Edgar Filing: ARMSTRONG WORLD INDUSTRIES INC

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, 2003

[_] 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 000-50408

RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
(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)

Page No.

Item 1. Independent Auditors' Report 4

Item 2. Statements of Net Assets Available for Benefits 5
September 30, 2003 and 2002

Item 3. Statements of Changes in Net Assets Available for Benefits 6
Years ended September 30, 2003 and 2002

Notes to Financial Statements 7-18

Schedule H, line 4i - Schedule of Assets (Held at End of Year) 19

Exhibits

Consent of Independent Auditors 20

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the members
of the committee constituting the administrator which administers the plan have
duly caused this annual report to be signed by the undersigned hereunto duly
authorized.

RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.

March 23, 2004 By: /s/ Matthew J. Angello
---------------------------

Matthew J. Angello, Chairman of the
Retirement Committee

Item 1

Independent Auditors' Report

The Retirement Committee
Armstrong World Industries, Inc.:

We have audited the accompanying statements of net assets available for benefits
of the Retirement Savings and Stock Ownership Plan of Armstrong World
Industries, Inc. as of September 30, 2003 and 2002 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.

As discussed in Note 1 to the financial statements, on December 6, 2000,
Armstrong World Industries, Inc., the Plan's sponsor, filed a voluntary petition
for relief under Chapter 11 of the U.S. Bankruptcy Code in order to use the
court-supervised reorganization process to achieve a resolution of its asbestos
liability.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Retirement
Savings and Stock Ownership Plan of Armstrong World Industries, Inc. as of
September 30, 2003 and 2002 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 is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements but is supplementary information required by the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the 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.

/s/ KPMG LLP

March 15, 2004
Philadelphia, Pennsylvania

Item 2

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Net Assets Available for Benefits
September 30, 2003 and 2002

September 30,
-----------------------------
2003 2002
------------ ------------

Assets:
Investments in master trust:
Cash equivalents:
Fidelity Retirement Money Market Portfolio $ 12,453,249 $ 5,556,960
Shares of registered investment companies:
Fidelity Magellan Fund 68,528,640 51,003,508
Fidelity Low-Priced Stock Fund 7,072,362 4,123,067
Fidelity OTC Portfolio 15,405,596 11,362,627
Fidelity Asset Manager Fund 6,876,337 5,215,695
Fidelity Asset Manager: Income Fund 1,743,139 2,045,481
Fidelity Asset Manager: Growth Fund 7,213,049 7,063,524
Fidelity Overseas Fund 2,500,271 981,827
MSIF Trust Value Portfolio 2,058,986 1,357,675
MSIF Trust Mid Cap Core Portfolio 5,359,490 3,806,859
Spartan US Equity Index Fund 38,428,154 32,293,863
MSIF Global Value Equity Portfolio 1,970,707 1,531,596
Fidelity Equity Income Fund 5,557,608 --
Fidelity Intermediate Bond Fund 3,845,027 --
Fidelity Freedom 2010 Fund 1,453,389 --
Fidelity Freedom 2020 Fund 1,472,476 --
Fidelity Freedom 2030 Fund 569,659 --
Fidelity Freedom 2040 Fund 61,620 --
Fidelity Freedom Income Fund 363,012 --
Interest in common/collective trusts:
Fidelity Managed Income Portfolio II, Class 3 134,356,409 --
Fixed income investment contracts:
Fidelity Interest Income Fund -- 129,426,624
Armstrong Holdings, Inc. Common Stock 1,442,043 1,315,270
Participant loans 4,115,721 3,340,927
------------ ------------
Total investments in master trust 322,846,944 260,425,503
Investments in employee stock ownership funds:
Cash equivalents 112,280 115,529
Allocated Armstrong Holdings, Inc. Common Stock 3,665,459 3,556,219
Unallocated Armstrong Holdings, Inc. Common Stock 2,867,325 2,580,593
------------ ------------
Total investments in employee stock ownership funds 6,645,064 6,252,341
Restorative payment receivable pursuant to settlement agreement 1,500,000 --
Interest and other receivables 4,299 1,441
------------ ------------
Total assets 330,996,307 266,679,285
------------ ------------

Liabilities:
Guaranteed ESOP notes 142,158,150 142,158,150
Interest and tax penalty 15,458,029 15,458,029
Accrued interest 74,457,059 47,360,229
------------ ------------
Total liabilities 232,073,238 204,976,408
------------ ------------

Net assets available for benefits $ 98,923,069 $ 61,702,877
============ ============

See accompanying notes to the financial statements.

Item 3

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Statements of Changes in Net Assets Available for Benefits
Years Ended September 30, 2003 and 2002

Year Ended September 30,
----------------------------
2003 2002
----------- ------------

Additions to net assets attributed to:
Employee contributions $18,201,070 $ 16,014,947
Employer contributions 5,485,615 4,581,065
----------- ------------
23,686,685 20,596,012

Dividends 6,457,768 1,671,532
Interest on fixed income investments and cash equivalents 1,637,176 7,023,448
Interest on loans 209,971 234,551
Net appreciation in fair value of investments 29,827,015 --
Restorative payment pursuant to settlement agreement 1,500,000 --
Net transfers from other employee benefit plans 27,215,884 617,509
----------- ------------
66,847,814 9,547,040
----------- ------------

Total additions 90,534,499 30,143,052
----------- ------------

Reduction in net assets attributed to:
Benefits paid to participants 26,142,786 20,216,869
Deemed distributions of participant loans 74,691 20,087
Interest expense 27,096,830 23,932,139
Net depreciation in fair value of investments -- 36,493,094
----------- ------------

Total reductions 53,314,307 80,662,189
----------- ------------

Net increase (decrease) 37,220,192 (50,519,137)

Net assets available for benefits:

Beginning of year 61,702,877 112,222,014
----------- ------------

End of year $98,923,069 $61,702,877
=========== ============

See accompanying notes to the financial statements.

