Good day, ladies and gentlemen. Welcome to the Armstrong World Industries Fourth Quarter 2014 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. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for today’s call, Mr. Tom Waters, Vice President of Treasury and Investor Relations. Sir, you may begin.

Thanks, Amanda. Good morning and welcome. 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 today are Matt Espe, our President and CEO; Dave Schulz, our CFO; Don Maier, CEO of our Worldwide Floor businesses and Vic Grizzle, CEO of our Worldwide Ceilings business. Hopefully, you have seen our press release this morning, and both the releases and the presentation we 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, please review our SEC filings, including the 10-Q 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 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 Matt.

Thanks, Tom. Good morning, everyone. We have a lot to cover today, so let me start by laying out our agenda. First, I will spend a minute on fourth quarter and full year results, and I will leave the bulk of that discussion to Dave. I want to spend the majority of my time discussing the announcement we made this morning to separate our two businesses and provide some context on our guidance for 2015 and the internal and external factors that inform our view on the coming year. For the fourth quarter, reported sales of $587 million in EBITDA of $78 million were within our guidance range after moving our European flooring business to discontinued operations. Dave will help you reconcile that impact and touch on a one-time item that helped us deliver earnings near the top of the range we provided in October. Within the fourth quarter results, our North American Residential businesses were challenged. The Wood business continued to see volume losses as a result of competitor pricing actions and profitability for this segment swung to a loss. Residential Resilient experienced a mid single-digit sales decline. Commercial Resilient in the Americas had a solid quarter with sales and EBITDA, both up. The Ceilings business in the Americas delivered another quarter of record profitability with up over 10% from 2013 despite volumes being down year-on-year. For the full year Ceilings grew sales 3% and profitability to a record level. America ceilings' EBITDA margins expanded to 42%, with continued price and mix gains, strong manufacturing productivity and an increased contribution from WAVE, driving the results. For the year, consolidated as reported sales of $2.5 billion were down 0.5%, but sales were up slightly when adjusted for foreign-exchange. EBITDA for the year of $384 million was up $12 million or…

Thanks, Matt. Good morning to everyone on the call. In review our fourth quarter results, I will be referring to the deck that Matt used while addressing the separation. I want to remind you that Slide 3 outlines our standard basis of presentation. Note that starting with this presentation, we will be excluding the earnings impact of our U.S. retirement income plan from adjusted EBITDA. As many of you know, the accounting impact of this plan in the past has been accredited and will in the immediate future be an expense. However, as we have not made cash contributions to this plan in more than 20 years and do not anticipate cash contributions and coming years, we view the expensing credit from this plan to be non-economic and thus our results and guidance are more relevant when this is excluded. Slide 10 illustrates the adjustments to our October guidance as a result of the European flooring business moving to discontinued operations. The slide is self-explanatory and additional details of the financial statements impact of our exit from the European flooring business can be found in our 10-K. Slide 11, Key Metrics, lays out our fourth-quarter results. As you can see for the quarter sales of $595 million were down 2.5% versus 2013 on a comparable foreign-exchange basis. Operating income was up 7% and EBITDA was up 8%. Earnings per share of $0.38 were up $0.03 from 2013. Free cash flow for the quarter was $49 million, up $56 million from last year. I will talk more about cash flow and EBITDA on upcoming slides. Net debt was down $97 million from prior year, driven primarily by operational cash generation and the cash settlement of a foreign currency hedge that I will discuss in a moment. Return on invested capital was…

Thanks, Dave. Before we get to your questions, I want to take a moment to recap some of Armstrong's 2014 accomplishments around the globe. In the Americas, as mentioned we achieved a record property year for our Ceilings business. We progressed with construction of our Lancaster LVT plant and the capacity and capability enhancements of our Somerset engineer wood facility and we completed the addition of high and capability and edge performance improvements to our Hilliard, Ohio Ceilings plant. In the Pacific Rim, we commercialized our three new plants and grew China sales by 13%, India sales by 18% and total regional sales by 8% we added metal ceiling capability within our new plant in Kunshan, China to support continued growth and architectural specialties. We closed our Kunshan China engineered wood plant and on short production to our Somerset facility. We also closed a small floor tile plant in Thomastown, Australia to improve our cost position. In Europe, we took the decision to seize funding our unprofitable flooring business. We added world-class edge capabilities to our Muenster, Germany, Ceilings facility. Finally in Europe, we completed construction of our $100 million Ceilings plant in Alabuga, Russia and the plant began shipping just last week. The team here at Armstrong worked smart, worked hard and worked safely to realize these achievements and they should feel proud of what they accomplished in 2014. With that, we would be happy to take questions.

Thank you. [Operator Instructions] Our first question comes from Stephen Kim with Barclays. Your line is open.

