<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, 1998
-------------------------------------------------
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.
2500 Columbia Avenue
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
<PAGE>
Page No.
-------
Item 1. Statements of Net Assets 4
------------------------
September 30, 1998 and 1997
Item 2. Statements of Changes in Plan Equity 6-9
------------------------------------
(a) Year ended September 30, 1998
(b) Year ended September 30, 1997
(c) Year ended September 30, 1996
Notes to Financial Statements 10-15
- -----------------------------
Item 3. Independent Auditors' Report 16
----------------------------
Exhibits
- --------
23. 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.
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID
EMPLOYEES OF ARMSTRONG WORLD INDUSTRIES, INC.
March 18, 1999 By: /s/ Douglas L. Boles
------------------------------------------
Douglas L. Boles
Vice - Chairman of the Retirement Committee
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets
September 30, 1998 and 1997
<TABLE>
<CAPTION>
1998
Commingled Specialized Low-Priced Money Fixed Income
Equity Fund Equity Fund Stock Fund Market Fund Fund
----------- ----------- ---------- ----------- ----
Assets:
<S> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $8,583,441 $12,540,209 $168,683 $582,926 $46,277,835
---------- ----------- -------- -------- -----------
Total assets $8,583,441 $12,540,209 $168,683 $582,926 $46,277,835
---------- ----------- -------- -------- -----------
Plan equity $8,583,441 $12,540,209 $168,683 $582,926 $46,277,835
========== =========== ======== ======== ===========
<CAPTION>
1998
"OTC" Asset Asset Mgr. Asset Mgr. Mid Cap Value
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund
------------- ------------ ----------- ----------- --------------
Assets:
<S> <C> <C> <C> <C> <C>
Investments in master trust
at fair value (note 3) $2,238,113 $1,017,123 $94,315 $1,436,814 $458,830
---------- ---------- ------- ---------- --------
Total assets $2,238,113 $1,017,123 $94,315 $1,436,814 $458,830
---------- ---------- ------- ---------- --------
Plan equity $2,238,113 $1,017,123 $94,315 $1,436,814 $458,830
========== ========== ======= ========== ========
</TABLE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets
September 30, 1998 and 1997
<TABLE>
<CAPTION>
Global Equity Armstrong Overseas
Portfolio Fund Stock Fund Fund
-------------- ---------- ----
Assets:
<S> <C> <C> <C>
Investments in master trust
at fair value (note 3) $139,500 $8,438,568 $41,636
-------- ---------- -------
Total assets $139,500 $8,438,568 $41,636
-------- ---------- -------
Plan equity $139,500 $8,438,568 $41,636
======== ========== =======
<CAPTION>
Value Loan
Portfolio Fund Portfolio Fund Total
-------------- -------------- -----
Assets:
<S> <C> <C> <C>
Investments in master trust
at fair value (note 3) $46,506 $2,272,842 $84,337,341
------- ---------- -----------
Total assets $46,506 $2,272,842 $84,337,341
------- ---------- -----------
Plan equity $46,506 $2,272,842 $84,337,341
======= ========== ===========
The accompanying notes are an integral part of the financial statements. (Continued)
</TABLE>
4
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets
1997
<TABLE>
<CAPTION>
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) $7,455,996 $11,265,055 $733,693 $45,727,952 $9,711,278
---------- ----------- -------- ----------- ----------