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements

(1) Plan Description

The Retirement Savings and Stock Ownership Plan of Armstrong World
Industries, Inc. ("the Plan") is a defined contribution plan established
for the purpose of providing participants a means for long-term savings
intended for the accumulation of retirement income. The Plan is comprised
of two parts--Retirement Savings Plan and Employee Stock Ownership Plan
(ESOP). Each part has its own set of participant accounts and investment
funds. On December 6, 2000 Armstrong World Industries, Inc. ("Armstrong")
filed a voluntary petition for relief under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware in order to use the court-supervised reorganization process to
achieve a resolution of its asbestos-related liability. On December 6, 2000
Armstrong filed a motion with the bankruptcy court to allow Armstrong to
continue making contributions to the Plan. The motion was approved by the
bankruptcy court. Management does not anticipate that Armstrong's
bankruptcy filing will have an adverse impact on the operations of the
Plan. See Note 13 for further discussion of Chapter 11 events.

On October 17, 2002, Armstrong's Retirement Committee unanimously passed a
resolution to merge the Armstrong Wood Products Salaried Employees' Profit
Sharing Plan and portions of the Hartco Flooring Co. Retirement Savings
Plan and the Robbins Hardwood Flooring, Inc. Employees' Retirement Savings
Plan into the Plan. Effective December 20, 2002, plan assets of $26.9
million were transferred into the Plan.

(a) Retirement Savings

Separate balances are maintained for contributions made by or on behalf
of a participant. The balances in each fund reflect the participants'
contributions together with dividends, interest, other income, and
realized and unrealized gains and losses allocated thereon.

Each participant may have up to seven accounts that make up the
participant's total balance:

Sheltered account - The Plan was amended effective April 1, 2002
to allow participants to contribute from 1% to 40% of pretax
compensation as deferred compensation, as permitted under
Section 401(k) of the Internal Revenue Code. Prior to April 1,
2002, participants could contribute from 1% to 15% of pretax
compensation.

Standard account - Participants may contribute from 1% to 10% of
after-tax compensation.

Rollover account - Participants may invest any untaxed amounts
rolled over from another tax-qualified, employer-sponsored plan.
The Plan was amended to expand the permissible sources of
rollover contributions beginning January 1, 2003 to include
qualified annuity contracts, tax-deferred annuity plans,
governmental deferred compensation plans, and individual
retirement arrangements.

Retirement savings match account - This account holds any cash
match amount contributed by Armstrong beginning in December
2000. Armstrong contributes an amount equal to 50% of the first
6% of each participant's sheltered account contributions. This
account also holds any amount contributed by Armstrong before
cash matching contributions were discontinued in 1990 (formerly
referred to as the Old Match account).

Age 50 catch-up account - The Plan was amended effective January
1, 2003 to allow participants who are age 50 or older to make
"catch-up" contributions, subject to the annual limits on
catch-up contributions specified in the Internal Revenue Code.

AWP profit sharing account - This account holds discretionary
profit sharing money contributed by Armstrong for certain
employees.

Tax-deductible account (MIRA) - This account holds any
contributions made to the Plan before January 1, 1987. No new
contributions can be made to this account.

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

Participants have an immediate 100% vested interest with respect to their
contributions and are fully vested with regard to any Armstrong
contributions in the retirement savings match account attributable to
matching contributions made before December 1, 2000. Participants have a
100% vested interest in Armstrong amounts contributed to their retirement
savings match account made on or after December 1, 2000 upon completion of
five years of service. On June 25, 2002, the Plan was amended such that all
participants actively employed on or after October 1, 2002 will become 100%
vested in Armstrong amounts contributed to their retirement savings match
account upon completion of three years of service. Participants who were
former participants in the Armstrong Wood Products Salaried Employees'
Profit Sharing Plan, the Hartco Flooring Co. Retirement Savings Plan and
the Robbins Hardwood Flooring, Inc. Employees' Retirement Savings Plan and
were hired prior to and actively employed on January 1, 2003 are fully
vested with regard to any Armstrong contributions. Participants who were
former participants in the Armstrong Wood Products Salaried Employees'
Profit Sharing Plan, the Hartco Flooring Co. Retirement Savings Plan and
the Robbins Hardwood Flooring, Inc. Employees' Retirement Savings Plan but
were not actively employed on January 1, 2003 will become vested based upon
the requirements of those predecessor plans (maximum vesting period of five
years).

(b) Stock Ownership

The ESOP portion of the Plan has three accounts maintained for each
member for contributions and allocations of shares of Armstrong
Holdings, Inc. common stock from the Unallocated Armstrong Holdings,
Inc. Common Stock Fund:

Exchange account -Participants who elected to reduce their
pretax compensation in amounts ranging from 1% to 6% had these
contributions credited to an Exchange Account. Contributions to
the Exchange Account were invested in Armstrong Holdings, Inc.
common stock. Effective December 1, 2000, all regular
contributions and allocations to the Exchange Account ceased.

