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 December 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______ to _________
Commission file numbers 1-2116 and 333-32530
HARTCO FLOORING COMPANY RETIREMENT SAVINGS PLAN
(Full title of the Plan)
ARMSTRONG WORLD INDUSTRIES, INC.
ARMSTRONG HOLDINGS, INC.
2500 Columbia Avenue Lancaster, Pennsylvania 17604
(Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office)
1
Page
Item 1. Independent Auditors' Report 4
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Item 2. Statements of Net Assets Available for Benefits as of December 31, 2001 and 2000 5
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Item 3. Statements of Changes in Net Assets Available for Benefits for the years ended
------------------------------------------------------------------------------
December 31, 2001 and 2000 6
--------------------------
Notes to Financial Statements 7
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 14
Schedules not filed herewith are omitted because of the absence of conditions under which they
are required.
Exhibits
--------
Consent of Independent Auditors 15
2
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.
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
July 1, 2002 By: /s/: Donald C. Fetzer, Jr.
------------------------------
Donald C. Fetzer, Jr., Member of the Administrative Committee
3
Independent Auditors' Report
To the Retirement Committee of the
Hartco Flooring Company
Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Hartco Flooring Company Retirement Savings Plan as of December 31, 2001
and 2000, and the related statements of changes in net assets available for
benefits for the years then ended. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Hartco
Flooring Company Retirement Savings Plan as of December 31, 2001 and 2000, and
the changes in net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure Under the Employee Retirement Income Security Act of
1974. The supplemental schedule has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
KPMG LLP
Dallas, Texas
May 24, 2002
4
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
2001 2000
------------------- -------------------
Assets:
Investments, at fair value (note 5):
Armstrong Holdings, Inc. common stock $ 285,950 183,608
Fidelity Magellan Fund 1,662,086 1,813,926
Fidelity Equity Income Fund 1,231,342 1,454,970
Fidelity Intermediate Bond Fund 926,906 963,539
Fidelity Overseas Fund 373,857 488,818
Fidelity Asset Manager Fund 252,816 229,440
Fidelity Retirement Money Market Fund 1,104,893 804,567
Participant loans 299,941 295,746
------------------- -------------------
Total investments 6,137,791 6,234,614
------------------- -------------------
Receivables (note 2):
Employer contributions 4,390 180,305
Employee contributions 10,821 2,947
Participant loans 3,789 1,135
------------------- -------------------
Total receivables 19,000 184,387
------------------- -------------------
Total assets 6,156,791 6,419,001
Refund payable to participants 11,614 42,669
------------------- -------------------
Net assets available for benefits $ 6,145,177 6,376,332
=================== ===================
See accompanying notes to financial statements.
5
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2001 and 2000
2001 2000
------------------- -------------------
Additions to net assets attributed to:
Investment income (loss):
Interest and dividend income $ 194,041 427,583
Net depreciation in fair value of investments (note 5) (326,663) (1,057,188)
------------------- -------------------
Net investment loss (132,622) (629,605)
------------------- -------------------
Contributions:
Participant (note 2) 380,265 343,653
Employer (note 2) 134,374 319,976
Rollovers (note 3) 16,074 36,801
------------------- -------------------
Total contributions 530,713 700,430
------------------- -------------------
Total additions 398,091 70,825
Deductions from net assets attributed to:
Benefits paid to participants (notes 2 and 3) 629,246 (327,052)
------------------- -------------------
Net decrease (231,155) (256,227)
Net assets available for benefits at beginning of year 6,376,332 6,632,559
------------------- -------------------
Net assets available for benefits at end of year $ 6,145,177 6,376,332
=================== ===================
See accompanying notes to financial statements.
6
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(1) General Information
On June 28, 1996, Armstrong Wood Products, Inc. (the Company) (formerly
known as Triangle Pacific Corp.) acquired from Premark International, Inc.
(Premark) all of the common stock of Hartco Flooring Company. In connection
with this acquisition, Premark and the Company agreed to spin off,
effective as of June 28, 1996, that portion of the Premark Plan benefiting
participants who were employees or former employees of Premark, to a
separate plan sponsored and maintained by the Company to be known as the
Hartco Flooring Company Retirement Savings Plan (the Plan), as set forth
herein, as a continuation, without interruption, of such portion of the
Premark Plan.
On July 22, 1998, Armstrong Wood Products, Inc. was acquired by Armstrong
World Industries, Inc. (a subsidiary of Armstrong Holdings, Inc.). The
Board of Directors of Armstrong Wood Products, Inc. intends to continue
providing retirement benefits through the Company's defined contribution
plans.
