 95,414 119,337 20,887 150,368 -- 7,425,711
Dividends 16,793 25,002 3,593 22,899 -- 523,399
Interest 2,443 3,230 701 2,771 -- 3,424,330
Realized gain (loss) on
investments (note 3) 31,229 (6,672) (215) (17,965) -- 630,156
Unrealized appreciation of
investments 132,867 52,303 6,409 62,284 -- 6,150,093
Loan activity, net 2,818 (7,583) (5) 3,381 500,672 --
-------- -------- -------- --------- ---------- -----------
281,564 185,617 31,370 223,738 500,672 18,153,689
-------- -------- -------- --------- ---------- -----------
Decreases in plan equity:
Benefits paid (note 4) (7,317) (20,156) -- (23,665) -- (4,319,106)
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. (3,480) -- -- -- (19,181) (118,376)
Interfund transfers, net (64,243) 20,108 (7,413) (279,492) -- --
-------- -------- -------- --------- ---------- -----------
(75,040) (48) (7,413) (303,157) (19,181) (4,437,482)
-------- -------- -------- --------- ---------- -----------
Plan equity at September 30, 1995 $657,654 $850,760 $103,847 $733,731 $2,381,480 $85,199,487
======== ======== ======== ========= ========== ===========
</TABLE>
See accompanying notes to financial statements.
(Continued)
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
1994
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Plan equity at
October 1, 1993 $4,608,160 $6,627,445 $346,871 $43,948,437 $ 7,788,330
---------- ----------- -------- ----------- -----------
Increases in plan equity:
Contributions 383,985 1,144,906 99,580 4,053,152 675,730
Dividends 165,531 706,720 16,055 -- 222,608
Interest 7,280 18,246 3,130 3,314,709 15,090
Realized gain(loss) on
investments (note 3) 179,572 41,311 -- -- 438,241
Loan activity, net (60,846) (77,982) (11,591) (124,939) (62,210)
---------- ---------- -------- ----------- -----------
675,522 1,833,201 107,174 7,242,922 1,289,459
---------- ---------- -------- ----------- -----------
Decreases in plan equity:
Unrealized depreciation of
investments (194,915) (851,126) -- -- (90,070)
Benefits paid (note 4) (361,954) (206,174) (23,618) (3,156,290) (294,971)
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. (7,221) (6,518) (21) 11,772 (25,274)
Interfund transfers, net (380,085) 651,496 (41,552) (1,147,486) (769,584)
---------- ---------- -------- ----------- -----------
(944,175) (412,322) (65,191) (4,292,004) (1,179,899)
---------- ---------- -------- ----------- -----------
Plan equity at
September 30, 1994 $4,339,507 $8,048,324 $388,854 $46,899,355 $ 7,897,890
========== ========== ======== =========== ===========
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Plan equity at
October 1, 1993 $134,271 $ 190 $ -- $ 97 $1,539,245 $64,993,046
-------- -------- -------- -------- ---------- -----------
Increases in plan equity:
Contributions 87,560 73,860 13,085 104,853 -- 6,636,711
Dividends 11,999 32,291 3,137 14,234 -- 1,172,575
Interest 1,412 1,530 363 1,727 -- 3,363,487
Realized gain(loss) on
investments (note 3) (3,025) (5,237) (593) (4,889) -- 645,380
Loan activity, net (4,979) (26,984) (13,265) (8,847) 391,643 --
-------- -------- -------- -------- ---------- -----------
92,967 75,460 2,727 107,078 391,643 11,818,153
-------- -------- -------- -------- ---------- -----------
Decreases in plan equity:
Unrealized depreciation of
investments (11,375) (30,988) (2,941) (16,454) -- (1,197,869)
Benefits paid (note 4) (1,171) (4,777) -- (22,934) -- (4,071,889)
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. -- -- -- -- (30,899) (58,161)
Interfund transfers, net 236,438 625,306 80,104 745,363 -- --
-------- -------- -------- -------- ---------- -----------
223,892 589,541 77,163 705,975 (30,899) (5,327,919)
-------- -------- -------- -------- ---------- -----------
Plan equity at
September 30, 1994 $451,130 $665,191 $ 79,890 $813,150 $1,899,989 $71,483,280
======== ======== ======== ======== ========== ===========
</TABLE>
See accompanying notes to financial statements.
(Continued)
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
1993
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1992 $4,386,260 $4,477,432 $294,327 $39,221,724 $5,092,760
---------- ---------- -------- ----------- ----------
Increases in plan equity:
Contributions 432,882 796,749 81,475 4,030,031 702,836
Dividends 142,358 617,693 10,820 -- 214,445
Interest 7,356 11,427 3,128 3,318,955 13,284
Realized gain(loss) on
investments (note 3) 158,379 48,725 -- -- (1,959)
Unrealized appreciation
(depreciation) of
investments 224,275 814,731 -- -- 2,214,920
Loan activity, net (79,125) (92,389) (16,984) (236,907) (22,946)
---------- ---------- -------- ----------- ----------
886,125 2,196,936 78,439 7,112,079 3,120,580
---------- ---------- -------- ----------- ----------
Decreases in plan equity:
Benefits paid (note 4) (308,376) (107,764) (40,716) (2,749,830) (216,767)
Transfers (to) from other
employee benefit plans
of Armstrong World
Industries, Inc. (1,181) (3,817) -- (13,784) (10,008)
Interfund transfers, net (354,668) 64,658 14,821 378,248 (198,235)
---------- ---------- -------- ----------- ----------
(664,225) (46,923) (25,895) (2,385,366) (425,010)
---------- ---------- -------- ----------- ----------
Plan equity at
September 30, 1993 $4,608,160 $6,627,445 $346,871 $43,948,437 $7,788,330
========== ========== ======== =========== ==========
<CAPTION>
"OTC" Asset Asset Mgr. Loan
Portfolio Fd. Manager Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1992 $ -- $ -- $ -- $1,103,257 $54,575,760
-------- --------- --------- ---------- -----------
Increases in plan equity:
Contributions 29,497 190 97 -- 6,073,757
Dividends 9,814 -- -- -- 995,130
Interest 374 -- -- -- 3,354,524
Realized gain(loss) on
investments (note 3) (310) -- -- -- 204,835
Unrealized appreciation
(depreciation) of
investments (1,656) -- -- -- 3,252,270
Loan activity, net 1,707 -- -- 446,644 --
-------- --------- ---------- ---------- -----------
39,426 190 97 446,644 13,880,516
-------- --------- ---------- ---------- -----------
Decreases in plan equity:
Benefits paid (note 4) (331) -- -- -- (3,423,784)
Transfers (to) from other
employee benefit plans of
Armstrong World
Industries, Inc. -- -- -- (10,656) (39,446)
Interfund transfers, net 95,176 -- -- -- --
-------- --------- --------- ---------- -----------
94,845 -- -- (10,656) (3,463,230)
-------- --------- --------- ---------- -----------
Plan equity at
September 30, 1993 $134,271 $190 $97 $1,539,245 $64,993,046
======== ========= ========= ========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
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.
(b) Investments in Master Trust
---------------------------
The fair value of the commingled equity, specialized equity,
over-the-counter portfolio, and Asset Manager funds is based on
the underlying market value of the investments. The money
market fund is stated at cost which approximates fair value.
The fixed income fund is stated at the value of the underlying
investment contracts which represents contributions plus
interest at the contract rate, less benefits paid. The value of
the Armstrong stock fund is based on quoted market price. The
value of the loan portfolio fund represents the unpaid
principal of employee loans.
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.
(c) Expenses
---------
All legal, accounting and administrative expenses associated
with Plan operations are paid by the Company.
(2) Plan Description
----------------
Armstrong World Industries, Inc. (the Company) has adopted the
Retirement Savings Plan for Hourly-Paid Employees of Armstrong World
Industries, Inc. (the Plan). The Plan is a defined contribution plan
established for the purpose of providing to eligible hourly-paid
employees 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.
During the Plan year ended September 30, 1993, four investment
options were added to the Plan. Effective January 1, 1993, an over-
the-counter portfolio mutual fund was made available for participant
investment and, effective September 1, 1993, three Asset Manager
mutual funds became investment options.
Participants may elect to make contributions to the Plan in each of
the following methods:
1. Up to 15% of their before-tax compensation, as deferred
compensation as permitted under Section 401(k) of the Internal
Revenue Code.
2. Up to 10% of their after-tax compensation.
Separate accounts are maintained for contributions made by or on
behalf of a participant. The accounts in each fund reflect the
participants' contributions together with dividends, interest, other
income, and realized and unrealized gains and losses allocated
thereon.
Participants have an immediate 100 percent vested interest with
respect to their contributions and are fully vested with regard to
any previously made matching company contributions.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(3) Investments in Master Trust
---------------------------
Assets are held in a Master Trust administered by Fidelity
Management Trust Co., as Trustee, and are segregated into nine
investment options: a commingled equity mutual fund (Fidelity U.S.
Equity Index Portfolio), a specialized equity mutual fund (Fidelity
Magellan), a money market mutual fund (Fidelity Return Money Market
Portfolio), three Asset Manager mutual funds, an over-the-counter
mutual fund (OTC Portfolio Fund), a fixed income fund, and an
Armstrong stock fund. The Plan utilizes the Trustee and associated
investment managers to direct investment activity. The Plan
participates in all nine investment alternatives.
The following is a description of the investment funds to which Plan
participants can elect to allocate their contributions.
1. Commingled Equity 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. At September 30, 1995, there were 462
active participants in this investment fund.
2. Specialized Equity Fund - This fund invests in common stocks of
companies having substantial growth prospects as determined by
independent investment managers. At September 30, 1995, there were
874 active participants in this investment fund.
3. Money Market Fund - 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. At
September 30, 1995, there were 145 active participants in this
investment fund.
4. Fixed Income Fund - Contributions to this fund are invested in the
general accounts of insurance companies and are credited at
contracted interest rates. At September 30, 1995, the interest rates
ranged between 5.69% and 9.00%. Invested principal and accumulated
interest amounts are guaranteed against loss by the insurance
company. At September 30, 1995, there were 2,612 active participants
in this investment fund.
5. Armstrong Stock Fund - Amounts invested in this fund, along with
dividend earnings thereon, are invested in Armstrong common stock.
At September 30, 1995, there were 1,686 active participants in this
investment fund. Common stock shares held by the fund at September
30, 1995 and 1994 were 189,316 and 182,060, respectively.
6. OTC Portfolio Fund - 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. At September 30, 1995, there were
109 active participants in this investment fund.
7. Asset Manager Fund - 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. At September 30, 1995, there were
96 active participants in this investment fund.
8. Asset Manager Income Fund - An asset allocation fund which invests
in a diversified portfolio of stocks, bonds, and short-term
instruments. The fund has a conservative investment strategy
focusing on bonds and short-term instruments to achieve a high level
of current income and capital preservation. At September 30, 1995,
there were 19 active participants in this investment fund.
9. Asset Manager Growth Fund - 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. At
September 30, 1995, there were 122 active participants in this
investment fund.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
10. Loan Portfolio Fund - The amount in this fund represents the unpaid
principal balances of loans made by Plan participants in accordance
with established loan provision guidelines. At September 30, 1995,
there were 628 loans outstanding.