Match account - The Plan matched a portion of the contributions
made to the Exchange Account with additional shares of Armstrong
Holdings, Inc. common stock. The matching amounts were recorded
in participants' Match Accounts. The match percentage, either
50% or 75%, was determined by the closing stock price on the
last day of the allocation period. Effective December 1, 2000,
all regular contributions and allocations to the Match Account
ceased.

Equity account - Eligible participants also received shares of
Armstrong Holdings, Inc. common stock in their Equity Account.
The Equity Account was intended to provide a source of funds to
replace certain retiree medical benefits which were phased out
in conjunction with the adoption of the ESOP. Effective December
1, 2000, all allocations to the Equity Account ceased.

All participants have a 100% vested interest in the full value of their
Exchange Account. Interest in the Equity and Match Accounts vests after
five years of service. On June 25, 2002, the Plan was amended such that
all participants actively employed on or after October 1, 2002 will
become 100% vested in their Equity and Match Accounts upon completion
of three years of service.

Amounts forfeited by participants are first used to reduce future Armstrong
contributions, and then to pay administrative expenses under the Plan.

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

The accompanying financial statements have been prepared on the accrual
basis except for interest income on participant loans, which is
recorded when received.

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from estimates recorded.

(b) Investments in Master Trust

The money market and managed income portfolios are stated at cost,
which approximates fair value. The value of the participant loans
represents the unpaid principal of employee loans. The value of all
other investments is based on quoted market price.

Securities transactions are recognized on the settlement date (the date
on which payment for a buy or sell order is made or received), since
adjustment to a trade-date basis would not be material. Dividend income
is recorded on the ex-dividend date. Interest income on participant
loans is recorded when received.

Deemed distributions occur when active participants default on their
loans. Their loans are in default due to failure to make the required
repayments or their loans mature and have not been repaid in full.

Employee Stock Ownership Funds

Investments in the Employee Stock Ownership Funds represent shares of
Armstrong Holdings, Inc. common stock valued at quoted market price.
Cash equivalents are stated at cost, which approximates fair value.

All legal, accounting and administrative expenses associated with Plan
operations are paid by Armstrong.

(3) Investments in Master Trust

(a) Retirement Savings Funds

Assets are held in a Master Trust administered by Fidelity Management
Trust Co., as Trustee, and are segregated into twenty-one investment
options.

The following is a brief description of the investment funds to which
Plan participants may elect to allocate their contributions.
Participants should refer to fund prospectuses for more complete
information regarding the investment funds.

1. Spartan US Equity Index Fund - This fund is principally a
portfolio of common stocks constructed and maintained with the
objective of providing investment results which approximate
the overall performance of the common stocks included in the
Standard & Poor's Composite Index of 500 stocks.

2. Fidelity Magellan Fund - This fund invests in common stocks of
companies having substantial growth prospects as determined by
independent investment managers.

3. Fidelity Low-Priced Stock Fund - This fund seeks capital
appreciation through investments primarily in U.S. and foreign
low-priced stocks that may be undervalued, overlooked or out
of favor.

4. Fidelity Retirement Money Market Portfolio - This fund invests
in short-term (less than one year maturity) fixed income
instruments such as U.S. Treasury Bills, bank certificates of
deposit, and high grade commercial paper.

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

5. Fidelity Managed Income Portfolio II, Class 3 - Prior to May
15, 2001, contributions to the Fidelity Interest Income Fund
were invested in the general accounts of insurance companies
and were credited at contracted interest rates. Invested
principal and accumulated interest amounts were guaranteed
against loss by the insurance company. Crediting interest
rates were reset periodically during the plan year. At
September 30, 2002, the interest rates ranged between 3.25%
and 6.82%. The average yield at September 30, 2002 was 4.98%.
Beginning May 15, 2001, contributions to this fund are
invested in shares of Fidelity Managed Income Portfolio II
(MIPII). As existing insurance contracts matured or were
liquidated, the Fidelity Interest Income Fund used the
proceeds to purchase shares of MIPII. As of January 2, 2003,
all insurance contracts had matured or were liquidated, the
Fidelity Interest Income Fund was dissolved, and the Plan
began investing directly in the Fidelity MIPII Fund. MIPII is
a commingled pool of the Fidelity Group Trust for 401(k) plans
which is comprised of high-quality fixed income investment
contracts.

6. MSIF Global Value Equity Portfolio - This fund invests in a
diversified selection of stocks throughout the world. It seeks
to increase the value of the investment over the long term
through growth of capital.

7. Armstrong Holdings, Inc. Common Stock - Amounts invested in
this fund, along with dividend earnings thereon, are invested
in Armstrong Holdings, Inc. common stock. Common stock shares
held by the fund at September 30, 2003 and 2002 were 961,362
and 974,274, respectively. 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. As
of December 19, 2000, the Plan was amended to eliminate this
investment option effective with contributions made on or
after December 27, 2000 and transfers processed on or after
January 1, 2001.

8. Fidelity Overseas Fund - This fund invests in securities of
issuers whose principal business activities are outside the
U.S. Investments may include common stock and securities
convertible into common stock, as well as debt instruments.

9. Fidelity OTC Portfolio - This fund invests in securities
traded in the over-the-counter securities market with the
objective of maximizing capital appreciation. Over-the-counter
securities include common and preferred stocks, securities
convertible into common stock, warrants, and debt instruments.

