Exhibit No. 99(c)
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, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-2116
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ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
("SHARE IN SUCCESS PLAN")
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
Page No.
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Item 1. Statements of Net Assets Available for Plan Benefits
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September 30, 1996 and 1995 4
Item 2. Statements of Changes in Net Assets Available
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for Plan Benefits
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Years ended September 30, 1996, 1995, and 1994 5
Notes to Financial Statements 6-8
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Item 3. Independent Auditors' Report 9
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Exhibits
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24. Consent of Independent Auditors
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
members of the committee constituting the administrator which administers the
plan have duly caused this annual report to be signed by the undersigned
hereunto duly authorized.
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
("SHARE IN SUCCESS PLAN")
March 25, 1997 By: /s/ E. Allen Deaver
-----------------------------------------
E. Allen Deaver
Chairman of the Retirement Committee
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
September 30, 1996 and 1995
1996
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Allocated Unallocated Total
--------- ----------- -----
Assets
Investment in Armstrong World
Industries, Inc. (note 3)
Preferred Stock $ -- $ -- $ --
Common Stock 94,796,070 220,658,132 315,454,202
Cash and short-term investments 664,665 2,191,796 2,856,461
Employee contributions receivable -- 330,392 330,392
Employer contributions receivable -- 3,405,019 3,405,019
Dividends receivable -- -- --
Interest receivable 2,709 991 3,700
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Total assets 95,463,444 226,586,331 322,049,774
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Liabilities
Guaranteed ESOP notes (note 7) -- 228,382,403 228,382,403
Accrued interest -- 5,775,128 5,775,128
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Total liabilities -- 234,157,531 234,157,531
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Net assets available for plan benefits $ 95,463,444 $ (7,571,201) $ 87,892,243
============= ============= =============
1995
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Allocated Unallocated Total
--------- ----------- -----
Assets
Investment in Armstrong World
Industries, Inc. (note 3)
Preferred Stock $ 85,204,819 $ 215,716,530 $ 300,921,349
Common Stock -- -- --
Cash and short-term investments 75,583 1,039,001 1,114,584
Employee contributions receivable -- 463,981 463,981
Employer contributions receivable -- 2,125,167 2,125,167
Dividends receivable 1,553,813 3,933,872 5,487,685
Interest receivable 107 1,479 1,586
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Total assets 86,834,322 223,280,030 310,114,352
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Liabilities
Guaranteed ESOP notes (note 7) -- 240,405,403 240,405,403
Accrued interest -- 6,068,624 6,068,624
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Total liabilities -- 246,474,027 246,474,027
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Net assets available for plan benefits $ 86,834,322 $ (23,193,997) $ 63,640,325
============= ============= =============
See accompanying notes to financial statements.
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years Ended September 30, 1996, 1995 and 1994
1996 1995
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Allocated Unallocated Total Allocated Unallocated Total
----------- ----------- ------- ----------- ----------- -------
Increases:
Employee contributions (note 1) $ -- $5,033,300 $5,033,300 $ -- $6,744,735 $6,744,735
Employer contributions -- 10,071,540 10,071,540 -- 5,670,971 5,670,971
Dividends (note 3) 4,133,471 10,638,900 14,772,371 4,879,273 13,984,817 18,864,090
Interest income 13,910 74,056 87,966 2,149 55,411 57,560
Realized gain (note 5) 1,401,739 -- 1,401,739 202,717 -- 202,717
Unrealized appreciation (note 3) 10,448,393 24,321,094 34,769,487 11,897,970 30,122,579 42,020,549
Allocation of preferred stock of
Armstrong World Industries, Inc. 14,288,974 14,288,974 11,239,017 -- 11,239,017
----------- ----------- ----------- ----------- ------------ -----------
30,286,487 50,138,890 80,425,377 28,221,126 56,578,513 84,799,639
----------- ----------- ----------- ----------- ------------ -----------
Decreases:
Interest expense -- (20,227,120) (20,227,120) -- (21,135,170) (21,135,170)
Benefits paid (note 4) (21,657,365) -- (21,657,365) (2,907,999) -- (2,907,999)
Allocation of preferred stock of
Armstrong World Industries, Inc. -- (14,288,974) (14,288,974) -- (11,239,017) (11,239,017)
----------- ----------- ----------- ----------- ------------ -----------
(21,657,365) (34,516,094) (56,173,459) (2,907,999) (32,374,187) (35,282,186)
----------- ----------- ----------- ----------- ------------ -----------
Net increase (decrease) 8,629,122 15,622,796 24,251,918 25,313,127 24,204,326 49,517,453
Net assets available for
plan benefits:
Beginning of year 86,834,322 (23,193,997) 63,640,325 61,521,195 (47,398,323) 14,122,872
----------- ----------- ----------- ----------- ------------ -----------
End of year $95,463,444 ($7,571,201) $87,892,243 $86,834,322 ($23,193,997) $63,640,325
----------- ----------- ----------- ----------- ------------ -----------
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years Ended September 30, 1996, 1995 and 1994