The following table presents the cost and fair values of the investments
in securities of the Master Trust at September 30, 1995 and 1994:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Commingled equity $ 3,842,761 $ 5,767,464 $ 3,471,594 $ 4,339,507
Specialized equity 8,136,472 11,315,817 7,621,159 8,048,324
Money market 540,741 540,741 388,854 388,854
Fixed income 52,340,946 52,340,946 46,899,355 46,899,355
Armstrong stock 6,940,090 10,507,047 6,418,193 7,897,890
OTC portfolio 537,818 657,654 464,161 451,130
Asset manager 829,445 850,760 696,179 665,191
Asset manager income 100,379 103,847 82,831 79,890
Asset manager growth 687,901 733,731 829,604 813,150
Loan portfolio 2,381,480 2,381,480 1,899,989 1,899,989
----------- ----------- ----------- -----------
$76,338,033 $85,199,487 $68,771,919 $71,483,280
=========== =========== =========== ===========
</TABLE>
The amounts of realized gain (loss) on investments in securities of the
Master Trust for the years ended September 30, 1995, 1994, and 1993 are
presented below:
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
1995 --------- --------- --------
---- Proceeds Cost Gain (Loss)
-------- --------- -----------
<S> <C> <C> <C>
Commingled equity $ 472,019 $ 365,070 $106,949
Specialized equity 5,448,317 5,146,746 301,571
Armstrong stock 826,591 611,332 215,259
OTC portfolio 246,546 215,317 31,229
Asset manager 176,640 183,312 (6,672)
Asset manager income 24,947 25,162 (215)
Asset manager growth 391,525 409,490 (17,965)
---------- ---------- --------
$7,586,585 $6,956,429 $630,156
========== ========== ========
<CAPTION>
1994
----
<S> <C> <C> <C>
Commingled equity $ 878,672 $ 699,100 $179,572
Specialized equity 2,458,673 2,417,362 41,311
Armstrong stock 1,401,041 962,800 438,241
OTC portfolio 44,812 47,837 (3,025)
Asset manager 89,701 94,938 (5,237)
Asset manager income 15,000 15,593 (593)
Asset manager growth 142,652 147,541 (4,889)
---------- ---------- --------
$5,030,551 $4,385,171 $645,380
========== ========== ========
</TABLE>
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
<TABLE>
<CAPTION>
1993 Aggregate Aggregate Realized
---- --------- --------- --------
Proceeds Cost Gain (Loss)
-------- ---- -----------
<S> <C> <C> <C>
Commingled equity $813,795 $655,416 $158,379
Specialized equity 2,026,637 1,977,912 48,725
Armstrong stock 577,975 579,934 (1,959)
OTC portfolio 74,147 74,457 (310)
---------- ---------- --------
$3,492,554 $3,287,719 $204,835
========== ========== ========
</TABLE>
(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. In addition, a
participant may elect to withdraw all or any part of his account
attributable to his contributions.
If the amount of a withdrawal exceeds the amount of contributions
made by the participant and not previously withdrawn, the
participant shall be ineligible to make contributions for a
specified period, except that a participant may elect to withdraw
all or any portion of his account attributable to tax deductible
contributions.
Under the rules of the Plan, the participant may borrow up to 90
percent of his account, other than amounts attributable to tax
deductible contributions or amounts invested in the Armstrong Stock
Fund, with the approval of the Plan Administrator. 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 Savings
Plan 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 the Company under a trust agreement or investment
contract. Benefits under the Plan are payable only out of these
funds. The Company 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 the
Company nor any investing institution guarantees the funds of the
Plan against any loss or depreciation or guarantees the payment of
any benefit hereunder. Although the Company 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) Federal Income Taxes
--------------------
By a letter dated February 13, 1996, the Internal Revenue Service
has determined and informed the Company that the Plan qualifies
under the applicable provisions of the Internal Revenue Code and is
therefore exempt from federal income taxes.
<PAGE>
Independent Auditors' Report
----------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We have audited the accompanying statements of net assets of the Retirement
Savings Plan for Hourly-Paid Employees of Armstrong World Industries, Inc. as of
September 30, 1995 and 1994 and the related statements of changes in plan equity
for each of the years in the three-year period ended September 30, 1995. 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 generally accepted auditing
standards. 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 financial position of the Retirement Savings Plan for
Hourly-Paid Employees of Armstrong World Industries, Inc. as of September 30,
1995 and 1994 and the changes in its plan equity for each of the years in the
three-year period ended September 30, 1995, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements of
net assets and the statements of changes in plan equity is presented for
purposes of additional analysis rather than to present the net assets and
changes in plan equity of each fund. The fund information 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.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 26, 1996
<PAGE>
EXHIBIT INDEX
24 Consent of Independent Auditors
<PAGE>
Consent of Independent Auditors
-------------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We consent to incorporation by reference in the Registration Statement No. 33-
18997 on Form S-8 of Armstrong World Industries, Inc. of our report dated
February 26, 1996, relating to the statements of net assets of the Retirement
Savings Plan for Hourly-Paid Employees of Armstrong World Industries, Inc. as of
September 30, 1995 and 1994 and the related statements of changes in plan equity
for each of the years in the three-year period ended September 30, 1995, which
report is included herein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 21, 1996
<PAGE>
Exhibit No. 28(ii)(c)
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, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 1-2116
-------------------------------------------------------
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE, INC.
401 East Main Street
Thomasville, N.C. 27360
(Full title and address of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
Page No.
-------
Item 1. Statements of Net Assets 4
------------------------
September 30, 1995 and 1994
Item 2. Statements of Changes in Plan Equity 5-7
------------------------------------
(a) Year ended September 30, 1995
(b) Year ended September 30, 1994
(c) Year ended September 30, 1993
Notes to Financial Statements 8-11
- -----------------------------
Item 3. Independent Auditors' Report 12
----------------------------
Exhibits
- --------
24. Consent of Independent Auditors
- 2 -
<PAGE>
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 THOMASVILLE FURNITURE
INDUSTRIES, INC.
March 24, 1996 By:/s/ Richard O. Millen
----------------------------------
Richard O. Millen
Chairman of Thomasville Hourly-Paid
Retirement Committee
- 3 -
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE INDUSTRIES, INC.
Statements of Net Assets
September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995
Commingled Specialized Money Fixed Income Armstrong "OTC"
Equity Fund Equity Fund Market Fund Fund Stock Fund Portfolio Fd.
----------- ----------- ----------- ---- ---------- -------------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $453,689 $2,075,704 $27,124 $7,557,768 $1,013,874 $67,955
-------- ---------- ------- ---------- ---------- -------
Total assets $453,689 $2,075,704 $27,124 $7,557,768 $1,013,874 $67,955
-------- ---------- ------- ---------- ---------- -------
Plan equity $453,689 $2,075,704 $27,124 $7,557,768 $1,013,874 $67,955
======== ========== ======= ========== ========== =======
<CAPTION>
Asset Asset Mgr. Asset Mgr. Loan
Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------ ----------- ----------- -------------- -----
Assets:
<S> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $86,146 $14,358 $11,798 $243,422 $11,551,838
------- ------- ------- -------- -----------
Total assets $86,146 $14,358 $11,798 $243,422 $11,551,838
------- ------- ------- -------- -----------
Plan equity $86,146 $14,358 $11,798 $243,422 $11,551,838
======= ======= ======= ======== ===========
<CAPTION>
1994
Commingled Specialized Money Fixed Income Armstrong "OTC"
Equity Fund Equity Fund Market Fund Fund Stock Fund Portfolio Fd.
----------- ----------- ----------- ---- ---------- -------------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $465,846 $1,787,904 $20,577 $6,383,024 $850,417 $44,676
-------- ---------- ------- ---------- -------- -------
Total assets $465,846 $1,787,904 $20,577 $6,383,024 $850,417 $44,676
-------- ---------- ------- ---------- -------- -------
Plan equity $465,846 $1,787,904 $20,577 $6,383,024 $850,417 $44,676
======== ========== ======= ========== ======== =======
<CAPTION>
Asset Asset Mgr. Asset Mgr. Loan
Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------ ----------- ----------- -------------- -----
Assets:
<S> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $93,661 $1,519 $7,882 $203,387 $9,858,893
------- ------ ------ -------- ----------
Total assets $93,661 $1,519 $7,882 $203,387 $9,858,893
------- ------ ------ -------- ----------
Plan equity $93,661 $1,519 $7,882 $203,387 $9,858,893
======= ====== ====== ======== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE INDUSTRIES, INC.
Statements of Changes in Plan Equity
Years Ended September 30, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995
Commingled Specialized Money Fixed Income Armstrong "OTC"
Equity Fund Equity Fund Market Fund Fund Stock Fund Portfolio Fd.
----------- ----------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1994 $ 465,846 $1,787,904 $ 20,577 $6,383,024 $ 850,417 $44,676
--------- ---------- -------- ---------- ---------- -------
Increases in plan equity:
Contributions 14,008 47,878 36,187 455,723 38,778 1,324
Dividends 11,899 7,342 1,574 -- 25,977 1,705
Interest 356 3,429 371 473,708 751 80
Realized gain (loss) on
investments (note 3) 15,736 47,268 -- -- 33,786 117
Unrealized appreciation of
investments 87,155 516,048 -- -- 193,747 16,142
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. 16,454 26,403 -- 393 (9,856) 3,885
Loan activity, net (726) (21,620) (31,585) 4,459 (10,532) 525
--------- ---------- -------- ---------- ---------- -------
144,882 626,748 6,547 934,283 272,651 23,778
--------- ---------- -------- ---------- ---------- -------
Decreases in plan equity:
Benefits paid (note 4) (46,152) (78,504) -- (209,920) (41,702) (499)
Interfund transfers, net (110,887) (260,444) -- 450,381 (67,492) --
--------- ---------- -------- ---------- ---------- -------
(157,039) (338,948) -- 240,461 (109,194) (499)
--------- ---------- -------- ---------- ---------- -------
Plan equity at September 30, 1995 $ 453,689 $2,075,704 $ 27,124 $7,557,768 $1,013,874 $67,955
========= ========== ======== ========== ========== =======
<CAPTION>
Asset Asset Mgr. Asset Mgr. Loan
Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------ ----------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1994 $ 93,661 $ 1,519 $ 7,882 $203,387 $ 9,858,893
-------- ------- ------- -------- -----------
Increases in plan equity:
Contributions 3,201 1,606 3,441 -- 602,146
Dividends 3,379 271 220 -- 52,367
Interest 25 266 8 -- 478,994
Realized gain (loss) on
investments (note 3) (868) 110 59 -- 96,208
Unrealized appreciation of
investments 6,982 749 886 -- 821,709
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. (1,301) -- -- (15,860) 20,118
Loan activity, net (2,366) 5,905 45 55,895 --
-------- ------- ------- --------- -----------
9,052 8,907 4,659 40,035 2,071,542
-------- ------- ------- --------- -----------
Decreases in plan equity:
Benefits paid (note 4) (1,077) -- (743) -- (378,597)
Interfund transfers, net (15,490) 3,932 -- -- --
-------- ------- ------- --------- -----------
(16,567) 3,932 (743) -- (378,597)
-------- ------- ------- --------- -----------
Plan equity at September 30, 1995 $ 86,146 $14,358 $11,798 $243,422 $11,551,838
========= ======== ======== ========= ===========
</TABLE>
See accompanying notes to financial statements.
(Continued)
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
1994
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong "OTC"
Equity Fund Equity Fund Market Fund Fund Stock Fund Portfolio Fd.