Thanks very much guys. I guess, my question would relate to, I am trying to understand what kind of corporate expenses you think might be attributable to the various divisions, particularly with an eye towards how we should be thinking about those if they were to become standalone companies. Thanks.

Hi, Steven, it is Dave Schulz. Thank you for your question. At this point, we still have a lot of work to do obviously but you know we are initially projecting that will have a minimal impact on our operating expenses on the separation of the company. If you could talk a little bit about the SG&A associated with that. As we look at your company, you had indicated I think that there were no synergies, but there will be some duplicative costs I would assume if you run them independently. Could you give us any sense of how much that might be?

No. We are not in the position right now to provide you an enormous amount of detail on that. I think it is safe to say that obviously as we have to stand up two separate companies, there are a series of corporate expenses that will also need to be split out. As we provide those details today, we do have a rather large corporate segment that we talked about being about $60 million in 2014. We would anticipate that it would require all of that SG&A that is currently incorporate to effectively staff and operate two standalone companies. At this point, we are not in a position where we can provide you more detail beyond that.

Okay. Great. Thanks very much, guys.

Thanks, Steven.

Our next question comes from Dennis McGill with Zelman & Associates. Your line is now open.

Good morning. Thank you. I guess, just as it relates to the spin-off, I realize you are still going through a lot of the decisions here, but as you think about capital structure can you maybe just offer any initial thoughts or what would go into that thought process along the way? Then kind of related, Matt, what your role would be on a go-forward basis if this evolves?

Well, let us take your first question. Much like the last question, Dennis, we are at the very preliminary stages here. I mean, we have got a lot of work to do on the details of the capital structure for both of the standalone companies and we would expect as we go through time here in the next few months to provide more clarity and detail on that. We have got lots of time ahead of us, lots of work to do, our intent would be to update you regularly as things evolve and develop. As for me right now, my priority is to lead a successful separation of the two businesses and make sure that the both are positioned to succeed as they go forward.

Okay. If I could just sneak in a clarification, Dave, on the unknown cash cost in Europe, is that related to the pension over there or could you give a little detail on what that relates to?

Sure, Dennis. It is not necessarily related to the pension. It is more related to some of the transactions that occurred between the German entity and the North American entity here at Armstrong, so we had a series of transactions that obviously as we go to the insolvency process, there will be an evaluation as to whether some of those transactions, particularly the cash associated with them should have been retained in the German entity verses in the AWI parent entity. Obviously, we will have in-depth discussions with our administrator about that as we go through this process, but it's not necessarily related to the pension.

Okay. Thank you.

Our next question comes from Kathryn Thompson with Thompson Research. Your line is open.

Hi. Thanks for taking my questions today. Just more conceptually focusing on flooring because that has been a division that has struggled a bit over the past couple of years, with this split up announcement today, will this be an opportunity to make more structural changes in division ranging from product type to how products are sold in the market? Thank you.

I would say it would be preliminary to talk about any specific structural decisions that we make in flooring. I think this gives us an opportunity to think about growth opportunities more broadly and a platform to move more strategically than we have in the past. I think in our comments we talked about decisions in floor may be encumbered by trade-offs in Ceilings business or vice-versa, so by separating the two businesses, you create a two very independent businesses and are now able to building our capital structures and make those decisions as they go forward. We are not in a position today to point to any structural changes we would make on a product development basis or go-to-market basis. I think more importantly this gives Don as a leader of flooring Vic as a leader of our Ceilings business [ph] more flexibility to do what makes sense for them in their respective industries.

Conceptually, though this would be an opportunity to make changes be it growth or tweaking the model itself?

Well, I don't really want to get into conceptual or speculation, Kathryn. I mean, we got a lot of work to do. I think what this does provide is, more flexibility for both the business leaders than they may have had in the past.

Okay. A quick follow-up, I assume that the JV relationship is unchanged with this announcement for Ceilings?

Yes. This does not affect WAVE at all.

Great. Thank you.

You bet. Thank you.

Our next question comes from Michael Rehaut with JPMorgan. Your line is open.

Thanks. Good morning everyone. First question I had, I guess, was just going back to any corporate expense and just trying to make sure I understand it correctly. In terms of the $22 million to $28 million of the pension expense, would that be split out between the two separate companies as well on a pro rata basis? I guess also along the lines of corporate, with the shared services and some of extensive there would be some separate administrative costs that flooring would need to incur as a separate public company. Would there need to be additional costs as it relates to the shared services that flooring would have with Ceilings that they would start to need to build out some infrastructure of their own as well?

Let me take the last question, David, maybe you take the pension question.

