Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
ARMSTRONG HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Pennsylvania | 000-50408 | 23-3033414 | ||
(State or other jurisdiction of incorporation or organization) | (Commission file number) | (I.R.S. Employer Identification No.) |
| P. O. Box 3001, Lancaster, Pennsylvania | 17604 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (717) 397-0611
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class |
| Common Stock ($1 par value) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
1
Table of Contents
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨ No x
The aggregate market value of the Common Stock of Armstrong Holdings, Inc. held by non-affiliates based on the closing price ($.57 per share) on the over-the-counter (OTC) Bulletin Board under trading symbol ACKHQ (“ACKH” after October 2, 2006) on June 30, 2006, was approximately $19.4 million. As of March 16, 2007, the number of shares outstanding of registrant’s Common Stock was 40,551,974.
Explanatory Paragraph
Armstrong Holdings, Inc., (“AHI”) is filing this Amendment to its Annual Report on Form 10-K for the year ended December 31, 2006, which was originally filed on April 2, 2007. The Amendment incorporates the April 2, 2007 decision of the U.S. Bankruptcy Court that presided over Armstrong World Industries, Inc,’s (AWI) Chapter 11 case regarding the settlement with AWI into the financial statements and related disclosures. The settlement covered intercompany claims and tax rights. Therefore, the Amendment reflects events that occurred after the initial filing.
As required under Rule 12b-15 promulgated under the Securities and Exchange Act of 1934, the Company’s principal executive officer and principal financial officer are providing new Rule 13a-14(a) certifications in connection with this Form 10-K/A (but otherwise identical to their prior certifications) and are also furnishing, but not filing, new written statements pursuant to section 906 of the Sarbanes-Oxley Act of 2002. Also, the Company is filing an updated Consent of Independent Registered Public Accounting Firm.
2
Table of Contents
3
Table of Contents
Uncertainties Affecting Forward-Looking Statements
Our disclosures here and in other public documents and comments sometimes contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Those statements provide our future expectations or forecasts, and can be identified by our use of words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “outlook,” etc. in discussions of future operating or financial performance or the outcome of contingencies such as liabilities or legal proceedings.
Any of our forward-looking statements may turn out to be wrong. Actual future results may differ materially. Forward-looking statements involve risks and uncertainties (such as those discussed in the Risk Factors section below) because they relate to events and depend on circumstances that may or may not occur in the future. We undertake no obligation to update any forward-looking statement.
You should take into account risks and uncertainties that affect our business, operations and financial condition in evaluating any investment decision involving AHI. It is not possible to predict all factors that could cause actual results to differ materially from expected and historical results. The discussion in the “Risk Factors” section below at Item 1A is a summary of what we currently believe to be our most significant risk factors. Related disclosures in subsequent 10-K, 10-Q and 8-K reports should also be consulted.
4
Table of Contents
PART I
| ITEM 1. | BUSINESS |
Armstrong Holdings, Inc. (“AHI”) is a Pennsylvania corporation. AHI is the parent company of Armstrong Worldwide, Inc. (“AWWD”) and AHI Funding Company, LLC. The Company has conducted no business and has had no operations and no employees since the Company’s stock ownership in Armstrong World Industries, Inc. (“AWI”) was cancelled on October 2, 2006.
When we refer to the “Company,” “we”, “our” and “us” in this report, we are referring collectively to AHI and its subsidiary AWWD.
The Company previously was the parent holding company of AWI. On December 6, 2000, AWI filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code to achieve a resolution of its asbestos-related liability. On October 2, 2006, AWI emerged from Chapter 11 reorganization under its Fourth Amended Plan of Reorganization (the “Chapter 11 Plan”), which provided for the cancellation of the AWI stock owned by the Company. (The Chapter 11 Plan and related documents are available atwww.armstrongplan.com.)
The Company and its shareholders were not entitled to any distribution under the AWI Chapter 11 Plan in respect of the Company’s former ownership of AWI. However, the Company filed a claim against AWI with respect to intercompany accounts owed to it. In addition, upon the cancellation of the Company’s ownership interest in AWI, the Company realized a substantial tax loss. This loss is in addition to the tax loss which AWI incurred in connection with the consummation of its Chapter 11 Plan.
Due to their affiliated status through October 1, 2006, the Company and AWI are required by the IRS to file a consolidated 2006 federal tax return by September 15th of this year. As a result of the above-mentioned tax losses, the Armstrong consolidated tax group is entitled to recover estimated tax payments made by AWI to the IRS in 2006, and in addition has the ability to elect to carry back the group’s tax losses either two or ten years in order to recover taxes paid in those years.
The election made in the 2006 tax return will benefit the Company and AWI differently, and the Company’s and AWI’s respective preferences for utilization of the group’s tax losses would not necessarily be the same. Moreover, there is no IRS regulation nor any prior written agreement between the companies that prescribed how to allocate tax refunds between them.
In order to resolve the Company’s claim against AWI, determine how to handle the tax elections and establish the Company’s and AWI’s respective rights to prospective tax refunds, the Board of Directors of the Company appointed a special committee of the Board comprised of independent outside directors Jerre L. Stead and M. Edward Sellers. Neither of these directors was at that time or is now a current or prospective director or officer of AWI. The special committee engaged the law firm of McDermott, Will & Emery to advise it in connection with these matters.
Following negotiations of the special committee and their legal counsel with AWI, on February 26, 2007 the Company announced that a settlement (the “Settlement”) had been reached with AWI.
The Settlement called for AWI to pay the Company $20 million in cash related to the tax matters, and gave the Company an allowed claim under AWI’s Chapter 11 Plan of $8.5 million related to the intercompany claims. The Company recovered on this claim on the same basis as other unsecured creditors of AWI. The initial distribution in satisfaction of the $8.5 million claim consisted of approximately $2 million in cash plus 98,697 shares of reorganized AWI. The Settlement also gave AWI the right to make all relevant tax elections and file all required tax returns on behalf of the Armstrong tax filing group for all relevant tax periods through 2006, and to receive and retain all related tax refunds.
5
Table of Contents
The Settlement was approved by the U.S. Bankruptcy Court in Wilmington, Delaware that presided over AWI’s Chapter 11 case on April 2, 2007. Under the terms of the Settlement, the Company received the cash and AWI common stock proceeds in April 2007. The Company sold the AWI common stock in the open market during April 2007.
Under the Settlement, AWI will administer both companies’ tax returns for 2006. Depending on elections that AWI would make, the Company’s worthless stock tax loss, and related loss available for carry forward, could be significantly reduced.
If the Company does have a tax loss to carry forward after the 2006 tax return is filed, it is highly uncertain whether the Company would be able to utilize this loss in any practical fashion that would serve the interests of shareholders. Internal Revenue Service rules concerning use of such losses are highly complicated and restrictive, and their effective use may be severely restricted if an ownership change of the Company occurs, as defined in IRS regulations. The Company is studying these issues.
AWI’s Chapter 11 Plan contemplates that the Company would dissolve following AWI’s emergence from Chapter 11 reorganization. The Armstrong Holdings Board of Directors is evaluating what future action is in the best interests of the Company, including the matter of dissolution and an evaluation of its assets, obligations and tax position.
If a plan of dissolution is authorized by the Board of Directors, the proposed plan would be submitted to shareholders for approval. If a plan of dissolution is approved by shareholders, a distribution to shareholders of the Company’s net assets would be effected as soon as practicable thereafter. The dissolution process would involve a number of steps, such as noticing any potential claimants, resolving any viable claims and obtaining tax clearance from the Commonwealth of Pennsylvania.
As discussed above, AWI’s Chapter 11 Plan provided that the former capital stock of AWI, all of which was held by the Company was cancelled upon that Chapter 11 Plan becoming effective.
Other provisions of the AWI Chapter 11 Plan affecting the Company include the following:
| • | AHI, AWWD and their directors and officers have protection from liability for asbestos liabilities of AWI as specified in that Plan pursuant to Section 3.2(g). |
| • | AWI assumed obligations to indemnify certain directors and officers of AHI who served during the course of AWI’s Chapter 11 case for their service under Section 8.6. |
| • | All existing equity compensation plans of AHI (which had previously been used to compensate employees of AWI and its subsidiaries) were terminated pursuant to Section 8.7. |
| • | AHI, AWWD and their officers, directors, employees and agents received the benefit of certain exculpation provisions of Section 11.6. |
| • | AWI will bear costs and expenses of AHI for a reasonable time through an eventual dissolution of AHI contemplated in the Plan as provided in Section 7.24. |
This description of the provisions of the AWI Chapter 11 Plan is qualified in its entirety by reference to the terms thereof.
6
Table of Contents
| ITEM 1A. | RISK FACTORS |
As noted in the introductory section above titled, “Uncertainties Affecting Forward-Looking Statements”, the Company’s financial condition is subject to substantial risks. You should take them into account in evaluating any investment decision. It is not possible to predict or identify all factors that could cause actual results to differ materially from expected and historical results. The following discussion is a summary of what we believe to be our most significant risk factor. These and other factors could cause our actual results to differ materially from those in forward-looking statements made in this report.
No matter how accurate our foresight, how well we evaluate risks, and how effective we are at mitigating them, it is still possible that one of these problems or some other issue could have serious consequences for the Company. See related discussions in this document and our other SEC filings for more details and subsequent disclosures.
