Armstrong World Industries Inc

Good day, ladies and gentlemen, and thank you for standing by. We welcome you to Armstrong World Industries' fourth quarter 2018 earnings 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. If anyone should require operator assistance during today's conference, please press star, then zero on your touchtone telephone. As a reminder, this conference call may be recorded. I would now like to turn the conference over to Tom Waters, Vice President of Corporate Finance. Please go ahead, sir.

Thank you. 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 armstrongceilings.com. With me today are Vic Grizzle, our CEO, and Brian McNeil, our CFO. Hopefully you have seen our press release this morning, and both the release and the presentation Brian 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-K 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 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 will 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, Tommy. Good morning, everyone. It's good to be with you today to review our quarterly results, recap our 2018 accomplishments, and review our outlook for 2019, which will be another strong year for Armstrong. Our solid fourth quarter results capped off another strong year for AWI. Sales were up 11%, our best quarterly growth rate in seven years. Our average unit value, or AUV as we refer to it, in the mineral fiber segment and volume gains in both the architectural specialties and mineral fiber segments fueled the growth. Adjusted EBITDA was up 16% as margins expanded 130 basis points. Price ahead of inflation in the mineral fiber segment, volume growth, and solid manufacturing performance were all key contributors to the earnings growth. 2018 was a year of acceleration for AWI. Full-year sales grew 9%, faster than the 7% growth we achieved in 2017, and was a continuation of AWI's transformation from a low single-digit growth company to a high single-digit growth company. Adjusted EBITDA was up 11% and squarely at the midpoint of our double-digit guidance for the year. Again, volume growth, primarily in architectural specialties, price realization greater than inflation, manufacturing productivity, and contributions from Wave were the drivers of higher earnings. Essentially, all our value creation drivers contributing. Free cash flow generation for the year was an impressive $236 million, an increase of 61% from prior year. In the architectural specialty segment, full-year sales grew 27%. Organic sales were up an impressive 20%, significantly outpacing the underlying market. Our team continues to win large projects, including iconic venues such as Grand Central Terminal and LAX. These highly visible jobs further enhance our reputation and demonstrate our capabilities. The team also continues to grow share by expanding our standard product portfolio and through the ability of our best-in-class distribution partners to service small and mid-sized projects. We also executed two more acquisitions in the segment, Plasterform, a manufacturer of ultra-expressive glass fiber-reinforced gypsum ceilings and walls, and Steel Ceilings, a producer of metal ceilings, including specialty radiant and security-type ceilings. Combined, they added 700 basis points to segment growth, and added important capabilities and capacity to our specialty ceilings and wall portfolio. In the mineral fiber segment, AUV grew 6% as like-for-like pricing once again outpaced inflation, and our new high-end product offerings, including Total Acoustics, Sustain, and DesignFlex, helped to drive positive mix gains. Sales of these high-end products grew high single digits as the market continues to demand superior acoustical performance and products that are free of redless chemicals. Overall mineral fiber volume for the year was positive. Other highlights in 2018 included receiving the cash from the pending sale of our international businesses, a majority of which we returned to shareholders in the form of a $150 million accelerated share repurchase program. We are increasing our expected net cash received from this transaction by $30 million to $280 million. We now expect this transaction to close in the second quarter. In 2018, we also further optimized our manufacturing footprint and right-sized our SG&A to reflect our new Americas-focused company. Closing our St. Helens plant and opening a distribution center in Phoenix not only drives savings, but it also improves service to our West Coast customers. The restructuring savings created by these actions will continue to benefit us in the first half of 2019. And finally, with continued confidence in our strategic initiatives and future cash flow, we instituted a regular quarterly dividend in the fourth quarter. All in all, it's been a strong year for AWI, and I'm proud of our employees and their great work. And I want to thank our team and our partners for their commitment to building this foundation for growth and for their execution and delivering on our full year earnings guidance. So with that, I'll pause and turn it over to Brian for more details on the financial results, and then I'll be back to preview our 2019 initiatives and our market outlook.