(2) Description of the Plan
The following description of the Plan provides only general information.
Participants should refer to the Plan document for more detailed
information.
(a) General
The Plan is a defined contribution plan which provides retirement
benefits to employees of Hartco Flooring Company, a division of
Armstrong Wood Products, Inc., who are not members of a collective
bargaining agreement and whose customary employment is for at least
1,000 hours during a 12-month period. Employees are eligible to
participate in the Plan on the first day of the month coincident with
or following the completion of six months of service. All eligible
employees whose customary employment is not for at least 1,000 hours
during a year participate in the plan on the first day of the month
coincident with or following the 12-month period after their
employment or any plan year thereafter, provided 1,000 hours of
service are completed during this time period. However, employees must
not be active participants in any other defined contribution plan to
which the Company or any subsidiary contributes on their behalf.
Effective November 1, 2001, the Plan was amended to allow for
immediate participation by employees upon the completion of one hour
of service. The Plan is administered by Hartco Flooring Company, a
subsidiary of Armstrong Wood Products, Inc., and advised by the
Company's Retirement Committee appointed by the Board of Directors of
the Company. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
(b) Contributions
Participants are permitted to contribute from 1% to 16% of their
eligible compensation to the Plan, as defined by the Plan documents.
Participants may elect to invest their contributions in any of the
available investment funds offered by Fidelity Management Trust
Company, the Trustee. Effective January 1, 2000, the Company provides
a 50% match of active participants' contributions, up to 6% of the
participant's eligible compensation.
7
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
Effective January 1, 1998, the Plan was amended to include a profit
sharing component. The Company may contribute a discretionary profit
sharing amount based solely at the discretion of the Board of
Directors of the Company. The board of directors approved a
discretionary profit sharing contribution of $0 and $179,034 for the
years ended December 31, 2001 and 2000, respectively.
(c) Participant Accounts
Each participant's account is credited with the participant's
contribution and an allocation of the Company's contribution, Plan
earnings, and forfeitures of terminated participants' nonvested
accounts. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account.
(d) Vesting
Participants are fully vested in the current value of their own
contributions and earnings thereon, and become fully vested in Company
contributions and related earnings credited to their accounts based
upon their years of vesting service as shown in the following table:
Years of Vested
vesting service percentage
------------------------------ -------------------
Less than 1 0%
1 but less than 2 20
2 but less than 3 40
3 but less than 4 60
4 but less than 5 80
5 or more 100
Participants who are age 65 or over or become permanently disabled are
automatically 100% vested in the value of Company contributions and
related earnings credited to their account.
(e) Investment Options
Elective contributions may be invested in guaranteed income funds,
fixed income funds, equity funds, or a money market fund at the option
of the participating employee. The Plan has investment options
available to which participants may allocate their contributions as
follows:
. Armstrong Holdings, Inc. Common Stock - Effective April 1, 1999,
the Plan was amended to include Armstrong World Industries, Inc.
common stock as one of the investment options. On May 1, 2000,
Armstrong Holdings, Inc. acquired the stock of Armstrong World
Industries, Inc. An indirect holding in Armstrong World
Industries, Inc. makes up substantially all of the assets of
Armstrong Holdings, Inc. Armstrong Holdings, Inc. is publicly
traded on the New York Stock Exchange. On December 6, 2000,
Armstrong World Industries, Inc. filed a
8
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
voluntary petition for relief under Chapter 11 of the U.S.
Bankruptcy Code in Wilmington, DE in order to use the
court-supervised reorganization process to achieve a resolution
of its asbestos liability. Armstrong Wood Products, Inc. was not
included in the filing. As of December 19, 2000, the Plan was
amended to eliminate the Armstrong Holdings, Inc. Common Stock
fund as an investment option effective with contributions made on
or after December 27, 2000 and transfers processed on or after
January 1, 2001.
. Fidelity Magellan Fund - The Fidelity Magellan Fund is a
diversified portfolio of common stocks of domestic and foreign
issuers. The portfolio seeks capital appreciation by investing in
growth stocks, value stocks, or both.
. Fidelity Equity Income Fund - The Fidelity Equity Income Fund has
a primary objective of seeking reasonable income levels by
investing 65% of total assets in foreign and domestic income
producing equity securities, such as stocks, bonds, and other
debt securities. The fund also seeks capital appreciation when
consistent with its primary objective.
. Fidelity Intermediate Bond Fund - The Fidelity Intermediate Bond
Fund has a primary objective of seeking high current income by
investing in U.S. dollar-dominated investment grade debt
securities with maturities between three to ten years. The Lehman
Brothers Intermediate Government/Corporate Bond Index is used as
a guide in structuring the fund and selecting the investments.
