Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Armstrong World Industries Incorporated Earnings Conference Call. My name is Regina, and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will be conducting a question-and-answer session. (Operator Instructions). Today's event is being recorded for replay purposes. I would now like to turn the conference over to your host for today Mr. Tom Waters, Vice President of Treasury and Investor Relations. Please go ahead sir.

Thank you, Regina. Good afternoon everyone and thank you for your patience as we worked our phone problems there. Please note that members of the media have been invited to listen to this call, and the call is being broadcast live on our website at armstrong.com. With me this afternoon are Matt Espe, our President and CEO; Tom Mangas, our CFO; Frank Ready, the CEO of our Worldwide Flooring business; and Vic Grizzle, CEO of our Worldwide Ceiling business. Hopefully, you have seen our press release this morning. And both the release and the presentation that Tom Mangas will reference during this call are posted on our website in the Investor Relations section. In keeping with SEC requirements, I advise that during this call, we will be making forward-looking statements that involve risks and uncertainties. Actual outcomes may differ materially from those expected or implied. For a more detailed discussion of the risks and uncertainties that may affect Armstrong, please review our SEC filings, including the 10-K filed this morning. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statement beyond what is required by applicable securities laws. In addition, our discussion of operating performance will include non-GAAP financial measures within the meaning of SEC Regulation G. A reconciliation of these measures with the most directly comparable GAAP measures is included in the press release and in the appendix of the presentation. Both are available on our website. With that, I will turn the call over to Matt.

Thanks, Tom. Good afternoon, everyone, and thanks for participating in our call today. In the fourth quarter of 2011, we saw stability in North America, but the turmoil surrounding Greece and Eurozone precipitated a sharp drop in demand in Western Europe late in the quarter. Against the backdrop of global uncertainty and macroeconomic volatility, our sales for the quarter were $652 million within our guidance range albeit near the low end, primarily reflecting the weakness that we saw in Europe. Year-on-year sales were up $9 million or $6 million on a comparable foreign exchange basis, both about a 1% increase. Europe was the only geography with lower sales. Adjusted EBIDTA for the fourth quarter of 2011 was $51 million, up $4 million or 9% from 2010, but below our guidance range of $55 million to $75 million driven by weaker than anticipated sales in western Europe in both our business, flat volumes in North American ceilings versus our expectation of a small uptick and weakness in our Cabinets division. For the year, net sales of $2.86 billion were up $90 million or 3% from 2010. Excluding the impact of foreign exchange and product category exits in our European Flooring segment, sales were also up 3%. The sales increase came in the form of price and mix as global volumes were roughly flat. Now, when excluding exited businesses, 2011 marks the first time in the last three years that volumes have not declined year-over-year. Despite no meaningful help from markets, full year adjusted EBITDA was $377 million, up $74 million or 24% from 2010. Our business units contributed to this result with significant contributions from the following operations. Wood Flooring grew adjusted EBITDA from $5 million in 2010 to $53 million in 2011 despite flat sales. This result is our best…

Thanks, Matt. Good afternoon and thanks for participating in today's call. In reviewing our fourth quarter results, I'll be referring to the slides available on our website stating with slide four, Key Metrics, as Tom Waters previously covered slide two and slide three is simply an explanation regarding our basis of presentation. As Matt reviewed, we delivered a 9% improvement in EBITDA on a 1% increase in sales when excluding foreign exchange impacts. Adjusted operating income and earnings per share results were also positive by 36% and 45% respectively. Fourth quarter free cash flow of $90 million was well ahead of 2010 driven by the WAVE special dividend, which we disclosed in early January. I'll address the drivers of EBITDA and free cash flow in more detail on upcoming slides. We closed 2011 with net debt of $362 million, down almost $200 million from yearend 2010 levels. Slide five details to the adjustments we made to EBITDA and provide reconciliation to our reported net income of $9 million on the quarter. The most recent quarter was relatively clean with only minor charges related to our cost reduction program. As you'll recall, in the fourth quarter of 2010 we had more cost reduction and restructuring adjustments as we were in the early stages of our cost out efforts. We also had $11 million of accelerated depreciation in 2010 primarily related to the shutdown of the Beaver Falls, Pennsylvania Ceiling plant and the Center Texas Wood Flooring plant. Finally, we took an impairment charge of $22 million on the Bruce brand name in 2010; no impairment on the Bruce brand was required in 2011. Moving to slide six, this provides our sales and adjusted EBITDA by segment for the fourth quarter. Resilient Flooring had a sales decline of 4% primarily driven by…