10. Fidelity Asset Manager Fund - This is an asset allocation fund
which invests in a diversified portfolio of stocks, bonds, and
short-term instruments. The fund has a balanced investment
strategy with a goal of high total return with reduced risk
over the long term.

11. Fidelity Asset Manager: Income Fund - This is an asset
allocation fund which invests in a diversified portfolio of
stocks, bonds, and short-term instruments. The fund has an
investment strategy focusing on bonds and short-term
instruments to achieve a high level of current income and
capital preservation.

12. Fidelity Asset Manager: Growth Fund - This is an asset
allocation fund invested in a diversified mix of stocks,
bonds, and short-term instruments. The fund's investment
strategy is an aggressive one emphasizing stocks with the goal
of maximum total return over the long term.

13. MSIF Trust Mid Cap Core Portfolio - This fund invests in
undervalued common stocks of mid-sized companies with a strong
potential for increase in share price. It seeks to provide
above-average long-term returns.

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

14. MSIF Trust Value Portfolio - This fund seeks to provide above
average long-term returns by investing mostly in common stocks
of large companies that are considered undervalued.

15. Fidelity Equity Income Fund - This fund has a primary
objective of seeking reasonable income levels by investing at
least 80% of total assets in income producing equity
securities, which tends to lead to investments in large cap
"value" stocks. The fund may also invest in other types of
equity securities and debt securities, including lower-quality
debt securities. The fund seeks a yield that exceeds the yield
of the securities comprising the Standard & Poor's 500 Index.

16. Fidelity Intermediate Bond Fund - This 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.

17. Fidelity Freedom 2010 Fund - This fund seeks high total return
by investing in a combination of Fidelity equity,
fixed-income, and money market funds using a moderate asset
allocation strategy designed for investors expecting to retire
around the year 2010.

18. Fidelity Freedom 2020 Fund - This fund seeks high total return
by investing in a combination of Fidelity equity,
fixed-income, and money market funds using a moderate asset
allocation strategy designed for investors expecting to retire
around the year 2020.

19. Fidelity Freedom 2030 Fund - This fund seeks high total return
by investing in a combination of Fidelity equity,
fixed-income, and money market funds using a moderate asset
allocation strategy designed for investors expecting to retire
around the year 2030.

20. Fidelity Freedom 2040 Fund - This fund seeks high total return
by investing in a combination of Fidelity equity,
fixed-income, and money market funds using a moderate asset
allocation strategy designed for investors expecting to retire
around the year 2040.

21. Fidelity Freedom Income Fund - This fund seeks high current
income and, as a secondary objective, capital appreciation.
The fund invests in a combination of Fidelity equity,
fixed-income, and money market funds using a moderate
allocation strategy designed for investors already in
retirement.

Participant loans represent the unpaid principal balances of loans to
Plan participants in accordance with established loan provision
guidelines. At September 30, 2003, the interest rates ranged between
4.00% and 11.50%. At September 30, 2002, the interest rates ranged
between 4.75% and 11.96%.

On June 25, 2002, the Plan was amended to add the Fidelity Equity
Income Fund, the Fidelity Intermediate Bond Fund, and the Fidelity
Freedom Funds as investment options effective January 1, 2003. In
addition, the Asset Manager Funds are no longer offered with respect to
contributions made or transfers requested on or after January 1, 2003.
Any contribution election on December 31, 2002 to invest in one of the
Asset Manager Funds was changed to a corresponding Fidelity Freedom
Fund on January 1, 2003. Any balances in the Asset Manager Funds as of
December 31, 2003 were also transferred to a corresponding Fidelity
Freedom Fund on December 31, 2003.

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

The following table presents the estimated fair values of the investments
of the Master Trust at September 30, 2003 and 2002:

Investment September 30, 2003 September 30, 2002
---------- ------------------ ------------------

Spartan US Equity Index Fund $ 38,428,154 $ 32,293,863
Fidelity Magellan Fund 68,528,640 51,003,508
Fidelity Low-Priced Stock Fund 7,072,362 4,123,067
Fidelity Retirement Money Market Portfolio 12,453,249 5,556,960
Fidelity Managed Income Portfolio II, Class 3 134,356,409 --
Fidelity Interest Income Fund -- 129,426,624
MSIF Global Value Equity Portfolio 1,970,707 1,531,596
Armstrong Holdings, Inc. Common Stock 1,442,043 1,315,270
Fidelity Overseas Fund 2,500,271 981,827
Fidelity OTC Portfolio 15,405,596 11,362,627
Fidelity Asset Manager Fund 6,876,337 5,215,695
Fidelity Asset Manager: Income Fund 1,743,139 2,045,481
Fidelity Asset Manager: Growth Fund 7,213,049 7,063,524
MSIF Trust Mid Cap Core Portfolio 5,359,490 3,806,859
MSIF Trust Value Portfolio 2,058,986 1,357,675
Fidelity Equity Income Fund 5,557,608 --
Fidelity Intermediate Bond Fund 3,845,027 --
Fidelity Freedom 2010 Fund 1,453,389 --
Fidelity Freedom 2020 Fund 1,472,476 --
Fidelity Freedom 2030 Fund 569,659 --
Fidelity Freedom 2040 Fund 61,620 --
Fidelity Freedom Income Fund 363,012 --
Participant loans 4,115,721 3,340,927
------------------ ------------------
Total investment in Master Trust $322,846,944 $260,425,503
================== ==================

