Good day, ladies and gentlemen, and welcome to the Armstrong World Industries' Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to hand the floor over to Tom Waters with Investor Relations at Armstrong. Please go ahead, sir.

Thanks, Karen. Good morning and welcome, everyone. 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 armstrongceilings.com. With me today are Vic Grizzle, our CEO; and Brian MacNeal, our CFO. Hopefully, you have seen our press release this morning, and both the release and the presentation Brian MacNeal will reference during this call are posted on our website in the Investor Relations section. I advise you 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 World Industries, please review our SEC filings, including the 10-Q filed earlier this morning. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required by applicable securities law. 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 Vic.

Thanks, Tom, and good morning, everyone. It's good to be with you today to discuss our third quarter and to summarize our year-to-date results. On a global basis, we had a solid quarter with constant currency sales up 4%. We had positive contributions from all sales levers: volume, price and mix. Volumes were particularly strong in the Pacific Rim, and Russia and in our Global Architectural Specialties business. Our like-for-like pricing gains, which we continue to earn with our industry-leading customer service and quality, again, outpace raw material and energy costs in the current inflationary environment. Positive mix continued as growth in our high-end mineral fiber products remains well above market growth rates, and the adoption rate of our newest, most innovative products, Total Acoustics and Sustain, is frankly unprecedented and reflects our strong connection to customer needs and to where the market is going. And adjusted EBITDA in the quarter of $107 million was an all-time record for the ceilings business. So, overall, a solid quarter. Globally, year-to-date sales were up 7%, with all regions contributing to the growth. Volume and average unit value, or AUVs we refer to it, are both positive year-to-date. In fact, both components of AUV like-for-like pricing and mix were positive in the quarter. In the quarter, we also continued to gain momentum with our growth initiatives. First, our average unit value expanded as market trends toward higher rent products, coupled with our ability to win specifications, resulted in mid-single-digit growth in our high-end mineral fiber products. Secondly, we continued to gain share in the Architectural Specialty sector. This product group had another excellent quarter, with sales up 20% globally, including the benefit of Tectum acquisition. Excluding Tectum's contribution, organic Architectural Specialty sales grew double-digits in both the Americas and Asia. And thirdly, the…

Thanks, Vic. Good morning to everyone on the call. Today, I'll be reviewing our third quarter and year-to-date September results. But before we go into the financials, as a friendly reminder, I'll be referring to the slides available on our website. Slide 3 details our basis of presentation used throughout this discussion. The primary differences to our reported results are expenses related to the separation in the prior year and the adjustments made for our U.S. pension plan. Turning to slide 4, for our third quarter results. Consolidated constant currency sales of $346 million grew 4%. Adjusted operating income increased 9%, while adjusted EBITDA increased 12%, expanding margins by 230 basis points. Adjusted diluted earnings per share were up 12% – 14% due to higher earnings. Adjusted free cash flow improved by 12% over the prior-year quarter, due primarily to higher cash earnings and less CapEx. Net debt increased by $10 million due to a slightly lower cash position from our share repurchase activity. Turning now to slide 5. Adjusted EBITDA increased 12%, driven by solid AUV fall-through to profit, higher volumes and lower SG&A expenses. AUV improvements in the Americas drove this result. Both positive mix and positive like-for-like pricing led to the strong AUV fall-through as we continue to sell a richer mix of products and benefit from prior pricing actions. Globally, volume improved, driven by our international markets, particularly in China, as the office market continues to recover. In total, emerging market sales grew 16% over the prior-year quarter. WAVE equity earnings are lower this quarter as both parents executed a revised support cost arrangement. This periodic process updates support cost for services provided by the parent companies. These revised costs positively impacted our adjusted EBITDA by approximately net $3 million in the quarter, including a year-to-date…