Thanks, Tom. One of our major issues entering 2011 was labor. I'm happy to report that during 2011 we renegotiated seven collective bargaining agreements at six of our plants, including reaching an agreement with our locked up production workers at the Marietta Ceiling's plant in December. These employees are now back at work and the plant is working well. We're pleased to have these negotiations behind us and have been to maintain our safety performance and customer service levels throughout the entire process. These negotiations were at times painful and costly, but they were necessary. We now have contracts that more closely reflected the local economic realities, addressed legacy cost issues and provide the company with an appropriate cost structure going forward. Our employees receive a competitive wage and benefit package and we've improved the odds that our manufacturing facilities can remain viable and survive in an increasingly competitive global marketplace. As Tom noted, we feel good about the actions we've taken and plan to take and are confident that we'll continue to drive operational and financial improvements in 2012. And so with that we'll be happy to take any questions. Thank you.

(Operator Instructions). And your first question today comes from the line of Stephen Kim with Barclays Capital. Stephen Kim – Barclays Capital: I wanted to touch on incremental margins, if you could. Particularly what I'd love to hear you expand on is, given the numerous changes you've made in taking cost out and also given the rising fixed cost you're implementing here overseas, what do you think your incremental margins are across your major segments, namely Resilient and Wood at this point?

This is Tom Mangas. Well, we are pleased with the margin progress we've made and continue to make. I will still say we're in the range of incrementality on new sales in the segments as we've talked before. So we've talked before in Building Materials, Building Products rather that the incremental margin should be 30% to 40% on new sales on the upside and on the flooring, but Wood and Resilient in 20% to 30% incremental margin range. Stephen Kim – Barclays Capital: Okay. And it doesn't really matter if let's say, the increase is skewed geographically, let's say U.S. housing were to come back stronger than your folks forecasting over the next two years, that wouldn't necessarily change the kind of incremental margins you might see?

Well, I would say not over the next couple of years. Really, we do expect that the U.S. recovery will come, slightly ahead of when we're opening the new plants in China, I think late 2013 for the ABP plant as an example. Absolutely we have better margins in the U.S., as our home market for both businesses but we're working in all regions to improve margins and profitability. As we expand our footprint and put plants out there we're striving to achieve U.S. like margins. We likely won't be there out of the gate as we open plants up and are not quite as scaled. So that's our objective. Stephen Kim – Barclays Capital: And then lastly, I was curious if you can give us a sense for particularly your Ceilings and your Resilient business; how much of an increase in overall volumes do you think you could accommodate before needing to bring some increased capacity back online?

Let me answer it little more generally than that. This is a question that's come up a few times and we think it's important to give a good answer. We feel like we have a sales capacity as a Company of around $4.5 billion with the current installed infrastructure, inclusive of the Chinese plants. So that's not quite a specific on Resilient and Ceilings but all in all we feel like we've got good growth capacity from where we are today, reflect the both the installed U.S. base as well as the new plants we're bringing online. Stephen Kim – Barclays Capital: And that includes the Russia? Not, right?

Yeah. Within rounding. Sure.

Ladies and gentleman, we ask that in interest of time and so that everyone has the opportunity to ask a question that you hold your questions to one question and one follow-up please. Your next question comes from the line of Bob Wetenhall with RBC Capital Markets. Bob Wetenhall – RBC Capital Markets: You made a lot of progress on the Wood Flooring segment and I wanted to understand how much of the improvement is due to raw material tailwind I suppose to inflation and do you think this improved level of profitability is sustainable as we go into 2012?

Bob, just a couple of general comments. The performance of Wood is remarkable and it's a combination of things. We've driven significant manufacturing productivity as we've pointed to lean and I think that really serves us our best example, a second deployment of lean resources in the throughput. Frank has also driven mix as we've positioned new products over the last year. We've gained share wallet or shelf space at our key distributors here in the U.S. and managed I think the relationship between some limited inflation and price extremely well. So it's really a combination of all those things. I don't know if Tom or Frank.

