<PAGE>
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, 1997
------------------------------------------------------
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, 1997 and 1996 4
Item 2. Statements of Changes in Net Assets Available
for Plan Benefits
Years ended September 30, 1997, 1996, and 1995 5
Notes to Financial Statements 6-8
Item 3. Independent Auditors' Report 9
Exhibits
24. Consent of Independent Auditors
<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 23, 1998 By: /s/ George A. Lorch
-----------------------------------------------
George A. Lorch
Chairman of the Retirement Committee
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------
Allocated Unallocated Total
--------- ----------- -----
<S> <C> <C> <C>
Assets
- ------
Investment in Armstrong World Industries,
Inc., Common Stock (note 3) $ -- $ -- $ --
Cash and short-term investments -- -- --
Employee contributions receivable -- -- --
Employer contributions receivable -- -- --
Dividends receivable -- -- --
Interest receivable -- -- --
---------------- ---------------- ---------------
Total assets -- -- --
---------------- ---------------- ---------------
Liabilities
- -----------
Guaranteed ESOP notes (note 7) -- -- --
Accrued interest -- -- --
---------------- ---------------- ---------------
Total liabilities -- -- --
---------------- ---------------- ---------------
Net assets available for plan benefits $ -- $ -- $ --
- -------------------------------------- ================ ================ ===============
</TABLE>
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------
Allocated Unallocated Total
--------- ----------- -----
<S> <C> <C> <C>
Assets
- ------
Investment in Armstrong World Industries,
Inc., Common Stock (note 3) $ 94,796,070 $ 220,658,132 $ 315,454,202
Cash and short-term investments 664,665 2,191,796 2,856,461
Employee contributions receivable -- 330,392 330,392
Employer contributions receivable -- 3,405,019 3,405,019
Dividends receivable -- -- 0
Interest receivable 2,709 991 3,700
---------------- ---------------- ---------------
Total assets 95,463,444 226,586,330 322,049,774
---------------- ---------------- ---------------
Liabilities
- -----------
Guaranteed ESOP notes (note 7) -- 228,382,403 228,382,403
Accrued interest -- 5,775,128 5,775,128
---------------- ---------------- ---------------
Total liabilities -- 234,157,531 234,157,531
---------------- ---------------- ---------------
Net assets available for plan benefits $ 95,463,444 $ (7,571,201) $ 87,892,243
- -------------------------------------- ================ ================ ===============
</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, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997
------------------------------------------------------
Allocated Unallocated Total
--------- ----------- -----
<S> <C> <C> <C>
Increases:
- ---------
Employee contributions (note 2) $ -- $ -- $--
Employer contributions -- -- --
Dividends (note 3) -- -- --
Interest income -- -- --
Realized gain (note 5) -- -- --
Unrealized appreciation (note 3) -- -- --
Allocation of preferred stock of
Armstrong World Industries, Inc. -- -- --
-- -- --
-- -- --
Decreases:
- ---------
Interest expense -- -- --
Benefits paid (note 4) -- -- --
Allocation of preferred stock of
Armstrong World Industries, Inc. -- -- --
Transfer to other employee benefit
plan of Armstrong World Industries,
Inc. (note 1) ($95,463,444) $7,571,201 (87,892,243)
------------ ---------- -----------
(95,463,444) 7,571,201 (87,892,243)
------------ ---------- -----------
Net increase (decrease) (95,463,444) 7,571,201 (87,892,243)
Net assets available for
plan benefits:
Beginning of year 95,463,444 (7,571,201) 87,892,243
------------ ---------- -----------
End of year ($--) $-- ($--)
==== == ====
<CAPTION>
1996
-----------------------------------------------------
Allocated Unallocated Total
--------- ----------- -----
<S> <C> <C> <C>
Increases:
- ---------
Employee contributions (note 2) $ -- $5,033,300 $5,033,300
Employer contributions -- 10,071,540 10,071,540
Dividends (note 3) 4,133,471 10,638,900 14,772,371
Interest income 13,910 74,056 87,966
Realized gain (note 5) 1,401,739 -- 1,401,739
Unrealized appreciation (note 3) 10,448,393 24,321,094 34,769,487
Allocation of preferred stock of