Sure. As we said in remarks, what we intend to do is create a transitional plan where the shared services would be embedded in AWI, which is the Ceilings business, so it will be a transaction agreement with very specific service levels between AWI and Armstrong Flooring, and we expect that to remain in place for a very specific amount of time as Don and the leadership team in flooring build out their own capabilities in those regard. The first step is Don and the team need to determine exactly what level of capabilities, what level of services they need for IT, HR transaction processing, et cetera. This structure gives him time to think through that then begin methodically adding those capabilities to the organization. That could be in the form of in-house capabilities, in the form of continued outsourcing of those capabilities or more likely some hybrid of the two, depending upon the nature of what needs to be done, but the thinking at this point is we want to give a AFP or Armstrong Flooring the opportunity think through that by embedding their capability initially in Armstrong World Industries and then creating a transaction services agreement with the AFP leadership team. Did you want to take…

Sure. Mike. It is Dave Schulz. Let me just address the pension. Obviously, as a company today, we have roughly $2 billion pension liability. I first want to say that our pension as it stands today in the rights of our current retirees will not change, so we fully anticipate that we will continue to pension in its current form under AWI ownership. Again, that is for the U.S. pension plan. We also have pension plans that are outside the United States. Again, the rights of the current retirees will not change as we go through the separation transaction. In terms of how that will flow through to the different business units, we do anticipate that the flooring company on a standalone basis will still be absorbing their fair share of the $22 million to $28 million of pension liability and pension expense moving forward, so we would anticipate that any expense component relative to the pension and the separate flooring business would flow to that flooring business. The actual vehicle of how we are going to set that pension up is still to be determined. Obviously, it is a very complicated area that we started the work on, but we are not in a position to provide you any more detailed composition of the pension going forward, but I do want to reiterate that our intent is that the rights of our retirees and our current employees that are under the pension will continue.

That is great. Just one other quick question if I could, the Flooring business, I was hoping to get some kind of an update on some of the issues that were highlighted from the third quarter, perhaps, Don, can you speak to this or Matt if you like. There were several issues that were highlighted last quarter in terms of challenges in that business, shifts between glass-back sheet and felt-back sheet, share loss within glass-back sheet, LVT and engineered wood on the wood flooring, so a lot of things that were going on last quarter. I was hoping to get kind of an update on how you are thinking about addressing those issues? I know that in the guidance, you talked about a lot of investments that 2015 will be an investment year, but any type of update around those different issues that you described last quarter would be helpful.

Yes. Let me kind of take that one and kick it over to Don for additional comments, so the investment speaks to a lot of the actions we are taking in response to the issues we described as you pointed out. The marketing and promotional spend behind the LVT launch, significant upgrades and our retail displays etcetera are all stemmed from extensive discussions that Don has had and that Don and I have had with distributors and retailers across the country. I think, Don and his team have done a great job responding to a significant deterioration in the market conditions in the second half of 2014, plus more flexibility around our promotional and pricing support regionally. The feedback from the distribution channel partners have been very positive around the speed and adaptability of Don's organization to a significant change in the operating environment, so I think that you aside from about 300 individual actions, Don, not exaggerating, individual actions Don and the team have taken and are taking in response to opportunities regionally, I think, structurally investments were going to point to in 2015 around strengthening our play in retail and putting some real marketing muscle behind the LVT launch and thinking through and focusing on the Wood facility, engineered wood from our Somerset. Almost every single thing Don and his team are focus on particularly, the resi business is a result of dealing with the issues that we identified and discussed a little bit at the end of the third quarter. Don, any additional?

Yes. I think you summed it up well. I think, I am pleased with the progress we have made, but obviously a lot more work to be done here. Everything we are doing has been informed through this engagement with our distributors and our retail customers. As it relates to the felt glass piece or glue down to loose-lay is how we are really referring to it, we have had a couple new product introductions which appear to really be addressing the opportunities for us in the property management segment. With the investments we have at winning with retail that Matt mentioned that will round out I think filling some of the gaps that we have on our sheet products. On the LVT line as well, we have introduced a price fighting line in the commercial segment called parallel, as well as the launched an innovative installation methodology called [ph] on commercial fast [ph] on the resident residential business and both of those products and the parallel product have been extremely well received in the market. As we have seen the continued shift from solids to engineered, the investments in Somerset that Matt referred, we pretty much completed all of that project work and have those products all transitioned over. Again, a lot more work to be done, but solid progress in addressing those specific areas and the investments we are going to make in 2015 are really going to leverage on top of that.

Great. Thank you.

Our next question comes from Bob Wetenhall with RBC Capital Markets. Your line is open.

Hi. Thanks for taking the question. Congratulations on the announcement. I wanted to ask Dave about the guidance for 2015, because it looks like at the mid-point of your guidance for EBITDA, you are $20 million, $25 million lower than 2014 levels. I am just trying to understand, because some of your commentary suggests that Resilient had some very favorable trends in 4Q. Given those trends, I actually thought your guide would be a little higher and I am trying to understand is the guide lower because of investment, which was flowing through the P&L or what explains that difference?