Yeah, definitely wood deflation relative to last year, somewhere in 2010 we had significant lumber inflation that was a drag to earnings. In 2011 we didn't see that level of inflation and actually tailed off a little bit and some deflation in the back half of the year. So that was contributor on a year-over-year basis, but by far the bigger contributors are the structural improvements that Frank has put in place, both in the SG&A structure as well as in the manufacturing cost structure. Frank, do you want to add anything?

No. I think you guys… Bob Wetenhall – RBC Capital Markets: Got it. And it sounds like this is kind of the final year of the initial cost savings and then you have a pretty aggressive schedule to expand internationally and I was hoping you could just walk through the timing of the plants you're bringing on and somewhat just very rough outlines and the revenue contribution you expect to achieve in the next couple of years when they come online?

Well, we've got the homogeneous flooring plant coming out at the end of this year. We have the second Building Products or Ceilings plant coming on in first quarter of 2013 and then the second heterogeneous plant coming on the end of 2013. The plant we just announced in Russia would come online at this point it looks like 2015.

First quarter 2015.

So that's the way we're thinking about feathering it in. I'll just comment Bob, this team isn't done with manufacturing productivity or SG&A savings and I think we've been very aspirational and aggressive in setting and resetting targets. As we pointed out, we're $185 million here and we expect to accomplish that in 2012 but that doesn't mean we're at the finish line. I think some of the major structural stuff would be behind us for sure but we'll continue to commit to lean productivity. We're continuing to simplify our G&A related processes to get hidden cost out of there and so we're not going to be finished with our focus on cost as we exit 2012 for sure. And then incremental revenues…

So Bob on the three China plants we've outlined, we think that at full capacity utilization they can generate about $200 million in revenues. So you got to imagine that feathering, beginning with the first opening over the next several years, we're not going to open with full capacity. So you can probably think about at an increment of $25 million or so over the next several quarters through the final opening and the heterogeneous plant. In Russia we've really not outlined a revenue goal. Really that was, that was as much about cost savings as it is incremental revenue. It's already a very large market for us and we really see this plant as helping us get a more competitive cost position by in country production, avoiding all of the duties and freight that we're experiencing today. So, it's less of a revenue play, although there is some certain share growth and market participation that we expect to reap out of the plant Russia, but it's actually a margin enhancing program for us.

And significant improvement in customer service reliability in country so.

Your next question is from the line of Dennis McGill with Zelman & Associates. Dennis McGill – Zelman & Associates: and thank you. I guess first question, you went through some of the recent trends on volumes quickly, so I didn't get it all. But can you just review what you're seeing on the residential side and then just touch on what might be the lag there from production that comes through to when you actually see it?

Okay. So on the residential side Dennis, we've seen some light. I think the fourth quarter ended, okay. January and February started out positive. So I would say we're seeing some good signs of life in the residential segment, both at independent retailers and at Big Box. We're participating in both. And I will say that January and February a little bit ahead of what we thought was possible. So it's a good start in residential. I will caution though, we said that the last two years in a row. So we're a little cautious on the sustainability of it, but so far all signs are good on the domestic residential market. Dennis McGill – Zelman & Associates: Okay. And on the other side of it, did I hear you say that Europe was down high single volumes and if so maybe just talk to the sensitivity there about what could happen, where you're seeing the pressure between Flooring and Building Products and any type of comfort you can give us there, if it does fall further, there is action that you can take to offset?

Okay. So the question was on how we're thinking about Europe. So let me start with, we have seen a significant deceleration in, what I'd call, the Eurozone. We've been very specific in using that language in our remarks here. As you look at our financial statements Europe to us, both in Building Products and in Flooring includes the U.K., obviously Continental Europe, Eastern Europe, Russia and Middle East, okay? And they are not all behaving the same. Obviously our Flooring business is much more concentrated in Eurozone countries, very, Germanic, Switzerland and Benelux based. Ceilings is less concentrated there. In fact it has a big U.K. business, big Russia business, big Middle East. But both businesses have been hit equally in the Eurozone in the last five months or four months with, what I'd call, high single-digit volume declines, which we continue to see in January and February. Dennis McGill – Zelman and Associates: And I guess the second part of that was just flexibility you would have around the cost structure if that continues to decline.