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

The amounts of net appreciation (depreciation) in fair value of
investments of the Master Trust for the years ended September 30, 2003
and 2002 are presented below:

Investment 2003 2002
---------- ----------- ------------
Spartan US Equity Index Fund $ 7,124,307 $ (8,995,610)
Fidelity Magellan Fund 10,853,379 (14,033,234)
Fidelity Low-Priced Stock Fund 1,479,759 (314,962)
MSIF Global Value Equity Portfolio 250,277 (324,665)
Armstrong Holdings, Inc. Common Stock 268,408 (1,459,578)
Fidelity Overseas Fund 501,060 (172,507)
Fidelity OTC Portfolio 3,909,525 (1,180,609)
Fidelity Asset Manager Fund 853,262 (692,306)
Fidelity Asset Manager: Income Fund 189,049 (92,950)
Fidelity Asset Manager: Growth Fund 1,270,716 (1,431,149)
MSIF Trust Mid Cap Core Portfolio 1,332,110 (1,040,335)
MSIF Trust Value Portfolio 407,810 (448,749)
Fidelity Equity Income Fund 503,291 --
Fidelity Intermediate Bond Fund 23,604 --
Fidelity Freedom 2010 Fund 97,554 --
Fidelity Freedom 2020 Fund 124,886 --
Fidelity Freedom 2030 Fund 41,422 --
Fidelity Freedom 2040 Fund 4,644 --
Fidelity Freedom Income Fund 10,388 --
----------- ------------
Total appreciation (depreciation) $29,245,451 $(30,186,654)
=========== ============

(b) Stock Ownership Funds

According to the terms of the trust agreement between JPMorgan Chase
Bank ("the Trustee") and Armstrong World Industries, Inc., the Trustee
manages a trust fund that has been created under the Plan and has been
granted authority to purchase and sell Armstrong Holdings, Inc. common
stock as is necessary to administer the Plan in accordance with its
terms.

At September 30, 2003, the investment in Armstrong Holdings, Inc.
common stock represents 4,355,189 shares, valued at a quoted market
price of $1.50. There are 2,443,639 shares held in the Allocated
Armstrong Holdings, Inc. Stock Fund and 1,911,550 shares held in the
Unallocated Armstrong Holdings, Inc. Stock Fund. The net appreciation
in fair value of these investments for 2003 was $581,564. At September
30, 2002, the investment in Armstrong Holdings, Inc. common stock
represented 4,545,786 shares, valued at a quoted market price of $1.35.
There were 2,634,236 shares held in theAllocated Armstrong Holdings,
Inc. Stock Fund and 1,911,550 shares held in the Unallocated Armstrong
Holdings, Inc. Stock Fund. The net depreciation in fair value of these
investments for 2002 was $6,306,440.

(4) Armstrong Contributions

Armstrong matches in cash, 50% of the first 6% of each employee's
before-tax contribution into the Sheltered Account. Armstrong may also
make, for Armstrong Cabinets Products salaried employees, discretionary
contributions to the profit sharing portion of the Plan which are
determined by the Retirement Committee. On December 12, 2003, the Plan was
amended to eliminate future discretionary profit sharing contributions
effective January 1, 2004.

RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

(5) Guaranteed ESOP Notes and Loans Due Plan Sponsor

The shares of Armstrong Holdings, Inc. common stock held in the Plan's
Stock Ownership Accounts were purchased from Armstrong from the proceeds of
the sale of Guaranteed ESOP notes in a total principal amount of
$270,000,000 in 1989. Armstrong guaranteed the payment of principal and
interest on the notes. The notes were scheduled to be repaid in semi-annual
installments with interest per annum at 8.35% on the Series A Guaranteed
Serial ESOP Notes due 1989-2001 and 8.92% on the Series B Guaranteed Serial
ESOP notes due 2001-2004. At September 30, 2000, the principal amounts of
the Guaranteed ESOP notes for Series A and Series B were $22,115,150 and
$120,043,000, respectively. On November 22, 2000, Armstrong failed to repay
$50,000,000 in commercial paper that was due. As a result, the Plan's
remaining principal balance of $142,158,150 and unpaid interest became
immediately payable along with a $15,458,029 interest and tax penalty. As
discussed in Note 1, Armstrong filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code on December 6, 2000. On December 15,
2000, the Plan failed to make the scheduled principal and interest payment
and, in light of Armstrong's Chapter 11 filing, Armstrong was not permitted
to comply with its guarantee to pay such amounts. Subsequent to December
15, 2000, no debt service payments have been made and interest on unpaid
principal, interest, and penalty accrues at contractual gross-up interest
rates, 10.61% for the Series A notes and 11.32% for the Series B notes,
plus 2% as stipulated in the ESOP notes. After Armstrong's Chapter 11
filing, such interest amounts are not recorded on Armstrong's financial
statements. None of the Plan's assets have been pledged as collateral for
the Guaranteed ESOP notes.

Refinancing loans from Armstrong were used to ensure that the number of
shares allocated during a semi-annual allocation period was equal to the
sum of participants' exchange, equity and match shares. At September 30,
2000, there were 11 loans outstanding totaling $39,864,575. In July 2001,
Armstrong forgave these outstanding loans, resulting in a non-cash employer
contribution to the Plan of $39,864,575.

The sources of cash used to repay the Plan's debt were employee
contributions, employer contributions, and dividends on unallocated shares.
Currently, there are no employee or employer contributions being made to
the ESOP portion of the Plan. In addition, Armstrong has not declared any
dividends since July 2000. On December 12, 2003 the Plan was amended to
prohibit the future use of employee contributions to repay the Plan's debt.