A final federal income tax return for the Company and AWI on a consolidated basis is expected to be filed for 2006 by September 15, 2007. Both the Company and AWI will report substantial tax losses in this tax return. The Company will claim a loss due to the cancellation of its ownership of AWI on October 2, 2006. The amount of the Company’s loss used in the upcoming tax return as an offset to past income in order to generate refunds depends on elections made with the return. Further, the amount of the Company’s loss realized from the cancellation of its ownership of AWI depends on the acceptance by the Internal Revenue Service of the calculated amount of the Company’s worthless stock deduction.
Some portion of the Company’s worthless stock loss may be used as a carry back against taxable income in prior years, with the remainder, if any, to be applied to future tax years. The Company’s ability to use the balance of any tax loss carry forward is subject to limitations that may be applicable for federal income tax purposes in the event of certain changes in ownership of the Company, and to the Company’s ability to generate future taxable income. There is no assurance such a limiting change in ownership has not and will not occur. Further, since October 2, 2006, the Company has conducted no business and has had no operations or employees, so there is no assurance that there will be significant future taxable income.
| ITEM 2. | PROPERTIES |
None.
7
Table of Contents
| ITEM 3. | LEGAL PROCEEDINGS |
There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject.
On August 23, 2006, the Company announced it had claims in AWI’s Chapter 11 case (the AHI Claim). The AHI Claim related to intercompany charges and credits between the companies and tax losses and refunds. On February 26, 2007, AHI and AWI announced they had reached a settlement on all intercompany claims and tax matters and on April 2, 2007, the settlement was approved by the U.S. Bankruptcy Court. See Item 1 for further details on the settlement. A copy of the Stipulation and Agreement is incorporated by reference from the AHI Current Report on Form 8-K dated February 26, 2007, wherein it appeared as Exhibit No. 99.2
| ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
No matters were submitted to a vote of stockholders during the fourth quarter of 2006.
8
Table of Contents
PART II
| ITEM 5. | MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
As a result of filing AWI’s Plan of Reorganization on November 4, 2002, the New York Stock Exchange stopped trading on the Exchange of the common stock of AHI (traded under the ticker symbol “ACK”). From November 14, 2002 until October 2006, Armstrong Holding’s common stock traded on the over-the-counter (OTC) Bulletin Board under the ticker symbol ACKHQ. In October 2006, the symbol changed to ACKH. As of March 19, 2007, there were approximately 6,480 holders of record of Armstrong Holding’s Common Stock.
| First | Second | Third | Fourth | Total Year | |||||||||||
2006 | |||||||||||||||
Price range of common stock—high | $ | 3.05 | $ | 0.90 | $ | 0.60 | $ | 0.59 | $ | 3.05 | |||||
Price range of common stock—low | $ | 0.57 | $ | 0.54 | $ | 0.12 | $ | 0.06 | $ | 0.06 | |||||
2005 | |||||||||||||||
Price range of common stock—high | $ | 2.82 | $ | 4.40 | $ | 3.10 | $ | 2.34 | $ | 4.40 | |||||
Price range of common stock—low | $ | 1.65 | $ | 1.50 | $ | 1.99 | $ | 1.49 | $ | 1.49 | |||||
There were no dividends declared or paid during 2006 or 2005.
No Company securities were repurchased by the Company during 2006.
9
Table of Contents
| ITEM 6. | SELECTED FINANCIAL DATA |
(Dollars in millions except for per-share data) | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||
Income statement data | |||||||||||||||||||
Earnings (loss) from discontinued operations | $ | 1,226.4 | $ | 112.1 | $ | (80.8 | ) | $ | (39.3 | ) | $ | (2,142.8 | ) | ||||||
Net earnings (loss) | $ | 1,226.4 | $ | 112.1 | $ | (80.8 | ) | $ | (39.3 | ) | $ | (2,142.8 | ) | ||||||
Per common share – basic (a) | $ | 30.21 | $ | 2.77 | $ | (2.00 | ) | $ | (0.97 | ) | $ | (52.91 | ) | ||||||
Per common share – diluted (a) | $ | 30.21 | $ | 2.75 | $ | (2.00 | ) | $ | (0.97 | ) | $ | (52.91 | ) | ||||||
Dividends declared per share of common stock | — | — | — | — | — | ||||||||||||||
Balance sheet data (end of period) | |||||||||||||||||||
Total assets | $ | 26.4 | $ | 4,606.0 | $ | 4,609.4 | $ | 4,647.8 | $ | 4,504.8 | |||||||||
Shareholders’ equity (deficit) | 26.3 | (1,305.3 | ) | (1,411.7 | ) | (1,330.2 | ) | (1,346.7 | ) | ||||||||||
Notes:
| (a) | See definition of basic and diluted earnings per share in Note 2 of the Consolidated Financial Statements. |
All activity of AWI and its subsidiaries has been reclassified as discontinued operations due to the cancellation of AHI’s ownership in AWI effective October 2, 2006. Since AHI has no operations, there are no amounts reported on a continuing operations basis.
10
Table of Contents
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
OVERVIEW
Armstrong Holdings, Inc. (“AHI”) is a Pennsylvania corporation. AHI is the parent company of Armstrong Worldwide, Inc. (“AWWD”). The Company has conducted no business and has had no operations and no employees since the Company’s stock ownership in Armstrong World Industries, Inc. (“AWI”) was cancelled on October 2, 2006.
When we refer to the “Company,” “we”, “our” and “us” in this report, we are referring collectively to AHI and its subsidiary AWWD.
The Company previously was the parent holding company of AWI. On December 6, 2000, AWI filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code to achieve a resolution of its asbestos-related liability. On October 2, 2006, AWI emerged from Chapter 11 reorganization under its Fourth Amended Plan of Reorganization (the “Chapter 11 Plan”), which provided for the cancellation of the AWI stock owned by the Company. (The Chapter 11 Plan and related documents are available atwww.armstrongplan.com.)
The Company and its shareholders were not entitled to any distribution under the AWI Chapter 11 Plan in respect of the Company’s former ownership of AWI. However, the Company filed a claim against AWI with respect to intercompany accounts owed to it. In addition, upon the cancellation of the Company’s ownership interest in AWI, the Company realized a substantial tax loss. This loss is in addition to the tax loss which AWI incurred in connection with the consummation of its Chapter 11 Plan.
Due to their affiliated status through October 1, 2006, the Company and AWI are required by the IRS to file a consolidated 2006 federal tax return by September 15th of this year. As a result of the above-mentioned tax losses, the Armstrong consolidated tax group is entitled to recover estimated tax payments made by AWI to the IRS in 2006, and in addition has the ability to elect to carry back the group’s tax losses either two or ten years in order to recover taxes paid in those years.
The election made in the 2006 tax return will benefit the Company and AWI differently, and the Company’s and AWI’s respective preferences for utilization of the group’s tax losses would not necessarily be the same. Moreover, there is no IRS regulation nor any prior written agreement between the companies that prescribed how to allocate tax refunds between them.
In order to resolve the Company’s claim against AWI, determine how to handle the tax elections and establish the Company’s and AWI’s respective rights to prospective tax refunds, the Board of Directors of the Company appointed a special committee of the Board comprised of independent outside directors Jerre L. Stead and M. Edward Sellers. Neither of these directors was at that time or is now a current or prospective director or officer of AWI. The special committee engaged the law firm of McDermott, Will & Emery to advise it in connection with these matters.
Following negotiations of the special committee and their legal counsel with AWI, on February 26, 2007 the Company announced that a settlement (the “Settlement”) had been reached with AWI.
The Settlement called for AWI to pay the Company $20 million in cash related to the tax matters, and gave the Company an allowed claim under AWI’s Chapter 11 Plan of $8.5 million related to the intercompany claims. The Company recovered on this claim on the same basis as other unsecured creditors of AWI. The initial distribution in satisfaction of the $8.5 million claim consisted of approximately $2 million in cash plus 98,697 shares of reorganized AWI. The Settlement also gave AWI the right to make all relevant tax elections and file all required tax returns on behalf of the Armstrong tax filing group for all relevant tax periods through 2006, and to receive and retain all related tax refunds.
The Settlement was approved by the U.S. Bankruptcy Court in Wilmington, Delaware that presided over AWI’s Chapter 11 case on April 2, 2007. Under the terms of the Settlement, the Company received the
11
Table of Contents
cash and AWI common stock proceeds in April 2007. The Company sold the AWI common stock in the open market during April 2007.
Under the Settlement, AWI will administer both companies’ tax returns for 2006. Depending on elections that AWI would make, the Company’s worthless stock tax loss, and related loss available for carry forward, could be significantly reduced.
If the Company does have a tax loss to carry forward after the 2006 tax return is filed, it is highly uncertain whether the Company would be able to utilize this loss in any practical fashion that would serve the interests of shareholders. Internal Revenue Service rules concerning use of such losses are highly complicated and restrictive, and their effective use may be severely restricted if an ownership change of the Company occurs, as defined in IRS regulations. The Company is studying these issues.
AWI’s Chapter 11 Plan contemplates that the Company would dissolve following AWI’s emergence from Chapter 11 reorganization. The Armstrong Holdings Board of Directors is evaluating what future action is in the best interests of the Company, including the matter of dissolution and an evaluation of its assets, obligations and tax position.