Sure. Well, one thing as we're very grateful of that we embarked on the cost restructuring we pursued in for Europe, a little over 15 months ago under Frank's leadership despite the volume falling off the back of the truck last quarter. We still eked out good improvement year-over-year on Flooring. We shut down two of the four plants. Right now we don't see a way to show down other plant in Flooring. We feel like we got the right capacity in Europe manufacturing wise for ceilings. Obviously we'll look at ways to improve our crewing and staff to the volume, but I don't see big structural changes on the plant footprint Europe, and SG&A we continue to make efforts against both Building Products and Ceilings on the SG&A front. But at the same time we're investing, we're investing in Russia. This new plant is going to come with new plant is going to come with significant SG&A investment as well. So, we're cautious on Europe. There is probably not huge swaps of costs to take out of Europe. It's materially worse, but trust me we're working around the edges to make sure we are staying cost competitive and delivering earnings improvement in the region despite tough macroeconomic environment.

I would just add, total exposure of Europe is 20%?

Yes.

And so, while it's significant challenge economically and obviously we take even a 20% exposure rate seriously, but just to put everything in context.

Your next question is from the line of Mike Wood with Macquarie. Mike Wood – Macquarie: You mentioned the growth coming from Multifamily for the 700,000 that you'd forecasted, can you tell us how you model that out in terms of the mix impact and average ticket on your businesses?

Well, when we're talking residential, we are really talking from fundamentally the four business, a little bit of Ceilings. So, it's a important component, but not the big driver certainly, commercial is a bigger driver. We're frankly looking at a lot of the data that showing that Multifamily is growing at double the rate of single family. And certainly, the Multifamily consumer which builders who are building in the Multifamily segment are generally buying mid-Tier quality and mid-Tier margin products from us. So, fundamentally, Frank's business both in Cabinets and Floorings sells a lot into the Multifamily segment and just generally, we're seeing the product forms that go in there both the Resilient and the Wood forms carry a little bit lower margin. So, that's how we're modeling it out versus individual family, individual home buyers who often looking for higher value add products that we're producing.

I mean, you'll find more Resilient Flooring, less Wood Flooring to Multifamily and the Cabinets business as Tom said, they are going for value lines. So, we just look at the margins on those lines and the mix of the products as we think about given the mix between multifamily and single family housing. Listen while we're thrilled to have increase in both from a mix effect, we'd certainly rather see a more robust single family expansion than multifamily. Mike Wood – Macquarie: Okay, that's helpful. And on the Cabinet side, you'd mentioned the market share loss related to the service levels, is that a function of the restructuring that you've done, I mean you've managed the margins extremely well on that segment, I am curious how that's effected your service levels and in a recovery scenario, what you would have to do regain those service levels?

The way I would characterize that we have some supply chain challenges in the quarter that I think we corrected in the fourth quarter going forward. No significant impact on our existing customer service. We had to play catch up and again I think we're in fairly good shape now and are able to fulfill orders, so we're sort of back in track. I wouldn't call it a 60 to 90 day blip. Frank, I don't know if there is anything else.

That's right. I think it's behind us. It did impact us in the quarter, but I would not anticipate it having an impact on the first quarter.

I think, again, even on weaker sales in the quarter, softer sales in quarter, I mean that business has done a phenomenal job in turning around to profitability from a loss of about $6 million last year to plus $2 billion. I helped a little bit by as we just said robust multifamily housing, great execution across the board there and nice recovery in EBITDA.

One point if I might add, really the issue was not because of our plant consolidation or SG&A, it was much more of a supplier on long lead times, we had one supplier that got really long us, on critical parts that created those service problems.

Exactly right.

Your next question is from the line of David MacGregor with Longbow Research. Jarrod Rapalje – Longbow Research: On the commercial business within the America's Ceilings business, you guys mentioned that volumes came in a little bit lower than expected. Can you just talk about what you're seeing within the model business and how it's change your expectation for 2012?

