<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, 1999
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)
1
<PAGE>
Page No.
--------
Item 1. Independent Auditors' Report 4
----------------------------
Item 2. Statements of Net Assets Available for Benefits 5
-----------------------------------------------
September 30, 1999 and 1998
Item 3. Statements of Changes in Net Assets Available for Benefits 6
----------------------------------------------------------
Years ended September 30, 1999 and 1998
Notes to Financial Statements 7-12
Exhibits 13
- --------
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.
April 11, 2000 By: /s/: Douglas L. Boles
-------------------------
Douglas L. Boles Vice-Chairman of the Retirement
Committee
3
<PAGE>
Independent Auditors' Report
----------------------------
The Retirement Committee
Armstrong World Industries, Inc.:
We have audited the accompanying statements of net assets available for benefits
of the Retirement Savings Plan for Hourly-Paid Employees of Armstrong World
Industries, Inc. as of September 30, 1999 and 1998 and the related statements of
changes in net assets available for benefits for each of the years in the
two-year period ended September 30, 1999. 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 net assets available for benefits of the Retirement
Savings Plan for Hourly-Paid Employees of Armstrong World Industries, Inc. as of
September 30, 1999 and 1998 and the changes in net assets available for benefits
for each of the years in the two-year period ended September 30, 1999, in
conformity with generally accepted accounting principles.
April 10, 2000
Philadelphia, Pennsylvania
4
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statement of Net Assets Available for Benefits
September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Assets:
Investments in master trust, at fair value (note 3):
Cash equivalents:
Fidelity Retirement Money Market Portfolio $ 684,549 $ 582,926
Shares of registered investment companies:
Fidelity Magellan Fund 16,603,182 12,540,209
Fidelity Low-Priced Stock Fund 190,877 168,683
Fidelity OTC Portfolio 3,699,268 2,238,113
Fidelity Asset Manager Fund 1,169,693 1,017,123
Fidelity Asset Manager: Income Fund 232,356 94,315
Fidelity Asset Manager: Growth Fund 1,477,241 1,436,814
Fidelity Overseas Fund 110,057 41,636
MAS Value Portfolio 102,582 46,506
MAS Mid Cap Value Portfolio 725,634 458,830
Spartan US Equity Index Fund 10,753,530 8,583,441
Morgan Stanley Global Equity Portfolio 197,999 139,500
Fixed income insurance contracts:
Fidelity Interest Income Fund 47,969,002 46,277,835
Armstrong Common Stock 7,268,901 8,438,568
Participant loans 2,099,291 2,272,842
--------- ---------
Total investments 93,284,162 84,337,341
---------- ----------
Net assets available for benefits $93,284,162 $84,337,341
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statement of Changes in Net Assets Available for Benefits
Years Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Contributions $ 5,889,905 $ 5,912,522
Dividends 2,622,910 1,833,596
Interest 2,923,006 3,076,524
Realized gain on investments (note 3) 1,724,936 1,133,527
Unrealized appreciation (depreciation) of investments 3,165,545 (3,613,202)
--------- -----------
Total additions 16,326,302 8,342,967
---------- ---------
Reduction in net assets attributed to:
Benefits paid to participants 7,053,761 4,943,905
Transfers to other employee benefit plans 325,720 379,764
------- -------
Total reductions 7,379,481 5,323,669
--------- ---------
Net increase 8,946,821 3,019,298
Net assets available for benefits:
Beginning of year 84,337,341 81,318,043
---------- ----------
End of year $ 93,284,162 $ 84,337,341
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<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.
The financial statements have been prepared in accordance with
Statement of Position 99-3, "Accounting for and Reporting of Certain
Defined Contribution Plan Investments and Other Disclosure Matters"
(SOP 99-3). This standard eliminates the requirement to disclose
amounts relating to individual participant-directed investment
programs. As required by SOP 99-3, prior year amounts have been
reclassified to conform with the current year presentation.
(b) Investments in Master Trust
---------------------------
The money market portfolio is stated at cost, which approximates fair
value. The interest income fund is comprised of guaranteed interest
rate contracts within the Master Trust which are fully benefit
responsive; and therefore are reflected at contract value plus
credited interest in the financial statements. The value of the
participant loans represents the unpaid principal of employee loans.
The value of all other investments is based on quoted market price.
Securities transactions are recognized on the settlement date (the
date on which payment for a buy or sell order is made or received),
since adjustment to a trade-date basis would not be material. Dividend
income is recorded on the ex-dividend date.