Armstrong World Industries, Inc. 14,288,974 -- 14,288,974
----------- ----------- -----------
30,286,487 50,138,890 80,425,377
----------- ----------- -----------
Decreases:
- ---------
Interest expense -- (20,227,120) (20,227,120)
Benefits paid (note 4) (21,657,365) -- (21,657,365)
Allocation of preferred stock of
Armstrong World Industries, Inc. -- (14,288,974) (14,288,974)
Transfer to other employee benefit
plan of Armstrong World Industries,
Inc. (note 1) -- -- --
----------- ----------- -----------
(21,657,365) (34,516,094) (56,173,459)
----------- ----------- -----------
Net increase (decrease) 8,629,122 15,622,796 24,251,918
Net assets available for
plan benefits:
Beginning of year 86,834,322 (23,193,997) 63,640,325
----------- ----------- -----------
End of year $95,463,444 ($7,571,201) $87,892,243
=========== ============ ===========
<CAPTION>
1995
----------------------------------------------------
Allocated Unallocated Total
--------- ----------- -----
<S> <C> <C> <C>
Increases:
- ---------
Employee contributions (note 2) $ -- $6,744,735 $6,744,735
Employer contributions -- 5,670,971 5,670,971
Dividends (note 3) 4,879,273 13,984,817 18,864,090
Interest income 2,149 55,411 57,560
Realized gain (note 5) 202,717 -- 202,717
Unrealized appreciation (note 3) 11,897,970 30,122,579 42,020,549
Allocation of preferred stock of
Armstrong World Industries, Inc. 11,239,017 -- 11,239,017
----------- ----------- -----------
28,221,126 56,578,513 84,799,639
----------- ----------- -----------
Decreases:
- ---------
Interest expense -- (21,135,170) (21,135,170)
Benefits paid (note 4) (2,907,999) -- (2,907,999)
Allocation of preferred stock of
Armstrong World Industries, Inc. -- (11,239,017) (11,239,017)
Transfer to other employee benefit
plan of Armstrong World Industries,
Inc. (note 1) -- -- --
----------- ----------- -----------
(2,907,999) (32,374,187) (35,282,186)
----------- ----------- -----------
Net increase (decrease) 25,313,127 24,204,326 49,517,453
Net assets available for
plan benefits:
Beginning of year 61,521,195 (47,398,323) 14,122,872
----------- ----------- -----------
End of year $86,834,322 ($23,193,997) $63,640,325
=========== ============= ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
1. Plan Redesign
-------------
On May 29, 1996, the Board of Directors of Armstrong World Industries,
Inc. (the Company) approved the restructuring of the Armstrong World
Industries, Inc. Employee Stock Ownership Plan (the Plan). The Plan was
merged into the Retirement Savings Plan for Salaried Employees of
Armstrong World Industries, Inc., which was renamed the Retirement
Savings and Stock Ownership Plan of Armstrong World Industries, Inc. The
effective date of the merger was October 1, 1996.
2. Plan Description (Prior to Plan Redesign)
----------------
The Company established the Plan in 1989. The Plan, which was both a
stock bonus plan with a cash or deferred arrangement and an employee
stock ownership plan, was designed to attract and keep employees
possessing the qualities required for future growth of the Company. The
Plan intended 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
were at least twenty-one years of age and had completed one year of
service, were 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 had
agreed to coverage under the Plan.
Under the Plan, participants received 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 were held in a suspense
account and released to members' accounts as the notes were repaid. The
shares were 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 maintained three accounts for each member for contributions and
allocations of shares from the suspense account. Participants who elected
to reduce their before-tax compensation in amounts ranging from one
percent to four percent (exchange contributions) had such amounts
credited to an exchange contribution account. Shares released from the
suspense account were 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 were allocated to members' equity accounts (equity
allocations) based on an established shares released schedule. The equity
account was 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, was designed
to provide greater allocation of shares to older employees.