Total assets $7,455,996 $11,265,055 $733,693 $45,727,952 $9,711,278
---------- ----------- -------- ----------- ----------
Plan equity $7,455,996 $11,265,055 $733,693 $45,727,952 $9,711,278
========== =========== ======== =========== ==========
</TABLE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets
<TABLE>
<CAPTION>
"OTC" Asset Asset Mgr. Asset Mgr. Loan
Portfolio Fund 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) $2,096,966 $966,047 $73,122 $992,028 $2,295,906 $81,318,043
---------- -------- ------- -------- ---------- -----------
Total assets $2,096,966 $966,047 $73,122 $992,028 $2,295,906 $81,318,043
---------- -------- ------- -------- ---------- -----------
Plan equity $2,096,966 $966,047 $73,122 $992,028 $2,295,906 $81,318,043
========== ======== ======= ======== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity
Years Ended September 30, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998
Commingled Specialized Low-Priced Money Fixed Income
Equity Fund Equity Fund Stock Fund Market Fund Fund
----------- ----------- ---------- ----------- ----
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1997 $7,455,996 $11,265,055 $ -- $733,693 $45,727,952
---------- ----------- ---------- -------- -----------
Increases in plan equity:
Contributions 495,303 924,620 12,740 60,163 3,361,949
Dividends 236,319 833,278 13,318 33,165 -
Interest 17,008 30,922 273 4,435 2,975,022
Realized gain (loss) on
investments (note 3) 289,916 352,659 (465) - -
Loan activity, net (32,657) (34,952) (2,994) 2,420 (28,966)
---------- ---------- ---------- ---------- ----------
1,005,889 2,106,527 22,872 100,183 6,308,005
---------- ---------- ---------- ---------- ----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments 98,226 (684,488) (46,765) - -
Benefits paid (note 4) (274,019) (501,878) - (100,665) (3,620,812)
Transfers (to) from other
employee benefit plans (11,093) (15,278) - 22,718 (185,481)
Interfund transfers, net 308,442 370,271 192,576 (173,003) (1,951,829)
---------- ---------- ---------- ---------- ----------
121,556 (831,373) 145,811 (250,950) (5,758,122)
---------- ---------- ---------- ---------- ----------
Plan equity at September 30,1998 $8,583,441 $12,540,209 $168,683 $582,926 $46,277,835
========== =========== ======== ======== ===========
</TABLE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity
Years Ended September 30, 1998, 1997, and 1996
<TABLE>
<CAPTION>
Global Equity Armstrong Overseas
Portfolio Fund Stock Fund Fund
-------------- ---------- ----
<S> <C> <C> <C>
Plan equity at October 1, 1997 $-- $9,711,278 $--
--- ---------- ---
Increases in plan equity:
Contributions 9,646 493,575 5,200
Dividends 1,427 267,830 -
Interest 221 32,223 151
Realized gain (loss) on
investments (note 3) (1,539) 354,202 (1,335)
Loan activity, net 6,923 (49,051) 4,501
---------- ---------- ----------
16,678 1,098,779 8,517
---------- ---------- ----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments (25,765) (2,333,738) (8,431)
Benefits paid (note 4) - (358,401) (187)
Transfers (to) from other
employee benefit plans - (16,656) -
Interfund transfers, net 148,587 337,306 41,737
---------- ---------- ----------
122,822 (2,371,489) 33,119
---------- ---------- ----------
Plan equity at September 30, 1998 $139,500 $8,438,568 $41,636
======== ========== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
(Continued)
6
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity
<TABLE>
<CAPTION>
1998, cont.