Realized gains and losses on investments are determined by the average
cost method.
(c) Expenses
--------
All legal, accounting and administrative expenses associated with Plan
operations are paid by Armstrong World Industries, Inc. ("Armstrong")
(2) Plan Description
----------------
The Retirement Savings Plan for Hourly-Paid Employees of Armstrong World
Industries, Inc. ("the Plan") is a defined contribution plan established
for the purpose of providing eligible hourly-paid employees a means for
long-term savings intended for the accumulation of retirement income in
addition to that provided under other retirement plans maintained for the
benefit of employees.
Separate balances are maintained for contributions made by or on behalf of
a participant. The balances in each fund reflect the participants'
contributions together with dividends, interest, other income, and realized
and unrealized gains and losses allocated thereon.
Each participant may have up to five accounts that make up the
participant's total balance:
Sheltered account - Participants may contribute from 1% to 15% of
-----------------
before-tax compensation as deferred compensation, as permitted under
Section 401(k) of the Internal Revenue Code.
Standard account - Participants may contribute from 1% to 10% of
----------------
after-tax compensation.
7
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
Rollover account - Participants may invest any untaxed amounts rolled
----------------
over from another tax-qualified, employer-sponsored plan.
Tax-deductible account (MIRA) - This account holds any contributions
-----------------------------
made to the Plan before January 1, 1987. No new contributions can be
made to this account.
Old Match account - This account holds any amount contributed by
-----------------
Armstrong before matching contributions were discontinued. No new
contributions are being made to this account.
Participants have an immediate 100 percent vested interest with respect to
their contributions and are fully vested with regard to any previously made
matching Armstrong contributions.
(3) Investments in Master Trust
---------------------------
Assets are held in a Master Trust administered by Fidelity Management Trust
Co., as Trustee, and are segregated into fourteen investment options. The
Plan utilizes the Trustee and associated investment managers to direct
investment activity. The Plan participates in fourteen investment
alternatives.
The following is a brief description of the investment funds to which Plan
participants may elect to allocate their contributions. Participants should
refer to fund prospectuses for more complete information regarding the
investment funds.
1. Spartan US Equity Index Fund - This fund is principally a portfolio of
common stocks constructed and maintained with the objective of
providing investment results which approximate the overall performance
of the common stocks included in the Standard & Poor's Composite Index
of 500 stocks.
2. Fidelity Magellan Fund - This fund invests in common stocks of
companies having substantial growth prospects as determined by
independent investment managers.
3. Fidelity Low-Priced Stock Fund - This fund seeks capital appreciation
through investments primarily in U.S. and foreign low-priced stocks
that may be undervalued, overlooked or out of favor.
4. Fidelity Retirement Money Market Portfolio - This fund invests in
short-term (less than one year maturity) fixed income instruments such
as U.S. Treasury Bills, bank certificates of deposit, and high grade
commercial paper.
5. Fidelity Interest Income Fund - Contributions to this fund are
invested in the general accounts of insurance companies and are
credited at contracted interest rates. Invested principal and
accumulated interest amounts are guaranteed against loss by the
insurance company. Credited interest rates are reset periodically
during the plan year. At September 30, 1999, the interest rates ranged
between 4.73% and 7.88%. At September 30, 1998, the interest rates
ranged between 5.45% and 8.26%. The average yields for the plan year
ended September 30, 1999 and September 30, 1998 were 6.01% and 6.27%,
respectively. The fair value of the contracts approximate cost.
6. Morgan Stanley Global Equity Portfolio - This fund invests in a
diversified selection of stocks throughout the world, after a detailed
analysis by local country investment experts. It seeks to increase the
value of the investment over the long term through growth of capital.
8
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
7. Armstrong Common Stock - Amounts invested in this fund, along with
dividend earnings thereon, are invested in Armstrong common stock.
Common stock shares held by the fund at September 30, 1999 and 1998
were 161,754 and 157,730, respectively.
8. Fidelity Overseas Fund - This fund invests in securities of issuers
whose principal business activities are outside the U.S. Investments
may include common stock and securities convertible into common stock,
as well as debt instruments.
9. Fidelity OTC Portfolio - This fund invests in securities traded in the
over-the-counter securities market with the objective of maximizing
capital appreciation. Over-the-counter securities include common and
preferred stocks, securities convertible into common stock, warrants,
and debt instruments.
10. Fidelity Asset Manager Fund - This is an asset allocation fund which
invests in a portfolio of stocks, bonds, and short-term instruments.