If any shares released from the suspense account remained unallocated
after the exchange and equity allocations, such shares were 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 had an immediate 100 percent vested interest with respect to
their exchange contributions. Interest in the Equity and Bonus Accounts
vested after five years of service.
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements, (Continued)
3. 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 managed a trust fund that had been created under the Plan
and had been granted authority to purchase and sell stock of the
Company as was necessary to administer the Plan in accordance with
its terms.
As part of the restructuring and merger of the Plan as discussed
in note 1, the Company preferred stock held by the trust was
converted into shares of Company common stock on a one-for-one
basis. The date of the conversion, which involved 5,057,382 shares
of preferred stock, was July 31, 1996, when the quoted market
price per share of the common stock was $55.50. At September 30,
1996, the investment in Company common stock represented 5,057,382
shares, valued at a quoted market price per share of $62.375. The
investment in Company preferred stock was presented at fair value.
Fair value was 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 represented 5,422,006
shares, valued at a market price per share of $55.50. Each share
of preferred stock was convertible into one share of Company
common stock. A dividend of $3.462 per share per annum was payable
semi-annually on the preferred stock held in the trust. The
preferred stock was 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 were paid by the Company.
4. Benefits
--------
Upon death or any other separation from service from the Company,
participants were entitled to receive a distribution of their vested ESOP
account. Distributions were in the form of a lump sum cash payment or,
upon request, Company common stock. Participants entitled to a
distribution could 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, 1996 and 1995, distributions were
made to participants of $21,657,365 representing 364,624 shares, and
$2,907,999 representing 57,756 shares, respectively.
<PAGE>
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements, (Continued)
5. Realized Gain
-------------
During the years ended September 30, 1996 and 1995, the number of
shares of preferred stock redeemed at prices per share in excess of
$47.75 totaled 359,427 and 30,660, respectively. The amount of redemption
proceeds in excess of the minimum conversion value totaled $1,401,739 in
1996 and $202,717 in 1995.
6. Plan Termination
----------------
The redesign of the Plan, as discussed in note 1, did not constitute a
termination of the Plan. Upon a Plan termination, all participants would
have become fully vested in their entire ESOP account balance.
7. Guaranteed ESOP Notes
---------------------
The Company has guaranteed the payment of principal and interest on the
notes. The notes are to be repaid in semi-annual installments with
interest per annum at 8.35% on the Series A Guaranteed Serial ESOP Notes
due 1989-2001 ($108,339,403 and $120,362,403 at September 30, 1996 and
1995, respectively) and 8.92% on the Series B Guaranteed Serial ESOP
Notes due 2001-2004 ($120,043,000 at September 30, 1996 and 1995).
8. Company Contributions
---------------------
The Company was 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,
was at least equal to the amount necessary to enable the Trustee to pay
currently maturing obligations under the Guaranteed ESOP notes.
9. Federal Income Taxes
--------------------
By a letter dated February 13, 1996, the Internal Revenue Service had
determined and informed the Company that the plan qualified under the
applicable provisions of the Internal Revenue Code and was 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, 1997 and 1996 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, 1997. 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.
On October 2, 1996, the Armstrong World Industries, Inc. Employee Stock
Ownership Plan was merged into the Retirement Savings Plan for Salaried
Employees of Armstrong World Industries, Inc. which was renamed the Retirement
Savings and Stock Ownership Plan of Armstrong World Industries, Inc.
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, 1997 and 1996 and the
changes in its net assets available for plan benefits for each of the years in
the three-year period ended September 30, 1997, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 23, 1998
<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 Registration Statement No. 33-29768
on Form S-8 of Armstrong World Industries, Inc. of our report dated March 23,
1998, 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, 1997 and 1996 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, 1997, which report is included herein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 23, 1998