Thanks, Brian. Further to Brian's comments on our insurance settlement, I wanted to add that, while this is still an ongoing matter, the progress to-date and these initial settlements are a reflection of our management team's focus on taking actions to deliver shareholder value from all available assets and sources. With this multi-year effort, we're not only proactively mitigating future risk, but also seeking to recover previously incurred costs and expenses that will meaningfully impact our bottom-line. Our legal team has done a fantastic job of executing this initiative. Now in closing, we delivered a solid quarter in spite of the disruption in the Americas segment. I continue to be impressed with the adoption rate of some of our new product platforms, like Total Acoustics and Sustain, and how our market-leading innovation efforts and our Architectural Specialty capabilities are differentiating us in the marketplace, enabling us to deliver higher growth rates in the overall market. And I'm pleased with how our teams are responding with sufficient price realization to more than cover higher input costs in an inflationary period. To sum up, this was another quarter where I hope you can see that Armstrong is no longer just a mineral fiber suspended ceiling company, that Armstrong has moved into the expanded market of total ceilings, and is becoming a complete ceiling solutions company. We are selling into more spaces than ever before with our broad portfolio, including Architectural Specialties and Tectum-like products. And we are selling more into every space with our component products from our WAVE joint venture. This is a strategy to grow beyond the core mineral fiber category. We continue to build out our M&A pipeline to accelerate our penetration into these adjacencies. All in all, we couldn't be more excited about our future, as you can clearly see from the authorization of an additional $250 million stock buyback program. So, thank you for being with us today. And with that, we're happy to take your questions.

Thank you. And our first question for today comes from the line of Mike Wood from Nomura Instinet.

Hi. Good morning. Thanks for taking my question. I guess, I'll just focus on the sales guidance. It's a pretty wide range with two months left in the year. So, I hope you can give some color in terms of what the biggest difference is between the low-end and the high-end with that. It looks like a 5% upside-downside to the midpoint of the fourth quarter guidance.

Hi, Mike. This is Brian. So, yeah, the range is a little wide. I'd say that, it's continued to be driven by volume expectations and especially in our international markets as they close out the year.

Thank you. And our next question comes from the line of Jason Marcus with JPMorgan.

Hi. Good morning. So, first question on the Americas volumes. I know you called out the hurricane is negatively impacting volumes in the quarter as well as softer education. But as you look outside of the hurricane region, just wanted to see if you can give us some more color on the underlying growth rates in mineral fiber that you saw during the quarter. And then just a quick follow-up, with the plant closure in China, are you – are there any charges that you would expect beyond what you had this quarter?

Yeah. Jason, let me take the volume question. The education, in particular, the repair and remodel activity in education was broad-based. And so, that was much broader than the hurricane regions. I think, we saw a shift, as I mentioned, from September to – sometime in the fourth quarter. We're certainly seeing some of that bounce back in October, which is good to see. But the education repair and remodel activity was broad-based. Let me give a little bit of additional color around that. There was 23 states that had made midyear budget reductions this year on – for educational spending, and this is the highest budget reductions we've seen since 2010. So, it was a meaningful and broad-based reduction for money spent on R&R activity in education. So, that was a big driver and that was really the bigger than the impact hurricane for us in the third quarter.

And then, Jason, on the QingPu question, we don't expect or anticipate any additional charges or changes there.

Great. Thanks.

Thank you.

Thank you. Our next question comes from the line of Stephen Kim with Evercore ISI.

Hi. This is actually Chris Shook on for Steve. Good morning. My first question is on the WAVE business. So, you commented that JV income dropped due to high steel cost and high support cost. Can you just add more color on just really what drove the support cost and whether we should expect this elevated level to continue into 2018?

Sure, Chris. This is Brian. As you look at slide 5, we showed equity earnings globally were down $5 million, $4 million of that was specifically related to the cost change. So, still some headwinds between the price realization and steel input cost. We did have a year-to-date catch-up, so it's worth roughly $2 million, $2.5 million in the quarter, and we'll expect a little tailwind in Q4 for that changing and cost support.

All right. Thanks very much.