The fund has a balanced investment strategy with a goal of high total
return with reduced risk over the long term.
11. Fidelity Asset Manager: Income Fund - This is an asset allocation fund
which invests in a diversified portfolio of stocks, bonds, and
short-term instruments. The fund has an investment strategy focusing
on bonds and short-term instruments to achieve a high level of current
income and capital preservation.
12. Fidelity Asset Manager: Growth Fund - This is an asset allocation fund
invested in a diversified mix of stocks, bonds, and short-term
instruments. The fund's investment strategy is an aggressive one
emphasizing stocks with the goal of maximum total return over the long
term.
13. MAS Mid Cap Value Portfolio - This fund invests in undervalued common
stocks of mid-sized companies with a strong potential for increase in
share price. It seeks to provide above-average long-term returns.
14. MAS Value Portfolio - This fund seeks to provide above average
long-term returns by investing mostly in common stocks of large
companies that are considered undervalued.
Participant loans represent the unpaid principal balances of loans made by Plan
participants in accordance with established loan provision guidelines.
9
<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, 1999 and 1998:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
------------------ ------------------
Investment Cost Fair Value Cost Fair Value
---------- ---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Spartan US Equity Index Fund $ 5,768,185 $ 10,753,530 $ 5,084,737 $ 8,583,441
Fidelity Magellan Fund 11,880,548 16,603,182 10,263,076 12,540,209
Fidelity Low-Priced Stock Fund 219,255 190,877 215,448 168,683
Fidelity Retirement Money Market Portfolio 684,549 684,549 582,926 582,926
Fidelity Interest Income Fund 47,969,002 47,969,002 46,277,835 46,277,835
Morgan Stanley Global Equity Portfolio 209,379 197,999 165,265 139,500
Armstrong Common Stock 7,467,688 7,268,901 7,112,972 8,438,568
Fidelity Overseas Fund 100,677 110,057 50,067 41,636
Fidelity OTC Portfolio 2,964,750 3,699,268 2,172,671 2,238,113
Fidelity Asset Manager Fund 1,135,288 1,169,693 924,767 1,017,123
Fidelity Asset Manager: Income Fund 233,007 232,356 91,920 94,315
Fidelity Asset Manager: Growth Fund 1,351,450 1,477,241 1,312,490 1,436,814
MAS Mid Cap Value Portfolio 702,138 725,634 541,851 458,830
MAS Value Portfolio 123,625 102,582 58,689 46,506
Participant Loans 2,099,291 2,099,291 2,272,842 2,272,842
--------- --------- --------- ---------
$ 82,908,832 $ 93,284,162 $ 77,127,556 $ 84,337,341
=========== =========== =========== ===========
</TABLE>
The amounts of realized gain (loss) on investments in securities of the Master
Trust for the years ended September 30, 1999 and 1998 are presented below:
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
1999 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
<S> <C> <C> <C>
Spartan US Equity Index Fund $ 1,904,011 $ 1,183,945 $ 720,066
Fidelity Magellan Fund 3,718,576 3,164,588 553,988
Fidelity Low-Priced Stock Fund 78,083 87,527 (9,444)
Morgan Stanley Global Equity Portfolio 32,447 34,270 (1,823)
Armstrong Common Stock 1,363,576 1,164,103 199,473
Fidelity Overseas Fund 25,445 24,901 544
Fidelity OTC Portfolio 3,669,345 3,443,994 225,351
Fidelity Asset Manager Fund 210,801 201,615 9,186
Fidelity Asset Manager: Income Fund 58,821 58,793 28
Fidelity Asset Manager: Growth Fund 420,833 388,874 31,959
MAS Mid Cap Value Portfolio 187,350 189,278 (1,928)
MAS Value Portfolio 11,787 14,251 (2,464)
------ ------ -----
$ 11,681,075 $ 9,956,139 $ 1,724,936
============ ============ ============
</TABLE>
10
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
<TABLE>
<CAPTION>
Aggregate Aggregate Realized
1998 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
<S> <C> <C> <C>
Spartan US Equity Index Fund $ 1,405,186 $ 1,115,270 $ 289,916
Fidelity Magellan Fund 3,886,313 3,533,654 352,659
Fidelity Low-Priced Stock Fund 10,083 10,548 (465)
Morgan Stanley Global Equity Portfolio 24,746 26,285 (1,539)
Armstrong Common Stock 958,311 604,109 354,202
Fidelity Overseas Fund 30,474 31,809 (1,335)
Fidelity OTC Portfolio 3,943,120 3,849,041 94,079
Fidelity Asset Manager Fund 234,620 207,781 26,839
Fidelity Asset Manager: Income Fund 51,173 46,190 4,983
Fidelity Asset Manager: Growth Fund 348,024 327,326 20,698
MAS Mid Cap Value Portfolio 66,556 71,910 (5,354)
MAS Value portfolio 7,977 9,133 (1,156)
----- ----- -----
$ 10,966,583 $ 9,833,056 $ 1,133,527
============ ============ ============
</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 after-tax contributions. Before reaching age
59 1/2, an active employee may withdraw his pretax contributions from the
Sheltered Account, provided he can demonstrate financial hardship. Such
employee shall be ineligible to make contributions for a 12-month period.