If a plan of dissolution is authorized by the Board of Directors, the proposed plan would be submitted to shareholders for approval. If a plan of dissolution is approved by shareholders, a distribution to shareholders of the Company’s net assets would be effected as soon as practicable thereafter. The dissolution process would involve a number of steps, such as noticing any potential claimants, resolving any viable claims and obtaining tax clearance from the Commonwealth of Pennsylvania.
As discussed above, AWI’s Chapter 11 Plan provided that the former capital stock of AWI, all of which was held by the Company was cancelled upon that Chapter 11 Plan becoming effective.
Other provisions of the AWI Chapter 11 Plan affecting the Company include the following:
| • | AHI, AWWD and their directors and officers have protection from liability for asbestos liabilities of AWI as specified in that Plan pursuant to Section 3.2(g). |
| • | AWI assumed obligations to indemnify certain directors and officers of AHI who served during the course of AWI’s Chapter 11 case for their service under Section 8.6. |
| • | All existing equity compensation plans of AHI (which had previously been used to compensate employees of AWI and its subsidiaries) were terminated pursuant to Section 8.7. |
| • | AHI, AWWD and their officers, directors, employees and agents received the benefit of certain exculpation provisions of Section 11.6. |
| • | AWI will bear costs and expenses of AHI for a reasonable time through an eventual dissolution of AHI contemplated in the Plan as provided in Section 7.24. |
This description of the provisions of the AWI Chapter 11 Plan is qualified in its entirety by reference to the terms thereof.
RESULTS OF OPERATIONS
All activity of AWI and its subsidiaries has been reclassified as discontinued operations due to the cancellation of AHI’s ownership in AWI effective October 2, 2006. Since AHI has no operations, there are no amounts reported on a continuing operations basis. See “Overview” for further discussion.
12
Table of Contents
FINANCIAL CONDITION AND LIQUIDITY
As shown on the Consolidated Balance Sheets, AHI had no cash as of December 31, 2006. However, AHI received approximately $22.1 million of cash during April 2007 as a result of the Settlement between AHI and AWI. The Company also received 98,697 share of AWI common stock as part of the Settlement, which it sold in the open market during April 2007, resulting in additional cash proceeds of approximately $5 million.
AWI’s Chapter 11 Plan contemplates that the Company would dissolve following AWI’s emergence from Chapter 11 reorganization. The AHI Board of Directors is evaluating what future action is in the best interests of the Company, including the matter of dissolution and an evaluation of its assets, obligations and tax position.
If a plan of dissolution is authorized by the Board of Directors, the proposed plan would be submitted to shareholders for approval. If a plan of dissolution is approved by shareholders, a distribution to shareholders of the Company’s net assets would be effected as soon as practicable thereafter.
Since AHI does not conduct any business or operations, AHI does not expect to incur any operating expenses, cash outlays or liquidity needs in the foreseeable future. Under the terms of AWI’s POR, AWI will bear costs and expenses of AHI for a reasonable time through an eventual dissolution of AHI.
OFF-BALANCE SHEET ARRANGEMENTS
No disclosures are required pursuant to Item 303(a)(4) of Regulation S-K.
RELATED PARTIES
AHI’s stock ownership in AWI was cancelled on October 2, 2006. However, AHI filed a claim against AWI with respect to intercompany accounts owed to it. In addition, upon the cancellation of AHI’s ownership interest in AWI, AHI realized a substantial tax loss. On February 26, 2007, AHI announced that a settlement had been reached with AWI, which was approved by the bankruptcy court on April 2, 2007. See Item 1 for further discussion.
| ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Market Risk
Not applicable.
13
Table of Contents
| ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
SUPPLEMENTARY DATA
Quarterly Financial Information for the Years Ended December 31, 2006 and 2005 (Unaudited)
The following consolidated financial statements are filed as part of this Annual Report on Form 10-K/A:
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings for the Years Ended December 31, 2006, 2005 and 2004
Consolidated Balance Sheets as of December 31, 2006 and 2005
Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended December 31, 2006, 2005 and 2004
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements
14
Table of Contents
QUARTERLY FINANCIAL INFORMATION
ARMSTRONG HOLDINGS, INC. (unaudited)
(millions except for per share data) | First | Second | Third | Fourth | Total Year | |||||||||||
2006 | ||||||||||||||||
Earnings from discontinued operations | $ | 28.0 | $ | 40.2 | $ | 39.2 | $ | 1,119.0 | $ | 1,226.4 | ||||||
Net earnings | $ | 28.0 | $ | 40.2 | $ | 39.2 | $ | 1,119.0 | $ | 1,226.4 | ||||||
Per share of common stock: | ||||||||||||||||
Basic | $ | 0.69 | $ | 0.99 | $ | 0.97 | $ | 27.56 | $ | 30.21 | ||||||
Diluted | $ | 0.69 | $ | 0.99 | $ | 0.96 | $ | 27.56 | $ | 30.21 | ||||||
Price range of common stock—high | $ | 3.05 | $ | 0.90 | $ | 0.60 | $ | 0.59 | $ | 3.05 | ||||||
Price range of common stock—low | $ | 0.57 | $ | 0.54 | $ | 0.12 | $ | 0.06 | $ | 0.06 | ||||||
| First | Second | Third | Fourth | Total Year | ||||||||||||
2005 | ||||||||||||||||
Earnings (loss) from discontinued operations | $ | (3.0 | ) | $ | 17.7 | $ | 46.1 | $ | 51.3 | $ | 112.1 | |||||
Net earnings (loss) | $ | (3.0 | ) | $ | 17.7 | $ | 46.1 | $ | 51.3 | $ | 112.1 | |||||
Per share of common stock: | ||||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.44 | $ | 1.14 | $ | 1.26 | $ | 2.77 | |||||
Diluted | $ | (0.07 | ) | $ | 0.43 | $ | 1.13 | $ | 1.26 | $ | 2.75 | |||||
Price range of common stock—high | $ | 2.82 | $ | 4.40 | $ | 3.10 | $ | 2.34 | $ | 4.40 | ||||||
Price range of common stock—low | $ | 1.65 | $ | 1.50 | $ | 1.99 | $ | 1.49 | $ | 1.49 | ||||||
In the first quarter of 2005, the diluted loss per share is calculated using basic common shares outstanding since using diluted common shares would be anti-dilutive. The difference between the average number of basic and diluted common shares outstanding is due to contingently issuable shares. Earnings per share components may not add due to rounding.
There were no dividends paid in 2006 or 2005.
Note: All activity of AWI and its subsidiaries has been reclassified as discontinued operations due to the cancellation of AHI’s ownership in AWI effective October 2, 2006. Since AHI has no operations, there are no amounts reported on a continuing operations basis.
15
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Armstrong Holdings, Inc.:
We have audited the accompanying consolidated financial statements of Armstrong Holdings, Inc. and subsidiaries (“the Company”) as listed in the accompanying index on page 14. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Armstrong Holdings, Inc. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has conducted no business and has had no operations since the Company’s stock ownership in Armstrong World Industries, Inc. was cancelled on October 2, 2006 and the Board of Directors is evaluating what future action is in the best interests of the Company, including the matter of dissolution and an evaluation of its assets, obligations and tax position. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.
| /s/ KPMG LLP |
| Philadelphia, Pennsylvania |
| April 16, 2007 |
16
Table of Contents
Armstrong Holdings, Inc., Subsidiaries
Consolidated Statements of Earnings
(amounts in millions, except per share data)
| Years Ended December 31, | ||||||||||
| 2006 | 2005 | 2004 | ||||||||
Earnings/(loss) from discontinued operations, net of tax of $537.0, $2.2 and $24.4, respectively | $ | 1,226.4 | $ | 112.1 | $ | (80.8 | ) | |||
Net earnings (loss) | $ | 1,226.4 | $ | 112.1 | $ | (80.8 | ) | |||
Earnings/(loss) per share of common stock, discontinued operations: | ||||||||||
Basic | $ | 30.21 | $ | 2.77 | $ | (2.00 | ) | |||
Diluted | $ | 30.21 | $ | 2.75 | $ | (2.00 | ) | |||
Net earnings/(loss) per share of common stock: | ||||||||||
Basic | $ | 30.21 | $ | 2.77 | $ | (2.00 | ) | |||
Diluted | $ | 30.21 | $ | 2.75 | $ | (2.00 | ) | |||
Average number of common shares outstanding: | ||||||||||
Basic | 40.6 | 40.5 | 40.5 | |||||||
Diluted | 40.6 | 40.7 | 40.7 | |||||||
See accompanying notes to consolidated financial statements beginning on page 21.
