SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
June 30, 1999
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Date of Report (Date of earliest event reported)
ARMSTRONG WORLD INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Pennsylvania 1-2116 23-0366390
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(State of Organization) (Commission File Number) (I.R.S. Employer
Identification No.)
2500 Columbia Avenue
Lancaster, Pennsylvania 17603
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(Address of Registrant's Principal Executive Office)(Zip Code)
(717) 397-0611
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(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
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On June 30, 1999, Armstrong World Industries, Inc., a Pennsylvania
Corporation ("Armstrong"), sold 65% of its ownership in Armstrong Industrial
Specialties, Inc. ("AISI"), its gasket products subsidiary, to a group of
investors including Citicorp Venture Capital Ltd. and the management of AISI for
a cash purchase price of approximately $36.1 million. The sale will result in a
pretax and an after tax gain in Armstrong's second quarter of approximately
$8.3 million, or $0.21 per share. The pretax and after tax gains are the same
due to the realization of capital loss carryforwards.
AISI is a leading manufacturer of soft gasket materials and specialty
papers. AISI will be renamed Interface Solutions, Inc. ("IT"), and it is
anticipated that the company will remain headquartered in Lancaster,
Pennsylvania with its current management team. AISI reported sales of
approximately $106.5 million in 1998 which included approximately $39.5 million
of sales to another Armstrong business unit.
Under the terms of the Agreement and Plan of Merger the ("Agreement"),
Armstrong will continue to purchase felt products used in the manufacturing of
sheet vinyl flooring from IT for an initial term of eight years. The Agreement
also calls for quarterly adjustments to raw material prices, up and down, based
upon changing market prices. Armstrong can purchase felt products from another
supplier if IT's prices are more than 10% higher than another supplier's prices.
While the Agreement requires Armstrong and IT to cooperate in product
reformulation and new product development, Armstrong is free to seek
alternatives to felt products.
Armstrong plans to use the cash proceeds from the sale to reduce its
outstanding debt.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
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(A) FINANCIAL STATEMENTS
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NONE.
(B) PRO FORMA FINANCIAL INFORMATION
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The unaudited pro forma balance sheet as of March 31, 1999, has
been prepared by Armstrong as if the disposition had occurred on March 31, 1999.
The unaudited pro forma statement of operations for the three
months ended March 31, 1999 and for the year ended December 31, 1998 have been
prepared by Armstrong as if the disposition had occurred on January 1, 1999 and
January 1, 1998, respectively.
The pro forma financial information does not purport to be
indicative of the results that would have been obtained had the disposition been
completed as of the date and for the periods presented or the results that may
be obtained by Armstrong in the future.
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Armstrong World Industries, Inc., and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 1999
Actual Pro Forma
March 31, Pro Forma March 31,
(in millions) 1999 Adjustments 1999
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Assets
Current assets:
Cash and cash equivalents $36.6 $35.9 (1) $72.5
Accounts and notes receivable, net 477.1 (8.0)(2) 469.1
Inventories 465.6 (7.3)(2) 458.3
Income tax benefits 48.0 - 48.0
Net assets of businesses held for sale 47.5 - 47.5
Other current assets 86.3 0.1 (2) 86.4
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Total current assets 1,161.1 20.7 1,181.8
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Property, plant and equipment, net 1,481.2 (35.3)(2) 1,445.9
Insurance for asbestos-related liabilities 234.8 - 234.8
Investment in affiliates 43.7 14.3 (3) 58.0
Goodwill, net 958.4 - 958.4
Other intangibles, net 60.1 (3.3)(2) 56.8
Other noncurrent assets 342.9 (0.1)(2) 342.8
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Total assets $4,282.2 ($3.7) $4,278.5
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Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $188.8 - $188.8
Current installments of long-term debt 32.6 - 32.6
Accounts payable and accrued expenses 536.0 ($3.5)(4) 532.5
Income taxes 52.0 2.0 (2) 54.0
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Total current liabilities 809.4 (1.5) 807.9
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Long-term debt, less current installments 1,554.0 - 1,554.0
Employee Stock Ownership Plan (ESOP) loan guarantee 178.6 - 178.6
Deferred income taxes 112.8 (2.1)(2) 110.7
Postretirement and postemployment benefit liabilities 250.6 (6.1)(2) 244.5
Pension benefit liabilities 234.2 (0.1)(2) 234.1
Asbestos-related long-term liabilities 269.4 - 269.4
Other long-term liabilities 115.1 (1.5)(2) 113.6
Minority interest in subsidiaries 15.3 - 15.3
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Total noncurrent liabilities 2,730.0 (9.8) 2,720.2
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Shareholders' equity:
Common stock 51.9 - 51.9
Capital in excess of par value 173.6 - 173.6
Reduction for ESOP loan guarantee (195.6) - (195.6)
Retained earnings 1,286.5 7.6 (5) 1,294.1
Accumulated other comprehensive loss (26.5) - (26.5)
Treasury stock (547.1) - (547.1)
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Total shareholders' equity 742.8 7.6 750.4
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Total liabilities and shareholders' equity $4,282.2 ($3.7) $4,278.5
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See accompanying notes to the unaudited pro forma consolidated financial
statements.