Chris, I'll add to that if I can, that the input costs, which are really steel, have been going up, and I'm really pleased with how the team has executed on price. We realized price in the quarter, positive price, like-for-like pricing in that grid business and really closed the gap on the steel cost increase that we've been seeing there. So, I'm really pleased with the execution there aside from the true-up in the cost that Brian outlined.

Okay. Thank you.

Thanks for your question.

And our next question comes from the line of Keith Hughes with SunTrust.

Thank you. Going back to slide 7 on the Americas, the 160 basis points in margin expansion discussed at the bottom, which item specifically does that exclude to get to that number?

Hey, Keith. It's Brian. So, that excludes the environmental insurance settlement net of legal and other consulting fees. So, roughly $3 million in the quarter.

So, the fees were – that would have been $4 million. Is that right?

Yeah. We basically said the settlement was $6.5 million. And so, you're looking at roughly $3.5 million and kind of other legal and consulting fees that hit the quarter.

Okay. And those just show up in SG&A, is that right, the fees you're disclosing (28:04)?

Yeah. So, the insurance settlements end up following the traditional percentage of where the expense hits. So, roughly 70% in the cost of goods and 30% in SG&A. The other legal and consulting fees hit SG&A directly. And then, you could see in the footnote there, we've got the net benefit of year-to-date WAVE support cost change true-up. So, that's the math to get you to the margins expanded 160 basis points.

Okay. So the – you've taken out, is it the $5 million benefit?

No. On WAVE, it's really $2 million. It's the impact of the year-to-date catch-up. When you look at slide 15...

Right.

...we had $3 million in the quarter and $2 million of that was catch-up.

Okay. Thank you.

Thanks, Keith.

Great question.

Thank you. Our next question comes from the line of Kathryn Thompson with Thompson Research. Please go ahead.

Good morning. This is Steven Ramsey on for Kathryn. Just some clarity on volumes for the quarter, how much did Tectum contribute? And then, what was the North America core ceiling tile volume growth?

Yeah. Steven, this is Brian. So, consistent with prior quarters and really for the year, in the Americas, Tectum is going to add about 3 points. We don't talk or quote specifically core mineral fiber volumes as we break it down. So, for Tectum, that inorganic piece is worth 3 points.

Excellent. Thank you.

Yeah. Thank you.

Thank you. Our next question comes from the line of Bob Wetenhall with RBC Capital Markets.

Good morning. This is actually Marshall on for Bob today. In the Pacific Rim, obviously big improvement in revenues. Would you talk about the trade-off between price and volume there and what's contributing to that differential between the two items?

Yeah. Let me comment, really because China was the big driver of the double-digit growth across the region. I'd mentioned in my talking points that China was up over 40%. Really, there's a dynamic going on there that isn't driving actually a price-volume trade-off. There's a lack of supply in the market based on some local players not being able to supply. They have their own environmental issues, and it's limiting supply from those traditional suppliers. So, we're picking up share in the market without giving up price. In fact, we're working hard to raise price in that market. So, not the traditional price-volume trade-off that you would expect there. Nice volume growth, though.

And then, on the sourcing in that region, I know in the past you've highlighted some of the sourcing moving to the Americas and Europe, and potentially their earnings attributing to those regions, too. Is there any way to break out the impact of that or is that material enough to move the needle?

Yeah. Marshall, in the past, we've profiled in our guidance that roughly $11 million of EBITDA is going to come out of Asia, in the Pac Rim. $5 million of that is going to benefit the Americas and $6 million of it in Europe. That's an annual number.

Thank you.

Yeah.

Thank you.

And our next question comes from the line of John Lovallo with Bank of America, please go ahead. Peter T. Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Hey, guys. It's actually Pete Galbo on for John. Thanks for taking the question. Brian, just hoping to get a little bit of clarity on the go-forward on environmental insurance settlements. So, I think, in the press release, you had outlined $20 million benefit for the fourth quarter, but then in the slides, the $15 million net benefit. I just want to make sure I'm understanding that right. And then any color on whether or not those carry at all into 2018?