(6) Benefits

(a) Retirement Savings Accounts

Under terms of the Plan, a participant (or a beneficiary) is eligible
for benefits upon retirement, termination of employment, or death
before retirement. Disbursement of the total amount credited to a
participant's account is payable (i) in a lump sum or (ii) in the case
of retirement, partial disbursements are allowed.

In addition, an active employee may elect to withdraw all or any part
of his account attributable to after-tax contributions. Before reaching
age 59 1/2, an active employee may withdraw his pretax contributions
from the Sheltered Account, provided he can demonstrate financial
hardship. Such employee shall be ineligible to make contributions for a
12-month period. On June 25, 2002, the Plan was amended with respect to
hardship withdrawals made after December 31, 2002 to reduce the
contribution suspension period to a 6-month period. An active employee
may elect to withdraw all or any portion of his account balance in the
Tax-Deductible (MIRA) and Rollover Accounts.

Under the rules of the Plan, the participant may borrow up to the
lessor of 50% of his vested balance or $50,000. The money borrowed must
come from the Sheltered, Age 50 catch-up, Rollover, Standard, AWP
profit sharing or Retirement Savings Match Accounts. The amount of the
loan is transferred to a Loan Reserve pledged as security for the loan
and is evidenced by a promissory note payable to the Plan. Interest
rates are determined periodically by the Retirement Committee in
accordance with prevailing interest rates. The loans are reflected in
the Loan Portfolio investment fund. Loan repayments are made by payroll
deductions or in a manner agreed to by the employee and the Plan
Administrator. Effective November 22, 2002, Armstrong officers are
restricted from receiving loans through the Plan.

RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

(b) Stock Ownership Accounts

Upon death or any other separation from service from Armstrong,
participants or their beneficiaries are entitled to receive a
distribution of their vested account balances. Distributions are in the
form of a lump sum cash payment or, upon request, Armstrong Holdings,
Inc. common stock.

(7) Obligation for Benefits

All the funds of the Plan are held by investing institutions appointed by
Armstrong under a trust agreement or investment contract. Benefits under
the Plan are payable only out of these funds. Armstrong has no legal
obligation to make any direct payment of benefits accrued under the Plan.
Except as may be provided in an investment contract, neither Armstrong nor
any investing institution guarantees the funds of the Plan against any loss
or depreciation or guarantees the payment of any benefit thereunder.
Although Armstrong has not expressed any intent to terminate the Plan, it
may do so at any time. In case of termination or partial termination, the
total amount in each employee's account will be distributed as the Plan
Administrator directs.

(8) Eligibility

All salaried employees of Armstrong or any participating affiliated company
which adopts this plan are eligible to participate in the Plan except for
foreign nationals and leased employees. In addition, certain hourly
employees are eligible to participate, including those employees in a
collective bargaining unit where the collective bargaining agent for that
unit agrees to coverage under the Plan. Eligible participants who leave
Armstrong and are later reemployed can resume participation in the Plan on
the date of rehire.

(9) Diversification

Although the Plan allows all participants, regardless of age and vested
status, to fully diversify their ESOP accounts, certain participants are
precluded from diversifying because of Armstrong's ongoing Chapter 11
proceedings.

(10) Litigation

About 370 former Armstrong employees that were separated in two business
divestitures in 2000 brought two purported class actions against the
Retirement Committee of Armstrong, certain current and former members of
the Retirement Committee, the Plan, Armstrong Holdings, Inc. and the
trustee bank of the Plan. Plaintiffs allege breach of Employee Retirement
Income Security Act (ERISA) fiduciary duties and other violations of ERISA
pertaining to losses in their Plan accounts, which were invested in
Armstrong Holdings, Inc. common stock. An agreement was reached to settle
this matter. Contributors to the settlement are Armstrong, its insurer and
the trustee bank of the Plan. Armstrong made a $750,000 payment for this
matter in December 2003. The full amount of the settlement was allocated
among the approximately 370 former employees. The settlement was approved
by the Bankruptcy Court on March 31, 2003 and by the United States District
Court (Eastern District of PA) on June 16, 2003.

Subsequent to an audit by the United States Department of Labor ("DOL"),
Armstrong was informed that the DOL was challenging the validity of the use
of certain contributions to fund debt payments made by the ESOP, as
provided for by the Plan. Armstrong and the DOL reached a settlement to
resolve this matter with a funding to the ESOP of $1.5 million, which was
paid to the Plan in December 2003 and was distributed to plan participants'
accounts in February 2004 in accordance with terms of the agreement. Of the
$1.5 million total settlement, insurance and third parties contributed $0.9
million to Armstrong.

(11) Federal Income Taxes

The Internal Revenue Service issued its latest determination letter on
November 25, 2003, which stated that the Plan and its underlying trust
qualify under the applicable provisions of the Internal Revenue Code and
therefore are exempt from federal income taxes. The Plan has been amended
since receiving the determination letter. In the opinion of the Plan
administrator and the Plan's qualified tax adviser, the Plan is currently
designed and being operated in compliance with the applicable requirements
of the Internal Revenue Code. Therefore, they believe that the Plan is
qualified and the related trust is tax-exempt.

RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

(12) Master Trust Agreement

The Plan established a Master Trust Agreement with Fidelity Management
Trust Company whereby the Plan assets held by Fidelity Management Trust
Company are commingled and invested with the assets of the Retirement
Savings Plan for Hourly-Paid Employees of Armstrong World Industries, Inc.
and the Bonus Replacement Retirement Plan of Armstrong World Industries,
Inc. Prior to December 20, 2002, the assets were also commingled with the
assets of the Armstrong Wood Products Salaried Employees' Profit Sharing
Plan, the Armstrong Wood Products Non-union Hourly 401(k) Plan, the Robbins
Hardwood Flooring Inc. Employees' Retirement Savings Plan, the Hartco
Flooring Co. Bargaining Employees Retirement Savings Plan, and the Hartco
Flooring Co. Retirement Savings Plan. Separate accounting for each plan
under the Master Trust Agreement is maintained. The Plan has an undivided
interest in the assets of this trust, and ownership is represented by
proportionate dollar interest. The following summarizes the financial
information of the Master Trust at September 30, 2003 and 2002:

September 30, 2003 September 30, 2002
Cost Fair Value Cost Fair Value
------------ ------------ ------------ ------------

Cash equivalents $ 16,785,399 $ 16,785,399 $ 16,510,231 $ 16,510,231
Armstrong Holdings, Inc. Common Stock 21,913,297 2,679,635 25,269,658 2,905,155
Investments in registered investment companies 198,165,001 201,621,042 204,702,712 164,805,422
Fixed income investment contracts -- -- 176,543,179 176,543,179
Investment in common/collective trusts 181,386,980 181,386,980 -- --
Participant loans 6,443,352 6,443,352 6,163,258 6,163,258
------------ ------------ ------------ ------------
Total investments in Master Trust $424,694,029 $408,916,408 $429,189,038 $366,927,245
============ ============ ============ ============

Plan's interest in Master Trust $329,492,583 $322,846,944 $298,508,049 $260,425,503
Plan's percentage in Master Trust 77.6% 79.0% 69.6% 71.0%

During 2003 and 2002, the Master Trust's investments (including investments
bought, sold, and held during the year) appreciated (depreciated) in value
as follows:

2003 2002
------------- -------------

Net appreciation (depreciation) in Master Trust $35,812,595 ($41,014,128)
Allocated net appreciation (depreciation) in Master Trust 29,245,451 (30,186,654)

During 2003 and 2002, interest and dividends in the Master Trust were as
follows:

2003 2002
------------- ------------

Interest and dividends in Master Trust $11,252,478 $12,841,359
Allocated interest and dividends from
investment in Master Trust 8,304,138 8,927,296

All of the above information was certified as complete and accurate by the
trustee at September 30, 2003 and 2002 and for the years then ended.

(13) Chapter 11 Reorganization of Armstrong
Plan of Reorganization

On November 4, 2002, Armstrong filed a Plan of Reorganization with the
United States Bankruptcy Court for the District of Delaware ("the
Bankruptcy Court"). During 2003, Armstrong filed several amendments to the
plan with the Bankruptcy Court, along with various exhibits. The Fourth
Amended Plan of Reorganization, with certain exhibits, was filed on May 23,
2003 (and, as so amended and as modified by modifications filed with the
Bankruptcy Court on October 17, 2003 and November 10, 2003, it is referred
to in this report as the "POR").

During 2003, the POR was submitted for a vote by Armstrong's creditors for
its approval. It was approved by each creditor class that was entitled to
vote on the POR except the class of unsecured creditors. On November

RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

17 and 18, 2003, the Bankruptcy Court held a hearing on confirmation of the
Plan and on December 19, 2003, issued proposed findings of fact and
conclusions of law and a proposed order confirming the POR, notwithstanding
the rejection of the POR by the class of unsecured creditors. On December
29, 2003, the Unsecured Creditors' Committee filed an objection to the
Bankruptcy Court's proposed findings of fact and conclusions of law and the
proposed order of confirmation of the POR. This objection remains pending
with the U.S. District Court. Confirmation of the POR requires action of
the U.S. District Court, as well as the Bankruptcy Court, in accordance
with the Bankruptcy Code. At this time, the District Court judge involved
in the Chapter 11 Case has stayed all proceedings before him concerning the
Chapter 11 Case. See "Recent Developments and Next Steps in the Chapter 11
Process."

Disclosure Statement

In connection with the vote of creditors on the POR, Armstrong was required
to prepare a disclosure statement concerning its business and the POR,
including certain projected financial information assuming an Effective
Date of the POR as July 1, 2003, intended to demonstrate to the Bankruptcy
Court the feasibility of the POR and Armstrong's ability to continue
operations upon its emergence from Chapter 11. On May 30, 2003, the
Bankruptcy Court approved the disclosure statement for distribution to
parties in interest in the Chapter 11 Case. The projected financial
information included in the disclosure statement was updated in certain
respects by information submitted to the Bankruptcy Court in connection
with the Bankruptcy Court's November 2003 hearing on confirmation of the
POR. The projected financial information was prepared for the limited
purposes of consideration by the Bankruptcy Court, creditors and other
parties in interest in the Chapter 11 Case of matters pertinent to the
case. As indicated in the disclosure statement, the projected financial
information and various estimates of value therein provided should not be
regarded as representations or warranties by Armstrong or any other person.
There is no assurance that any such projection or valuation will be
realized. The projected financial information and estimates of value were
prepared by Armstrong and its financial advisors and have not been audited
or reviewed by independent accountants. The projections will not be updated
on an ongoing basis. At the time they were prepared, the projections
reflected numerous assumptions concerning reorganized Armstrong's
anticipated future performance and with respect to prevailing and
anticipated market and economic conditions, which were and remain beyond
our control and which may not materialize. Projections are inherently
subject to significant and numerous uncertainties and to a wide variety of
significant business, economic and competitive risks and the assumptions
underlying the projections may be wrong in a material respect. Actual
results may vary significantly from those contemplated by the projections.