An active employee may elect to withdraw all or any portion of his account
balance in the Tax-Deductible (MIRA) and Rollover Accounts.
Under the rules of the Plan, the participant may borrow up to the lessor of
50% of his balance or $50,000. The money borrowed must come from the
Sheltered, Rollover, and Standard Accounts. The amount of the loan is
transferred to a Loan Reserve pledged as security for the loan and is
evidenced by a promissory note payable to the Plan. Interest rates are
determined periodically by the Retirement Committee in accordance with
prevailing interest rates. The loans are reflected in the Loan Portfolio
investment fund. Loan repayments are made by payroll deductions or in a
manner agreed to by the employee and the Plan Administrator.
(5) Obligation for Benefits
-----------------------
All the funds of the Plan are held by investing institutions appointed by
Armstrong under a trust agreement or investment contract. Benefits under
the Plan are payable only out of these funds. Armstrong has no legal
obligation to make any direct payment of benefits accrued under the Plan.
Except as may be provided in an investment contract, neither Armstrong nor
any investing institution guarantees the funds of the Plan against any loss
or depreciation or guarantees the payment of any benefit hereunder.
Although Armstrong has not expressed any intent to terminate the Plan, it
may do so at any time. In case of termination or partial termination, the
total amount in each employee's account will be distributed as the Plan
Administrator directs.
11
<PAGE>
RETIREMENT SAVINGS PLAN FOR HOURLY-PAID EMPLOYEES
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(6) Federal Income Taxes
--------------------
By a letter dated February 13, 1996, the Internal Revenue Service has
determined and informed Armstrong that the Plan qualifies under the
applicable provisions of the Internal Revenue Code and is therefore exempt
from federal income taxes.
(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. and the Bonus Retirement 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, 1999 and 1998:
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Cash equivalents $ 6,970,356 $ 6,970,356 $7,277,128 $7,277,128
Armstrong Common Stock 17,025,328 16,773,013 15,494,806 18,779,265
Registered investment companies 158,703,416 239,082,835 137,463,217 184,878,481
Fixed income insurance contracts 178,879,174 178,879,174 180,069,533 180,069,533
Participant loans 6,635,754 6,635,754 7,298,722 7,298,722
--------- --------- --------- ---------
Total investments in Master Trust $ 368,214,028 $448,341,132 $347,603,406 $398,303,129
============= ============ ============ ============
Plan's interest in Master Trust $ 82,908,831 $93,284,162 $77,127,556 $84,337,341
Plan's percentage in Master Trust 22.5% 20.8% 22.2% 21.2%
</TABLE>
During 1999 and 1998, the Master Trust's investments (including investments
bought, sold, and held during the year) appreciated (depreciated) in value as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net appreciation (depreciation) in Master Trust $39,306,600 $(6,524,510)
Allocated net appreciation (depreciation) in Master Trust $ 4,890,481 $(2,479,675)
</TABLE>
During 1999 and 1998, interest and dividends in the Master Trust were as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest and dividends in Master Trust $27,520,873 $23,337,613
Allocated interest and dividends from
Investment in Master Trust $ 5,545,916 4,910,120
</TABLE>
All of the above information was certified as complete and accurate by the
trustee at September 30, 1999 and 1998 and for the years then ended.
12
<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
April 10, 2000, relating to the statements of net assets available for benefits
of the Retirement Savings Plan for Hourly-Paid Employees of Armstrong World
Industries, Inc. as of September 30, 1999 and 1998 and the related statements of
changes in net assets available for benefits for each of the years in the
two-year period ended September 30, 1999, which report is included herein.
KPMG LLP
Philadelphia, PA
April 10, 2000
13