17
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Consolidated Balance Sheets
(amounts in millions, except share data)
| December 31, 2006 | December 31, 2005 | |||||||
| Assets | ||||||||
Current assets: | ||||||||
Receivables | $ | 26.4 | — | |||||
Assets of discontinued business | — | $ | 4,606.0 | |||||
Total current assets | $ | 26.4 | $ | 4,606.0 | ||||
Noncurrent deferred tax assets (See Note 6) | — | — | ||||||
Total assets | $ | 26.4 | $ | 4,606.0 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accrued expenses | $ | 0.1 | — | |||||
Liabilities of discontinued business | — | $ | 5,911.3 | |||||
Total current liabilities | $ | 0.1 | $ | 5,911.3 | ||||
Shareholders’ equity (deficit): | ||||||||
Common stock, par value $1 per share Authorized 200 million shares; issued 51,878,910 shares | $ | 51.9 | $ | 51.9 | ||||
Capital in excess of par value | 167.8 | 167.7 | ||||||
Reduction for ESOP loan guarantee | — | (142.2 | ) | |||||
Retained earnings (accumulated deficit) | 319.9 | (906.5 | ) | |||||
Accumulated other comprehensive income | — | 37.1 | ||||||
Less common stock in treasury, at cost 2006 – 11,326,935 shares and 2005 – 11,214,449 shares | (513.3 | ) | (513.3 | ) | ||||
Total shareholders’ equity (deficit) | $ | 26.3 | $ | (1,305.3 | ) | |||
Total liabilities and shareholders’ equity | $ | 26.4 | $ | 4,606.0 | ||||
See accompanying notes to consolidated financial statements beginning on page 21.
18
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(amounts in millions, except per share amounts)
| 2006 | 2005 | 2004 | ||||||||||||||||||||||
Common stock: | ||||||||||||||||||||||||
Balance at beginning and end of year | $ | 51.9 | $ | 51.9 | $ | 51.9 | ||||||||||||||||||
Capital in excess of par value: | ||||||||||||||||||||||||
Balance at beginning of year | $ | 167.7 | $ | 167.7 | $ | 167.9 | ||||||||||||||||||
Stock issuances and other | 0.1 | — | (0.2 | ) | ||||||||||||||||||||
Balance at end of year | $ | 167.8 | $ | 167.7 | $ | 167.7 | ||||||||||||||||||
Reduction for ESOP loan guarantee: | ||||||||||||||||||||||||
Balance at beginning of year | $ | (142.2 | ) | $ | (142.2 | ) | $ | (142.2 | ) | |||||||||||||||
Effects of cancellation of AWI shares (See Note 1) | 142.2 | — | — | |||||||||||||||||||||
Balance at end of year | $ | — | $ | (142.2 | ) | $ | (142.2 | ) | ||||||||||||||||
Retained earnings (accumulated deficit): | ||||||||||||||||||||||||
Balance at beginning of year | $ | (906.5 | ) | $ | (1,018.6 | ) | $ | (937.8 | ) | |||||||||||||||
Net earnings (loss) for year | 1,226.4 | $ | 1,226.4 | 112.1 | $ | 112.1 | (80.8 | ) | $ | (80.8 | ) | |||||||||||||
Balance at end of year | $ | 319.9 | $ | (906.5 | ) | $ | (1,018.6 | ) | ||||||||||||||||
Accumulated other comprehensive income (loss): | ||||||||||||||||||||||||
Balance at beginning of year | $ | 37.1 | $ | 42.8 | $ | 43.3 | ||||||||||||||||||
Foreign currency translation adjustments | 18.5 | (14.1 | ) | 22.4 | ||||||||||||||||||||
Derivative gain (loss), net | (9.5 | ) | 1.2 | 0.3 | ||||||||||||||||||||
Minimum pension liability adjustments | (0.7 | ) | 7.2 | (23.2 | ) | |||||||||||||||||||
Effects of cancellation of AWI shares (See Note 1) | (45.4 | ) | — | |||||||||||||||||||||
Total other comprehensive income (loss) | (37.1 | ) | (37.1 | ) | (5.7 | ) | (5.7 | ) | (0.5 | ) | ||||||||||||||
Balance at end of year | $ | — | $ | 37.1 | $ | 42.8 | ||||||||||||||||||
Comprehensive income (loss) | $ | 1,189.3 | $ | 106.4 | $ | (81.3 | ) | |||||||||||||||||
Less treasury stock at cost: | ||||||||||||||||||||||||
Balance at beginning and end of year | $ | (513.3 | ) | $ | (513.3 | ) | $ | (513.3 | ) | |||||||||||||||
Total shareholders’ equity (deficit) | $ | 26.3 | $ | (1,305.3 | ) | $ | (1,411.7 | ) | ||||||||||||||||
See accompanying notes to consolidated financial statements beginning on page 21.
19
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Consolidated Statements of Cash Flows
| Year Ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net earnings (loss) from discontinued operations | $ | 1,226.4 | $ | 112.1 | $ | (80.8 | ) | |||||
Adjustments to reconcile net earnings (loss) to net cash provided by (used for) discontinued operating activities | (1,168.4 | ) | 34.6 | 223.6 | ||||||||
Net cash provided by operating activities | $ | 58.0 | $ | 146.7 | $ | 142.8 | ||||||
Cash flows from investing activities: | ||||||||||||
Net cash provided by (used for) discontinued operations investing activities | $ | (113.7 | ) | $ | (48.5 | ) | $ | (111.7 | ) | |||
Effects of cancellation of shares and ownership interest in Armstrong World Industries, Inc. (see Note 1) | (520.6 | ) | — | — | ||||||||
Net cash used for investing activities | $ | (634.3 | ) | $ | (48.5 | ) | $ | (111.7 | ) | |||
Cash flows from financing activities: | ||||||||||||
Net cash used for discontinued financing activities | $ | (31.3 | ) | $ | (3.9 | ) | $ | (7.0 | ) | |||
Net cash used for financing activities | $ | (31.3 | ) | $ | (3.9 | ) | $ | (7.0 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | $ | 5.4 | $ | (8.0 | ) | $ | 7.5 | |||||
Net increase (decrease) in cash and cash equivalents | $ | (602.2 | ) | $ | 86.3 | $ | 31.6 | |||||
Cash and cash equivalents at beginning of period | 602.2 | 515.9 | 484.3 | |||||||||
Cash and cash equivalents at end of period | $ | — | $ | 602.2 | 515.9 | |||||||
Note: All cash and cash equivalents as of December 31, 2005 and 2004 were related to discontinued operations
See accompanying notes to consolidated financial statements beginning on page 21.
20
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
NOTE 1. BUSINESS
Armstrong Holdings, Inc. (“AHI”) is a Pennsylvania corporation. AHI is the parent company of Armstrong Worldwide, Inc. (“AWWD”). The Company has conducted no business and has had no operations and no employees since the Company’s stock ownership in Armstrong World Industries, Inc. (“AWI”) was cancelled on October 2, 2006.
When we refer to the “Company,” “we”, “our” and “us” in this report, we are referring collectively to AHI and its subsidiary AWWD.
The Company previously was the parent holding company of AWI. On December 6, 2000, AWI filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code to achieve a resolution of its asbestos-related liability. On October 2, 2006, AWI emerged from Chapter 11 reorganization under its Fourth Amended Plan of Reorganization (the “Chapter 11 Plan”), which provided for the cancellation of the AWI stock owned by the Company.
The Company and its shareholders were not entitled to any distribution under the AWI Chapter 11 Plan in respect of the Company’s former ownership of AWI. However, the Company filed a claim against AWI with respect to intercompany accounts owed to it. In addition, upon the cancellation of the Company’s ownership interest in AWI, the Company realized a substantial tax loss. This loss is in addition to the tax loss which AWI incurred in connection with the consummation of its Chapter 11 Plan.
Due to their affiliated status through October 1, 2006, the Company and AWI are required by the IRS to file a consolidated 2006 federal tax return by September 15th of this year. As a result of the above-mentioned tax losses, the Armstrong consolidated tax group is entitled to recover estimated tax payments made by AWI to the IRS in 2006, and in addition has the ability to elect to carry back the group’s tax losses either two or ten years in order to recover taxes paid in those years.
The election made in the 2006 tax return will benefit the Company and AWI differently, and the Company’s and AWI’s respective preferences for utilization of the group’s tax losses would not necessarily be the same. Moreover, there is no IRS regulation nor any prior written agreement between the companies that prescribed how to allocate tax refunds between them.
In order to resolve the Company’s claim against AWI, determine how to handle the tax elections and establish the Company’s and AWI’s respective rights to prospective tax refunds, the Board of Directors of the Company appointed a special committee of the Board comprised of independent outside directors Jerre L. Stead and M. Edward Sellers. Neither of these directors was at that time or is now a current or prospective director or officer of AWI. The special committee engaged the law firm of McDermott, Will & Emery to advise it in connection with these matters.
Following negotiations of the special committee and their legal counsel with AWI, on February 26, 2007 the Company announced that a settlement (the “Settlement”) had been reached with AWI.
The Settlement called for AWI to pay the Company $20 million in cash related to the tax matters, and gave the Company an allowed claim under AWI’s Chapter 11 Plan of $8.5 million related to the intercompany claims. The Company recovered on this claim on the same basis as other unsecured creditors of AWI. The initial distribution in satisfaction of the $8.5 million claim consisted of approximately $2.1 million in cash plus 98,697 shares of reorganized AWI. The Settlement also gave AWI the right to make all relevant tax elections and file all required tax returns on behalf of the Armstrong tax filing group for all relevant tax periods through 2006, and to receive and retain all related tax refunds.