"OTC" Asset Asset Mgr. Asset Mgr. Mid Cap Value
Portfolio Fd. Manager Fund Income Fund Growth Fund Portfolio Fund
------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Plan equity at October 1, 1997 $2,096,966 $966,047 $73,122 $992,028 $--
---------- -------- ------- -------- ---
Increases in plan equity:
Contributions 250,172 74,257 15,448 166,605 34,325
Dividends 234,320 91,620 5,879 116,109 -
Interest 9,258 2,605 71 3,741 521
Realized gain (loss) on
investments (note 3) 94,079 26,839 4,983 20,698 (5,354)
Loan activity, net (7,689) 2,784 (799) (3,857) 3,144
----------- ---------- ---------- ---------- ----------
580,140 198,105 25,582 303,296 32,636
----------- ---------- ---------- ---------- ----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments (354,071) (65,257) (3,855) (93,854) (83,021)
Benefits paid (note 4) (63,377) (7,398) (7) (15,955) (1,081)
Transfers (to) from other
employee benefit plans - - - (10,398) -
Interfund transfers, net (21,545) (74,374) (527) 261,697 510,296
----------- ---------- ---------- ---------- ----------
(438,993) (147,029) (4,389) 141,490 426,194
----------- ---------- ---------- ---------- ----------
Plan equity at September 30,1998 $2,238,113 $1,017,123 $94,315 $1,436,814 $458,830
========== ========== ======= ========== ========
</TABLE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity
<TABLE>
<CAPTION>
Value Loan
Portfolio Fund Portfolio Fund Total
-------------- -------------- -----
<S> <C> <C> <C>
Plan equity at October 1, 1997 $-- $2,295,906 $81,318,043
--- ---------- -----------
Increases in plan equity:
Contributions 8,519 - 5,912,522
Dividends 331 - 1,833,596
Interest 73 - 3,076,524
Realized gain (loss) on
investments (note 3) (1,156) - 1,133,527
Loan activity, net 681 140,512 -
---------- ---------- ----------
8,448 140,512 11,956,169
---------- ---------- ----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments (12,183) - (3,613,202)
Benefits paid (note 4) (125) - (4,943,905)
Transfers (to) from other
employee benefit plans - (163,576) (379,764)
Interfund transfers, net 50,366 - -
---------- ---------- ----------
38,058 (163,576) (8,936,871)
---------- ---------- ----------
Plan equity at September 30,1998 $46,506 $2,272,842 $84,337,341
======= ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(Continued)
7
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
<TABLE>
<CAPTION>
1997
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
----------- ----------- ----------- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1996 $4,883,660 $8,578,636 $416,000 $43,406,405 $9,386,415
---------- ---------- -------- ----------- ----------
Increases in plan equity:
Contributions 396,153 925,416 82,926 3,529,199 552,192
Dividends 161,332 305,919 31,777 - 244,989
Interest 13,762 29,295 4,814 2,900,183 25,355
Realized gain on investments
(note 3) 351,366 260,242 - - 550,950
Unrealized appreciation of
investments 1,580,784 2,365,599 - - 161,770
Loan activity, net (130,980) (126,204) (29,492) (115,061) (48,374)
---------- ---------- -------- ----------- ----------
2,372,417 3,760,267 90,025 6,314,321 1,486,882
---------- ---------- -------- ----------- ----------
Decreases in plan equity:
Benefits paid (note 4) (374,928) (596,146) (51,747) (4,048,400) (548,329)
Transfers (to) from other
employee benefit plans (1,542) (75,341) - (20,335) (16,068)
Interfund transfers, net 576,389 (402,361) 279,415 75,961 (597,622)
---------- ---------- -------- ----------- ----------
199,919 (1,073,848) 227,668 (3,992,774) (1,162,019)
---------- ---------- -------- ----------- ----------
Plan equity at September 30,1997 $7,455,996 $11,265,055 $733,693 $45,727,952 $9,711,278
========== =========== ======== =========== ==========
</TABLE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
<TABLE>
<CAPTION>
1997
"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> <C>
Plan equity at October 1, 1996 $1,436,335 $699,182 $105,627 $709,448 $1,906,340 $71,528,048
---------- -------- -------- -------- ---------- -----------
Increases in plan equity:
Contributions 217,619 62,467 11,615 121,049 - 5,898,636