1994
-----------------------------------------------------
Allocated Unallocated Total
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Increases:
Employee contributions (note 1) $ -- $6,158,036 $6,158,036
Employer contributions -- 4,533,805 4,533,805
Dividends (note 3) 3,942,264 15,108,800 19,051,064
Interest income -- 29,957 29,957
Realized gain (note 5) 156,242 -- 156,242
Unrealized appreciation (note 3) -- -- --
Allocation of preferred stock of
Armstrong World Industries, Inc. 11,377,004 -- 11,377,004
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15,475,510 25,830,598 41,306,108
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Decreases:
Interest expense -- (21,807,401) (21,807,401)
Benefits paid (note 4) (2,508,168) -- (2,508,168)
Allocation of preferred stock of
Armstrong World Industries, Inc. -- (11,377,004) (11,377,004)
----------- ----------- -----------
(2,508,168) (33,184,405) (35,692,573)
Net increase (decrease) 12,967,342 (7,353,807) 5,613,535
Net assets available for
plan benefits:
Beginning of year 48,553,853 (40,044,516) 8,509,337
----------- ----------- -----------
End of year $61,521,195 ($47,398,323) $14,122,872
----------- ----------- -----------
See accompanying notes to financial statements.
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
1. Plan Description
----------------
Armstrong World Industries, Inc. (the Company) established the Armstrong
World Industries, Inc. Employee Stock Ownership Plan (the Plan) in 1989. The
Plan, which is both a stock bonus plan with a cash or deferred arrangement
and an employee stock ownership plan, is designed to attract and keep
employees possessing the qualities required for future growth of the Company.
The Plan intends to provide such employees with additional incentive for
enhanced performance by permitting eligible employees to acquire a
proprietary interest in the Company and to accumulate capital for future
economic security.
All employees of the Company and of certain domestic subsidiaries, who are at
least twenty-one years of age and have completed one year of service, 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.
Under the Plan, participants receive interest in shares of Company preferred
stock held by the trust established under the Plan. The shares of Company
preferred stock held by the trust were purchased from the Company from the
proceeds of the sale of the Guaranteed ESOP notes in a total principal amount
of $270,000,000 in 1989. All shares of preferred stock acquired with the
proceeds of the notes are held in a suspense account and released to members'
accounts as the notes are repaid. The shares are released in proportion to
the ratio of the proportion of principal and interest paid down by any debt
payment to the total principal and interest to be paid over the life of the
notes.
The Plan maintains three accounts for each member for contributions and
allocations of shares from the suspense account. Participants who elect to
reduce their before-tax compensation in amounts ranging from one percent to
four percent (exchange contributions) will have such amounts credited to an
exchange contribution account. Shares released from the suspense account
will be first allocated to members' exchange contribution accounts with a
value as of the allocation date equal to the amount of their exchange
contributions.
Shares released from the suspense account not used for the purpose of
exchange allocations will be allocated to members' equity accounts (equity
allocations) based on an established shares released schedule. 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
this Plan. The allocation schedule, therefore, is designed to provide greater
allocation of shares to older employees.
If any shares released from the suspense account remain unallocated after the
exchange and equity allocations, such shares will be allocated to members'
bonus accounts in proportion to the ratio of exchange contributions made by a
member to the exchange contributions made by all members.
Participants have an immediate 100 percent vested interest with respect to
their exchange contributions. Interest in the Equity and Bonus Accounts vest
after five years of service.
2. Plan Redesign
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On May 29, 1996, the Employee Stock Ownership Plan Committee of the Company's
Board of Directors approved the restructuring of the Plan and the merger of
the Plan into the Retirement Savings Plan for Salaried Employees of Armstrong
World Industries, Inc. The merged plan was named the Retirement Savings and
Stock Ownership Plan and had an effective date of October 1, 1996.
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements, (Continued)
3. Summary of Significant Accounting Policies
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(a) Basis of Presentation
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The accompanying financial statements have been prepared on an accrual
basis.
(b) Investment in Armstrong World Industries, Inc., Preferred Stock
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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 stock of the Company as is necessary to
administer the Plan in accordance with its terms.
As part of the restructuring of the Plan as discussed in note 2, the
Company preferred stock held by the trust was converted into shares of
Company common stock on a one-for-one basis. The date of the conversion,
which involved 5,057,382 shares of preferred stock, was July 31, 1996,
when the quoted market price per share of the common stock was $55.50.
At September 30, 1996, the investment in Company common stock represents
5,057,382 shares, valued at a quoted market price per share of $62.375.