----------- ----------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1993 $499,160 $1,803,185 $13,805 $5,900,380 $828,332 $53,964
-------- ---------- ------- ---------- -------- -------
Increases in plan equity:
Contributions 5,788 38,612 3,846 348,617 47,582 748
Dividends 18,382 191,388 542 -- 24,484 2,542
Interest 912 2,843 55 433,604 534 --
Realized gain (loss) on
investments (note 3) 5,887 7,013 -- -- 22,284 186
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. 2,576 (27,694) 2,624 (5,428) 786 --
Loan activity, net (9,243) (2,792) 154 (26,429) 1,520 --
-------- ---------- ------- ---------- -------- --------
24,302 209,370 7,221 750,364 97,190 3,476
-------- ---------- ------- ---------- -------- --------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments (5,171) (224,772) -- -- 11,076 (2,286)
Benefits paid (note 4) (45,422) (61,339) -- (148,260) (60,160) --
Interfund transfers, net (7,023) 61,460 (449) (119,460) (26,021) (10,478)
-------- ---------- ------- ---------- -------- --------
(57,616) (224,651) (449) (267,720) (75,105) (12,764)
-------- ---------- ------- ---------- -------- --------
Plan equity at September 30, 1994 $465,846 $1,787,904 $20,577 $6,383,024 $850,417 $ 44,676
======== ========== ======= ========== ======== ========
<CAPTION>
Asset Asset Mgr. Asset Mgr. Loan
Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------ ----------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, $ 313 $ -- $ -- $178,401 $9,277,540
1993 ------- ------ ------ --------- ----------
Increases in plan equity:
Contributions 833 554 2,976 -- 449,556
Dividends 2,146 106 194 -- 239,784
Interest 9 366 -- -- 438,323
Realized gain (loss) on
investments (note 3) (696) (513) (274) -- 33,887
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. -- -- -- (10,429) (37,565)
Loan activity, net 298 1,077 -- 35,415 --
------- ------ ------ --------- ----------
2,590 1,590 2,896 24,986 1,123,985
------- ------ ------ --------- ----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments (6,216) (9) (73) -- (227,451)
Benefits paid (note 4) -- -- -- -- (315,181)
Interfund transfers, net 96,974 (62) 5,059 -- --
------- ------ ------ --------- ----------
90,758 (71) 4,986 -- (542,632)
------- ------ ------ --------- ----------
Plan equity at September 30, 1994 $93,661 $1,519 $7,882 $203,387 $9,858,893
======= ====== ====== ======== ==========
</TABLE>
See accompanying notes to financial statements.
(Continued)
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
1993
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong "OTC"
Equity Fund Equity Fund Market Fund Fund Stock Fund Portfolio Fd.
----------- ----------- ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1992 $ 12,302 $ 52,039 $ 7,626 $1,565,638 $582,701 $ --
-------- ---------- ------- ---------- -------- -------
Increases in plan equity:
Contributions 8,195 24,213 5,157 331,489 48,934 372
Dividends 16,872 141,129 286 -- 23,698 4,081
Interest 938 2,958 34 423,048 595 6
Realized gain (loss) on
investments (note 3) 7,012 2,555 -- -- (5,799) 782
Unrealized appreciation
(depreciation) of investments 26,902 236,224 -- -- 241,799 (594)
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. 490,254 1,208,043 7,584 3,971,275 9,155 --
Loan activity, net (32,520) (68,478) (2,493) 11,809 (1,013) 90
-------- ---------- ------- ---------- -------- -------
517,653 1,546,644 10,568 4,737,621 317,369 4,737
-------- ---------- ------- ---------- -------- -------
Decreases in plan equity:
Benefits paid (note 4) (2,093) (3,363) (3,225) (179,542) (67,091) (483)
Interfund transfers, net (28,702) 207,865 (1,164) (223,337) (4,647) 49,710
-------- ---------- ------- ---------- -------- -------
30,795 204,502 (4,389) (402,879) (71,738) 49,227
-------- ---------- ------- ---------- -------- -------
Plan equity at September 30, 1993 $499,160 $1,803,185 $13,805 $5,900,380 $828,332 $53,964
======== ========== ======= ========== ======== =======
<CAPTION>
Asset Loan
Manager Fund Portfolio Fund Total
------------ -------------- -----
<S> <C> <C> <C>
Plan equity at October 1, 1992 $ -- $ 98,931 $2,319,237
---- -------- ----------
Increases in plan equity:
Contributions 12 -- 418,372
Dividends -- -- 186,066
Interest 1 -- 427,580
Realized gain (loss) on
investments (note 3) -- -- 4,550
Unrealized appreciation
(depreciation) of investments 5 -- 504,336
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. -- (13,115) 5,673,196
Loan activity, net 20 92,585 --
---- -------- ----------
38 79,470 7,214,100
---- -------- ----------
Decreases in plan equity:
Benefits paid (note 4) -- -- (255,797)
Interfund transfers, net 275 -- --
---- -------- ----------
275 -- (255,797)
---- -------- ----------
Plan equity at September 30, 1993 $313 $178,401 $9,277,540
==== ======== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE 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.
(b) Investments in Master Trust
---------------------------
The fair value of the commingled equity, specialized equity, over-
the-counter portfolio, and Asset Manager funds is based on the
underlying market value of the investments. The money market fund
is stated at cost which approximates fair value. The fixed income
fund is stated at the value of the underlying investment contracts
which represents contributions plus interest at the contract rate,
less benefits paid. The value of the Armstrong stock fund is based
on quoted market price. The value of the loan portfolio fund
represents the unpaid principal of employee loans.
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.
(c) Expenses
---------
All legal, accounting and administrative expenses associated with
Plan operations are paid by the Company.
(2) Plan Description
----------------
Thomasville Furniture Industries, Inc. (the Company), a wholly-owned
subsidiary of Armstrong World Industries, Inc., adopted on February 1,
1988, the Retirement Savings Plan for Hourly-Paid Employees of
Thomasville Furniture Industries, Inc. (the Plan). The Plan is a
defined contribution plan established for the purpose of providing to
eligible hourly-paid employees 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 Company's Board of Directors amended the Plan, effective October 1,
1992, to permit former participants of the Capital Accumulation Plan
for Commissioned Sales Representatives of Thomasville Furniture
Industries, Inc. (the CAP Plan) to make a rollover contribution into
the Plan of their CAP Plan account balances. During the Plan year
ended September 30, 1993, rollover contributions made to the Plan
totaled $5.9 million. The CAP Plan participants are fully vested with
regard to their rollover amounts, but are ineligible to make further
contributions to the Plan. CAP Plan participants are treated as
members of the Plan with regard to provisions addressing investment,
distribution, withdrawal, and loan eligibility.
During the Plan year ended September 30, 1993, four investment options
were added to the Plan. Effective January 1, 1993, an over-the-counter
portfolio mutual fund was made available for participant investment
and, effective September 1, 1993, three Asset Manager mutual funds
became investment options.
Participants may elect to make contributions to the Plan, up to 15
percent of their before-tax compensation, as deferred compensation as
permitted under Section 401(k) of the Internal Revenue Code.
Separate accounts are maintained for contributions made by or on behalf
of a participant. The accounts in each fund reflect the participants'
contributions together with dividends, interest, other income, and
realized and unrealized gains and losses allocated thereon.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
Participants have an immediate 100 percent vested interest with respect
to their contributions and are
fully vested with regard to any previously made matching company
contributions.
(3) Investments in Master Trust
---------------------------
Assets are held in a Master Trust administered by Fidelity Management
Trust Co., as Trustee, and are segregated into nine investment options:
a commingled equity mutual fund (Fidelity U.S. Equity Index Portfolio),
a specialized equity mutual fund (Fidelity Magellan), a money market
mutual fund (Fidelity Return Money Market Portfolio), three Asset
Manager mutual funds, an over-the-counter mutual fund (OTC Portfolio
Fund), a fixed income fund, and an Armstrong stock fund. The Plan
utilizes the Trustee and associated investment managers to direct
investment activity. The Plan participates in all nine investment
alternatives.
The following is a description of the investment funds to which Plan
participants can elect to allocate their contributions.
1. Commingled Equity 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. At September 30, 1995, there were 33 active
participants in this investment fund.
2. Specialized Equity Fund - This fund invests in common stocks of
companies having substantial growth prospects as determined by
independent investment managers. At September 30, 1995, there were 82
active participants in this investment fund.
3. Money Market Fund - 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. At
September 30, 1995, there were 15 active participants in this
investment fund.
4. Fixed Income Fund - Contributions to this fund are invested in the
general accounts of insurance companies and are credited at contracted
interest rates. At September 30, 1995, the interest rates ranged
between 5.69% and 9.00%. Invested principal and accumulated interest
amounts are guaranteed against loss by the insurance company. At
September 30, 1995, there were 574 active participants in this
investment fund.
5. Armstrong Stock Fund - Amounts invested in this fund, along with
dividend earnings thereon, are invested in Armstrong common stock. At
September 30, 1995, there were 441 active participants in this
investment fund. Common stock shares held by the fund at September
30, 1995 and 1994 were 18,268 and 19,606, respectively.
6. OTC Portfolio Fund - 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. At September 30, 1995, there were 4 active
participants in this investment fund.
7. Asset Manager Fund - 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. At September 30, 1995, there were 5
active participants in this investment fund.
8. Asset Manager Income Fund - An asset allocation fund which invests in
a diversified portfolio of stocks, bonds, and short-term instruments.
The fund has a conservative investment strategy focusing on bonds and
short-term instruments to achieve a high level of current income and
capital preservation. At September 30, 1995, there were 3 active
participants in this investment fund.
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
9. Asset Manager Growth Fund - 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. At
September 30, 1995, there were 3 active participants in this
investment fund.
10. Loan Portfolio Fund - The amount in this fund represents the unpaid
principal balances of loans made by Plan participants in accordance
with established loan provision guidelines. At September 30, 1995,
there were 108 loans outstanding.
The following table presents the cost and fair values of the investments
in securities of the Master Trust at September 30, 1995 and 1994:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Commingled equity $ 343,064 $ 453,689 $ 442,376 $ 465,846
Specialized equity 1,546,928 2,075,704 1,775,176 1,787,904
Money market 27,124 27,124 20,577 20,577
Fixed income 7,557,768 7,557,768 6,383,024 6,383,024
Armstrong stock 668,404 1,013,874 698,694 850,417
OTC portfolio 54,693 67,955 47,556 44,676
Asset manager 85,375 86,146 99,872 93,661
Asset manager income 13,618 14,358 1,528 1,519
Asset manager growth 10,985 11,798 7,955 7,882
Loan portfolio 243,422 243,422 203,387 203,387
----------- ----------- ---------- ----------
$10,551,381 $11,551,838 $9,680,145 $9,858,893
=========== =========== ========== ==========
</TABLE>
The amounts of realized gain (loss) on investments in securities of the
Master Trust for the years ended September 30, 1995, 1994, and 1993 are
presented below:
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
--------- --------- --------
Proceeds Cost Gain (Loss)
-------- ---- -----------
<S> <C> <C> <C>
1995
----
Commingled equity $160,033 $144,297 $15,736
Specialized equity 522,460 475,192 47,268
Armstrong stock 132,286 98,500 33,786
OTC portfolio 499 382 117
Asset manager 30,298 31,166 (868)
Asset manger income 4,000 3,890 110
Asset manager growth 743 684 59
-------- -------- -------
$850,319 $754,111 $96,208
======== ======== =======
1994
----
Commingled equity $ 64,647 $ 58,760 $ 5,887
Specialized equity 396,430 389,417 7,013
Armstrong stock 87,480 65,196 22,284
OTC portfolio 11,000 10,814 186
Asset manager 9,388 10,084 (696)
Asset manager income 14,762 15,275 (513)
Asset manager growth 4,726 5,000 (274)
-------- -------- -------
$588,433 $554,546 $33,887
======== ======== =======
</TABLE>
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF THOMASVILLE FURNITURE INDUSTRIES, INC.
Notes to Financial Statements
<TABLE>
<CAPTION>
1993 Aggregate Aggregate Realized
---- --------- --------- --------
Proceeds Cost Gain (Loss)
-------- ---- -----------
<S> <C> <C> <C>
Commingled equity $220,464 $213,452 $ 7,012
Specialized equity 238,812 236,257 2,555
Armstrong stock 76,506 82,305 (5,799)
OTC portfolio 104,846 104,064 782
-------- -------- -------
$640,628 $636,078 $ 4,550
======== ======== =======
</TABLE>
(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.