Bob, thanks for the question. It is primarily related to some of the investments that we are building into our 2015 plan as appropriately reflected in the guidance. As both Matt and Don just mentioned, we do have a lot of activity right now on both, the product innovation front. We also are spending significantly to enhance our retail presence, so some of things that Matt mentioned earlier about our displays and our promotional activity, making sure that we have the right literature, the right go-to-market strategy as it goes down to our retail partners, so there are some significant investments. Then the other thing I just want to point out is, we talked about the market opportunity going forward. We do still see very low single-digit opportunity primarily in the healthcare and education side as it relates to our flooring business and that is also reflected appropriately into the guidance that we provided.

That's very helpful. I was going to ask Vic. You guys had a really healthy Ceilings' EBITDA margin in the 25% range last year, which is great and I know you have talked before at your Investor Day about getting that margin 500 basis points higher to like 30%, 32%. How should we think about that, is that driven by volume and pricing or is it lower cost inputs and how do we bridge that 500 basis points? While we are talking about ceilings, I was hoping, you mentioned in your deck the verticals you participate like healthcare and education, any specific color what you are seeing on end market demand would be great. Thanks.

Sure. Thank you for the question. On the margin level, first, back in May at our Investor Day, we talked about growing the margin levels from where we are today at a kind of a mid-cycle volume level. You remember we were talking about volumes getting back to mid-cycle levels of our peak in the 2006-2007 timeframe, so that is an important component to getting back to some of those, that the volume leverage that you need to increase the margin levels, but the play that we are continuing to run that that allows us to grow the margins even on lower volume basis right now is the work that we are doing in our plants around productivity. Our lean methodology is really gaining some nice traction and we continue to get some nice significant productivity gains that is helping us to drive the margin and we are committed to continue to get price for the value that we bringing to our customers and that exceeds the inflationary level that we have had in the last couple of years and we plan to continue the efforts around that. Again, based on the value and the services that we are bringing to our customers making sure that we are getting paid for that, so we are committed to that, we still believe that that's the results that we can get this marketplace, so that is that. In terms of the market verticals, if you will, again in the Americas' business, you get a little bit more about balance of the verticals between office, healthcare and education. Really right now, we see the office leading the market recovery and really on the new construction side in fact on the office, so we continue to stay focused on that and elsewhere outside the United States, the vertical really that drives our business is the office segment, especially in emerging markets. One of the differences between our business and the flooring business, if you remember as we discussed back in May, was the development of Ceilings in healthcare and education are behind I would say the Office segment. In fact, a lot of those buildings and office [ph] do not even have a Ceiling, so that is our opportunity. In the near-term, the Office segment is really going to be what is driving our business. Again, in emerging markets both, in Russia and China, as Matt talked about, those are challenged segments for us in the short-term. I hope that answer your question.

Yes. That was great and any commentary just to follow-up on the Ceilings with Worthington and that is going to stay in touch. I know you guys have some joint production facilities. Any change to that through the splitter or is that going to remain intact in the current structure?

We are very pleased with that relation.

Cool. Good luck. Thanks very much.

Thanks Bob.

Our next question comes from Mike Wood with Macquarie. Your line is open.

Hi. Thanks for taking my question. Are you able to quantify for us the incremental investment embedded in 2015 guidance on that flooring, sales and marketing. Just overall how much you would say would be the total inefficiencies in 2015 from the plant start-ups with Lancaster and Somerset? Thanks.

Yes. Hi, Mike. It is Dave Schulz. Thank you for your question. We have a couple of significant investments and we talked about some of the SG&A. The SG&A investment that we are making is a continuation of some of the work that we started in 2014, so they were in the best position to leverage the LVT facility when it comes online here, but I am hesitant to break that out for you between the pure LVT plant startup cost, plus the SG&A investments. Obviously, we are going to be able to continue to react to the market as necessary here. We are committed to making sure that as we go through the separation process, resetting both businesses up for success on a standalone basis and we are going to make investments that we need to do so on the flooring business, particularly.

If I could just peg in on that, I think we covered this in the comments a little bit, Mike. We have deferred investments in Flooring, sort of waiting market related volume. In anticipation of recovery, we deferred promotional spending, retail support et cetera. We feel that we have reached the point even with a modest outlook and the volume deltas in the market in the residential business in 2015, that we need to bring back those investments completely line with the board, so 2015 is really a year to get back in the game with the pretty significant marketing and promotional support for our Flooring business in North America. These are the investments we have had visibility to, but we feel like, I think that we have reached a point where it is necessary to do this [ph], especially in light of a pretty significant LVT investment in Lancaster, so the team is excited about it. These will be focused investments, very targeted, in line with Don's strategic priorities. As Dave said, as we go through 2015, we will see if we need to make some additional investments either proactively in the marketplace or reactively to changing conditions.