The Settlement was approved by the U.S. Bankruptcy Court in Wilmington, Delaware that presided over AWI’s Chapter 11 case on April 2, 2007. Under the Settlement, the Company received the cash and AWI common stock proceeds in April 2007. The Company sold the AWI common stock in the open market during April 2007.
21
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
Under the Settlement, AWI will administer both companies’ tax returns for 2006. Depending on elections that AWI makes, the Company’s worthless stock tax loss, and related loss available for carry forward, could be significantly reduced.
If the Company does have a tax loss to carry forward after the 2006 tax return is filed, it is highly uncertain whether the Company would be able to utilize this loss in any practical fashion that would serve the interests of shareholders. Internal Revenue Service rules concerning use of such losses are highly complicated and restrictive, and their effective use may be severely restricted if an ownership change of the Company occurs, as defined in IRS regulations. The Company is studying these issues.
AWI’s Chapter 11 Plan contemplates that the Company would dissolve following AWI’s emergence from Chapter 11 reorganization. The Armstrong Holdings Board of Directors is evaluating what future action is in the best interests of the Company, including the matter of dissolution and an evaluation of its assets, obligations and tax position.
If a plan of dissolution is authorized by the Board of Directors, the proposed plan would be submitted to shareholders for approval. If a plan of dissolution is approved by shareholders, a distribution to shareholders of the Company’s net assets would be effected as soon as practicable thereafter. The dissolution process would involve a number of steps, such as noticing any potential claimants, resolving any viable claims and obtaining tax clearance from the Commonwealth of Pennsylvania.
As discussed above, AWI’s Chapter 11 Plan provided that the former capital stock of AWI, all of which was held by the Company was cancelled upon that Chapter 11 Plan becoming effective.
Other provisions of the AWI Chapter 11 Plan affecting the Company include the following:
| • | AHI, AWWD and their directors and officers have protection from liability for asbestos liabilities of AWI as specified in that Plan. |
| • | AWI assumed obligations to indemnify certain directors and officers of AHI who served during the course of AWI’s Chapter 11 case for their service. |
| • | All existing equity compensation plans of AHI (which had previously been used to compensate employees of AWI and its subsidiaries) were terminated. |
| • | AHI, AWWD and their officers, directors, employees and agents received the benefit of certain exculpation provisions. |
| • | AWI will bear costs and expenses of AHI for a reasonable time through an eventual dissolution of AHI contemplated in the Plan. |
22
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy. The consolidated financial statements and accompanying data in this report include the accounts of AHI and its majority-owned subsidiary, AWWD.
Use of Estimates. These financial statements are prepared in accordance with U.S. generally accepted accounting principles and include management estimates and judgments, where appropriate. When preparing an estimate, management determines the amount based upon the consideration of relevant information. Management may confer with outside parties, including outside counsel. Actual results may differ from these estimates.
Earnings per Common Share. Basic earnings per share is computed by dividing the earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share reflect the potential dilution of securities that could share in the earnings.
Stock-based Employee Compensation. On January 1, 2006, we adopted FASB Statement No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”). Prior to January 1, 2006, we used the intrinsic value method for stock-based employee compensation. There would have been no effect on net income if we had applied the fair value recognition provisions of FAS 123R to share-based employee compensation in 2005 and 2004. See Note 7 for additional information on FAS 123R.
NOTE 3. DISCONTINUED OPERATIONS
As more fully described in Note 1, AHI’s sole operation was conducted through its indirect ownership of all capital stock of AWI. Upon AWI’s Plan of Reorganization becoming effective on October 2, 2006, all then-current shares of AWI were cancelled, effectively ending AHI’s ownership interest in AWI. Accordingly, no revenue and expenses associated with operating activities of AWI have been reflected since October 2, 2006.
In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets”, the financial statements at December 31, 2006 and all prior periods have been reclassified to reflect AWI as a discontinued operation. Upon AWI’s emergence on October 2, 2006, AHI recorded a net gain on the disposition of AWI in the amount of $1,585.7 million. Included in that net gain is an impairment loss of $8.5 million, which arose from the settlement of intercompany claims due from AWI approved by the bankruptcy court on April 2, 2007. As part of that settlement, AHI received cash of approximately $2.1 million and 98,697 shares of newly emerged AWI stock, valued at $4.2 million as of December 31, 2006. Additionally, in settlement of tax matters relating to consolidated tax filings and refunds, AHI also received $20 million directly from AWI. The Company believes these proceeds will not be subject to federal or state income taxes.
23
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
Net sales, pre-tax income (loss) and earnings (loss) from discontinued operations, as well as net assets of the AWI business for the periods presented below are as follows:
| For the years ended December 31, | ||||||||||||
| 2006 | 2005 | 2004 | ||||||||||
Net sales | $ | 2,795.7 | $ | 3,558.4 | $ | 3,497.3 | ||||||
Pre-tax income (loss) from discontinued operations | 177.7 | 103.9 | (55.8 | ) | ||||||||
Gain resulting from cancellation of AWI shares | 1,585.7 | — | — | |||||||||
Income tax (expense) on AWI discontinued operations | (537.0 | ) | (2.2 | ) | (24.6 | ) | ||||||
Gain (loss) from previous divestitures, net of tax of 0.0 and 0.2 in 2005 and 2004, respectively | — | 10.4 | (0.4 | ) | ||||||||
Earnings (loss) from discontinued operations | $ | 1,226.4 | $ | 112.1 | $ | (80.8 | ) | |||||
December 31, 2005 | ||||
Cash | $ | 602.2 | ||
Other current assets | 959.1 | |||
Property, plant and equipment | 1,180.7 | |||
Non-current assets | 1,864.0 | |||
Assets of discontinued operation | 4,606.0 | |||
Current liabilities | (423.4 | ) | ||
Liabilities subject to compromise | (4,864.7 | ) | ||
Other non-current liabilities | (623.2 | ) | ||
Liabilities of discontinued operation | (5,911.3 | ) | ||
Net liabilities | $ | (1,305.3 | ) | |
NOTE 4. RECEIVABLES
| 2006 | 2005 | |||||
Receivables associated with AWI settlement | $ | 26.3 | $ | — | ||
Miscellaneous receivables | 0.1 | — | ||||
Receivables | $ | 26.4 | $ | — | ||
The $26.3 million receivable at December 31, 2006 represents the expected proceeds from the settlement between AHI and AWI on all inter-company claim and tax matters. The settlement calls for AWI to pay AHI $20 million in cash related to the tax matters and gives AHI an allowed claim under AWI’s POR related to the intercompany claims. The POR claim was settled for approximately $2.1 million in cash and 98,697 shares of newly emerged AWI stock, valued at $4.2 million at December 31, 2006. AHI received these proceeds in April 2007.
The $0.1 million receivable at December 31, 2006 represents the reimbursement of AHI legal, audit and director fees. In accordance with the AWI POR, AWI will bear costs and expenses of AHI for a reasonable time through an eventual dissolution of AHI. See Note 5.
All accounts and notes receivable held at December 31, 2005 are included in ‘Assets of discontinued business.’
24
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
NOTE 5. ACCRUED EXPENSES
| 2006 | 2005 | ||||
Total accrued expenses | $ | 0.1 | — | ||
The $0.1 million accrued expenses at December 31, 2006 represent the accrual of AHI legal, audit and director fees. In accordance with the AWI POR, AWI will bear costs and expenses of AHI for a reasonable time through an eventual dissolution of AHI. See
Note 4.
All accounts payable and accrued expenses owed at December 31, 2005 are included in ‘Liabilities of discontinued business.
NOTE 6. INCOME TAXES
The tax effects of principal temporary differences between the carrying amounts of assets and liabilities and their tax bases are summarized in the table below. Because AHI has no operations, management has provided a full valuation allowance for net operating loss carryforwards of $1,008.4 million for federal taxes and $60.0 million for state taxes. The Company’s ability to use the balance of any tax loss carry forward is subject to limitations that may be applicable for federal income tax purposes in the event of certain changes in ownership of the Company, and to the Company’s ability to generate future taxable income. There is no assurance such a limiting change in ownership has not and will not occur. Further, since October 2, 2006, the Company has conducted no business and has had no operations or employees, so there is no assurance that there will be significant future taxable income.
The net operating loss (“NOL”) carryforward assumes that AWI will elect a 2-year carryback. AWI has until September 15, 2007 to decide whether to choose a 10-year, 2-year or no carryback. The gross amount of NOL carryforward for AHI may be substantially lower depending on this decision by AWI. The NOL carryforward may be carried forward for 20 years for federal and state taxes.
Deferred income tax assets (liabilities) | 2006 | 2005 | ||||
Net operating loss and minimum tax credit | $ | 358.6 | — | |||
Total deferred tax assets | $ | 358.6 | — | |||
Valuation allowance | (358.6 | ) | — | |||
Net deferred tax assets | $ | — | — | |||
Total deferred income tax liabilities | $ | — | — | |||
Net deferred income tax assets | $ | — | — | |||
All deferred tax assets and liabilities at December 31, 2005 are included in ‘Assets of discontinued business” and ‘Liabilities of discontinued business’.