If the amount of a withdrawal exceeds the amount of contributions made
by the participant and not previously withdrawn, the participant shall
be ineligible to make contributions for a specified period, except that
a participant may elect to withdraw all or any portion of his account
attributable to tax deductible contributions.
Under the rules of the Plan, the participant may borrow up to 90
percent of his account, other than amounts attributable to tax
deductible contributions or amounts invested in the Armstrong Stock
Fund, with the approval of the Plan Administrator. 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 Savings Plan
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 the Company under a trust agreement or investment contract.
Benefits under the Plan are payable only out of these funds. The
Company 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 the
Company nor any investing institution guarantees the funds of the Plan
against any loss or depreciation or guarantees the payment of any
benefit hereunder. Although the Company 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) Federal Income Taxes
--------------------
The Internal Revenue Service issued its latest determination letter on
April 13, 1990, which stated that the Plan qualifies under the
applicable provisions of the Internal Revenue Code and therefore is
exempt from federal income taxes. The Plan has been amended since
receiving the determination letter. However, it is the opinion of the
Plan administrator that the Plan remains qualified under the applicable
provisions of the Internal Revenue Code.
(7) Subsequent Event
----------------
On December 29, 1995, Armstrong World Industries, Inc., sold
Thomasville Furniture to INTERCO Incorporated. The agreement of sale
requires INTERCO to establish a savings plan for Thomasville employees
comparable to those it maintains for its other employees. The
anticipated start-up date of the successor plan is April 1, 1996. The
participants of the Plan have been allowed to make contributions to the
Plan through March 31, 1996, at which time they will be given the
option to transfer their account balances to the INTERCO plan.
<PAGE>
Independent Auditors' Report
----------------------------
The Retirement Committee
Thomasville Furniture Industries, Inc.
We have audited the accompanying statements of net assets of the Retirement
Savings Plan for Hourly-Paid Employees of Thomasville Furniture Industries, Inc.
as of September 30, 1995 and 1994 and the related statements of changes in plan
equity for each of the years in the three-year period ended September 30, 1995.
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 generally accepted auditing
standards. 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 financial position of the Retirement Savings Plan for
Hourly-Paid Employees of Thomasville Furniture Industries, Inc. as of September
30, 1995 and 1994 and the changes in its plan equity for each of the years in
the three-year period ended September 30, 1995, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements
of net assets and the statements of changes in plan equity is presented for
purposes of additional analysis rather than to present the net assets and
changes in plan equity of each fund. The fund information 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 realtion to
the basic financial statements taken as a whole.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 26, 1996
<PAGE>
EXHIBIT INDEX
24 Consent of Independent Auditors
<PAGE>
Consent of Independent Auditors
-------------------------------
The Retirement Committee
Thomasville Furniture Industries, Inc.:
We consent to incorporation by reference in the Registration Statement No. 33-
18998 on Form S-8 of Armstrong World Industries, Inc. of our report dated
February 26, 1996, relating to the statements of net assets of the Retirement
Savings Plan for Hourly-Paid Employees of Thomasville Furniture Industries, Inc.
as of September 30, 1995 and 1994 and the related statements of changes in plan
equity for each of the years in the three-year period ended September 30, 1995,
which report is included herein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 21, 1996
<PAGE>
Exhibit No. 28(ii)(d)
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, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 1-2116
-------------------------------------------------------
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
("SHARE IN SUCCESS PLAN")
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
Page No.
-------
Item 1. Statements of Net Assets Available for Plan Benefits
----------------------------------------------------
September 30, 1995 and 1994 4
Item 2. Statements of Changes in Net Assets Available
---------------------------------------------
for Plan Benefits
-----------------
Years ended September 30, 1995, 1994, and 1993 5
Notes to Financial Statements 6-8
- -----------------------------
Item 3. Independent Auditors' Report 9
----------------------------
Exhibits
- --------
24. Consent of Independent Auditors
- 2 -
<PAGE>
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.
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
("SHARE IN SUCCESS PLAN")
March 25, 1996 By:/s/ E. Allen Deaver
--------------------------------------
E. Allen Deaver
Chairman of the Retirement Committee
- 3 -
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------------------------------------- --------------------------------------
Allocated Unallocated Total Allocated Unallocated Total
Assets --------- ----------- ----- --------- ----------- -----
- ------
<S> <C> <C> <C> <C> <C> <C>
Investment in Armstrong World
Industries, Inc, Preferred
Stock (note 2) $ 85,204,819 $215,716,530 $300,921,349 $60,224,715 $201,433,916 $261,658,631
Cash and short-term investments 75,583 1,039,001 1,114,584 20,970 994,647 1,015,617
Employee contributions receivable -- 463,981 463,981 -- 537,086 537,086
Employer contributions receivable -- 2,125,167 2,125,167 -- 1,620,924 1,620,924
Dividends receivable 1,553,813 3,933,872 5,487,685 1,275,486 4,270,106 5,545,592
Interest receivable 107 1,479 1,586 24 1,127 1,151
------------ ------------ ------------ ----------- ------------ ------------
Total assets 86,834,322 223,280,030 310,114,352 61,521,195 208,857,806 270,379,001
------------ ------------ ------------ ----------- ------------ ------------
<CAPTION>
Liabilities
- -----------
<S> <C> <C> <C> <C> <C> <C>
Guaranteed ESOP notes (note 6) -- 240,405,403 240,405,403 -- 249,954,403 249,954,403
Accrued interest -- 6,068,624 6,068,624 -- 6,301,726 6,301,726
------------ ------------ ------------ ----------- ------------ ------------
Total liabilities -- 246,474,027 246,474,027 -- 256,256,129 256,256,129
------------ ------------ ------------ ----------- ------------ ------------
Net assets available for plan benefits $ 86,834,322 $(23,193,997) $ 63,640,325 $61,521,195 $(47,398,323) $ 14,122,872
- -------------------------------------- ============ ============ ============ =========== ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years Ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994
-------------------------------------- --------------------------------------
Allocated Unallocated Total Allocated Unallocated Total
--------- ----------- ----- --------- ----------- -----
Increases:
- ---------
<S> <C> <C> <C> <C> <C> <C>
Employee contributions (note 1) $ -- $ 6,744,735 $ 6,744,735 $ -- $ 6,158,036 $ 6,158,036
Employer contributions -- 5,670,971 5,670,971 -- 4,533,805 4,533,805
Dividends (note 2) 4,879,273 13,984,817 18,864,090 3,942,264 15,108,800 19,051,064
Interest income 2,149 55,411 57,560 -- 29,957 29,957
Realized gain (note 4) 202,717 -- 202,717 156,242 -- 156,242
Unrealized appreciation (note 2) 11,897,970 30,122,579 42,020,549 -- -- --
Allocation of preferred stock of
Armstrong World Industries, Inc. 11,239,017 -- 11,239,017 11,377,004 -- 11,377,004
---------- ---------- ---------- ---------- ---------- ----------
28,221,126 56,578,513 84,799,639 15,475,510 25,830,598 41,306,108
---------- ---------- ---------- ---------- ---------- ----------
Decreases:
- ----------
Interest expense -- (21,135,170) (21,135,170) -- (21,807,401) (21,807,401)
Benefits paid (note 3) (2,907,999) -- (2,907,999) (2,508,168) -- (2,508,168)
Allocation of preferred stock of
Armstrong World Industries, Inc. -- (11,239,017) (11,239,017) -- (11,377,004) (11,377,004)
---------- ----------- ----------- ---------- ---------- ----------
(2,907,999) (32,374,187) (35,282,186) (2,508,168) (33,184,405) (35,692,573)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 25,313,127 24,204,326 49,517,453 12,967,342 (7,353,807) 5,613,535
Net assets available for
plan benefits:
Beginning of year 61,521,195 (47,398,323) 14,122,872 48,553,853 (40,044,516) 8,509,337
---------- ---------- ---------- ---------- ---------- ---------
End of year $86,834,322 $(23,193,997) $63,640,325 $61,521,195 $(47,398,323) $14,122,872
=========== ============ =========== =========== ============ ===========
<CAPTION>
1993
------------------------------------
Allocated Unallocated Total
--------- ----------- -----
Increases:
- ----------
<S> <C> <C> <C>
Employee contributions (note 1) $ -- $ 5,956,851 $ 5,956,851
Employer contributions -- 3,274,572 3,274,572
Dividends (note 2) 3,043,702 16,174,289 19,217,991
Interest income -- 20,905 20,905
Realized gain (note 4) -- -- --
Unrealized appreciation (note 2) -- -- --
Allocation of preferred stock of
Armstrong World Industries, Inc. 11,570,821 -- 11,570,821
---------- ---------- ----------
14,614,523 25,426,617 40,041,140
---------- ---------- ----------
Decreases:
Interest expense -- (22,477,390) (22,477,390)
Benefits paid (note 3) (2,334,716) -- (2,334,716)
Allocation of preferred stock of
Armstrong World Industries,Inc. -- (11,570,821) (11,570,821)
--------- ---------- ----------
(2,334,716) (34,048,211) (36,382,927)
--------- ---------- ----------
Net increase (decrease) 12,279,807 (8,621,594) 3,658,213
Net assets available for
plan benefits:
Beginning of year 36,274,046 (31,422,922) 4,851,124
---------- ---------- ---------
End of year $48,553,853 $(40,044,516) $ 8,509,337
=========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
1. Plan Description
----------------
Armstrong World Industries, Inc. (the Company) established the Armstrong
World Industries, Inc. Employee Stock Ownership Plan (the Plan) in 1989. The
Plan, which is both a stock bonus plan with a cash or deferred arrangement
and an employee stock ownership plan, is designed to attract and keep
employees possessing the qualities required for future growth of the Company.
The Plan intends to provide such employees with additional incentive for
enhanced performance by permitting eligible employees to acquire a
proprietary interest in the Company and to accumulate capital for future
economic security.
All employees of the Company and of certain domestic subsidiaries, who are at
least twenty-one years of age and have completed one year of service, 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.
Under the Plan, participants receive interest in shares of Company preferred
stock held by the trust established under the Plan. The shares of Company
preferred stock held by the trust were purchased from the Company from the
proceeds of the sale of the Guaranteed ESOP notes in a total principal amount
of $270,000,000 in 1989. All shares of preferred stock acquired with the
proceeds of the notes are held in a suspense account and released to members'
accounts as the notes are repaid. The shares are released in proportion to
the ratio of the proportion of principal and interest paid down by any debt
payment to the total principal and interest to be paid over the life of the
notes.
The Plan maintains three accounts for each member for contributions and
allocations of shares from the suspense account. Participants who elect to
reduce their before-tax compensation in amounts ranging from one percent to
four percent (exchange contributions) will have such amounts credited to an
exchange contribution account. Shares released from the suspense account will
be first allocated to members' exchange contribution accounts with a value as
of the allocation date equal to the amount of their exchange contributions.
Shares released from the suspense account not used for the purpose of
exchange allocations will be allocated to members' equity accounts (equity
allocations) based on an established shares released schedule. 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
this Plan. The allocation schedule, therefore, is designed to provide greater
allocation of shares to older employees.
If any shares released from the suspense account remain unallocated after the
exchange and equity allocations, such shares will be allocated to members'
bonus accounts in proportion to the ratio of exchange contributions made by a
member to the exchange contributions made by all members.
Participants have an immediate 100 percent vested interest with respect to
their exchange contributions. Interest in the Equity and Bonus Accounts vest
after five years of service.
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements, (Continued)
2. Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation
---------------------
The accompanying financial statements have been prepared on an accrual
basis.