I would characterize the way I would talk about this, Tom and I probably had a little bit more ambitious view of where the Ceilings business was going to come in. So, it was sort of the uptick that we had expected to see. I'd tell you the business itself probably came in pretty close to where they expected. And we're seeing a continuation of performance in the year, I mean commercial office space, remodeling remained strong, healthcare remained strong. We continue to see some softness in education related to State budget. So, not a lot of difference within the quarter. I don't know Vic anything to.

I would say, the commercial business in the U.S. has been very stable. Our volume is in the last two or three months actually showing some improvement and activity, but it's just very stable right now. So, I would say that what you said is accurate. Jarrod Rapalje – Longbow Research: Okay, that's helpful. The cost reduction is $35 million next year, can you talk about where these are by segment and then how on a consolidated basis you are talking about 100 to 150 basis point of gross margin improvement. How should we expect to see that play out throughout the year, primarily second half weighted?

Yes, I mean it will be more second half weighted. First, I would say that we don't disclose the cost up program at the segment level on a prospective basis. Obviously you will see it in financial results when it comes. It's going to come in manufacturing productivity across all the plants but particularly, but ABP will be a good beneficiary I think given the embedded cost they absorb on the labor contingency and incentives they paid in the back half of his year so they'll lap those in the back half of this year. Also it's going to come in the form of pricing, we're continuing to take several price increases that chase commodity input cost and I think that that provides an opportunity for some margin growth at the total company level as we pursue our pricing strategies which we've implemented early in the first quarter.

Okay. Next question is from the line of Keith Hughes with SunTrust. Keith Hughes – SunTrust: You've mentioned a $15 million on the work stoppage, was that for third quarter and fourth quarter combined or was that just for the fourth quarter?

That was third quarter and fourth quarter combined. Keith Hughes – SunTrust: And is it roughly split equally between the two?

That's correct, Keith. Keith Hughes – SunTrust: And then we've another $4 million coming in the first quarter, correct.

That's correct. Keith Hughes – SunTrust: All right. Okay, Vic to extend on your comments on saying something on the pipeline coming, is there a specific segment you see strength versus others where is that coming from?

No, I think generally the Office segment is where we're seeing the strength. Keith Hughes – SunTrust: And is that from your short term projects or longer term projects?

Renovation projects. So those tend to be in short to medium term projects. Keith Hughes – SunTrust: Okay. And you've talked about residential and saying better months here in the last month or two, is there a geographic breakout of that or is that in all geographies?

No, really, this is Frank, Keith. And really across the board, regionally as well segments or moderate place as well as already being well talked about some of the new constructions associated with Multifamily.

Your next question is from the line of John Baugh with Stifel Nicolaus. John Baugh – Stifel Nicolaus: Quickly two things, one you mentioned that 20% consolidated expense to Europe. Is there any appreciable Floorings, Ceilings, difference on that number?

Not really. I think what is different is the geographical mix within that. So, as Tom pointed out when we think about Europe at the Armstrong level include the U.K., Russia, Middle East as well as Continental Europe. Our Ceilings business has a much stronger presence in Russia and the U.K. The Flooring business has a much stronger presence in Continental Europe. So, flooring business is going to get effected more by relatively soft at times of kind of high single-digit softness we're experiencing in the commercial segments in the Eurozone. Our Ceilings business is benefiting, while they're experiencing the similar kind of performance in Eurozone that's offset by a stronger relative presence in more robust markets like Russia which is very strong for us and the U.K. So that sort of explains the relative difference and operating performance between the two businesses. John Baugh – Stifel Nicolaus: Yes, that's very helpful. And then you're one of the few companies I thought is seemingly been able to offset raw materials with pricing. And I assume we still got 10 docs side going up, plasticizer is going up. I'm curious and yet you mentioned all these price increases you've got in place we can stay ahead of that curve again in 2012 and may be first quarter snapshot on particular.

