<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 AND STOCK OWNERSHIP PLAN
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>
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
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 7-14
Schedule of Net Assets Held for Investment Purposes 15
Exhibits 16
- --------
Consent of Independent Auditors
</TABLE>
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 AND STOCK OWNERSHIP PLAN
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 and Stock Ownership Plan 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 and Stock Ownership Plan 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.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of September 30, 1999 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audit 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.
April 10, 2000
Philadelphia, Pennsylvania
4
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statement of Net Assets Available for Benefits
September 30, 1999 and 1998
<TABLE>
<CAPTION>
September 30,
-------------
1999 1998
---- ----
<S> <C> <C>
Assets:
Investments in master trust, at fair value (note 3):
Cash equivalents:
Fidelity Retirement Money Market Portfolio $6,260,193 $6,694,202
Shares of registered investment companies:
Fidelity Magellan Fund 94,279,257 70,514,675
Fidelity Low-Priced Stock Fund 1,104,042 974,094
Fidelity OTC Portfolio 16,888,380 10,301,519
Fidelity Asset Manager Fund 6,575,650 5,863,649
Fidelity Asset Manager: Income Fund 2,745,807 3,062,879
Fidelity Asset Manager: Growth Fund 9,872,050 9,250,957
Fidelity Overseas Fund 687,156 342,931
MAS Value Portfolio 552,455 494,143
MAS Mid Cap Value Portfolio 2,603,629 1,979,431
Spartan US Equity Index Fund 66,781,827 54,298,768
Morgan Stanley Global Equity Portfolio 1,389,484 1,030,265
Fixed income insurance contracts:
Fidelity Interest Income Fund 130,734,847 133,791,698
Armstrong Common Stock 9,389,002 10,340,697
Participant loans 4,536,463 5,025,880
--------- ---------
354,400,242 313,965,788
Investments in employee stock ownership funds, at fair value:
Cash equivalents 1,329,085 1,497,589
Allocated Armstrong Common Stock 91,378,814 97,351,544
Unallocated Armstrong Common Stock 114,301,110 155,048,402
----------- -----------
207,009,009 253,897,535
Employer contributions receivable 3,397,035 3,766,886
Interest receivable 5,558 6,718
----- -----
Total assets 564,811,844 571,636,927
----------- -----------
Liabilities:
Guaranteed ESOP notes (note 6) 167,435,150 190,538,204
Loans due to plan sponsor (note 7) 20,551,404 14,971,603
Accrued interest 4,302,958 4,851,306
--------- ---------
Total liabilities 192,289,512 210,361,113
----------- -----------
Net assets available for benefits $372,522,332 $361,275,814
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statement of Changes in Net Assets Available for Benefits
Years Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1999 1998
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Employee contributions $19,773,862 $21,795,403
Employer contributions (note 4) 15,005,805 11,562,987
---------- ----------
34,779,667 33,358,390
Dividends 22,884,904 18,713,201
Interest 8,241,647 8,792,964
Realized gain on investments (note 3) 8,347,716 6,122,768
--------- ---------
39,474,267 33,628,933
---------- ----------
Total additions 74,253,934 66,987,323
---------- ----------
Reduction in net assets attributed to:
Benefits paid to participants (33,877,602) (24,655,993)
Interest expense (15,531,463) (17,398,000)
Unrealized depreciation of investments (13,288,300) (71,131,768)
Transfers to other employee benefit plans (310,051) (531,442)
--------- ---------
Total reductions (63,007,416) (113,717,203)
------------ -------------
Net increase (decrease) 11,246,518 (46,729,880)
Net assets available for benefits:
Beginning of year 361,275,814 408,005,694
----------- -----------
End of year $372,522,332 $361,275,814
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
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.
Employee Stock Ownership Funds
------------------------------
Investments in the Employee Stock Ownership Funds represent shares of
Armstrong common stock valued at quoted market price.
(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 and Stock Ownership Plan of Armstrong World
Industries, Inc. ("the Plan") is a defined-contribution plan established
for the purpose of providing participants 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 Plan is comprised of two parts--Retirement Savings Plan and
Employee Stock Ownership Plan (ESOP). Each part has its own set of
participant accounts and investment funds.
7
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(a) Retirement Savings
------------------
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.
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.
(b) Stock Ownership
---------------
The Stock Ownership portion of the Plan has three accounts maintained
for each member for contributions and allocations of shares of
Armstrong common stock from the Unallocated Armstrong Common Stock
Fund.
Participants who elect to reduce their before-tax compensation in
amounts ranging from one percent to six percent have these
contributions credited to an Exchange Account. Contributions to the
Exchange Account are invested in Armstrong common stock. The Plan
matches a portion of the contributions made to the Exchange Account
with additional shares of Armstrong common stock. The matching amounts
are recorded in participants' Match Accounts. The match percentage,
either 50% or 75%, is determined by the closing stock price on the
last day of the allocation period. For the allocation period ended in
December 1997, a 75% fixed match was in place on employee Exchange
Account contributions. For the allocation periods ended in June 1998,
December 1998 and June 1999 there was a 50% fixed match on employee
Exchange Account contributions.