Yeah. Pete, it's a great question. So, regarding the $20 million, you got the math right, net of some of the additional legal and other third-party expenses, it'll net down to $15 million. As we think about it, we've got a $3 million net benefit in Q3. We would anticipate another $3 million in Q4, and then taking the full-year up to $15 million, less those expenses. Obviously, we're in litigation right now with a number of other carriers and we're approaching, I'd say, our full P&L benefit. The way that works is, we look back since the last few years, look at all the expenses we have taken through the P&L, both in cost of goods and SG&A related to these sites and the legal fees associated with it. And we get to recover through the P&L up to that amount, and then any settlements above that will show up in the balance sheet to pay and fund future remediation and legal expenses. Peter T. Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Sorry, Brian. Just to clarify, did you say that there is a $3 million benefit also carrying into Q4, so really we should think about that as, like, an $18 million net or did I mishear you?

No. It's not an $18 million net. So it's $3 million, which we had already anticipated in our guidance, and then, the $15 million is incremental. So... Peter T. Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Got it, got it.

Yeah. If you do the math, you'll back into about $2 million of net expenses. Peter T. Galbo - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Okay. Thanks, guys.

Yeah.

Thank you.

And our next question comes from the line of Ken Zener with KeyBanc.

Good morning, gentlemen.

Hey, Ken.

Good morning.

Sticking with the Americas, you talked about Tectum and the tailwind that's provided. Last quarter I asked about this, and I just want to get a clarification again. The strong pricing that we're seeing, was that in the third quarter also like-for-like pricing across all your categories like you highlighted in 2Q or did you see better pricing in the high-end, less so at that lower commoditized end?

No, very similar to what we reported, Ken, in 2Q. Balanced price across the portfolio, and really across the portfolio, so we're getting price everywhere in the portfolio, to be very clear about that. And it's balanced between like-for-like pricing and, of course, the mix effect by selling more at the high-end of the product portfolio with our margin expansion initiative. So, yeah, I appreciate your question, but we're getting – I'm really pleased with how our team's executing the price in the field.

Right. It's very good. And I wonder – Vic, I know we've talked about this in the past, but so, education and state spending, you just call that education here, but those, probably out of the five categories you service, those are two of the cyclically weaker ones, if you think about some sort of baseline. Could you put this state budget revision in context for us, please, as it relates to how you guys have looked at it in the past, what it might mean, because I certainly think liabilities pension are one of the elements constraining states this cycle versus prior ones. But if you could just flesh that out a little bit so we know if there's perhaps a snap back expected next year. Thank you.

Yeah, Ken, that's a tough one, because each state has its own different set of challenges and for a variety of reasons. A lot of this R&R activity in education is quite discretionary. And so, if the state is facing a specific issue in any of its budgeting items, obviously they can divert this to those items. So, it's very difficult to put a finger on, which is really why it's hard to forecast and, I think, to really understand, because these types of budget reductions happen real time in the quarter. So, it's really hard to – I'm sorry I'm not going to give you a good answer on this one, because it's really hard to put our finger on it. What I will tell you about this demand, though, it's not foregone demand. The renovation and repair needs are still there and will be there again next year. And so, I don't think this is lost demand, but this is really going to be falling into the bucket of pent-up demand. They will eventually have to repair and renovate these damaged or outdated ceilings. What I'm encouraged by in the education segment, just to add a little bit to that, is on the new construction side. As I stated in the last November election, there was numerous bonds that were approved for renewed education spending. And the activity that we're seeing in education is very encouraging around the new construction and the major renovation project. So, I think, there's more to come here and I think that there's nothing structurally different about this education segment. I think, the discretionary nature of it is showing up in this third quarter as state and local budgets continue to be stressed.

Thank you.

Thank you, Ken.

Thank you. Our next question comes from the line of Scott Rednor with Zelman & Associates. Please go ahead. Scott Rednor - Zelman & Associates: Hi. Good morning. Brian, I was hoping to better understand what exactly the WAVE adjustment relates to. And the reason I asked that is, we obviously see, what, Worthington reports with a one-month delta. But it's the largest gap between what they report and what you guys reported in what looks like about 10 years. So, can you maybe just explain what exactly it is?

