Armstrong Emerges From Chapter 11

Lancaster, PA, October 2, 2006--Armstrong World Industries announced today that its "Fourth Amended Plan of Reorganization, as Modified," dated February 21, 2006 (the "Plan"), which was confirmed by U.S. District Court Judge Eduardo Robreno in August, has become effective and AWI has emerged from Chapter 11. The Plan includes a comprehensive settlement resolving AWI's asbestos liability by establishing and funding a trust to compensate all current and future asbestos personal injury claimants. "This is an exciting day for Armstrong and its employees," said Michael D. Lockhart, AWI's Chairman and Chief Executive Officer. "Today we emerged from Chapter 11 having made significant operational improvements that provide the opportunity to grow and strengthen our business. "In addition to resolving AWI's asbestos liability, we used the time in Chapter 11 to restructure our flooring business to make it more competitive," Mr. Lockhart said. "We made substantial improvements in our cost structure by closing several plants and streamlining our workforce in the U.S. We have also expanded capacity to manufacture wood flooring, broadened our product lines and improved product quality and customer service." AWI has had several consecutive quarters of improved financial performance. In the second quarter of 2006 AWI nearly doubled its operating income (from $36.6 million to $72.5 million) from a year ago. This increase was primarily due to increased manufacturing productivity and a 3% sales increase. For the first six months of 2006, AWI's operating income increased to $120.7 million (compared to $44.3 million for the first six months of 2005). The improvement in operating income was primarily due to higher sales, improved manufacturing productivity, and reduced SG&A expenses. "I would like to thank the nearly 15,000 Armstrong employees around the world for their hard work, dedication and loyalty during the past six years," said Mr. Lockhart. "Armstrong has gone through a lengthy and challenging Chapter 11 reorganization. We could not have overcome the many obstacles we encountered without the outstanding effort and commitment of our employees." AWI expects to receive commitments for a total of $1.1 billion in a senior credit facility, including: (i) a $300 million revolving credit facility; (ii) a $300 million term loan with a five year maturity; and (iii) a $500 million term loan with a seven year maturity. The Revolving Credit Facility is immediately available to support AWI's ongoing liquidity needs. Both term loans are expected to be funded on or about October 16, and will be utilized to satisfy distributions under the Plan. "We are emerging from Chapter 11 with less debt and a stronger balance sheet than six years ago," said Mr. Lockhart. "Our solid capital structure, combined with our recent financial performance, means that our employees, customers, distributors, suppliers and other business partners can be assured that the company is on strong financial footing with good prospects for continued growth and profitability going forward." As previously announced, pursuant to the Plan, AWI has established a trust in accordance with the provisions of section 524(g) of the U.S. Bankruptcy Code to resolve all current and future asbestos personal injury claims (the "Trust"). AWI is funding the Trust by making a one-time contribution of cash, insurance assets and common stock of the reorganized AWI. Those assets will be administered by the Trust's trustees and used to pay asbestos claims in accordance with the provisions of the Plan and the related Trust documents. The reorganized AWI will have no role or responsibility in the administration of the Trust. Pursuant to the Plan, all present and future asbestos personal injury claims must be asserted against the Trust, and all asbestos claimants will be permanently enjoined from pursuing their claims against the reorganized AWI. Continued -