25
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
NOTE 7. STOCK-BASED COMPENSATION PLANS
On January 1, 2006, we adopted FASB Statement No. 123 (revised 2004), “Share-Based Payment” (“FAS 123R”), which requires all share-based payment transactions to be recognized in the financial statements using a fair-value method of accounting. This statement replaced FASB Statement No. 123 and superseded APB Opinion No. 25. Prior to January 1, 2006, we used APB Opinion No. 25’s intrinsic value method for stock-based employee compensation. We used the modified prospective method of adopting FAS 123R, which does not require restatement of prior periods. There was no impact of adoption of the new standard because all of our outstanding stock options are fully vested. There would have been no effect on 2005 or 2004 net income if we had applied the fair value recognition provisions of FAS 123R to share-based employee compensation in those years because all outstanding awards were also fully vested in those periods.
Prior to AWI’s Chapter 11 Filing, stock options, stock appreciation rights in conjunction with stock options, performance restricted shares and restricted stock awards were issued under 1993 and 1999 Long-Term Stock Incentive Plans. Restricted stock was issued in 2000 under a 2000 Stock Award Plan. These three plans were terminated effective October 2, 2006.
No equity based compensation has been granted since AWI’s Chapter 11 filing date, other than commitments entered into prior to the Chapter 11 filing.
Options were granted to purchase shares at prices not less than the closing market price of the shares on the dates the options were granted. The options generally became exercisable in one to three years and expire 10 years from the date of grant.
Changes in option shares outstanding (thousands except for share price) | 2006 | 2005 | 2004 | |||||||||
Option shares at beginning of year | 1,987.3 | 2,264.0 | 2,376.9 | |||||||||
Options granted | — | — | — | |||||||||
Option shares exercised | — | — | — | |||||||||
Options forfeited | (27.1 | ) | (44.9 | ) | (20.8 | ) | ||||||
Options expired | (189.8 | ) | (231.8 | ) | (92.1 | ) | ||||||
Option shares at end of year | 1,770.4 | 1,987.3 | 2,264.0 | |||||||||
Option shares exercisable at end of year | 1,770.4 | 1,987.3 | 2,264.0 | |||||||||
Shares available for grant | — | 4,815.4 | 4,538.7 | |||||||||
Weighted average price per share: | ||||||||||||
Options outstanding | $ | 24.68 | $ | 27.97 | $ | 29.75 | ||||||
Options exercisable | $ | 24.68 | $ | 27.97 | $ | 29.75 | ||||||
26
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
The following table summarizes information about stock option activity during 2006:
| Number of shares (thousands) | Weighted- average exercise price | Weighted- average remaining contractual term (years) | ||||||
Option shares outstanding, January 1, 2006 | 1,987.3 | $ | 27.97 | |||||
Options forfeited | (27.1 | ) | 19.44 | |||||
Options expired | (189.8 | ) | 59.88 | |||||
Option shares outstanding, December 31, 2006 | 1,770.4 | $ | 24.68 | 3.0 | ||||
Option shares exercisable at end of period | 1,770.4 | $ | 24.68 | 3.0 | ||||
Shares available for grant | — | |||||||
There was no intrinsic value of the AHI option shares outstanding and exercisable at December 31, 2006, as the exercise price of all AHI options exceeded the market price of the stock on that date.
Although the plans under which these options were issued were terminated upon AWI’s emerging from Chapter 11, the existing option contracts remain enforceable against AHI.
Restricted stock awards were used for the purposes of recruitment, special recognition and retention of key employees. No award of restricted stock shares had been granted since 2000. There were 111,463 restricted shares of AHI common stock outstanding with 596 accumulated dividend equivalent shares outstanding during the year that expired upon AWI emerging from Chapter 11 on October 2, 2006.
We recognize compensation expense on a straight-line basis over the vesting period. There was no share-based compensation expense recorded in 2006, 2005 or 2004. There was also no cash flow impact of these awards.
As of December 31, 2006, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements.
NOTE 8. CONTINGENCIES
There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. The Company has conducted no business and has had no operations and no employees since its stock ownership in AWI was cancelled on October 2, 2006. Accordingly, AHI has not recorded any contingent liabilities.
NOTE 9. SHAREHOLDERS’ EQUITY
Treasury share changes for 2006, 2005 and 2004 are as follows:
Years ended December 31 (in thousands) | 2006 | 2005 | 2004 | |||
Common shares in treasury | ||||||
Balance at beginning of year | 11,214.4 | 11,210.0 | 11,210.0 | |||
Additions | 112.5 | 4.4 | — | |||
Balance at end of year | 11,326.9 | 11,214.4 | 11,210.0 | |||
The additions represent shares received under stock-based compensation plan forfeitures and share tax withholding transactions.
27
Table of Contents
Armstrong Holdings, Inc., and Subsidiaries
Noted to Consolidated Financial Statements
(dollar amounts in millions)
The balance of each component of accumulated other comprehensive income as of December 31, 2006 and 2005 is presented in the table below.
| 2006 | 2005 | ||||||
Foreign currency translation adjustments | $ | — | $ | 70.2 | |||
Derivative gain, net | — | 4.8 | |||||
Minimum pension liability adjustments | — | (37.9 | ) | ||||
Accumulated other comprehensive income | $ | — | $ | 37.1 | |||
NOTE 10. EARNINGS PER SHARE
In 2004, the diluted loss per share is calculated using basic common shares outstanding since using diluted common shares would be anti-dilutive. The difference between the average number of basic and diluted common shares outstanding is due to contingently issuable shares.
NOTE 11. RELATED PARTIES
AHI’s stock ownership in AWI was cancelled on October 2, 2006. However, AHI filed a claim against AWI with respect to intercompany accounts owed to it. In addition, upon the cancellation of AHI’s ownership interest in AWI, AHI realized a substantial tax loss. On February 26, 2007, AHI announced that a settlement had been reached with AWI, which was approved by the bankruptcy court on April 2, 2007. See Note 1 for further discussion.
In accordance with the AWI POR, AWI will bear costs and expenses of AHI for a reasonable time through an eventual dissolution of AHI. During the fourth quarter of 2006, AHI incurred $0.2 million of costs for legal, audit and director fees, which are reimbursable by AWI.
28
Table of Contents
| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Not applicable.
| ITEM 9A. | CONTROLS AND PROCEDURES |
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based on the evaluation of the effectiveness of our disclosure controls and procedures by our management, with the participation of our chief executive officer and our chief financial officer, as of the end of the period covered by this report, our chief executive officer and our chief financial officer have concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| ITEM 9B. | OTHER INFORMATION |
Not Applicable.
29
Table of Contents
PART III
| ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
Code of Ethics
The Company’s Code of Business Conduct, which applies to all officers and directors, and its Code of Ethics for Financial Professionals, are identical to those of AWI. These Codes are available on AWI’s website atwww.armstrong.com/corporatena/corp_mission.html. If the substance of either Code is amended in the future, we will duly note and publish that change. We will also note any express or implicit waiver from a provision of either Code granted to any AHI officer or director. To date, no such waivers have been granted.
Armstrong Holdings Inc. Board of Directors
The Board of Directors has determined that all outside members of the Board, including all members of the Audit Committee, are independent in accordance with the rules and regulations of the New York Stock Exchange (“NYSE”). Note: The Company is not currently listed on NYSE.
These independence standards were based upon the Board’s consideration of relationships between directors and the Company and management, and of known factors that reasonably could compromise the independent judgment of a director.
Based on information disclosed by the directors, the Board was advised that no outside director was disqualified from being considered an independent director under NYSE’s regulation. Following consideration of these facts, the Board of Directors determined that all outside directors are, in fact, “independent”.
The Board monitors the independence of outside directors. Each director is charged with a responsibility of candor and disclosure to their Board colleagues relative to potentially compromising relationships, transactions and compensation.
Audit Committee
The Audit Committee of Armstrong Holdings consists of Jerre L. Stead and M. Edward Sellers. They serve as Co-Chairs. The business experience of these and all other directors is described below under the heading “Director Information”. The Board of Directors has not considered whether any current member of this committee qualifies as an “Audit Committee Financial Expert” as defined in Item 401(h)(2) of Regulation S-K of the Securities Exchange Act. However, all of the members of the Audit Committee are independent under the listing standards of NYSE and within the meaning of the applicable SEC rule pertaining to Audit Committees (Rule 10A-3) under the Securities Exchange Act.
Director Information
The following information is current as of March 30, 2007. The directors named here serve until their successors are elected, or until their earlier retirement or removal.
Directors of Armstrong Holdings, Inc.
Michael D. Lockhart – Age 58; Chairman of the Board and Chief Executive Officer of AHI since August 2000. Director since November 2000 and Chairman of the Board and President since March 2001 of Armstrong World Industries, Inc. Mr. Lockhart previously served as Chairman and Chief Executive Officer of General Signal (a diversified manufacturer) headquartered in Stamford, Connecticut from September 1995 until it was acquired in October 1998. He joined General Signal as President and Chief Operating Officer in September 1994. From 1981 until 1994, Mr. Lockhart worked for General Electric in various executive capacities in GE Capital, GE Power Systems, GE Transportation Systems and GE Aircraft Engines.