Eligible participants also receive shares of Armstrong common stock in
their Equity Account. 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 the ESOP.
Participants have an immediate 100 percent vested interest in the full
value of their Exchange Account. Interest in the Equity and Match
Accounts vest after five years of service.
8
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(3) Investments in Master Trust
---------------------------
(a) Retirement Savings Funds
------------------------
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. Crediting 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 years ended September 30, 1999 and
September 30, 1998, were 5.91% and 6.22%, 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.
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 208,932 and 193,284, 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
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
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.
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 $33,366,637 $66,781,827 $30,965,142 $54,298,768
Fidelity Magellan Fund 63,218,189 94,279,257 53,733,116 70,514,675
Fidelity Low-Priced Stock Fund 1,277,167 1,104,042 1,226,454 974,094
Fidelity Retirement Money Market Portfolio 6,260,193 6,260,193 6,694,202 6,694,202
Fidelity Interest Income Fund 130,734,847 130,734,847 133,791,698 133,791,698
Morgan Stanley Global Equity Portfolio 1,461,196 1,389,484 1,216,654 1,030,265
Armstrong Common Stock 9,432,051 9,389,002 8,381,834 10,340,697
Fidelity Overseas Fund 621,668 687,156 410,197 342,931
Fidelity OTC Portfolio 12,650,977 16,888,380 9,668,586 10,301,519
Fidelity Asset Manager Fund 6,419,335 6,575,650 5,385,573 5,863,649
Fidelity Asset Manager: Income Fund 2,694,986 2,745,807 2,936,801 3,062,879
Fidelity Asset Manager: Growth Fund 8,723,512 9,872,050 8,057,265 9,250,957
MAS Mid Cap Value Portfolio 2,528,421 2,603,629 2,349,006 1,979,431
MAS Value Portfolio 713,422 552,455 633,442 494,143
Participant loans 4,536,463 4,536,463 5,025,880 5,025,880
--------- --------- --------- ---------
$284,639,064 $354,400,242 $270,475,850 $313,965,788
============ ============ ============ ============
</TABLE>
10
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
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 $9,073,848 $5,088,537 $3,985,311
Fidelity Magellan Fund 10,302,447 7,012,404 3,290,043
Fidelity Low-Priced Stock Fund 216,502 251,067 (34,565)
Morgan Stanley Global Equity Portfolio 303,663 318,334 (14,671)
Armstrong Common Stock 1,929,159 1,549,559 379,600
Fidelity Overseas Fund 101,370 99,668 1,702
Fidelity OTC Portfolio 1,951,437 1,645,180 306,257
Fidelity Asset Manager Fund 1,355,569 1,304,187 51,382
Fidelity Asset Manager: Income Fund 775,716 776,098 (382)
Fidelity Asset Manager: Growth Fund 2,330,060 2,061,562 268,498
MAS Mid Cap Value Portfolio 720,145 761,593 (41,448)
MAS Value Portfolio 257,353 295,579 (38,226)
------- ------- --------
$29,317,269 $21,163,768 $8,153,501
=========== =========== ==========
<CAPTION>
Aggregate Aggregate Realized
1998 Proceeds Cost Gain (Loss)
---- -------- ---- -----------
<S> <C> <C> <C>
Spartan US Equity Index Fund $6,375,852 $4,027,792 $2,348,060
Fidelity Magellan Fund 8,249,869 6,150,026 2,099,843
Fidelity Low-Priced Stock Fund 79,015 83,741 (4,726)
Morgan Stanley Global Equity Portfolio 116,139 123,406 (7,267)
Armstrong Common Stock 2,084,876 1,188,574 896,302
Fidelity Overseas Fund 40,318 40,748 (430)
Fidelity OTC Portfolio 3,285,757 2,856,529 429,228
Fidelity Asset Manager Fund 1,459,750 1,298,412 161,338
Fidelity Asset Manager: Income Fund 726,059 705,660 20,399
Fidelity Asset Manager: Growth Fund 1,965,174 1,710,580 254,594
MAS Mid Cap Value Portfolio 192,264 201,573 (9,309)
MAS Value Portfolio 55,756 58,416 (2,660)
------ ------ -------
$24,630,829 $18,445,457 $6,185,372
=========== =========== ==========
</TABLE>
(b) Stock Ownership Funds
---------------------
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 Armstrong common stock as is necessary to
administer the Plan in accordance with its terms.