Okay. Can you also give us an update on what has been happening with green oak pricing and with the potentially supply ramping with the increased price? Why there has not maybe been more of a deflation on green oak pricing?

I can only comment, generally speaking, pricing is flattish but still at fairly high levels compared to two or three years ago.

Thank you.

Thanks Mike.

Our next question comes from Will Randow with Citigroup. Your line is open.

Hi. Good morning. Thanks for taking my question.

Good morning.

Sorry if I missed this, but in terms of contemplating this tax free spin-off, what are your thoughts in terms of making sure, for lack of a better term, the tax free status stays in place if there were to be industry consolidation involving the flooring business near-term?

I mean, I do not know if we are in a position to even speculate on that. I mean, we are focused on a tax free spin of the Flooring business for our shareholders. That is the path we are on. I do not know. Dave, do you have any additional comments?

No. I mean, clearly, we are very much focused on a tax efficient transaction. We believe that the mechanism that we are planning for is the appropriate treatment from both, tax basis, but it is the right thing to do from both, our shareholders perspective and from the company perspective as this will be essentially tax free as a spin to both, our shareholders and to the company. We feel it is the right approach going forward and we are committed to getting it done.

Thanks for that. Just a follow-up in terms of input cost oil-based, are you seeing any easing in your current production costs for the Resilient business in particular?

Well, this is Don. We have started to see a little bit of a movement there in the downward correction, but at this point time nothing that I would call of material or significant. Obviously, we are starting to see oil prices stabilize and actually come up a bit more as well.

Could you quantify that? I am sorry.

No. Again, it has not been significant enough to move the needle.

Yes. Well, it is Dave Schulz. We have not seen the direct correlation yet between the drop in oil prices and the prices we are paying to our suppliers. We anticipate that there will be some form of a lag there. Obviously, we are watching it closely and we will make sure that we keep you updated as we learn more.

Thanks again, guys.

Thank you.

Our next question comes from Ken Zener with KeyBanc. Your line is now open.

Good morning, gentlemen. Can you guys hear me?

Yes.

Okay. Obviously, there is a lot of focus on the company being spun out, but if we could just take a step back here, is there any reason to think these spun out companies are going to have a higher corporate cost structure, after let us say the first year. Obviously there is a lot of focus on increased cost structure, but is there any reason to assume that costs will be higher on a standalone basis after the initial period?

As we go through the process, I think, we will try to provide or we will provide more clarity and transparency on that. I think it would be premature for us to be speculating or hypothesizing at this point. The driver for this is not cost reductions at headquarters. The driver for this is positioning two businesses in two very different markets or very different industries with different opportunities as pure play. Both businesses will eventually are both independent companies will need the same or very similar "corporate support" that they received today, the IT, the range of HR capabilities, transaction processing and accounting investor relations, all treasury, all of the traditional functions that any standalone business will have. Part of the process and the a methodical approach we intend to take over the next several months is to thoughtfully build those capabilities and position employees today that might be incorporate "into those positions", so this will open up opportunities in both, our Flooring and Ceilings businesses to built up the same the capability in both of those businesses that reside somewhat centrally today. Dave, anything?

Okay. Then my second question. Just want to drill down domestically in the U.S. ceiling tile. You grew 2% in the Americas, could you give us a sense if that is, let us say, 4% price mix minus 2% volume. Then if you could comment on what you expect WAVE contribution dollar-wise to be year-over-year. Then update us on any changes in the landscape that you have seen with new entrants into the Ceiling tile market and the grid? Thank you.

Yes. On the price mix volume, this is Vic Grizzle by the way. The price mix volume, the Americas volume overall was down, so all of the growth and I think Dave mentioned this in this talking remarks. All of the growth was price and mix both, positive in the Americas as we have in the last years few years in America. Again, on the base of contractionary volume that revenue was price and mix. If I understand your second question around competition, the competitive landscape remains about the same in the Americas with the addition of a new competitor Rockfon, which has been well-publicized on their efforts to penetrate the U.S. market. From everything that we can tell, they are active through their acquisition of CEC, [ph] market size that we are committed to obviously maintaining and holding our share. Again, just doing a better job serving our customers than they can do here in the Americas, so far we feel like we are doing that.

Thanks, Vic. I wonder if I could just clarify. You guys said you expected volume, price and mix to be up this year in the Americas. Could you comment on what you are seeing that gives you that confidence, given the change in guidance last year relative to a positive view on volume? Thank you.