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Armstrong World Industries, Inc., and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For the Three Months Ended March 31, 1999
Actual Pro Forma
March 31, Pro Forma March 31,
(in millions) 1999 Adjustments 1999
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Net sales $829.1 ($13.1)(1) $816.0
Cost of goods sold 553.8 (10.6)(1) 543.2
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275.3 (2.5) 272.8
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Selling, general and administrative expense 169.2 (2.1)(1) 167.1
Goodwill amortization 6.1 - 6.1
Equity earnings from affiliates (3.9) (0.3)(2) (4.2)
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Operating income 103.9 (0.1) 103.8
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Interest expense 26.7 (0.5)(3) 26.2
Other income, net (0.6) - (0.6)
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Earnings before income taxes 77.8 0.4 78.2
Income taxes 29.5 0.2 29.7
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Net earnings $48.3 $0.2 $48.5
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Net earnings per share of common stock:
Basic $1.21 $1.22
Diluted $1.20 $1.21
Average number of common shares outstanding:
Basic 39.8 39.8
Diluted 40.2 40.2
See accompanying notes to the unaudited pro forma consolidated financial
statements.
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Armstrong World Industries, Inc., and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 1998
Actual Pro Forma
December 31, Pro Forma December 31,
(in millions) 1998 Adjustments 1998
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Net sales $2,746.2 ($67.0)(1) $2,679.2
Cost of goods sold 1,838.6 (49.0)(1) 1,789.6
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907.6 (18.0) 889.6
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Selling, general and administrative expense 522.0 (9.3)(1) 512.7
Goodwill amortization 10.7 - 10.7
Reorganization charges 74.6 (1.9)(1) 72.7
Charge for asbestos liability 274.2 - 274.2
Equity earnings from affiliates (13.8) (1.0) (14.8)
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Operating income 39.9 (5.8) 34.1
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Interest expense 62.2 (2.2)(3) 60.0
Other income, net (1.7) - (1.7)
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Earnings (loss) before income taxes (20.6) (3.6) (24.2)
Income tax expense (benefit) (11.3) (1.2) (12.5)
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Net earnings (loss) ($9.3) ($2.4) ($11.7)
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Net loss per share of common stock:
Basic ($0.23) ($0.29)
Diluted ($0.23) ($0.29)
Average number of common shares outstanding:
Basic 39.8 39.8
Diluted 40.4 40.4
See accompanying notes to the unaudited pro forma consolidated financial
statements.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(1) Reflects consideration received of $36.1 million less cash of AISI as of
March 31, 1999.
(2) Reflects removal of assets and liabilities of AISI as of March 31, 1999.
(3) Reflects Armstrong's 35% equity investment in IT as of March 31, 1999.
(4) Reflects removal of liabilities of AISI as of March 31, 1999 net of
anticipated deal costs.
(5) Reflects the pro forma effect on retained earnings of the transaction as if
it occurred on March 31, 1999.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND THE YEAR ENDED DECEMBER 31, 1998
(1) Reflects the removal of the operating results of AISI.
(2) Reflects Armstrong's equity earnings in IT.
(3) Reflects Armstrong's reduced interest expense due to the use of cash
proceeds from the disposition for payment of outstanding debt at an
interest rate of 6.0%.
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(C) EXHIBITS
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EXHIBIT NO. DESCRIPTION OF DOCUMENT
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Agreement and Plan of Merger, dated as of June 30,
1999 by and among AISI Acquisition Corp. and
Armstrong World Industries, Inc. and Armstrong
Industrial Specialties, Inc.
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SIGNATURE
Pursuant to the requirements 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 WORLD INDUSTRIES, INC.
(registrant)
Date: July 14, 1999 By: \s\ Edward R. Case
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Edward R. Case, Vice President and
Controller (Principal Accounting
Officer)
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