. Fidelity Overseas Fund - The Fidelity Overseas Fund seeks
long-term growth of capital by primarily investing in the common
stock of foreign issuers.
. Fidelity Asset Manager Fund - The Fidelity Asset Manager Fund
strives for high total return with reduced risk over the long
term. The fund pursues this goal with diversified investments of
stocks, bonds, short-term, and money market instruments, both
domestic and international, while maintaining a diversified mix
of securities.
. Fidelity Retirement Money Market Fund - The Fidelity Retirement
Money Market Fund seeks to earn a high level of current income
while maintaining a stable $1.00 share price by investing in
high-quality, short-term securities. These securities may
include, but are not limited to, high-quality, short-term U.S.
dollar-denominated money market securities, domestic, and foreign
issuers.
(f) Participant Loans
Participants may borrow from the Plan an amount greater than $1,000
but less than 50% of the participant's vested account balance. In no
event can the participant borrow more than $50,000. Loans are for a
period not to exceed five years and bear interest at 1% above the
prime rate of interest being charged by local banks at the time the
loan is authorized. The interest rate at December 31, 2001 was 5.75%.
9
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(g) Payment of Benefits
On termination of service due to death, disability, or retirement, a
participant may elect to receive the total value of their account
attributable to their contributions, as well as the vested value of
their Company contributions, in cash or by purchasing an annuity under
the terms of an annuity contract. For termination of service due to
other reasons, a participant may receive the value of the vested
interest in his or her account as a lump-sum distribution.
Participants may make hardship withdrawals from their earnings
deferred contributions at specified times, subject to the
determination by the Plan administrator that the withdrawal is
required to meet an immediate and heavy financial need.
(h) Forfeitures
Company contributions forfeited by terminating employees are used to
reduce future Company contributions to the Plan ($19,654 and $6,708 in
2001 and 2000, respectively). The Company will reinstate forfeited
balances to the accounts of participants who rejoin the Company within
five years of their termination.
(3) Summary of Significant Accounting Policies
(a) Basis of Accounting
The financial statements of the Plan are prepared under the accrual
method of accounting.
(b) Investment Valuation and Income Recognition
The Plan's investments are stated at fair value and have been
determined based on closing market quotations. Purchases and sales of
securities are recorded by the trustee at current cost on the trade
date. Realized and unrealized gains (losses) on investments are based
on the fair value of the assets at the beginning of the Plan year or
at the time of purchase during the year. Interest income is recorded
on the accrual basis. Dividends are recorded on the ex-dividend date.
(c) Administration Expenses
In accordance with the provisions of the Plan, unless paid by the
Company, all costs of administering the Plan are charged to the Plan.
During 2001 and 2000, all significant expenses were paid by the
Company ($8,544 in 2001 and $16,087 in 2000, respectively).
(d) Payment of Benefits
Benefits are recorded when distributed.
(e) Rollover Contributions
Employee rollovers represent receipts from employees receiving
distributions from their previous employers' qualified plan(s).
10
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(f) Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from
those estimates.
(g) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities
(SFAS No. 133). SFAS No. 133 requires that an entity recognize all
derivatives in its statement of net assets and measure those
instruments at fair value with changes recognized in the statement of
changes in net assets.
SFAS No. 133 is effective for fiscal years beginning after June 15,
2000. Pursuant to SFAS No. 137, the Plan adopted SFAS No. 133
effective January 1, 2001. The Adoption of SFAS No. 133 did not have a
material impact on the Plan financial statements.