(b) Investment in Armstrong World Industries, Inc., Preferred Stock
---------------------------------------------------------------
According to the terms of the trust agreement between Mellon Bank,
N.A., the Trustee, 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 stock of the Company as is
necessary to administer the Plan in accordance with its terms.
The investment in Company preferred stock is presented at fair value.
Fair value is determined to be the greater of $47.75 per share, the
preferred stock's minimum conversion value, or the market price per
share of Company common stock. The investment in preferred stock at
September 30, 1995 represents 5,422,006 shares, valued at a market
price per share of $55.50. At September 30, 1994, the investment in
preferred stock reflects 5,479,762 shares, purchased at a cost per
share of $47.75. Each share of preferred stock is convertible into one
share of Company common stock. A dividend of $3.462 per share per
annum is payable semi-annually on the preferred stock held in the
trust. The preferred stock is redeemable at the option of the holder
at a redemption price of $47.75 per share plus accrued but unpaid
dividends.
(c) Expenses
--------
All costs and expenses incurred in administering the Trust and the
Plan are paid by the Company.
3. Benefits
--------
Upon death or any other separation from service from the Company,
participants are entitled to receive a distribution of their vested ESOP
account. Distributions are in the form of a lump sum cash payment or, upon
request, Company common stock. Participants entitled to a distribution can
direct the Trustee to either sell their ESOP Preferred Shares to the
Company at a per share price of $47.75 or convert the shares into shares of
Company common stock on a one-for-one basis.
During the years ended September 30, 1995, 1994 and 1993, distributions
were made to participants of $2,907,999 representing 57,756 shares,
$2,508,168 representing 49,609 shares, and $2,334,716 representing 48,894
shares, respectively.
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements, (Continued)
4. Realized Gain
-------------
During the years ended September 30, 1995 and 1994, the number of shares of
preferred stock redeemed at prices per share in excess of $47.75 totaled
30,660 and 21,012, respectively. The amount of redemption proceeds in
excess of the minimum conversion value totaled $202,717 in 1995 and
$156,242 in 1994.
5. Plan Termination
----------------
While it is intended to be permanent, the Plan may be terminated at anytime
by the Company's Board of Directors. Upon Plan termination, all
participants become fully vested in their entire ESOP account balance. Any
unallocated shares held by the Trust will be either sold to the Company or
converted to Company common stock and then sold to the Company or sold on
the open market, whichever produces the greatest cash proceeds. The cash
proceeds will be used to satisfy any outstanding Guaranteed ESOP notes,
with the balance of any excess proceeds being allocated to individual ESOP
account balances on a pro-rated basis.
6. Guaranteed ESOP Notes
---------------------
The Company 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 ($120,362,403 and $129,911,403 at September 30, 1995 and 1994,
respectively) and 8.92% on the Series B Guaranteed Serial ESOP Notes due
2001-2004 ($120,043,000 at September 30, 1995 and 1994). The scheduled
amortization of the notes for the next five fiscal years is as follows:
1996 - $12,023,000; 1997 - $14,801,000; 1998 - $17,908,000; 1999 -
$21,392,000; 2000 -$25,277,000.
7. Company Contributions
---------------------
The Company is obligated to make semi-annual contributions in cash or
Company stock to the Plan, on June 15 and December 15 of each year, which
when aggregated with all exchange contributions, dividends received by the
Trustee on the preferred 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.
8. Federal Income Taxes
--------------------
By a letter dated February 13, 1996, the Internal Revenue Service has
determined and informed the Company that the plan qualifies under the
applicable provisions of the Internal Revenue Code and is therefore exempt
from federal income taxes.
<PAGE>
Independent Auditors' Report
----------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We have audited the accompanying statements of net assets available for plan
benefits of the Armstrong World Industries, Inc. Employee Stock Ownership Plan
as of September 30, 1995 and 1994 and the related statements of changes in net
assets available for plan benefits for each of the years in the three-year
period ended September 30, 1995. 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 generally accepted auditing
standards. 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 financial position of the Armstrong World Industries,
Inc. Employee Stock Ownership Plan as of September 30, 1995 and 1994 and the
changes in its net assets available for plan benefits for each of the years in
the three-year period ended September 30, 1995, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 26, 1996
<PAGE>
EXHIBIT INDEX
24 Consent of Independent Auditors
<PAGE>
Consent of Independent Auditors
-------------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We consent to incorporation by reference in the Registration Statement No. 33-
29768 on Form S-8 of Armstrong World Industries, Inc. of our report dated
February 26, 1996, relating to the statements of net assets available for plan
benefits of the Armstrong World Industries, Inc. Employee Stock Ownership Plan
as of September 30, 1995 and 1994 and the related statements of changes in net
assets available for plan benefits for each of the years in the three-year
period ended September 30, 1995, which report is included herein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 21, 1996
<PAGE>
Exhibit No. 28(ii)(e)
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, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 1-2116
-------------------------------------------------------
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE
EMPLOYEES OF AMERICAN OLEAN TILE COMPANY, INC.
1000 Cannon Avenue
Lansdale, PA 19446
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
Page No.
-------
Item 1. Statements of Net Assets Available for Participants 4
---------------------------------------------------
September 30, 1995 and 1994
Item 2. Statements of Changes in Plan Equity 5-7
------------------------------------
(a) Year ended September 30, 1995
(b) Year ended September 30, 1994
(c) Year ended September 30, 1993
Notes to Financial Statements 8-11
- -----------------------------
Item 3. Independent Auditors' Report 12
----------------------------
- 2 -
<PAGE>
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.
AMERICAN OLEAN TILE COMPANY, INC.
SAVINGS PLAN FOR PRODUCTION &
MAINTENANCE EMPLOYEES
March 25, 1996 By:/s/ Michael J. Farley
--------------------------------
Michael J. Farley
Chairperson, Employee Benefits
Administrative Authority for the
American Olean Tile Company, Inc.,
Savings Plan for Production &
Maintenance Employees
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Statements of Net Assets
September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995
Commingled Specialized Money Fixed Armstrong "OTC"
Equity Equity Market Income Stock Portfolio Asset
Fund Fund Fund Fund Fund Fd. Manager
---------- ----------- ------ ------ --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $348,744 $1,117,446 $212,465 $3,429,888 $17,457 $53,802 $49,977
-------- ---------- -------- ---------- ------- ------- -------
Total assets $348,744 $1,117,446 $212,465 $3,429,888 $17,457 $53,802 $49,977
-------- ---------- -------- ---------- ------- ------- -------
Plan equity $348,744 $1,117,446 $212,465 $3,429,888 $17,457 $53,802 $49,977
======== ========== ======== ========== ======= ======= =======
<CAPTION>
Asset Asset
Mgr. Mgr. Loan
Income Growth Portfolio
Fund Fund Fund Total
------ ------ --------- -----
<S> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $5,197 $15,967 $5,663 $5,256,606
------ ------- ------ ----------
Total assets $5,197 $15,967 $5,663 $5,256,606
------ ------- ------ ----------
Plan equity $5,197 $15,967 $5,663 $5,256,606
====== ======= ====== ==========
</TABLE>
<TABLE>
<CAPTION>
1994
Commingled Specialized Money Fixed Armstrong "OTC"
Equity Equity Market Income Stock Portfolio Asset
Fund Fund Fund Fund Fund Fd. Manager
---------- ----------- ------ ------ --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $271,388 $712,289 $97,112 $3,297,779 $6,365 $39,012 $36,675
-------- -------- ------- ---------- ------ ------- -------
Total assets $271,388 $712,289 $97,112 $3,297,779 $6,365 $39,012 $36,675
-------- -------- ------- ---------- ------ ------- -------
Plan equity $271,388 $712,289 $97,112 $3,297,779 $6,365 $39,012 $36,675
======== ======== ======= ========== ====== ======= =======
<CAPTION>
Asset Asset
Mgr. Mgr. Loan
Income Growth Portfolio
Fund Fund Fund Total
------ ------ --------- -----
<S> <C> <C> <C> <C>
Assets:
Investments in master trust
at fair value (note 3) $404 $3,377 $ -- $4,464,401
---- ------ ------- ----------
Total assets $404 $3,377 $ -- $4,464,401
---- ------ ------- ----------
Plan equity $404 $3,377 $ -- $4,464,401
==== ====== ======= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY, INC.
Statements of Changes in Plan Equity
Years Ended September 30, 1995, 1994, and 1993
<TABLE>
<CAPTION>
1995
Commingled Specialized Money Fixed Armstrong "OTC" Asset
Equity Equity Market Income Stock Portfolio Manager
Fund Fund Fund Fund Fund Fd. Fund
---------- ----------- ------ ------ --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan equity at October 1,
1994 $271,388 $ 712,289 $ 97,112 $3,297,779 $ 6,365 $39,012 $36,675
-------- ---------- -------- ---------- ------- ------- -------
Increases in plan equity:
Contributions 24,050 100,788 79,530 227,610 8,631 9,002 9,163
Dividends 7,868 3,728 6,999 -- 298 1,370 1,481
Interest -- -- 8 224,706 -- -- --
Realized gain (loss) on
investments (note 3) 4,877 14,584 -- -- (507) (307) (12)
Unrealized appreciation
of investments 65,059 270,956 -- -- 3,471 12,493 2,926
Loan activity, net -- -- (3,396) (867) -- -- --
-------- ---------- -------- ---------- ------- ------- -------
101,854 390,056 83,141 451,449 11,893 22,558 13,558
-------- ---------- -------- ---------- ------- ------- -------
Decreases in plan equity:
Benefits paid (27,292) (17,364) (15,109) (235,767) (2,949) -- --
Interfund transfers, net 2,794 32,465 47,321 (83,573) 2,148 (7,768) (256)
-------- ---------- -------- ---------- ------- ------- -------
(24,498) 15,101 32,212 (319,340) (801) (7,768) (256)
-------- ---------- -------- ---------- ------- ------- -------
Plan equity at September
30, 1995 $348,744 $1,117,446 $212,465 $3,429,888 $17,457 $53,802 $49,977
======== ========== ======== ========== ======= ======= =======
<CAPTION>
Asset Asset
Mgr. Mgr. Loan
Income Growth Portfolio
Fund Fund Fund Total
------ ------ --------- -----
<S> <C> <C> <C> <C>
Plan equity at October 1,
1994 $ 404 $ 3,377 $ -- $4,464,401
------- ------- ---------- ----------
Increases in plan equity:
Contributions 4,389 5,720 -- 468,883
Dividends 132 288 -- 22,164
Interest -- -- -- 224,714
Realized gain (loss) on
investments (note 3) 81 (76) -- 18,640
Unrealized appreciation
of investments 244 1,136 -- 356,285
Loan activity, net (1,400) -- 5,663 --
------ ------- ---------- ----------
3,446 7,068 5,663 1,090,686
------- ------- ---------- ----------
Decreases in plan equity:
Benefits paid
Interfund transfers, net -- -- -- (298,481)
1,347 5,522 -- --
------- ------- ---------- ----------
1,347 5,522 -- (298,481)
------- ------- ---------- ----------
Plan equity at September
30, 1995 $ 5,197 $15,967 $ 5,663 $5,256,606
======= ======= ========== ==========
</TABLE>
See accompanying notes to financial statements. (Continued)
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY, INC.