Hi. That really in a new construction area, which I will remind everybody is somewhere between 20% and 30% of the demand profile in the Americas. That continues to get traction. Again, predominantly in the office space, so we are seeing the activity in the marketplace around construction activity. The other part of this which is the other 70% of demand profile in the Americas is, they repair and remodel or the renovation segment, which is highly correlated to GDP as we have talked about and this is the first time in three years that we are sitting at this time of the year and not seeing guidance for GDP being downwardly revised. The latest GDP reports have held the outlook for 3% to 3.2%, so I think that is positive and would yield an expansionary market on the remodel side in the Americas.

Thanks.

You are welcome.

Thank you.

Again, Ladies and gentlemen we ask that you please limit yourself to one question. Our next question comes from Keith Hughes with SunTrust. Your line is open.

Thank you. I want to go back to the guidance on Flooring for 2015, the $80 million to $100 million of EBITDA. I assume that compares to the $114 million in the slide, so around that how much is the LVT drag on that plant ramping up, but I put the rest of the decline in the sales and marketing you mentioned earlier?

Yes. Keith, it is Dave Schulz. Just additional commentary, as we have said during the prepared remarks, we think that wood is going to be roughly flat year-on-year. We have talked quite a bit about some of the investments that we need to make, primarily the SG&A side are related to improving our go-to-market capability, improving our displays with retail. We have not provided a breakout of the LVT ramp-up cost. Obviously, they are going to be somewhat significant, but that is included in the guidance range that we provided here. Again, the majority of the impact year-over-year is related to some of the investments that we are making in this go-to-market area.

Will we see the same go-to-market costs in Resilient as well as in Wood?

Well, I would say that the go-to-market costs are across the entire portfolio. As we think about improving our presence with retail that would service both, the Wood business plus our Resilient business and the LVT business as we go forward with those investments, it is not necessarily limited to Wood or simply the resilient side of the market.

Okay. Thank you.

Keith, this is Don. There is a significant portion of that focused towards the LVT line, so those investments have already begun and will carry us through the end of the year of making sure that we have got the LVT line well represented out in retail.

Okay. Thank you.

Our next question comes from Jim Barrett with C.L. King & Associates. Your line is now open.

Good morning, everyone. Matt, could you talk a bit about at this point in time, what will it take to fix wood flooring? Is it a function of higher volume or does the industry needs to exercise greater pricing discipline, could you sort of elaborate on that?

Yes. I guess the answer is yes. We had a significant degradation in the pricing environment in the second or third and fourth quarter of last year. We were leading price increases and the last one or two were not filed as they had been prior to that, so that create some downward pressure. Got some additional capacity coming online, particularly in engineered, so I think there is a number of factors at work. Our position is that by aligning our distributors and adapting our go-to-market structure more regionally and providing a different kind of support to our distributors and, again, adapting to the environment that we have found in the second half, we feel that we will be able to regain our volume. We are certainly going to need is, as we have said, we are going to need to make some price investments to compete effectively. We are not interested in losing share in Wood Flooring, We have got focus on new products, we have got shifts in demand and preference from solid wood to engineering as the engineering wood quality and characteristics improve and become more like solid, so there is a lot of stuff going on there. I think Don and Joe Bondi, who leads our residential business in North America, understand the issues, are working with our distributors on a local basis to be more reactive to pricing a little bit more proactive in terms of how they go-to-market. Then they are also working back here with our product management organizations and marketing teams on retail support as well as new product launches, so it is a combination of things. I think Don’s priorities are right on the mark and the investments that we are talking about really, I think, Dave and Don both, spoke to this. It is certainly LVT, but I would say I would characterize it is more residential broadly, so being a bigger factor in the independent retailers, through our Independent distribution, I think, we will go long way and get us where we need to get.

Thank you very much.

You bet.

Our next question comes from George Staphos with Bank of America. Your line is open.

Good morning. It is actually Alex Wong sitting in for George. Thanks for taking the question. Good luck with the transaction. On the outlook for low single-digit growth in North America commercial, I believe, industry sources are forecasting somewhat of a higher growth rate. Can you provide some color on the discrepancy between the two figures and what gives you confidence in that forecast? On a related note, we touched on end market trends in Ceilings earlier. Can you provide us with some updates on the flooring side?

This is Matt. Let me take the first question and then I will hand it to Dave for additional comments on the segments. We have hopefully adopted a fairly modest outlook in the market conditions for 2015. Our experience in the last three to five years has been significantly downward revisions in the market opportunity as we move through the current year. In many cases, that has caused us to revise our guidance and outlook as we have go through the year. Most of the revisions we have experienced have been directly related to a softening in environment as it relates to the original outlooks by many of the traditional sources that people use, so what we have tried very hard to do this year and what we thought we did last year, was have a very grounded look at the market. We expect and are not surprised at all if there is a little differential between the traditional sources and ourselves. You can write that off to conservatism. We would write it off to experience. With that said, let me hand over to Vic to kind of talk about outlook and some updates on the individual segments.