Dividends 118,866 63,179 7,829 60,481 - 994,372
Interest 7,442 1,002 105 2,598 - 2,984,556
Realized gain on investments
(note 3) 76,022 9,140 2,061 37,700 - 1,287,481
Unrealized appreciation of
investments 305,789 108,924 2,094 127,853 - 4,652,813
Loan activity, net 4,074 (25,281) 460 (21,317) 492,175
---------- -------- -------- -------- ---------- -----------
729,812 219,431 24,164 328,364 492,175 15,817,858
-------- -------- ------- -------- -------- -----------
Decreases in plan equity:
Benefits paid (note 4) (94,168) (24,466) (1,587) (49,821) - (5,789,592)
Transfers (to) from other
employee benefit plans - (12,062) - (10,314) (102,609) (238,271)
Interfund transfers, net 24,987 83,962 (55,082) 14,351 - -
---------- -------- -------- -------- ---------- -----------
(69,181) 47,434 (56,669) (45,784) (102,609) (6,027,863)
-------- ------- -------- -------- --------- ----------
Plan equity at September 30,1997 $2,096,966 $966,047 $73,122 $992,028 $2,295,906 $81,318,043
========== ======== ======= ======== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
(Continued)
8
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
<TABLE>
<CAPTION>
1996
Commingled Specialized Money Fixed Income Armstrong
Equity Fund Equity Fund Market Fund Fund Stock Fund
----------- ----------- ----------- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Plan equity at October 1, 1995 $5,767,464 $11,315,817 $540,741 $52,340,946 $10,507,047
---------- ----------- -------- ----------- -----------
Increases in plan equity:
Contributions 391,706 1,366,042 121,611 4,511,659 651,984
Dividends 175,391 2,450,944 31,527 - 284,330
Interest 11,647 27,737 2,993 3,439,151 27,919
Realized gain on investments
(note 3) 1,054,113 509,001 - - 1,338,682
Loan activity, net (43,609) (114,351) (24,188) (54,773) 40,571
---------- ----------- -------- ----------- -----------
1,589,248 4,239,373 131,943 7,896,037 2,343,486
---------- ----------- -------- ----------- -----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments (105,009) (2,583,323) - - (69,393)
Benefits paid (note 4) (746,345) (847,736) (114,511) (4,314,524) (681,467)
Transfers (to) from other
employee benefit plans (1,847,282) (3,236,368) (120,751) (11,735,341) (2,512,660)
Interfund transfers, net 225,584 (309,127) (21,422) (780,713) (200,598)
---------- ----------- -------- ----------- -----------
(2,473,052) (6,976,554) (256,684) (16,830,578) (3,464,118)
---------- ----------- -------- ----------- -----------
Plan equity at September 30,1996 $4,883,660 $8,578,636 $416,000 $43,406,405 $9,386,415
========== ========== ======== =========== ==========
</TABLE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Plan Equity, Continued
<TABLE>
<CAPTION>
1996
"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> <C>
Plan equity at October 1, 1995 $657,654 $850,760 $103,847 $733,731 $2,381,480 $85,199,487
-------- -------- -------- -------- ---------- -----------
Increases in plan equity:
Contributions 174,556 91,334 12,725 123,321 - 7,444,938
Dividends 156,848 33,031 5,802 11,678 - 3,149,551
Interest 4,912 2,722 112 1,989 - 3,519,182
Realized gain on investments
(note 3) 53,313 33,020 934 50,214 - 3,039,277
Loan activity, net 3,277 427 (717) (2,282) 195,645 -
-------- -------- -------- -------- ---------- -----------
392,906 160,534 18,856 184,920 195,645 17,152,948
-------- -------- -------- -------- ---------- -----------
Decreases in plan equity:
Unrealized appreciation
(depreciation) of investments (6,112) 27,374 688 44,495 - (2,691,280)
Benefits paid (note 4) (47,221) (96,915) (21,390) (35,812) - (6,905,921)
Transfers (to) from other
employee benefit plans (433,448) (342,700) (10,568) (317,283) (670,785) (21,227,186)
Interfund transfers, net 872,556 100,129 14,194 99,397 - -
-------- -------- -------- -------- ---------- -----------
385,775 (312,112) (17,076) (209,203) (670,785) (30,824,387)
-------- --------- -------- --------- --------- ------------
Plan equity at September 30,1996 $1,436,335 $699,182 $105,627 $709,448 $1,906,340 $71,528,048
========== ======== ======== ======== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from estimates recorded.