The investment in Company preferred stock is presented at fair value.
Fair value is determined to be the greater of $47.75 per share, the
preferred stock's minimum conversion value, or the market price per
share of Company common stock. The investment in preferred stock at
September 30, 1995 represents 5,422,006 shares, valued at a market price
per share of $55.50. Each share of preferred stock was convertible into
one share of Company common stock. A dividend of $3.462 per share per
annum was payable semi-annually on the preferred stock held in the
trust. The preferred stock was redeemable at the option of the holder at
a redemption price of $47.75 per share plus accrued but unpaid
dividends.
(c) Expenses
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All costs and expenses incurred in administering the Trust and the Plan
are paid by the Company.
4. Benefits
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Upon death or any other separation from service from the Company,
participants are entitled to receive a distribution of their vested ESOP
account. Distributions are in the form of a lump sum cash payment or, upon
request, Company common stock. Participants entitled to a distribution can
direct the Trustee to either sell their ESOP Preferred Shares to the Company
at a per share price of $47.75 or convert the shares into shares of Company
common stock on a one-for-one basis.
During the years ended September 30, 1996, 1995 and 1994, distributions were
made to participants of $21,657,365 representing 364,624 shares, $2,907,999
representing 57,756 shares, and $2,508,168 representing 49,609 shares,
respectively.
ARMSTRONG WORLD INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements, (Continued)
5. Realized Gain
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During the years ended September 30, 1996, 1995 and 1994, the number of
shares of preferred stock redeemed at prices per share in excess of $47.75
totaled 359,427, 30,660 and 21,012, respectively. The amount of redemption
proceeds in excess of the minimum conversion value totaled $1,401,739 in
1996, $202,717 in 1995, and $156,242 in 1994.
6. Plan Termination
----------------
While it is intended to be permanent, the Plan may be terminated at anytime
by the Company's Board of Directors. Upon Plan termination, all participants
become fully vested in their entire ESOP account balance. Any unallocated
shares held by the Trust will be either sold to the Company or converted to
Company common stock and then sold to the Company or sold on the open market,
whichever produces the greatest cash proceeds. The cash proceeds will be used
to satisfy any outstanding Guaranteed ESOP notes, with the balance of any
excess proceeds being allocated to individual ESOP account balances on a pro-
rated basis.
7. Guaranteed ESOP Notes
---------------------
The Company 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
($108,339,403 and $120,362,403 at September 30, 1996 and 1995, respectively)
and 8.92% on the Series B Guaranteed Serial ESOP Notes due 2001-2004
($120,043,000 at September 30, 1996 and 1995). The scheduled amortization of
the notes for the next five fiscal years is as follows: 1997 - $14,801,000;
1998 - $17,908,000; 1999 - $21,392,000; 2000 - $25,277,000; 2001 -
$28,961,404.
8. Company Contributions
---------------------
The Company is obligated to make semi-annual contributions in cash or Company
stock to the Plan, on June 15 and December 15 of each year, which when
aggregated with all exchange contributions, dividends received by the Trustee
on the preferred stock held by the Trust, and trust earnings, is at least
equal to the amount necessary to enable the Trustee to pay currently maturing
obligations under the Guaranteed ESOP notes.
9. Federal Income Taxes
--------------------
By a letter dated February 13, 1996, the Internal Revenue Service has
determined and informed the Company that the plan qualifies under the
applicable provisions of the Internal Revenue Code and is therefore exempt
from federal income taxes.
Independent Auditors' Report
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The Retirement Committee
Armstrong World Industries, Inc.:
We have audited the accompanying statements of net assets available for plan
benefits of the Armstrong World Industries, Inc. Employee Stock Ownership Plan
as of September 30, 1996 and 1995 and the related statements of changes in net
assets available for plan benefits for each of the years in the three-year
period ended September 30, 1996. These financial statements are the
responsibility of the plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Armstrong World Industries,
Inc. Employee Stock Ownership Plan as of September 30, 1996 and 1995 and the
changes in its net assets available for plan benefits for each of the years in
the three-year period ended September 30, 1996, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
February 28, 1997
EXHIBIT INDEX
24 Consent of Independent Auditors
Consent of Independent Auditors
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The Retirement Committee
Armstrong World Industries, Inc.:
We consent to incorporation by reference in the Registration Statement
No. 33-29768 on Form S-8 of Armstrong World Industries, Inc. of our report dated
February 28, 1997, relating to the statements of net assets available for plan
benefits of the Armstrong World Industries, Inc. Employee Stock Ownership Plan
as of September 30, 1996 and 1995 and the related statements of changes in net
assets available for plan benefits for each of the years in the three-year
period ended September 30, 1996, which report is included herein.
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
March 24, 1997