30
Table of Contents
M. Edward Sellers – Age 62; Director since April 2001; Member – Audit Committee (Co-Chair). Mr. Sellers is a graduate of Vanderbilt University and received his MBA from Harvard Business School. Mr. Sellers joined Blue Cross Blue Shield of South Carolina and The Companion Group of Companies (a health, life, property and casualty insurance company with related services and functions) in 1987, serving as President and Chief Operating Officer until 1992 when he assumed the role of President and Chief Executive Officer. In 2001, he was named Chairman and Chief Executive Officer. He serves as Chair of the South Carolina Council on Competitiveness. He also serves on the following Boards: Open Networks Technologies, Inc.; National Bank of South Carolina; American Red Cross; ETV (Educational Television) Endowment of South Carolina, Central Carolina Economic Development Alliance and Central Carolina Community Foundation. Mr. Sellers is past Chair of the South Carolina State Chamber of Commerce; Palmetto Business Forum; Columbia College; ETV Endowment Board, and the Palmetto Conservation Foundation.
Jerre L. Stead – Age 64; Director since May 2000 and, prior to that, of Armstrong World Industries, Inc. from April 1992 to May 2000. Member—Audit Committee (Co-Chair). Mr. Stead is a graduate of the University of Iowa and was a participant in the Advanced Management Program, Harvard Business School. He has served as the Chairman of the Board of IHS, Inc. since December 2000. From August 1996 until June 2000 he served as Chairman and Chief Executive Officer of Ingram Micro, Inc. (technology products and services). During 1995, he served as Chairman, President and Chief Executive Officer of Legent Corporation (integrated product and service software solutions) until its sale late in 1995. He was Executive Vice President, American Telephone and Telegraph Company (telecommunications) and Chairman and Chief Executive Officer of AT&T Global Information Solutions (computers and communicating), formerly NCR Corp. (1993-1994). He was President of AT&T Global Business Communications Systems (communications) (1991-1993) and Chairman, President and Chief Executive Officer (1989-1991) and President (1987-1989) of Square D Company (industrial control and electrical distribution products). In addition, he held numerous positions during a 21-year career at Honeywell. He is a Director of Conexant Systems, Inc., Brightpoint Inc., Mobility Electronics, Inc. and Mindspeed, Inc.
Changes to Nomination Procedures
There have been no changes to the procedures by which shareholders may recommend nominees to the Board of Directors since these procedures were first disclosed in the March 31, 2004 Form 10-Q.
Executive Officer Information
The following information is current as of March 30, 2007. Each executive officer serves a one-year term until reelected or until his earlier death, resignation, retirement or replacement.
Executive Officers of Armstrong Holdings, Inc.
Michael D. Lockhart - (See description, above.)
F. Nicholas Grasberger III – Age 43; Senior Vice President and Chief Financial Officer of Armstrong Holdings, Inc. and Armstrong World Industries, Inc. since January 2005. Vice President and Chief Financial Officer of Kennametal, Inc. (a manufacturer of cutting tools and wear parts) August 2000 – December 2004. Previously employed at H. J. Heinz (a global U.S. based food company) for eleven years, his last title being Treasurer.
John N. Rigas – Age 58; Senior Vice President, Secretary and General Counsel, Armstrong Holdings, Inc. since November 2000 and Armstrong World Industries, Inc. since May 2001. Previously Deputy General Counsel-Litigation, Armstrong World Industries, Inc. March 1999 – November 2000; worked for Dow Corning Corporation (specialty chemical company) October 1982 – March 1999, his last title being Senior Managing Counsel.
31
Table of Contents
William C. Rodruan – Age 52; Vice President and Controller, Armstrong Holdings, Inc. since May 2000 and Armstrong World Industries, Inc. since July 1999. Previously Director, Corporate Transformation and Shared Services, Armstrong World Industries, Inc. February 1997 – July 1999 and Vice President of Finance, Corporate Retail Accounts, Armstrong World Industries, Inc. July 1994 – February 1997.
Section 16(a) Beneficial Ownership Reporting Compliance
Securities and Exchange Commission (“SEC”) regulations require Company directors and executive officers, and any persons beneficially owning more than ten percent of its common stock to report to the SEC their ownership of this stock and any changes in that ownership. SEC regulations also require these persons to furnish the company with copies of these reports. SEC rules require the company to report any failure to timely file those reports in the previous fiscal year.
Based solely upon our review of copies of reports furnished to us and written representations from directors and executive officers, we believe that all of these filing requirements were satisfied by Company directors and executive officers during 2006.
32
Table of Contents
| ITEM 11. | EXECUTIVE COMPENSATION |
COMPENSATION DISCUSSION AND ANALYSIS
The Company was the parent holding company of AWI from May 2000 until its ownership of AWI ended October 2, 2006. As a result of the two companies’ past affiliation, each of the Company’s officers is an employee of AWI, and AWI has been responsible for their compensation. Since AWI is responsible for the expenses of the Company under the provisions of AWI’s Chapter 11 Plan referred to in Item 1 above, the Company expects to have no compensation expense in the future unless it decides not to dissolve.
COMPENSATION COMMITTEE REPORT
Since October 2, 2006, the Company has had no separate compensation committee. The Board of Directors has discussed the above disclosure and approved it for inclusion in this report.
SUMMARY COMPENSATION
Over the time period for which disclosure is called for under this Item, the Company’s officers have not been paid any compensation or received any equity or non-equity incentive awards for services rendered to the Company.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
No awards under any compensation or incentive plan involving Company stock have been granted since 2001, other than commitments entered into prior to AWI’s Chapter 11 filing on December 6, 2000. The table captioned “Security Ownership of Management” in Item 12 shows options granted to Messrs. Lockhart, Rigas, Rodruan and Stead prior to that date.
OPTION EXERCISES AND STOCK VESTED
None of the Company’s executive officers exercised any stock options, stock appreciation rights or similar instruments or acquired stock awards, restricted stock units or similar instruments during 2006.
PENSION BENEFITS AND DEFERRED COMPENSATION
The Company has no pension, deferred compensation, or retirement payment plans.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
As an artifact of the Company’s relationship with AWI, the Company is a named party to Change-in-Control agreements with all of its executive officers and several other AWI employees for which AWI is primarily responsible. The Company expects to address these agreements in the context of evaluating a potential dissolution.
33
Table of Contents
| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
a) Stock Ownership of Certain Beneficial Owners
The following table1sets forth, as of March 19, 2007, each person or entity known to the Company that may be deemed to have beneficial ownership of more than 5% of its outstanding common stock.
Name And Address Of Beneficial Owner(1) | Amount And Nature Of | Percent Of Class Outstanding2 | |||
S. Muoio & Co. LLC & Salvatore Muoio(3) 509 Madison Avenue, Suite 406 New York, NY 10022 | 2,284,326(shared) | 5.6 | % |
1) | In accordance with applicable rules of the Securities and Exchange Commission, this information is based on Schedule 13G information filed by March 19, 2007. |
2) | In accordance with applicable rules of the Securities and Exchange Commission, this percentage is based upon the total 40,551,974 shares of AHI’s common stock that were outstanding on December 31, 2006. |
3) | Schedule 13G filed March 2, 2007. |
b) Security Ownership of Management
The following table shows the amount of Company stock that each director, each executive officer and all directors and executive officers owned as a group. The ownership rights in these shares consist of sole voting and investment power, except where otherwise indicated. No named individual beneficially owns 1% or more of the outstanding common shares. Collectively, all of the directors and executive officers as a group beneficially own less than 1% of the outstanding common shares. This information is as of February 28, 2007.
Name | Stock(1) | Stock Options Exercisable within 60 days | Total Beneficial Ownership | Phantom Shares(2) | ||||
Michael D. Lockhart | 28,499 | 300,000 | 328,499 | |||||
M. Edward Sellers | — | — | — | |||||
Jerre L. Stead | 400 | 3,260 | 3,660 | |||||
F. Nicholas Grasberger III | — | — | — | |||||
William C. Rodruan | 4,356 | 13,600 | 17,956 | 283 | ||||
John N. Rigas | 979 | 17,000 | 17,979 | |||||
Director and officers as a group (6 persons) | 34,234 | 333,860 | 368,094 | 283 |
1) | Includes the following shares owned by the employee through the employee stock ownership accounts of AHI’s Savings and Investment Plan (“SIP”): M. D. Lockhart – 124; W. C. Rodruan – 2,134; J. N. Rigas – 979 and executive officers as a group 3,237. |
Includes the following shares indirectly owned and held in the savings accounts of the SIP accounts of the following individuals: W. C. Rodruan –782.
2) | Includes phantom shares held in a stock subaccount under the Deferred Compensation Plan. The participant has no voting or investment power. |
34
Table of Contents
Equity Compensation Plan Information
No equity-based compensation has been granted since Armstrong World Industries, Inc. filed for relief under Chapter 11 in December 2000, other than commitments entered into prior to the Chapter 11 filing.
The following table provides information as of December 31, 2006, regarding securities that were authorized for issuance pursuant to equity compensation plans:
Plan category | Number of securities to (a) | Weighted-average (b) | Number of securities (c) | ||||
Equity compensation plans approved by security holders | 1,770,400 | $ | 27.83 | 0 | |||
35
Table of Contents
| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Transactions with Related Persons
None.
Oversight and Review of Transactions with Related Persons
The Company’s Code of Business Conduct and its Corporate Governance Principles and governance documents address officer and director independence from conflicting interests as well as procedures for the review, approval or ratification of transactions with related persons. The Audit Committee is charged with reviewing and approving any proposed related-party transactions by the Company involving directors, nominees and/or executive officers and other persons.