Statements of Changes in Plan Equity, Continued
<TABLE>
<CAPTION>
1994
Commingled Specialized Money Fixed Armstrong "OTC" Asset
Equity Equity Market Income Stock Portfolio Manager
Fund Fund Fund Fund Fund Fd. Fund
---------- ----------- ------ ------ --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan equity at October 1,
1993 $257,638 $668,079 $ 86,435 $3,122,566 $ 10,111 $24,959 $ --
-------- -------- -------- ---------- -------- ------- -------
Increases in plan equity:
Contributions 17,572 65,968 24,322 221,634 3,365 3,677 1,370
Dividends 10,109 68,515 3,153 -- 116 1,566 747
Interest -- -- -- 231,859 -- -- --
Realized gain (loss) on
investments (note 3) 1,632 2,768 -- -- 2,888 (16) --
Transfers from other
employee benefit plans
of Armstrong World
Industries, Inc. -- -- -- 6,329 -- -- --
-------- -------- -------- ---------- -------- ------- -------
29,313 137,251 27,475 459,822 6,369 5,227 2,117
-------- -------- -------- ---------- -------- ------- -------
Decreases in plan equity:
Unrealized depreciation
of investments (2,904) (80,050) -- -- (3,088) (1,175) (1,366)
Benefits paid (7,627) (27,826) (15,643) (234,772) -- -- --
Interfund transfers, net (5,032) 14,835 (1,155) (49,837) (7,027) 10,001 35,924
-------- -------- -------- ---------- -------- ------- -------
(15,563) (93,041) (16,798) (284,609) (10,115) 8,826 34,558
-------- -------- -------- ---------- -------- ------- -------
Plan equity at September
30, 1994 $271,388 $712,289 $ 97,112 $3,297,779 $ 6,365 $39,012 $36,675
======== ======== ======== ========== ======== ======= =======
<CAPTION>
Asset Asset
Mgr. Mgr.
Income Growth
Fund Fund Total
------ ------ -----
<S> <C> <C> <C>
Plan equity at October 1,
1993 $ -- $ -- $4,169,788
---- ------ ----------
Increases in plan equity:
Contributions 363 1,073 339,344
Dividends 2 84 84,292
Interest -- -- 231,859
Realized gain(loss) on
investments (note 3) -- -- 7,272
Transfers from other
employee benefit plans
of Armstrong World
Industries, Inc. -- -- 6,329
---- ------ ----------
365 1,157 669,096
---- ------ ----------
Decreases in plan equity:
Unrealized depreciation
of investments (2) (30) (88,615)
Benefits paid -- -- (285,868)
Interfund transfers, net 41 2,250 --
---- ------ ----------
39 2,220 (374,483)
---- ------ ----------
Plan equity at September
30, 1994 $404 $3,377 $4,464,401
==== ====== ==========
</TABLE>
See accompanying notes to financial statements. (Continued)
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY, INC.
Statements of Changes in Plan Equity, Continued
<TABLE>
<CAPTION>
1993
Commingled Specialized Money Fixed Armstrong "OTC"
Equity Equity Market Income Stock Portfolio
Fund Fund Fund Fund Fund Fd. Total
---------- ----------- ------ ------ --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1992 $252,326 $459,743 $72,228 $3,104,287 $ 18,800 $ -- $3,907,384
-------- -------- ------- ---------- -------- ------- ----------
Increases in plan equity:
Contributions 17,894 60,637 16,039 261,081 1,290 1,769 358,710
Dividends 7,827 62,000 2,373 -- 524 1,866 74,590
Interest -- -- -- 235,754 -- -- 235,754
Realized gain(loss) on
investments (note 3) 2,706 (1,609) -- -- 1,485 -- 2,582
Unrealized appreciation
(depreciation) of investments 18,395 90,417 -- -- 2,946 (496) 111,262
-------- -------- ------- ---------- -------- ------- ----------
46,822 211,445 18,412 496,835 6,245 3,139 782,898
-------- -------- ------- ---------- -------- ------- ----------
Decreases in plan equity:
Benefits paid (30,004) (26,158) (9,669) (454,479) (184) -- (520,494)
Interfund transfers, net (11,506) 23,049 5,464 (24,077) (14,750) 21,820 --
-------- -------- ------- ---------- -------- ------- ----------
(41,510) (3,109) (4,205) (478,556) (14,934) 21,820 (520,494)
-------- -------- ------- ---------- -------- ------- ----------
Plan equity at September 30, 1993 $257,638 $668,079 $86,435 $3,122,566 $ 10,111 $24,959 $4,169,788
======== ======== ======= ========== ======== ======= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
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.
(b) Investments in Master Trust
---------------------------
The fair value of the commingled equity, specialized equity,
over-the-counter portfolio, and Asset Manager funds is based on
the underlying market value of the investments. The money
market fund is stated at cost which approximates fair value.
The fixed income fund is stated at the value of the underlying
investment contracts which represents contributions plus
interest at the contract rate, less benefits paid. The value of
the Armstrong stock fund is based on quoted market price. The
value of the loan portfolio fund represents the unpaid
principal of employee loans.
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.
(c) Expenses
---------
All legal, accounting and administrative expenses associated
with Plan operations are paid by the Company.
(2) Plan Description
----------------
The Plan is a defined contribution plan, the purpose of which is to
provide 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 of American
Olean Tile Company, Inc. (the Company), a wholly-owned subsidiary of
Armstrong World Industries, Inc. (Armstrong). The Plan is subject to
the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
Participants may contribute to the Plan by electing an amount up to
10%, but not less than 2% of their compensation.
Until December 31, 1989, the Company made a matching contribution to
the Plan in an amount equal to 50% of a participant's contribution,
up to $400 per calendar year. Effective January 1, 1990, the
matching Company contribution feature was discontinued.
In the event of a withdrawal during employment, a participant will
not be permitted to resume making contributions until the first day
of the following January, April, July, or October.
Separate accounts are maintained for contributions made by or on
behalf of a participant. The accounts in each fund reflect the
participants' and Company-matching contributions together with
allocated dividends, interest, realized gains (losses) on
investments, and unrealized appreciation (depreciation) of
investments.
Participants have an immediate 100 percent vested interest with
respect to their contributions and are fully vested with regard to
any previously made matching company contributions.
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Notes to Financial Statements, (Continued)
(3) Investments in Master Trust
---------------------------
Assets of the Plan are held in a Master Trust administered by the
Fidelity Management Trust Co. The assets are segregated into nine
investment options: a commingled equity mutual fund (Fidelity U.S.
Equity Index Portfolio), a specialized equity mutual fund (Fidelity
Magellan), a money market mutual fund (Fidelity Return Money Market
Portfolio), three Asset Manager mutual funds, an over-the-counter
mutual fund (OTC Portfolio Fund), a fixed income fund, and an
Armstrong stock fund. The Plan utilizes the Trustee and associated
investment managers to direct investment activity. The Plan
participates in all nine investment alternatives.
The following is a description of the investment funds to which Plan
participants can elect to allocate their contributions.
1. Commingled Equity 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. At September 30, 1995, there were 103 active
participants in this investment fund.
2. Specialized Equity Fund - This fund invests in common stocks of
companies having substantial growth prospects as determined by
independent investment managers. At September 30, 1995, there were
222 active participants in this investment fund.
3. Money Market Fund - 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. At
September 30, 1995, there were 140 active participants in this
investment fund.
4. Fixed Income Fund - Contributions to this fund are invested in the
general accounts of insurance companies and are credited at contracted
interest rates. At September 30, 1995, the interest rates ranged
between 5.69% and 9.00%. Invested principal and accumulated interest
amounts are guaranteed against loss by the insurance company. At
September 30, 1995, there were 471 active participants in this
investment fund.
5. Armstrong Stock Fund - Amounts invested in this fund, along with
dividend earnings thereon, are invested in Armstrong common stock. At
September 30, 1995, there were 15 active participants in this
investment fund. Common stock shares held by the fund at September
30, 1995 and 1994 were 315 and 147, respectively.
6. OTC Portfolio Fund - 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. At September 30, 1995, there were 21 active
participants in this investment fund.
7. Asset Manager Fund - 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. At September 30, 1995, there were 16
active participants in this investment fund.
8. Asset Manager Income Fund - An asset allocation fund which invests in
a diversified portfolio of stocks, bonds, and short-term instruments.
The fund has a conservative investment strategy focusing on bonds and
short-term instruments to achieve a high level of current income and
capital preservation. At September 30, 1995, there were 10 active
participants in this investment fund.
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Notes to Financial Statements, (Continued)
9. Asset Manager Growth Fund - 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. At
September 30, 1995, there were 18 active participants in this
investment fund.
10. Loan Portfolio Fund - The amount in this fund represents the unpaid
principal balances of loans made by Plan participants in accordance
with established loan provision guidelines. At September 30, 1995,
there were 2 loans outstanding.
The following table presents the cost and fair values of the investments
in securities of the Master Trust at September 30, 1995 and 1994:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Commingled equity $ 255,016 $ 348,744 $ 242,719 $ 271,388
Specialized equity 855,063 1,117,446 720,862 712,289
Money market 212,465 212,465 97,112 97,112
Fixed income 3,429,888 3,429,888 3,297,779 3,297,779
Armstrong stock 14,348 17,457 6,727 6,365
OTC portfolio 42,980 53,802 40,683 39,012
Asset manager 48,417 49,977 38,041 36,675
Asset manager income 4,955 5,197 406 404
Asset manager growth 14,861 15,967 3,407 3,377
Loan portfolio 5,663 5,663 -- --
---------- ---------- ---------- ----------
$4,883,656 $5,256,606 $4,447,736 $4,464,401
========== ========== ========== ==========
</TABLE>
The amounts of realized gain (loss) on investments in securities of the
Master Trust for the years ended September 30, 1995, 1994, and 1993 are
presented below:
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
--------- --------- --------
1995 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
<S> <C> <C> <C>
Commingled equity $ 31,292 $ 26,415 $ 4,877
Specialized equity 76,993 62,409 14,584
Armstrong stock 3,776 4,283 (507)
OTC portfolio 7,768 8,075 (307)
Asset manager 256 268 (12)
Asset manager income 1,400 1,319 81
Asset manager growth 1,196 1,272 (76)
-------- -------- -------
$122,681 $104,041 $18,640
======== ======== =======
1994
----
Commingled equity $ 15,875 $ 14,243 $ 1,632
Specialized equity 80,984 78,216 2,768
Armstrong stock 12,733 9,845 2,888
OTC portfolio 281 297 (16)
-------- -------- -------
$109,873 $102,601 $ 7,272
======== ======== =======
1993
----
Commingled equity $ 42,010 $ 39,304 $ 2,706
Specialized equity 65,167 66,776 (1,609)
Armstrong stock 14,934 13,449 1,485
-------- -------- -------
$122,111 $119,529 $ 2,582
======== ======== =======
</TABLE>
<PAGE>
SAVINGS PLAN FOR PRODUCTION AND MAINTENANCE EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Notes to Financial Statements, (Continued)
(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. In addition, a
participant may elect to withdraw all or any part of his account
attributable to his contributions.
If the amount of a withdrawal exceeds the amount of contributions
made by the participant and not previously withdrawn, the
participant shall be ineligible to make contributions for a
specified period, except that a participant may elect to withdraw
all or any portion of his account attributable to tax deductible
contributions.
(5) Obligation for Benefits
-----------------------
All the funds of the Plan are held by investing institutions
appointed by the Company under a trust agreement or investment
contract. Benefits under the Plan are payable only out of these
funds. The Company 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 the
Company nor any investing institution guarantees the funds of the
Plan against any loss or depreciation or guarantees the payment of
any benefit hereunder. Although the Company 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) Federal Income Taxes
--------------------
By a letter dated February 1, 1996, the Internal Revenue Service has
determined and informed the Company that the Plan qualifies under
the applicable provisions of the Internal Revenue Code and is
therefore exempt from federal income taxes.
(7) Subsequent Event
----------------
On December 29, 1995, American Olean Tile Company, Inc., formed a
business combination with Dal-Tile International, Inc. It is
anticipated that Dal-Tile will merge the Plan into a comparable
defined contribution plan on April 1, 1996.