(b) Investments in Master Trust
---------------------------
The fair value of the commingled equity, specialized equity, low-priced
stock, global equity portfolio, overseas, "OTC" portfolio, Asset
Manager, Asset Manager income, Asset Manager growth, mid cap value
portfolio and value portfolio 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 comprised of
guaranteed interest rate contracts within the Master Trust which are
fully benefit responsive; and therefore are reflected at contract value
plus credited interest in the financial statements. The value of the
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 Armstrong World Industries, Inc. (the Company)
(2) Plan Description
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.
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.
10
<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 fourteen investment options: a
commingled equity mutual fund (Fidelity U.S. Equity Index Portfolio), a
specialized equity mutual fund (Fidelity Magellan), a low-priced stock fund
(Fidelity Low-Priced Stock Fund), a money market mutual fund (Fidelity
Retirement Money Market Portfolio), a fixed income fund (Interest Income
Fund), a global equity mutual fund (Morgan Stanley Institutional Fund, Inc.
- Global Equity Portfolio), an Armstrong stock fund, an overseas fund
(Fidelity Overseas Fund), an "OTC" mutual fund (Over-the-counter
Portfolio), three Asset Manager mutual funds (Fidelity Asset Manager Fund,
Fidelity Asset Manager: Income Fund, and Fidelity Asset Manager: Growth
Fund), and two value-oriented mutual funds (Miller, Anderson & Sherrard,
LLP Value Portfolio and Miller, Anderson & Sherrard, LLP Mid Cap Value
Portfolio). The Plan utilizes the Trustee and associated investment
managers to direct investment activity. The Plan participates in all
fourteen investment alternatives.
The following is a brief description of the investment funds to which Plan
participants can elect to allocate their contributions. Participants should
refer to fund prospectuses for more complete information regarding the
investment funds.
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, 1998, there were 467 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, 1998, there were 735
active participants in this investment fund.
3. Low-priced Stock Fund - This fund seeks capital appreciation through
investments in mainly U.S. and foreign low-priced stocks that may be
undervalued, overlooked or out of favor. At September 30, 1998, there
were 40 active participants in this investment fund.
4. 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, 1998, there were 78 active participants in this investment fund.
5. Fixed Income Fund - Contributions to this fund are invested in the
general accounts of insurance companies and are credited at contracted
interest rates. Invested principal and accumulated interest amounts are
guaranteed against loss by the insurance company. Credited interest
rates are reset periodically during the plan year. At September 30,
1998, the interest rates ranged between 5.45% and 8.26%. At September
30, 1997, the interest rates ranged between 5.53% and 8.26%. The
average yields for the plan year ended September 30, 1998 and September
30, 1997 were 6.27% and 6.31%, respectively. The fair value of the
contracts approximate cost. At September 30, 1998, there were 1,920
active participants in this investment fund.
6. Global Equity Portfolio - This fund invests in a diversified selection
of stocks throughout the world, after a detailed analysis by local
country investment experts. It seeks to increase the value of the
investment over the long term through growth of capital. At September
30, 1998, there were 27 active participants in this investment fund.
7. Armstrong Stock Fund - Amounts invested in this fund, along with
dividend earnings thereon, are invested in Armstrong common stock. At
September 30, 1998, there were 1,063 active participants in this
investment fund. Common stock shares held by the fund at September 30,
1998 and 1997 were 157,730 and 144,808, respectively.
11
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
8. Overseas Fund - This fund invests in securities of issuers whose
principal business activities are outside the U.S. Investments may
include common stock and securities convertible into common stock, as
well as debt instruments. At September 30, 1998, there were 17 active
participants in this investment fund.
9. 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, 1998, there were 225 active
participants in this investment fund.
10. 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, 1998, there were 96
active participants in this investment fund.
11. Asset Manager - Income Fund - An asset allocation fund which invests in
a diversified portfolio of stocks, bonds, and short-term instruments.