Yes I think that is actually a very good summary. I mean, for three years in a row, I do not think anybody in this industry has called this recovery right, so yes you are probably detecting a little bit of conservatism in our outlook. As I mentioned earlier, I think the Office segment is definitely showing some good traction in a recovery both, on the new construction side as well as some of the renovation activity, so we are optimistic about that continuing, again, based on a positive outlook for the GDP, which support both, office, healthcare and education growth and recovery. Again, I think, Matt, I think you nailed it and I will turn it over to Don on the ForEx side.

Yes. I think that I would add is, our assumptions that we have made around housing starts remodel on the residential side and the commercial activities, particularly in healthcare and education seem to be pretty much aligned right now with what we have assume as we built these business plan. A lot of different forecasts and estimates out there as we kind of look for the center ground on this we have [ph] all correlated with what we have assumed in the 2015 plan.

Good. Thank you.

Thanks so much.

Thank you.

Our next question comes from Nishu Sood with Deutsche Bank. Your line is open.

Thanks. Following up on that question about the ceilings outlook for 2015, I just wanted to dig into that number again. The key expectation for this year is the Americas being up low single digits. I think you have gone into a fair bit of detail about the GDP, et cetera. If we look at '14, I think most people would say that GDP was decent for '14, yet Americas, I think you mentioned was down 2% and I think it was down even a little bit greater. I know there were some stocking issues or what have you done even greater than that in the fourth quarter, so what makes up that delta then going from down 2% to being up low-single digits as most people expect we get another year in 2015 like we had in 2014, with some acceleration in new commercial, but another decent performance in GDP?

Yes. On 2014, Nishu, the GDP came in around 2.5%, so it was definitely in a contractionary area, which is exactly what we saw on the marketplace. Again, the new construction portion of the market continues to get traction from 2013 starts that showed up in 2014 and we should see that continuing into 2015. That is really the difference. I mean, the GDP needs to get to that 3% level for you to have an expansionary environment for the renovation remodel segment. I hope that answer your question.

That is helpful. Then the second question I wanted to ask was on flooring. Matt, if I heard you correctly, there have been a lot of questions asked about this already, so I won't ask it again, but you mentioned that there are obviously the drags on Flooring EBITDA in 2015, the $80 million to $90 million EBITDA estimate that we are giving reflects that. If I heard you correctly, I think you mentioned that in '16, you would be above where you were in '14, which is around 110, so that is quite a big jump. Again, I know you are not going to quantify for us what the drags are in 2015, but what is your thought process there in putting that statement out there, is that just the longer-term potential of the business? Are you reflecting some optimism and I know not quantifying the charges, but are they quite large? I mean, is that the main driver there? That is a pretty big jump from '15 to '16. What is your thought process in putting that out there?

That is a fair question, Nishu, so the ultimate driver for revenue growth and earnings growth would be successful launch of the LVT plan at the end of this year and take advantage that growth opportunity in market 2016. A lot of the investments we are making whether they are sales and marketing or the plant itself are, kind of I would say one-time in nature, but let us call it is sort of the catch-up, so we do not necessarily anticipate sitting here today that the rate of investment in 2015 occur again in '16 and '17. What we are doing in 2015 is really I think a pretty significant exciting reset of the foreign business as it relates to retail and residential primarily in North America. In 2016, what we are talking about is the benefit of those in terms of revenue, volume mix and price. I would say that the market outlook for 2016 hopefully is sort of modest, so we are not banking on a big gift from the market as it relates to that.

Okay. Great, thanks.

You bet.

Our next question comes from Stephen Kim with Barclays. Your line is now open.

Yes. I wanted to just follow-up if I could on a couple of things. You talked about the commodity costs and you are not really sort of seeing it quite yet, but you anticipate you are going to. I guess I just want to make sure, are you embedding anything in your guidance? If you could also give us a sense for maybe what your average non-cash price that you paid that you let's say ran through the P&L in 2014 was, just, we could do some sort of comparisons on our own?

Hi. Stephen. It is Dave Schulz. Obviously, we are monitoring the commodities' impact year-over-year. We obviously had put some of that impact in the benefit from a natural gas and from some of the oil-based impact into our guidance for 2015. I will have to get back you on the specific natural gas, what we said we will do and what we are seeing going forward, but clearly that is one of the year-over-year impact that we are seeing as our trend on natural gas is still coming down, so we would anticipate that we would get basically a slight increase due to natural gas pricing in 2015 embedded in our guidance already. I will need to get back to you on specific numbers.

Yeah. That is fine. Thank you for that. I guess on a related note, how about lumber? What are you assuming on that?

This is Don, Steve. Again, on the lumber, we have seen over the last two months or so a slight downward movement on it. It has kind of leveled off the last three, four weeks. It is really hard to predict what the future holds. Our assumption is sort of a flat market in 2015.