(4) Units
Participant accounts are assigned investment fund units/shares. The net
asset value per unit/share by fund/account for the 2001 and 2000 calendar
quarters ended is as follows:
Units at
2001 quarters ended December 31,
------------------------------------------------------------ ---------------
March 31 June 30 September 30 December 31 2001
-------------- ------------- -------------- ------------- ---------------
Armstrong Holdings, Inc. common stock $ 4.05 3.55 2.73 3.41 83,856
Fidelity Magellan Fund 104.50 111.09 94.03 104.22 15,948
Fidelity Equity Income Fund 49.77 52.19 45.62 48.77 25,248
Fidelity Intermediate Bond Fund 10.22 10.14 10.45 10.32 89,817
Fidelity Overseas Fund 30.50 30.50 24.89 27.42 13,634
Fidelity Asset Manager Fund 15.70 16.11 14.71 15.50 16,311
Fidelity Retirement Money Market Fund 1.00 1.00 1.00 1.00 1,104,893
Units at
2000 quarters ended December 31,
------------------------------------------------------------ ---------------
March 31 June 30 September 30 December 31 2000
-------------- ------------- -------------- ------------- ---------------
Armstrong Holdings, Inc. common stock $ 17.88 15.30 11.94 2.07 89,001
Fidelity Magellan Fund 143.25 134.63 133.84 119.30 15,205
Fidelity Equity Income Fund 50.62 50.37 53.71 53.43 27,231
Fidelity Intermediate Bond Fund 9.75 9.75 9.86 10.04 95,970
Fidelity Overseas Fund 48.27 45.73 42.42 34.37 14,222
Fidelity Asset Manager Fund 19.05 18.80 19.11 16.82 13,641
Fidelity Retirement Money Market Fund 1.00 1.00 1.00 1.00 804,567
11
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(5) Investments
The following investments exceed 5% of the Plan's net assets available for
Plan benefits at December 31, 2001 and 2000:
Fair value
-------------------------------------------
2001 2000
-------------------- --------------------
Fidelity Magellan Fund $ 1,662,086 1,813,926
Fidelity Equity Income Fund 1,231,342 1,454,970
Fidelity Intermediate Bond Fund 926,906 963,539
Fidelity Overseas Fund 373,857 488,818
Fidelity Retirement Money Market Fund 1,104,893 804,567
Other - less than 5% 838,707 708,794
-------------------- --------------------
Total investments $ 6,137,791 6,234,614
==================== ====================
During 2001 and 2000, the Plan's investments had net realized and
unrealized gains (losses) as follows:
2001 2000
-------------------- --------------------
Armstrong Holdings, Inc. common stock $ 120,223 (621,277)
Fidelity Magellan Fund (232,102) (257,531)
Fidelity Equity Income Fund (122,207) (3,549)
Fidelity Intermediate Bond Fund 24,707 26,147
Fidelity Overseas Fund (98,243) (182,982)
Fidelity Asset Manager Fund (19,041) (17,995)
-------------------- --------------------
Net depreciation in fair value of investments $ (326,663) (1,057,188)
==================== ====================
The components of investment income (loss) for the years ended December 31,
2001 and 2000 are as follows:
2001 2000
-------------------- --------------------
Investment income (loss):
Interest and dividend income $ 194,041 427,583
Net depreciation in the fair value of investments (326,663) (1,057,188)
-------------------- --------------------
$ (132,622) (629,605)
==================== ====================
12
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2001 and 2000
(6) Tax Status of the Plan
The Internal Revenue Service has determined and informed the Company by a
letter dated January 27, 1998, that the Plan and related trust are designed
in accordance with applicable requirements of the Internal Revenue Code
(IRC). The Plan has been amended since receiving the determination letter.
However, the Plan administrator and Plan's management believe that the Plan
is designed and is currently being operated in compliance with the
applicable requirements of the IRC.
(7) Plan Termination
Although it has not expressed intent to do so, the Company has the right to
discontinue its contribution at any time and to terminate the Plan subject
to the provisions of ERISA. In the event of Plan termination, participants
will become fully vested in their accounts.
(8) Related-Party Transactions
Certain Plan investments are shares of common stock of Armstrong Holdings,
Inc. and shares of mutual funds managed by Fidelity Investments. Armstrong
Wood Products, Inc. is a wholly owned subsidiary of Armstrong World
Industries, Inc. Fidelity Management Trust Company is the trustee as
defined by the Plan. Therefore, transactions involving these entities or
funds qualify as party-in-interest transactions.
(9) Subsequent Events
In 2002, the Plan was amended due to changes in various legislation and
governmental regulations. These amendments were compliance related and no
changes were made to the design of the Plan.
Subsequent to December 31, 2001, the date for valuation of plan assets
provided herein, the value of plan investments has changed, and some have
fallen significantly from their values shown here.
13
Schedule 1
HARTCO FLOORING COMPANY
RETIREMENT SAVINGS PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001
Current
Identity of issuer Description of investment value
----------------------------------- ---------------------------------------------------- ------------------
Armstrong Holdings, Inc.* Common stock $ 285,950
Fidelity Investments* Fidelity Magellan Fund 1,662,086
Fidelity Investments* Fidelity Equity Income Fund 1,231,342
Fidelity Investments* Fidelity Intermediate Bond Fund 926,906
Fidelity Investments* Fidelity Overseas Fund 373,857
Fidelity Investments* Fidelity Asset Manager Fund 252,816
Fidelity Investments* Fidelity Retirement Money Market Fund 1,104,893
Participant loans* Loans to participants 299,941
------------------
Total investments $ 6,137,791
==================
* Party-in-interest
See accompanying independent auditors' report.
14