Any proposed “related party transaction” involving any executive officer, director or director nominee as defined under SEC Regulation SK, Item 404 must be approved by the Audit Committee comprised of independent directors who must have no connection with the transaction. Any waiver of the Company’s Code of Business Conduct, particularly its conflicts-of-interest provisions, that is proposed to apply to any director or executive officer must be reviewed in advance by the same Committee, which is responsible for making a recommendation to the Board of Directors for approval or disapproval. The Board’s decision on any such matter would be disclosed publicly in compliance with applicable law.
The governance documents referred to above (namely the Company’s Code of Business Conduct and its Corporate Governance Principles) are substantially similar to those of its former subsidiary, Armstrong World Industries, Inc., which can be found on AWI’s web site at Armstrong.com under “About Armstrong” and “Corporate Governance.”
Director Independence
The Board has determined that each of its two non-employee directors, namely, Messrs. Sellers and Stead, is independent, meaning in the Board’s business judgment each meets the standards of independence specified in the Company’s Corporate Governance Principles, SEC Rule 10A-3(b)(1) and New York Stock Exchange Rule 303A.02, and has no relationship with the Company or its management that may interfere with the exercise of his responsibilities on the Board or any committee.
The Board’s determinations were based upon consideration of relationships between directors and the Company or management, and of factors that reasonably could compromise the independent judgment of a director. For example, the Board considered whether there were any director relationships with service providers and considered whether any director had sought to influence any decisions by the Company in a manner beneficial to their personal interests. There were no transactions, relationships or arrangements disclosed by any non-employee director for the Board to consider in this regard.
The Board, led by its Audit Committee, monitors the independence of outside directors. Each director is charged with a responsibility of candor and disclosure to their Board colleagues relative to potentially compromising relationships, transactions and compensation.
36
Table of Contents
| ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Professional Audit Fee Services Rendered
The following table presents fees for professional audit services rendered by KPMG LLP for the audit of AHI’s annual financial statements for 2006. A portion of the billings occurred or will occur in 2007. All fees were pre-approved by the Audit Committee.
(amounts in 000’s) | 2006 | |
Audit Fees | $125 |
Audit Committee Pre-approval Policies and Procedures
The Audit Committee requires their pre-approval of any audit or accounting services provided by the firm that serves as our independent auditor. The Audit Committee delegates to either Committee Co-Chair the authority to pre-approve services not exceeding 5% of the total audit fees for the year for purposes of handling immediate needs, with a report to the full Committee of such approvals at its next meeting. This policy was adopted pursuant to Section 10A(i) of the Securities Exchange Act.
37
Table of Contents
PART IV
| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
| (a) (1)(2) | The financial statements of Armstrong Holdings, Inc. filed as a part of this 2006 Annual Report on Form 10-K are listed on page 14. | |
| (a) (3) | The following exhibits are filed as part of this 2006 Annual Report on Form 10-K: | |
| Exhibit No. | Description | |
| No. 2.1 | Armstrong World Industries, Inc.’s Fourth Amended Plan of Reorganization, as amended by modifications through May 23, 2006 is incorporated by reference from the 2005 Annual Report on Form 10-K wherein it appeared as Exhibit 2.3. | |
| No. 3.1 | Armstrong Holdings, Inc.’s Amended and Restated Articles of Incorporation are incorporated by reference from the Current Report on Form 8-K dated May 9, 2000, wherein it appeared as Exhibit 3.1(i). (SEC File No. 000-50408) | |
| No. 3.2 | Armstrong Holdings, Inc.’s Bylaws, as amended, effective October 2, 2006, are incorporated by reference from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, wherein they appeared as Exhibit 3.3. | |
| No. 10.1 | Employment Agreement between Armstrong Holdings, Inc. and Michael D. Lockhart dated August 7, 2000 is incorporated by reference from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 wherein it appeared as Exhibit 10(a). * (SEC File No. 000-50408) | |
| No. 10.2 | Change in Control Agreement and Indemnification Agreement between Armstrong Holdings, Inc. and Michael D. Lockhart, dated August 7, 2000 are incorporated by reference from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, wherein they appeared as Exhibits 10(e) and 10(f), respectively. * (SEC File No. 000-50408) | |
| No. 10.3 | Amendment to August 7, 2000 Employment Agreement between Armstrong Holdings, Inc. and Michael D. Lockhart is incorporated by reference from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, wherein it appeared as Exhibit 10. * (SEC File No. 000-50408) | |
| No. 10.4 | Form of Indemnification Agreement among Armstrong Holdings, Inc., Armstrong World Industries, Inc. and Mr. Stead is incorporated by reference from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, wherein it appeared as Exhibit 10(iii)(a). * (SEC File No. 000-50408) | |
| No. 10.5 | Form of Indemnification Agreement between Armstrong Holdings, Inc. and Messrs. Rigas and Rodruan is incorporated by reference from the 2000 Annual Report on Form 10-K wherein it appeared as Exhibit 10(iii)(o).* (SEC File No. 000-50408) | |
| No. 10.6 | Form of Change in Control Agreement with Armstrong World Industries, Inc. and Messrs. Rigas and Rodruan is incorporated by reference from the 2000 Annual Report on Form 10-K wherein it appeared as Exhibit 10(iii)(k).* (SEC File No. 1-2116) | |
| No. 10.7 | Form of Indemnification Agreement among Armstrong Holdings, Inc., Armstrong World Industries, Inc. and Mr. Sellers is incorporated by reference from the 2001 Annual | |
38
Table of Contents
| Report on Form 10-K wherein it appeared as Exhibit 10(iii)(s). * (SEC File No. 000-50408) | ||
| No. 10.8 | Order Authorizing and Approving Retention Program for Key Employees and Approving Assumption of Executory Contracts dated April 18, 2001 is incorporated by reference from the 2001 Annual Report on Form 10-K, wherein it appeared as Exhibit 10(iii)(u). | |
| No. 10.9 | Stipulation and Agreement with Respect to Claims of Armstrong Holdings, Inc. and Armstrong Worldwide, Inc.; and Motion for Order Approving Stipulation and Agreement are incorporated by reference from the Current Report on Form 8-K dated February 26, 2007, wherein they appeared as Exhibits 99.2 and 99.3, respectively. | |
| No. 11.1 | Computation for basic earnings per share | |
| No. 11.2 | Computation for diluted earnings per share | |
| No. 21 | List of Armstrong Holdings, Inc. subsidiaries | |
| No. 23 | Consent of Independent Registered Public Accounting Firm | |
| No. 24 | Power of Attorney and authorizing resolution | |
| No. 31.1 | Certification of Principal Executive Officer of Armstrong Holdings, Inc. required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act | |
| No. 31.2 | Certification of Principal Financial Officer of Armstrong Holdings, Inc. required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act | |
| No. 32.1 | Certification of Chief Executive Officer of Armstrong Holdings, Inc. required by Rule 13a-14(b) and 18 U.S.C. Section 1350 | |
| No. 32.2 | Certification of Chief Financial Officer of Armstrong Holdings, Inc. required by Rule 13a-14(b) and 18 U.S.C. Section 1350 | |
39
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ARMSTRONG HOLDINGS, INC. | ||
| (Registrant) | ||
| By: | /s/ Michael D. Lockhart | |
| Chairman and Chief Executive Officer | ||
| Date: April 16, 2007 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant AHI and in the capacities and on the dates indicated.
Directors and Principal Officers of the registrant:
Name | Title | |||
Michael D. Lockhart | Chairman and Chief Executive Officer (Principal Executive Officer) | |||
F. Nicholas Grasberger III | Senior Vice President and Chief Financial Officer (Principal Financial Officer) | |||
William C. Rodruan | Vice President and Controller (Chief Accounting Officer) | |||
M. Edward Sellers | Director | |||
Jerre L. Stead | Director | |||
| By: | /s/ Michael D. Lockhart | |
| (Michael D. Lockhart, as attorney-in-fact for AHI directors and on his own behalf) | ||
| As of April 16, 2007 | ||
| By: | /s/ F. Nicholas Grasberger III | |
| (F. Nicholas Grasberger III) | ||
| As of April 16, 2007 | ||
| By: | /s/ William C. Rodruan | |
| (William C. Rodruan) | ||
| As of April 16, 2007 | ||
40
Table of Contents
Exhibit Index
| No. 11.1 | Computation for basic earnings per share | |
| No. 11.2 | Computation for diluted earnings per share | |
| No. 21 | List of Armstrong Holdings, Inc. subsidiaries | |
| No. 23 | Consent of Independent Registered Public Accounting Firm | |
| No. 24 | Power of Attorney and authorizing resolution | |
| No. 31.1 | Certification of Principal Executive Officer of Armstrong Holdings, Inc. required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act | |
| No. 31.2 | Certification of Principal Financial Officer of Armstrong Holdings, Inc. required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act | |
| No. 32.1 | Certification of Chief Executive Officer of Armstrong Holdings, Inc. required by Rule 13a-14(b) and 18 U.S.C. Section 1350 | |
| No. 32.2 | Certification of Chief Financial Officer of Armstrong Holdings, Inc. required by Rule 13a-14(b) and 18 U.S.C. Section 1350 | |
41