Stock Price, Market Condition, Halt Armstrong Plan

Lancaster, PA, March 3, 2008–Armstrong World Industries Inc. has quit shopping the company because the company’s stock is undervalued and the housing and credit market conditions aren’t conducive to a favorable deal.

CEO Michael D. Lockhart revealed the new strategy during a Friday morning conference. The company’s fourth-quarter 2007 earnings soared to $19.6 million, or 34 cents a share, compared to $2.2 million, or 4 cents a share, a year earlier.

Armstrong has declared a special cash dividend of $4.50 per share payable on March 31 to shareholders of record on March 11.

That cash dividend represents a total payment of about $260 million. Lockhart said another $240 million in dividends would distributed this year if Armstrong’s business performs as expected.

“We’ve always said there is no reason to pile up cash if we don’t see a strategic need for it,” Lockhart said. “I think the only reason we’re waffling a little bit about it is we’re in a pretty uncertain world.”

Armstrong’s share price soared more than 11 percent Friday and closed up 8.7 percent at $36 per share on a day when the market dropped more than 315 points.

According to Armstrong’s fourth-quarter earnings report, the wood-flooring division prospered, with profits rising to $14.1 million from $10.2 million on the strength of improved manufacturing productivity and a more profitable mix of products sold.

But like the cabinet-sales division, the resilient-flooring division fared worse in the quarter.

Resilient flooring posted a loss of $7.3 million, versus a profit of $300,000 in the 2006 quarter, due to a slump in Europe.