The fund has an investment strategy focusing on bonds and short-term
instruments to achieve a high level of current income and capital
preservation. At September 30, 1998, there were 26 active participants
in this investment fund.
12. 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,
1998, there were 153 active participants in this investment fund.
13. Mid Cap Value Portfolio - This fund invests in undervalued common
stocks of mid-sized companies with a strong potential for increase in
share price It seeks to provide above-average long-term returns. At
September 30, 1998, there were 74 active participants in this
investment fund.
14. Value Portfolio - This fund seeks to provide above average long-term
returns by investing mostly in common stocks of large companies that
are considered undervalued. At September 30, 1998, there were 18 active
participants in this fund.
The Loan Portfolio Fund represents the unpaid principal balances of loans made
by Plan participants in accordance with established loan provision guidelines.
At September 30, 1998, there were 473 loans outstanding.
12
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
The following table presents the cost and estimated fair values of the
investments in securities of the Master Trust at September 30, 1998 and 1997:
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1997
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Commingled equity $5,084,737 $8,583,441 $4,055,518 $7,455,996
Specialized equity 10,263,076 12,540,209 8,303,434 11,265,055
Low-priced stock 215,448 168,683 - -
Money market 582,926 582,926 733,693 733,693
Fixed income 46,277,835 46,277,835 45,727,952 45,727,952
Global equity portfolio 165,265 139,500 - -
Armstrong stock 7,112,972 8,438,568 6,051,944 9,711,278
Overseas 50,067 41,636 - -
OTC portfolio 2,172,671 2,238,113 1,677,453 2,096,966
Asset manager 924,767 1,017,123 808,434 966,047
Asset manager income 91,920 94,315 66,872 73,122
Asset manager growth 1,312,490 1,436,814 773,850 992,028
Mid cap value portfolio 541,851 458,830 - -
Value portfolio 58,689 46,506 - -
Loan portfolio 2,272,842 2,272,842 2,295,906 2,295,906
--------- --------- --------- ---------
77,127,556 84,337,341 $70,495,056 $81,318,043
========== ========== =========== ===========
</TABLE>
The amounts of realized gain (loss) on investments in securities of the Master
Trust for the years ended September 30, 1998, 1997, and 1996 are presented
below:
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
1998 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
<S> <C> <C> <C>
Commingled equity $1,405,186 $1,115,270 $289,916
Specialized equity 3,886,313 3,533,654 352,659
Low-priced stock 10,083 10,548 (465)
Global equity portfolio 24,746 26,285 (1,539)
Armstrong stock 958,311 604,109 354,202
Overseas 30,474 31,809 (1,335)
OTC portfolio 3,943,120 3,849,041 94,079
Asset manager 234,620 207,781 26,839
Asset manager income 51,173 46,190 4,983
Asset manager growth 348,024 327,326 20,698
Mid cap value portfolio 66,556 71,910 (5,354)
Value portfolio 7,977 9,133 (1,156)
----------- ---------- ----------
$10,966,583 $9,833,056 $1,133,527
=========== ========== ==========
1997
Commingled equity $1,225,383 $874,017 $351,366
Specialized equity 3,517,283 3,257,041 260,242
Armstrong stock 1,497,284 946,334 550,950
OTC portfolio 3,026,966 2,950,944 76,022
Asset manager 116,680 107,540 9,140
Asset manager income 80,693 78,632 2,061
Asset manager growth 253,077 215,377 37,700
---------- ---------- ----------
$9,717,366 $8,429,885 $1,287,481
========== ========== ==========
</TABLE>
13
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
1996 Proceeds Cost Gain (Loss)
- ---- -------- ---- -----------
<S> <C> <C> <C>
Commingled equity $2,844,308 $1,790,195 $1,054,113
Specialized equity 8,058,491 7,549,490 509,001
Armstrong stock 3,660,766 2,322,084 1,338,682
OTC portfolio 1,393,457 1,340,144 53,313
Asset manager 514,737 481,717 33,020
Asset manager income 54,345 53,411 934
Asset manager growth 453,629 403,415 50,214
----------- ----------- ----------
$16,979,733 $13,940,456 $3,039,277
=========== =========== ==========
</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, an active employee may elect to withdraw all or any part of
his account attributable to his after-tax contributions. Before reaching
age 59 1/2, an active employee may withdraw his pretax contributions from
the Sheltered Account, provided he can demonstrate financial hardship. Such
employee shall be ineligible to make contributions for a 12 month period.