Thank you very much for that.

Thanks, Stephen.

Our next question comes from Justin Bergner with Gabelli & Company. Your line is open.

Hello, everyone.

Good morning.

Hi Justin.

Good afternoon.

My first question relates to the split of the businesses. To what degree is the European insolvency process as it relates to your Flooring business? Does that need to be resolved as a pre-condition from a timing point of view for the split to occur?

No. Those are two separate actions. Remember that the split, the separation itself it is 12 months away, but they are not related financially or restructuring. We do not need to finish one and do the other.

Got it. Did you consider other strategic alternatives besides the split of the businesses as you went through this process?

Of course, we do. I mean, the Board continually reviews strategic options. We have done so several times during the year, every year, so certainly many other options we were considered evaluated and the Board reach a unanimous decision and this was the best path forward for our shareholders, our employees in order to position the two businesses to become two companies and compete most effectively as they go forward in the markets that they have to serve.

Got it. Then one last one if I may. In terms of renovation trends in the Ceilings business, obviously, it has been a soft patch as far as volumetric demand goes. Could you maybe contrast what you are seeing on the renovation side as it relates to Ceilings versus some better trends that we might be seeing in sort of the roofing and lighting areas?

That is a difficult comparison for me to make to the roofing, but I can tell you that the level of activity and the renovation segment is giving us hope that we really do have a 3%, 3.2% GDP environment. Again, I can only point to the activity, at this point so early in the year, I can only point to the activity and the optimism in the contractor distribution communities that, again, should give us some hope that the recovery will gain some traction throughout the year with a stronger second half than we have the first half, I hope that was helpful?

Yes. Thank you very much.

Okay. You are welcome.

Our next question comes from Michael Rehaut with JPMorgan. Your line is open.

Hey, Michael.

Thanks. Hi. Thanks for taking my follow-ups. First of all, I just wanted to get back to the question asked before about other alternatives for the Flooring business before the decision of a spin-off. It seem that there was a pretty protracted process in terms of those other options improving [ph] sale of that business. Was it more from the tax perspective that that ultimately did not occur or did you just find lack of offers out there? Given the length of time until the spin-off occurs about a year from now, is that something that could offers, could still be entertained during that period given that it seems to be a little bit of a lengthy period. Was that done by intent to see if there is still some interest to the extent that a sale might still make sense?

I appreciate the question. I understand the nature of it. Our priority and our intent is to have a successful separation of the Flooring and Ceilings businesses into very successful and competitive companies. That is the play we are running. That is the priority. The timing that we have laid out has absolutely nothing to do with any other potential strategic actions that may or may not occur. This is a thoughtful timeline aided by several external advisors to provide the maximum ability for our two businesses that thoughtfully separate and build out their capabilities. That is the decision we have made. That is the path we are on.

Okay. I appreciate that.

You bet.

I guess the second question I wanted to circle back to understanding the investments being made in the Resilient business in 2015. I guess, describe that you expect Wood EBITDA to be flat year-over-year and the Resilient to be down. I understand largely if not fully due to these investments, and it would describe that some of those investments would involve marketing promotion behind a new LVT plant as well as upgrades and retail displays. Both of those sound very much again kind of on the marketing and promotional side. Just kind of curious if you could provide any thoughts around if any of those investments from an expense standpoint might be more permanent in nature or ongoing to the extent that in some of these areas it might be viewed that you did not invest sufficiently on a regular basis and might be part of kind of day-to-day operating expenses going forward?

Okay. Thank you. This is really does need to be the very last question, unfortunately, but as we described earlier I think a few times, we believe that these are necessary to position Flooring to compete particularly in the residential business segments in North America. We deferred these investments over the last three to five years in anticipation of a volume recovery that it has not really shown itself as much as we anticipated, so we felt that we are at a point now, where a refresh of our residential and retail support promotional activities is warranted. In addition, that of course we want to provide the appropriate levels of support and promotional activity behind a very exciting LVT launch, later this year. The vast majority this the spend, as I said a little bit ago is kind of a catch up, we do not expect or not sitting here guiding a structural increase expense on an annual basis, but as we get to the 2016, we will evaluate the opportunities and needs for investment there too. That said, Listen, I appreciate and understand all of the interest and attention to our announcement today. We want to provide the utmost opportunity to be clear about what we are doing. We think we are an exciting point in the history of Armstrong, we have got a very solid team around the world and the entire company we have got two very exciting businesses that are well-positioned to be two very exciting independent companies. We have a lot of work ahead of us. This is the beginning of the beginning. We have got very solid project management expertise, we expect to execute this crisply and be completed by the end of the first quarter of 2016 and we are committed updating you regularly on our progress and any developments that we feel are necessary. Again, thank you very much for all your attention and time and we will see you and talk to all very soon. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone, have a great day.