I think we commented on the inflation we expect to see $25 million to $35 million range. We continue to drive price over inflation totally as a company. We continue to get the traditional yield from our price increases, so it's obviously our intent to continue to price over inflation as we go through 2012. I think first quarter wise, I mean we matched fourth quarter, but the commodities went up linearly in 2011, so I do think relative to year-over-year we've got pressure in the first quarter on commodities, which these increases are intended to go after. And who knows where commodities go, but they went up recently. We're cautious on our ability to continue to price to fully recover and certainly our guidance reflects our ability to do that maybe a little bit better, but that would be more evident in the back half of the year I think than the first half.

Your next question is from the line of Jim Barrett with C. L. King & Associates. Jim Barrett – C. L. King & Associates: Matt, can you talk about your promotional calendar on Resilient and Wood Flooring in the home centers this year year-over-year, how does that shaping up?

Here I'm going to buck that one right over to Frank who will able to describe that in a better detail than I am.

Yes, when you look at both products to the home center, without getting into too much detail of what our plans are, we're pretty confident about where our position is and some new products we bringing in the market and our ability to get them placed at the home center. So, we worked hard with those guys every day in terms of customer service and quality of products. We've had some good momentum that we hope to continue in 2012. Jim Barrett – C. L. King & Associates: And Tom on Wood Flooring, I mean your margins are approaching the margins you achieved in 2005, 20%, 30% incremental margins in that business, do you have a target that may could back into it, but do have a target as to what Wood Flooring margins would be in a more normal residential construction market?

No. I don't have one for you Jim. I've kind of shy it away trying to describe what the segments are at a normalized market simply because I'm not sure without doing that, I don't give away other mid cycle guidance forms that we're not quite prepared to give you yet.

Your next question comes from the line of Rodny Nacier with Keybanc Capital Markets. Rodny Nacier – Keybanc Capital Markets: I have some questions on the Ceiling, tile and grid business. The grid business it's outpace the tiles throughout the year and I was curious there to how much of that was FX or perhaps better volumes or price?

Okay. So, not FX, our results are normalizing FX out. So, it is fundamentally a business that's benefited by commodity volatility and the ability to price. We're very disciplined in that market on following steel price up, it sometimes get there a little bit ahead of the steel price, and we could hold a little bit on the way down. So it's largely a price driven result this past year. Volumes probably outpaced Ceiling as little bit as we made some volume gains in Europe ahead of the European volume gains. So, price and volume is what's allowed them to stay ahead little bit on the Building Products, mineral and fiber segments. Rodny Nacier – Keybanc Capital Markets: Got you. And is that a near-term, would you expect the grid business continue to outpace tiles or would you see task catching up?

Well, I think if you look at our overall guidance, you saw that we were only anticipating WAVE to be flat to up $5 million on its contribution which should only be about something sub 10% earnings growth and total company we are anticipating much greater in our total EBITDA results. So I think you can always have the pricing ahead of inflation that we've enjoyed this last year. So, I think they'd take little bit of breather and the mineral fiber portion of the business kicks in and delivers more than its fair share in the year ahead. Rodny Nacier – Keybanc Capital Markets: Got you. And just lastly on the $4 million of expense that you expect for contract renegotiation in the first quarter, is that tied to two plant that have expiring contracts in the second half of 2012?

No, this is fundamentally, we ended the lockout middle of January, early to mid-January and had both workforces, one workforce training essentially while the other one continue to work and so we basically doubled the labor cost. That's fundamentally what's driving the higher expense. It's not associated with the upfront labor negotiations to come. Rodny Nacier – Keybanc Capital Markets: Got you and so the labor negotiations that would be excluded from the changes that you expect from the cost cutting initiatives in 2012?

Are you talking about the labor negotiations later this year? Rodny Nacier – Keybanc Capital Markets: The expense, the $15 million of expense…

It's all inclusive. No, we've not excluded anything at all, we've not tried to normalized that out, so everything, the $115 million that we achieved could have been if we didn't have that, $50 million. So it's not included nor is the $4 million in the guidance in the year ahead. It's all in. We've not, I mean there was a lot cost around the business, and so we've tried to normalized that out.

Ladies and gentlemen, this concludes the question and answer portion of today's event. I'd like to return the call back over to management for some closing remarks.

Thank you very much, we appreciate everybody's interest have a good day. Thanks.

Ladies and gentlemen, thank you so much for your participation today. This does conclude our presentation and you may now disconnect. Have a great day.