Sure. So, both parents provide support services to the joint venture, and we've been working on this for quite some time now and finally came to agreement between Worthington and ourselves and the JV on changes to those support costs. So, both Worthington and AWI have changed their support cost. And it's stuff like, for example, selling. We've been making an investment in our selling organization here over the last few years, and, in many cases, we haven't passed along all those expenses. So, these support costs are for those types of things. Scott Rednor - Zelman & Associates: So, will it change – their cash will come down in terms of the dividend comparable to the expense you're now allocating to the JV? Is that a fair way to look at it?

Yeah. What I would say is, we, as parents, will have lower cash out, because we're getting reimbursements for that SG&A. And then, yes, the JV itself will also have (39:02) a slightly lower dividend back to us. That's why when you look at page 15, just to drive it just a little bit further home, you see the net benefit for us in EBITDA is $3 million, but our WAVE equity earnings are down $4 million because that reflects the additional cost that Worthington has also passed along. Scott Rednor - Zelman & Associates: Okay. Thank you. Very helpful. Appreciate it.

Thanks.

Thanks, Scott.

And our next question comes from the line of Garik Shmois with Longbow Research.

Hi. This is Jeff Stevenson on for Garik. My question is, at a high level, how should we be thinking about incremental margins moving forward and margin expansion headed into 2018? Are there any risks we should be considering?

Let me just start and then, Brian, you could add some color to that.

Sure.

The initiatives that we've got going on driving margin expansion, which is driving innovation into the marketplace with higher value products, which – there's actually a pool that the market wants to mix up to. We're leading the way with that. Those products are not only higher price points, but they're higher margin products for us as well. So, the more that we continue to mix up, it's going to continue to drive that. I don't see that ending in the near future at all. In fact, there's many years of this to go as we replace the old technology that's in installed, especially here in the U.S. The others that we're committed to, driving price over inflation. We have a nine-year history of delivering price realization to cover our inflationary costs. We're going to do that again this year, and I expect that we'll continue to do that as a discipline that we have. So, we're going to continue to drive those two things. And then, on the back-end of the business were productivity. Our plants are committed to the Lean methodology. We're seven years into our Lean journey, and we're continuing to make good progress there. I don't think we're finished there. We've made some additional investments also in our manufacturing. It's going to structurally help our productivity going forward. So, I think, we have three strong initiatives that are going to continue to contribute to margin expansion going forward.

Vic, and one last one I'd add to that is really the focus on G&A more so. We've been making investments in selling and driving productivity in the G&A spend. And so, to your question, I'd say no, we fully expect to continue to drive EBITDA margin expansion. As you know, when you look at the Americas, we're right around 36%, globally, 26%. And so, we continue to be focused on driving that margin expansion in Americas, and then as we've outlined before, one of our strategic initiatives is around improving the profitability in our international businesses which have seen some nice pickups in margin expansion in the last 18 months.

Great. Thank you.

Great.

Thanks, Jeff.

Thank you. And that concludes our question-and-answer session for today. I would like to turn the floor back over to Armstrong for any closing remarks.

Great. Thank you. Thank you, everybody, for being with us today. We appreciate the questions on some of the unusual items or one-time items in the quarter, but once you peel those back, we really had a solid quarter, we executed very well on pricing which is really important in this environment. We continue to sell more products at the high-end, driving the mix. Our team's executing internally in our plants, so feel very good about the performance in the quarter. And really, we're well positioned to finish the year strong as we reinforcing our guidance. We are feeling very good about where we are. And again, with the position that we've created in the third quarter with our pricing initiatives, we feel good about finishing the year very, very strong. And the traction that we're getting in our growth initiatives is frankly exciting. And, as I've mentioned earlier, we're excited about where we are as a company and we look forward to updating you further in February when we get back together. So, thank you, everybody, and have a nice day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone, have a great day.