Consideration to be Distributed under the POR (unaudited)

Under the POR, the existing equity interests in Armstrong (including all of
its outstanding shares of common stock) will be cancelled. The POR provides
for the distribution of warrants to purchase shares of reorganized
Armstrong (the "Warrants") to the holders of Armstrong's existing common
stock. The terms of the Warrants are provided in an exhibit to the POR.
Generally, the Warrants would permit the purchase of 5% of the common stock
of reorganized Armstrong on a fully diluted basis upon exercise of all the
Warrants, would be exercisable at any time during the seven years after the
effective date of the POR, and would permit the purchase of shares at an
exercise price of $37.50, which is equal to 125% of the $30.00 per share
equity value of reorganized Armstrong. It is expected that warrants held
inside the Plan will not be exercisable to purchase the common stock of
reorganized Armstrong. Warrants held in the Plan may be sold by
participants, with the monies reinvested among any of the investment funds
available in the Plan. Whether any value will be realized from the Warrants
will depend on whether the market value of reorganized Armstrong's new
common stock reaches a value in excess of the exercise price of the
Warrants during the period that they may be exercised. Armstrong Holdings
Inc.'s ("AHI") shareholders were not entitled to vote on the POR. However,
AHI's shareholders were sent the Disclosure Statement and the POR. If the
POR is implemented, the only value that will be available to AHI
shareholders is their ratable share of the Warrants available upon the
contemplated dissolution of AHI. See AHI's Plan of Dissolution below.

Armstrong Holdings, Inc's Plan of Dissolution, Winding Up and Distribution

("Plan of Dissolution")

In connection with the implementation of the POR, the Warrants will be
issued to AHI (or a wholly-owned subsidiary of AHI). The Board of Directors
of AHI has determined that it is not practicable for AHI to continue

RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Notes to Financial Statements, (Continued)

in operation as an on-going business owning the Warrants, which will then
be AHI's only asset. Accordingly, the Board of Directors of AHI approved
and recommended to AHI shareholders the Plan of Dissolution, whereby AHI
will voluntarily dissolve and wind up its affairs in accordance with
Pennsylvania law and, subject to completion of AHI's winding up (including
the satisfaction of any liabilities of AHI), distribute any remaining
Warrants to the shareholders. At a special meeting of AHI shareholders held
on January 7, 2004, the Plan of Dissolution was approved by the AHI
shareholders. The POR provides that Armstrong will pay the costs and
expenses incurred in connection with administering AHI's Plan of
Dissolution.

Recent Developments and Next Steps in the Chapter 11 Process

In order for the POR to be confirmed, the U.S. District Court must issue
findings of fact and conclusions of law in support of confirmation of the
POR, enter or affirm an order confirming the POR and issue the "524(g)
injunction" which is part of the POR. In certain other companies'
asbestos-related Chapter 11 cases, motions for recusal were filed in 2003
against U.S. District Court Judge Alfred M. Wolin, who is jointly
administering with the Bankruptcy Court the asbestos-related issues in the
Chapter 11 cases of five companies, including Armstrong. The Unsecured
Creditors' Committee requested that in the event Judge Wolin is recused in
the other cases, he also be recused in Armstrong's case. Judge Wolin has
stayed further proceedings in all five cases before him, including
Armstrong's Chapter 11 Case. On February 2, 2004, Judge Wolin denied the
motions for recusal. An appeal of Judge Wolin's ruling is currently
pending, with oral argument before the U.S. Court of Appeals for the Third
Circuit scheduled for April 19, 2004. Armstrong is uncertain as to the
impact, if any, beyond the present delay in confirmation of the POR that
the motions and appeal will have on Armstrong's Chapter 11 proceedings, and
when confirmation of the POR will be considered by the U.S. District Court
is uncertain.

Common Stock

As a result of Armstrong filing the POR on November 4, 2002, the New York
Stock Exchange stopped trading on the Exchange of the common stock of
Armstrong Holdings, Inc. (traded under the ticker symbol "ACK"). Armstrong
Holdings, Inc.'s common stock resumed trading in the over-the-counter (OTC)
Bulletin Board under the ticker symbol "ACKHQ."

Conclusion

Although the POR has been developed, implementation of the POR is subject
to confirmation of the POR in accordance with the provisions of the
Bankruptcy Code and satisfaction after consummation of certain conditions,
as provided by the POR. Armstrong is unable to predict when and if the POR
will be confirmed. Therefore, the timing and terms of a resolution of the
Chapter 11 Case remain uncertain.

THE RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN
OF ARMSTRONG WORLD INDUSTRIES, INC.
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
September 30, 2003

Description of Investment Cost Fair Value
------------------------- ------------ ------------

Unallocated Armstrong Holdings, Inc. Common Stock $ 91,276,513 $ 2,867,325

Allocated Armstrong Holdings, Inc. Common Stock 104,384,454 3,665,459

Investments in Master Trust 329,492,583 322,846,944