At September 30, 1999, the investment in Armstrong common stock represents
4,576,971 shares, valued at a quoted market price of $44.938. There are
2,033,442 shares held in the Allocated Armstrong Stock Fund and 2,543,529
shares held in the Unallocated Armstrong Stock Fund. During 1999, aggregate
proceeds were $8,337,648, aggregate costs were $8,143,433, and the realized
gain was $194,215. Losses of $62,604 were realized during 1998.
11
<PAGE>
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(4) Armstrong Contributions
-----------------------
Armstrong is obligated to make semi-annual contributions in cash or
Armstrong stock to the Stock Ownership Funds, on June 15 and December 15 of
each year, which when aggregated with all exchange contributions, dividends
received by the Trustee on the common 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.
(Note 6) The contribution from Armstrong on December 15, 1999 included
199,053 shares of Armstrong common stock contributed directly to allocated
accounts.
(5) Employee ESOP Contributions and Dividends
-----------------------------------------
Employee ESOP contributions made during the year and dividends paid on
Allocated Armstrong Stock are initially deposited into the Fidelity
Retirement Money Market Portfolio until the next semi-annual allocation
date, at which time they are contributed to the ESOP. During the time in
the Fidelity Retirement Money Market Portfolio, these funds earn interest.
At September 30, 1999 and 1998, the amounts in the Fidelity Retirement
Money Market Portfolio to be contributed to the ESOP were $3,609,424 and
$3,530,318, respectively.
(6) Guaranteed ESOP Notes
---------------------
The shares of Armstrong common stock held in the Plan's Stock Ownership
Accounts were purchased from Armstrong from the proceeds of the sale of
Guaranteed ESOP notes in a total principal amount of $270,000,000 in 1989.
Armstrong 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
and 8.92% on the Series B Guaranteed Serial ESOP notes due 2001-2004. At
September 30, 1999, the Guaranteed ESOP notes for Series A and Series B
were $47,392,150 and $120,043,000, respectively. At September 30, 1998, the
Guaranteed ESOP notes for Series A and Series B were $70,495,204 and
$120,043,000, respectively. The scheduled amortization of the notes for the
next five plan years is as follows: 2000 - $25,277,000; 2001 - $22,115,150;
2002 - $34,442,000; 2003 - $39,816,000; 2004 - $45,785,000.
(7) Loans Due Plan Sponsor
----------------------
A refinancing loan from Armstrong is used to ensure that the number of
shares allocated during a semi-annual allocation period is equal to the sum
of participants' exchange, equity and match shares. At September 30, 1999,
there were nine loans outstanding totaling $20,551,404.
12
<PAGE>
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(8) Benefits
--------
(a) Retirement Savings Accounts
---------------------------
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.
(b) Stock Ownership Accounts
------------------------
Upon death or any other separation from service from Armstrong,
participants are entitled to receive a distribution of their vested
account balances. Distributions are in the form of a lump sum cash
payment or, upon request, Armstrong common stock.
(9) 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 thereunder.
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.
(10) Eligibility
-----------
All regular full-time employees of Armstrong or of any participating
affiliated Armstrong 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.
Eligible participants, who leave Armstrong and are later reemployed, can
resume participation in the Plan on the date of rehire.
(11) Diversification
---------------
Effective January 1, 1997, Plan participants who meet certain age and
service requirements were granted the ability to diversify specified
portions of their Stock Ownership Account balances in any combination of
the other investment funds available for Retirement Savings Account
balances, except for the Fidelity Retirement Money Market Portfolio.
13
<PAGE>
RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)
(12) Federal Income Taxes
--------------------
By a letter dated April 21, 1998, the Internal Revenue Service has
determined and informed the Armstrong that the Plan qualifies under the
applicable provisions of the Internal Revenue Code and is therefore exempt
from federal income taxes.
(13) 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 $284,639,064 $354,400,242 $270,475,850 $313,965,788
Plan's percentage in Master Trust 77.3% 79.0% 77.8% 78.8%
</TABLE>
During 1999 and 1998, the Master Trust's investments (including investments
bought, sold, and held during the year) appreciated in value as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net appreciation in Master Trust $39,306,600 $(6,524,510)
Allocated net appreciation in Master Trust $34,424,744 $(4,044,835)
</TABLE>
During 1999 and 1998, interest and dividends 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 $21,954,068 $18,427,493
</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.
14
<PAGE>
THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Line 27A - Schedule of Assets Held for Investment Purposes
September 30, 1999
Description of Investment Cost Fair Value
- --------------------------------------------------------------------------------
Unallocated Armstrong Common Stock $121,453,510 $114,301,110
Allocated Armstrong Common Stock $95,539,681 $91,378,814
Investments in Master Trust $284,639,064 $354,400,242
15
<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
April 10, 2000, relating to the statements of net assets available for benefits
of the Retirement Savings and Stock Ownership Plan 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
16