An active employee may elect to withdraw all or any portion of his account
balance in the Tax-Deductible (MIRA) and Rollover Accounts. A
Tax-Deductible (MIRA) Account holds contributions made to the Plan before
January 1, 1987. No new contributions may be made to this account.
Under the rules of the Plan, the participant may borrow up to the lessor of
50% of his balance or $50,000. The money borrowed must come from the
Sheltered, Rollover, and Standard Accounts. Before-tax contributions are
made to the Sheltered Account and after-tax contributions are made to the
Standard Account. 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.
14
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(7) Master Trust Agreement
----------------------
Effective October 1, 1990, the Plan established a Master Trust
Agreement with Fidelity Management Trust Company. Under the Master
Trust Agreement, the Plan assets held by Fidelity Management Trust
Company are commingled and invested with the assets of the Retirement
Savings and Stock Ownership Plan of Armstrong World Industries,
Inc. Separate accounting for each plan under the Master Trust Agreement
is provided by Fidelity Management Trust Company. The Plan has an
undivided interest in the assets of this trust, and ownership is
represented by proportionate dollar interest. The following summarizes
the financial information of the Master Trust at September 30, 1998 and
1997:
<TABLE>
<CAPTION>
September 30, 1998 September 30, 1997
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Money market fund 7,277,128 7,277,128 4,332,728 4,332,728
Armstrong common stock fund 15,494,806 18,779,265 13,793,357 22,471,238
Registered investment companies 137,463,217 184,878,481 111,940,786 167,806,037
Fixed income insurance contracts 180,069,533 180,069,533 176,728,629 176,728,629
Loan portfolio 7,298,722 7,298,722 6,869,084 6,869,084
--------- --------- --------- ---------
Total investments in Master Trust 347,603,406 398,303,129 313,664,584 378,207,716
=========== =========== =========== ===========
Plan's interest in Master Trust 77,127,556 84,337,341 70,495,056 81,318,043
Plan's percentage in Master Trust 22.2% 21.2% 22.5% 21.5%
</TABLE>
During 1998 and 1997, the Plan's investments (including investments bought,
sold, and held during the year) appreciated in value as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net appreciation (depreciation) in fair value of investments
in the Fidelity Management Trust
Company Master Trust (6,524,510) 40,903,095
Allocated net appreciation (depreciation) in fair value of
investments in the Master Trust (2,479,675) 5,940,294
During 1998 and 1997, interest and dividends were as follows:
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Interest and dividends in Fidelity
Management Trust Company
Master Trust 23,337,613 17,683,902
Allocated interest and dividends from
investment in Master Trust 4,910,120 3,978,928
</TABLE>
All of the above information was certified by the trustee at September 30, 1998
and 1997 and for the years then ended.
15
<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, 1998 and 1997 and the related statements of changes in plan equity
for each of the years in the three-year period ended September 30, 1998. 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, 1998 and 1997 and the changes in its plan equity for each of the
years in the three-year period ended September 30, 1998, 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 LLP
Philadelphia, PA
March 11, 1999
16
<PAGE>
EXHIBIT INDEX
23 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
March 11, 1999, 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, 1998 and 1997 and the related statements of changes in plan equity
for each of the years in the three-year period ended September 30, 1998, which
report is included herein.
KPMG LLP
Philadelphia, PA
March 11, 1999