<PAGE>
Independent Auditors' Report
The Executive Committee
American Olean Tile Company, Inc.:
We have audited the accompanying statements of net assets of the Savings Plan
for Production and Maintenance Employees of American Olean Tile Company, Inc. as
of September 30, 1995 and 1994, and the related statements of changes in plan
equity for each of the years in the three-year period ended September 30, 1995.
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 generally accepted auditing
standards. 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 financial position of the Savings Plan for Production
and Maintenance Employees of American Olean Tile Company as of September 30,
1995 and 1994, and the changes in its plan equity for each of the years in the
three-year period ended September 30, 1995, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements of
net assets and the statements of changes in plan equity is presented for
purposes of additional analysis rather than to present the net assets and
changes in plan equity of each fund. The fund information 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.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
February 1, 1996
<PAGE>
EXHIBIT INDEX
24 Consent of Independent Auditors
<PAGE>
Consent of Independent Auditors
The Executive Committee
American Olean Tile Company, Inc.:
We consent to incorporation by reference in the Registration Statement
No. 33-60070 on Form S-8 of Armstrong World Industries, Inc. of our report dated
February 1, 1996 relating to the statements of net assets of the Savings Plan
for Production and Maintenance Employees of American Olean Tile Company, Inc. as
of September 30, 1995 and 1994 and the related statements of changes in plan
equity for each of the years in the three-year period ended September 30, 1995,
which report is included herein.
KPMG Peat Marwick LLP
Philadelphia, Pennsylvania
March 21, 1996
<PAGE>
Exhibit 28(ii)(f)
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, 1995
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -----------------------
Commission file number 1-2116
-------------------------------------------------------
SAVINGS PLAN FOR SALARIED EMPLOYEES OF
AMERICAN OLEAN TILE COMPANY, INC.
1000 Cannon Avenue
Lansdale, PA 19446
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
Page No.
-------
Item 1. Statements of Net Assets Available for Participants 4
---------------------------------------------------
September 30, 1995 and 1994
Item 2. Statements of Changes in Plan Equity
------------------------------------
for Participants 5-7
----------------
(a) Year ended September 30, 1995
(b) Year ended September 30, 1994
(c) Year ended September 30, 1993
Notes to Financial Statements 8-11
- -----------------------------
Item 3. Independent Auditors' Report 12
----------------------------
- 2 -
<PAGE>
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.
AMERICAN OLEAN TILE COMPANY, INC.
SAVINGS PLAN FOR SALARIED EMPLOYEES
March 25, 1996 By:/s/ Michael J. Farley
-------------------------------------
Michael J. Farley
Chairperson, Employee Benefits
Administrative Authority for the
American Olean Tile Company, Inc.,
Savings Plan for Salaried Employees
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Statements of Net Assets
September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
----------- ----------- ----------- ---- ----------
Assets:
<S> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $1,727,578 $3,296,426 $733,177 $11,360,637 $127,279
---------- ---------- -------- ----------- --------
Total assets $1,727,578 $3,296,426 $733,177 $11,360,637 $127,279
---------- ---------- -------- ----------- --------
Plan equity $1,727,578 $3,296,426 $733,177 $11,360,637 $127,279
========== ========== ======== =========== ========
<CAPTION>
1995
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- ------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $305,196 $136,817 $2,187 $139,599 $430,649 $18,259,545
-------- -------- ------ -------- --------- -----------
Total assets $305,196 $136,817 $2,187 $139,599 $430,649 $18,259,545
-------- -------- ------ -------- --------- -----------
Plan equity $305,196 $136,817 $2,187 $139,599 $430,649 $18,259,545
======== ======== ====== ======== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
1994
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
----------- ----------- ----------- ---- ----------
Assets:
<S> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $1,266,140 $2,508,818 $386,345 $10,986,093 $93,825
---------- ---------- -------- ----------- -------
Total assets $1,266,140 $2,508,818 $386,345 $10,986,093 $93,825
---------- ---------- -------- ----------- -------
Plan equity $1,266,140 $2,508,818 $386,345 $10,986,093 $93,825
========== ========== ======== =========== =======
<CAPTION>
1994
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- ------
Assets:
<S> <C> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $231,492 $136,309 $86,261 $114,092 $400,699 $16,210,074
-------- -------- ------- -------- -------- -----------
Total assets $231,492 $136,309 $86,261 $114,092 $400,699 $16,210,074
-------- -------- ------- -------- -------- -----------
Plan equity $231,492 $136,309 $86,261 $114,092 $400,699 $16,210,074
======== ======== ======= ======== ======== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY, INC.
Statements of Changes in Plan Equity
Years Ended September 30, 1995, 1994, and 1993
1995
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
----------- ----------- ----------- ---- ----------
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1994 $1,266,140 $2,508,818 $ 386,345 $10,986,093 $ 93,825
---------- ---------- --------- ----------- --------
Increases in plan equity:
Contributions 135,576 315,880 126,215 465,332 24,684
Dividends 38,384 12,511 27,413 -- 3,168
Interest 3,586 (2,866) 1,875 755,248 132
Realized gain(loss) on
investments (note 3) 33,918 71,680 -- -- 2,395
Unrealized appreciation of
investments 315,922 833,088 -- -- 24,745
Loan activity, net (5,508) 30,119 (10,333) (89,784) 2,017
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. 3,264 (151,505) (5,739) (13,472) (9,784)
---------- ---------- --------- ----------- --------
525,142 1,108,907 139,431 1,117,324 47,357
---------- ---------- --------- ----------- --------
Decreases in plan equity:
Benefits paid (87,972) (63,155) (46,738) (754,529) (12,623)
Interfund transfers, net 24,268 (258,144) 254,139 11,749 (1,280)
---------- ---------- --------- ----------- --------
(63,704) (321,299) (207,401) (742,780) (13,903)
---------- ---------- --------- ----------- --------
Plan equity at September 30, 1995 $1,727,578 $3,296,426 $ 733,177 $11,360,637 $127,279
========== ========== ========= =========== ========
<CAPTION>
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1994 $231,492 $136,309 $ 86,261 $114,092 $400,699 $16,210,074
-------- -------- -------- -------- --------- -----------
Increases in plan equity:
Contributions 40,942 25,401 2,322 38,471 -- 1,174,823
Dividends 7,581 4,940 3,605 3,292 -- 100,894
Interest 677 102 -- 1,010 -- 759,764
Realized gain(loss) on
investments (note 3) 12,108 (1,395) 832 1,005 -- 120,543
Unrealized appreciation of
investments 58,506 9,966 3,941 10,407 -- 1,256,575
Loan activity, net (7,997) 670 -- 5,143 75,673 --
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. (41,529) 4,317 -- -- (45,723) (260,171)
-------- -------- -------- -------- --------- -----------
70,288 44,001 10,700 59,328 29,950 3,152,428
-------- -------- -------- -------- --------- -----------
Decreases in plan equity:
Benefits paid
Interfund transfers, net (36,441) (5,646) (94,349) (1,504) -- (1,102,957)
39,857 (37,847) (425) (32,317) -- --
-------- -------- -------- -------- --------- -----------
3,416 (43,493) (94,774) (33,821) -- (1,102,957)
-------- -------- -------- -------- --------- -----------
Plan equity at September 30, 1995 $305,196 $136,817 $ 2,187 $139,599 $430,649 $18,259,545
======== ======== ======== ======== ======== ===========
</TABLE>
See accompanying notes to financial statements. (Continued)
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY, INC.
Statements of Changes in Plan Equity, Continued
1994
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
----------- ----------- ----------- ---- ----------
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1993 $1,344,427 $2,250,245 $379,911 $10,423,771 $47,845
---------- ---------- -------- ----------- -------
Increases in plan equity:
Contributions 150,243 348,055 97,377 503,274 24,197
Dividends 49,197 235,582 14,498 -- 2,038
Interest 3,485 10,873 2,020 781,273 88
Realized gain(loss) on
investments (note 3) 25,528 8,108 -- -- 2,523
Unrealized depreciation of
investments (28,451) (265,483) -- -- (2,562)
Loan activity, net (28,243) (26,926) (30,254) 51,581 1,133
Transfers (to) from other
employee benefit plans of
Armstrong World
Industries, Inc. 3,792 24,651 (14,041) 7,226 13,362
---------- ---------- -------- ----------- -------
175,551 334,860 69,600 1,343,354 40,779
---------- ---------- -------- ----------- -------
Decreases in plan equity:
Benefits paid (104,101) (284,290) (29,592) (455,164) (6,656)
Interfund transfers, net (149,737) 208,003 (33,574) (325,868) 11,857
---------- ---------- -------- ----------- -------
(253,838) (76,287) (63,166) (781,032) 5,201
---------- ---------- -------- ----------- -------
Plan equity at September 30, 1994 $1,266,140 $2,508,818 $386,345 $10,986,093 $93,825
========== ========== ======== =========== =======
<CAPTION>
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- ----------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1993 $175,265 $ 80 $ -- $ 17,153 $423,830 $15,062,527
-------- -------- ------- -------- --------- -----------
Increases in plan equity:
Contributions 49,110 16,577 6,175 26,507 -- 1,221,515
Dividends 10,178 6,318 3,829 1,546 -- 323,186
Interest 665 77 22 697 -- 799,200
Realized gain(loss) on
investments (note 3) (2,385) (1,953) (105) (44) -- 31,672
Unrealized depreciation of
investments (6,072) (6,785) (3,817) (1,196) -- (314,366)
Loan activity, net 2,884 735 1,041 (645) 28,694 --
Transfers (to) from other
employee benefit plans of
Armstrong World
Industries, Inc. (4,555) -- -- (1,119) (51,825) (22,509)
-------- -------- ------- -------- --------- -----------
49,825 14,969 7,145 25,746 (23,131) 2,038,698
-------- -------- ------- -------- --------- -----------
Decreases in plan equity:
Benefits paid (6,736) (412) -- (4,200) -- (891,151)
Interfund transfers, net 13,138 121,672 79,116 75,393 -- --
-------- -------- ------- -------- --------- -----------
6,402 121,260 79,116 71,193 -- (891,151)
-------- -------- ------- -------- --------- -----------
Plan equity at September 30, 1994 $231,492 $136,309 $86,261 $114,092 $400,699 $16,210,074
======== ======== ======= ======== ======== ===========
</TABLE>
See accompanying notes to financial statements. (Continued)
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY, INC.
Statements of Changes in Plan Equity, Continued
1993
<TABLE>
<CAPTION>
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
----------- ----------- ----------- ---- ----------
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1992 $1,205,383 $1,397,522 $ 461,412 $10,144,449 $21,271
---------- ---------- --------- ----------- -------
Increases in plan equity:
Contributions 157,397 268,666 76,458 623,188 12,670
Dividends 39,894 194,534 12,385 -- 1,054
Interest 4,374 8,879 2,992 828,198 21
Realized gain (loss) on
investments (note 3) 20,198 919 -- -- (52)
Unrealized appreciation
(depreciation) of investments 90,326 296,726 -- -- 12,140
Loan activity, net (26,357) (18,752) (25,237) (71,144) 311
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. 1,478 76,216 -- 8,930 2,576
---------- ---------- --------- ----------- -------
287,310 827,188 66,598 1,389,172 28,720
---------- ---------- --------- ----------- -------
Decreases in plan equity:
Benefits paid (114,149) (124,922) (72,439) (924,027) (1,051)
Interfund transfers, net (34,117) 150,457 (75,660) (185,823) (1,095)
---------- ---------- --------- ----------- -------
(148,266) 25,535 (148,099) (1,109,850) (2,146)
---------- ---------- --------- ----------- -------
Plan equity at September 30, 1993 $1,344,427 $2,250,245 $ 379,911 $10,423,771 $47,845
========== ========== ========= =========== =======
<CAPTION>
"OTC" Asset Asset Mgr. Loan
Portfolio Fd. Manager Fund Growth Fund Portfolio Fund Total
------------- ------------ ----------- -------------- -----
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1992 $ -- $ -- $ -- $275,100 $13,505,137
-------- ------- ------- -------- -----------
Increases in plan equity:
Contributions 27,550 80 591 -- 1,166,600
Dividends 13,252 -- -- -- 261,119
Interest 915 -- 46 -- 845,425
Realized gain (loss) on
investments (note 3) 162 -- -- -- 21,227
Unrealized appreciation
(depreciation) of investments (3,087) -- 164 -- 396,269
Loan activity, net 2,548 -- 71 138,560 --
Transfers (to) from other
employee benefit plans of
Armstrong World Industries,
Inc. 11,638 -- -- 10,170 111,008
-------- ------- ------- -------- -----------
52,978 80 872 148,730 2,801,648
-------- ------- ------- -------- -----------
Decreases in plan equity:
Benefits paid (7,670) -- -- -- (1,244,258)
Interfund transfers, net 129,957 -- 16,281 -- --
-------- ------- ------- -------- -----------
122,287 -- 16,281 -- (1,244,258)
-------- ------- ------- -------- -----------
Plan equity at September 30, 1993 $175,265 $80 $17,153 $423,830 $15,062,527
======== ===== ======= ======== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
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.
(b) Investments in Master Trust
---------------------------
The fair value of the commingled equity, specialized equity, over-
the-counter portfolio, and Asset Manager funds is based on the
underlying market value of the investments. The money market fund
is stated at cost which approximates fair value. The fixed income
fund is stated at the value of the underlying investment contracts
which represents contributions plus interest at the contract rate,
less benefits paid. The value of the Armstrong stock fund is based
on quoted market price. The value of the loan portfolio fund
represents the unpaid principal of employee loans.
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.
(c) Expenses
---------
All legal, accounting and administrative expenses associated with
Plan operations are paid by the Company.
(2) Plan Description
----------------
The Plan is a defined contribution plan, the purpose of which is to
provide 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 of American Olean Tile
Company, Inc. (the Company), a wholly-owned subsidiary of Armstrong
World Industries, Inc. (Armstrong). The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
Participants may contribute to the Plan in each of the following
methods:
1. Up to 15%, but not less than 2%, of their compensation as deferred
compensation as permitted under Section 401(k) of the Internal
Revenue Code.
2. Up to 10%, but not less than 2%, of their compensation.
Until December 31, 1989, the Company made a matching contribution to
the Plan in an amount equal to 50% of a participant's contribution, up
to $400 per calendar year. Effective January 1, 1990, the matching
Company contribution feature was discontinued.
In the event of a withdrawal during employment of amounts attributable
to before-tax contributions, a participant will not be permitted to
resume making contributions until the first day of January, April,
July, or October which follows twelve months from the date of the
withdrawal.
In the event of a withdrawal during employment of amounts attributable
to after-tax contributions, a participant will not be permitted to
resume making contributions until the first day of the following
January, April, July, or October.
Separate accounts are maintained for contributions made by or on behalf
of a participant. The accounts in each fund reflect the participants'
and Company-matching contributions together with allocated dividends,
interest, realized gains (losses) on investments, and unrealized
appreciation (depreciation) of investments.
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Notes to Financial Statements, (Continued)
Participants have an immediate 100 percent vested interest with respect
to their contributions and are fully vested with regard to any
previously made matching company contributions.
Under the rules of the Plan, a participant may borrow up to 50% of his
or her account other than amounts attributable to after-tax
contributions or amounts invested in the Armstrong Stock Fund
attributable to Company-matching contributions, subject to a $50,000
maximum, with the approval of the Plan Administrator. The amount of
the loan is transferred to a loan portfolio fund pledged as security
for the loan and is evidenced by a promissory note payable to the Plan.
Interest rates are determined periodically by the Company in accordance
with prevailing interest rates. Loan repayments are made by payroll
deductions or in a manner agreed to by the participant and the Plan
Administrator.
(3) Investments in Master Trust
---------------------------
Assets of the Plan are held in a Master Trust administered by the
Fidelity Management Trust Co. The assets are segregated into nine
investment options: a commingled equity mutual fund (Fidelity U.S.
Equity Index Portfolio), a specialized equity mutual fund (Fidelity
Magellan), a money market mutual fund (Fidelity Return Money Market
Portfolio), three Asset Manager mutual funds, an over-the-counter
mutual fund (OTC Portfolio Fund), a fixed income fund, and an Armstrong
stock fund. The Plan utilizes the Trustee and associated investment
managers to direct investment activity. The Plan participates in all
nine investment alternatives.
The following is a description of the investment funds to which Plan
participants can elect to allocate their contributions.
1. Commingled Equity 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. At September 30, 1995, there were 206 active
participants in this investment fund.
2. Specialized Equity Fund - This fund invests in common stocks of
companies having substantial growth prospects as determined by
independent investment managers. At September 30, 1995, there were
297 active participants in this investment fund.
3. Money Market Fund - 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. At
September 30, 1995, there were 165 active participants in this
investment fund.
4. Fixed Income Fund - Contributions to this fund are invested in the
general accounts of insurance companies and are credited at contracted
interest rates. At September 30, 1995, the interest rates ranged
between 5.69% and 9.00%. Invested principal and accumulated interest
amounts are guaranteed against loss by the insurance company. At
September 30, 1995, there were 508 active participants in this
investment fund.
5. Armstrong Stock Fund - Amounts invested in this fund, along with
dividend earnings thereon, are invested in Armstrong common stock. At
September 30, 1995, there were 56 active participants in this
investment fund. Common stock shares held by the fund at September
30, 1995 and 1994 were 2,293 and 2,163, respectively.
6. OTC Portfolio Fund - 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. At September 30, 1995, there were 63 active
participants in this investment fund.
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Notes to Financial Statements, (Continued)
7. Asset Manager Fund - 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. At September 30, 1995, there were 28
active participants in this investment fund.
8. Asset Manager Income Fund - An asset allocation fund which invests in
a diversified portfolio of stocks, bonds, and short-term instruments.
The fund has a conservative investment strategy focusing on bonds and
short-term instruments to achieve a high level of current income and
capital preservation. At September 30, 1995, there were 7 active
participants in this investment fund.
9. Asset Manager Growth Fund - 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. At
September 30, 1995, there were 41 active participants in this
investment fund.
10. Loan Portfolio Fund - The amount in this fund represents the unpaid
principal balances of loans made by Plan participants in accordance
with established loan provision guidelines. At September 30, 1995,
there were 76 loans outstanding.
The following table presents the cost and fair values of the investments
in securities of the Master Trust at September 30, 1995 and 1994:
<TABLE>
<CAPTION>
September 30, 1995 September 30, 1994
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Commingled equity $ 1,289,642 $ 1,727,578 $ 1,144,126 $ 1,266,140
Specialized equity 2,482,720 3,296,426 2,528,200 2,508,818
Money market 733,177 733,177 386,345 386,345
Fixed income 11,360,637 11,360,637 10,986,093 10,986,093
Armstrong stock 96,538 127,279 87,829 93,825
OTC portfolio 255,849 305,196 240,651 231,492
Asset manager 133,636 136,817 143,094 136,309
Asset manager income 2,063 2,187 90,078 86,261
Asset manager growth 130,224 139,599 115,124 114,092
Loan portfolio 430,649 430,649 400,699 400,699
----------- ----------- ----------- -----------
$16,915,135 $18,259,545 $16,122,239 $16,210,074
=========== =========== =========== ===========
</TABLE>
The amounts of realized gain (loss) on investments in securities of the
Master Trust for the years ended September 30, 1995, 1994, and 1993 are
presented below:
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
--------- --------- --------
1995 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
<S> <C> <C> <C>
Commingled equity $ 205,346 $ 171,428 $ 33,918
Specialized equity 622,238 550,558 71,680
Armstrong stock 26,732 24,337 2,395
OTC portfolio 154,894 142,786 12,108
Asset manager 63,132 64,527 (1,395)
Asset manager income 94,774 93,942 832
Asset manager growth 42,558 41,553 1,005
---------- ---------- --------
$1,209,674 $1,089,131 $120,543
========== ========== ========
</TABLE>
<PAGE>
SAVINGS PLAN FOR SALARIED EMPLOYEES
OF AMERICAN OLEAN TILE COMPANY
Notes to Financial Statements, (Continued)
<TABLE>
<CAPTION>
1994 Aggregate Aggregate Realized
---- ---------- --------- --------
Proceeds Cost Gain (Loss)
-------- ---- -----------
<S> <C> <C> <C>
Commingled equity $ 304,239 $278,711 $25,528
Specialized equity 585,116 577,008 8,108
Armstrong stock 8,409 5,886 2,523
OTC portfolio 68,779 71,164 (2,385)
Asset manager 36,646 38,599 (1,953)
Asset manager income 2,906 3,011 (105)
Asset manager growth 23,364 23,408 (44)
---------- -------- -------
$1,029,459 $997,787 $31,672
========== ======== =======
1993
----
Commingled equity $ 233,149 $212,951 $20,198
Specialized equity 252,641 251,722 919
Armstrong stock 2,396 2,448 (52)
OTC portfolio 16,404 16,242 162
---------- -------- -------
$ 504,590 $483,363 $21,227
========== ======== =======
</TABLE>
(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. In addition, a participant may
elect to withdraw all or any part of his account attributable to his
contributions.
If the amount of a withdrawal exceeds the amount of contributions made
by the participant and not previously withdrawn, the participant shall
be ineligible to make contributions for a specified period, except that
a participant may elect to withdraw all or any portion of his account
attributable to tax deductible contributions.
(5) Obligation for Benefits
-----------------------
All the funds of the Plan are held by investing institutions appointed
by the Company under a trust agreement or investment contract.
Benefits under the Plan are payable only out of these funds. The
Company 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 the
Company nor any investing institution guarantees the funds of the Plan
against any loss or depreciation or guarantees the payment of any
benefit hereunder. Although the Company 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) Federal Income Taxes
--------------------
By a letter dated February 1, 1996, the Internal Revenue Service has
determined and informed the Company that the Plan qualifies under the
applicable provisions of the Internal Revenue Code and is therefore
exempt from federal income taxes.
(7) Subsequent Event
----------------
On December 29, 1995, American Olean Tile Company, Inc., formed a
business combination with Dal-Tile International, Inc. It is
anticipated that Dal-Tile will merge the Plan into a comparable defined
contribution plan on April 1, 1996.
<PAGE>
Independent Auditors' Report
The Executive Committee
American Olean Tile Company, Inc.:
We have audited the accompanying statements of net assets of the Savings Plan
for Salaried Employees of American Olean Tile Company, Inc. as of September 30,
1995 and 1994, and the related statements of changes in plan equity for each of
the years in the three-year period ended September 30, 1995. 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 generally accepted auditing
standards. 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 financial position of the Plan as of September 30,
1995 and 1994, and the changes in its plan equity for each of the years in the
three-year period ended September 30, 1995, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statements
of net assets and the statements of changes in plan equity is presented for
purposes of additional analysis rather than to present the net assets and
changes in plan equity of each fund. The fund information 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.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 1, 1996
<PAGE>
EXHIBIT INDEX
24 Consent of Independent Auditors
<PAGE>
Consent of Independent Auditors
The Executive Committee
American Olean Tile Company, Inc.:
We consent to incorporation by reference in the Registration Statement
No. 33-60070 on Form S-8 of Armstrong World Industries, Inc. of our report dated
February 1, 1996 relating to the statements of net assets of the Savings Plan
for Salaried Employees of American Olean Tile Company, Inc. as of September 30,
1995 and 1994 and the related statements of changes in plan equity for each of
the years in the three-year period ended September 30, 1995, which report is
included herein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 21, 1996
