Good morning, and welcome to the Allegion Fourth Quarter and Full Year 2015 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there'll be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Tom Martineau, Director of Investor Relations. Please go ahead.

Thank you, Emilie. Good morning, everyone. Welcome, and thank for joining us for the fourth quarter and full year 2015 Allegion earnings call. With me today is Dave Petratis, Chairman, President and Chief Executive Officer, and Patrick Shannon, Senior Vice President and Chief Financial Officer of Allegion. Our earnings release, which was issued earlier this morning, and the presentation, which we will refer to in today's call, are available on our website at www.allegion.com. This call will be recorded and archived on our website. Please go to slide number two. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities laws. Please see our SEC filings for a description of some of the factors that may cause actual results to vary from anticipated results. The company assumes no obligation to update these forward-looking statements. Our release and today's commentary includes non-GAAP financial measures, which exclude the impact of restructuring, acquisition and divestiture expenses and charges in current-year results and restructuring and spin expenses and charges related to the devaluation of our previously held Venezuela business from the prior-year results. We believe these adjustments reflect the underlying performance of the business when discussing operational results and comparing to the prior-year periods. Please refer to the reconciliation in the financial tables of our press release for further details. Dave and Patrick will discuss our fourth quarter and full year 2015 results and provide 2016 guidance, which will be followed by a Q&A session. For the Q&A, we would like to ask each caller to limit themselves to one question and then re-enter the queue. We will do our best to get to everyone, given the time allotted. Please go to slide three, and I'll turn the…

Thank you. We'll now begin the question-and-answer session. . Our first question is from Tim Wojs of Baird. Please go ahead. Tim R. Wojs - Robert W. Baird & Co., Inc. (Broker): Hey. Good morning, guys. Nice job. David D. Petratis - Chairman, President & Chief Executive Officer: Good morning. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Hey, Tim. Tim R. Wojs - Robert W. Baird & Co., Inc. (Broker): I guess just on Americas. Two questions. If you look at the growth, end market growth. I think I get to about 3% to 4% from a volume perspective, and you're guiding to 5% to 6%. So could you just give us a little bit of color of what you're expecting? I think new products and probably price is what the bridge is there, but just some confirmation on that. And then just could you talk about the puts and takes to just EBIT margins in Americas in 2016? David D. Petratis - Chairman, President & Chief Executive Officer: So I'll take the top line and pass it over to Patrick on some of the numbers. Our growth in Americas in 2016, we'll continue to leverage our electronic growth, which has been yielding nice returns. Second is we're moving into our second full year of channel development, and this is really going after the repair, replacement retrofit markets on the commercial side. And we presented that as really a five-year initiative, and we're gaining share with those initiatives and I think it should be reflected in the numbers. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah, so, Tim, just to add from a revenue perspective in Americas, if you kind of look at the components in organic growth, we ended 2015 full…

Our next question is from Steven Winoker of Bernstein. Please go ahead. David D. Petratis - Chairman, President & Chief Executive Officer: Good morning, Steve. Peter Richard Lennox-King - Sanford C. Bernstein & Co. LLC: Good morning guys. This is Peter Lennox-King on for Steve. Just – if we can talk about the EMEIA margins for a moment. Now that you've clearly breached to the 10% rate, at least for the quarter, and with the acquisitions and restructuring that you've been undergoing, what's the new run rate target that you've got there all-in? And then related to that, could you layout for us what the underlying or organic margin within EMEIA was, so leaving out there the recent acquisitions? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah. So a couple things, just as a reminder. Q4 historically from a seasonal perspective always operates at a much higher margin than the first three quarters of the year. So you're seeing a much higher than the 10% target that we had targeted in Q4. Having said that, if you kind of break out the components and you look at the base business, continued really excellent execution relative to our March toward the 10% target. I'd say we ended the year pretty much in line with our expectations. Moving some of the production out of our CISA facility this year will continue get us productivity benefits in 2016 and some carry forward in 2017 after that's completed. So we feel really good about the progress there. The acquisitions completed last year are accretive to the margins in the region. And so what you saw collectively, we ended pretty much for full year basis close to 8%, which is about 400 basis points improvement compared to full year 2014. You're looking at 2016 at a low kind of double-digit margin range. And I just remind you also that there is a big delta between EBIT and EBITDA margins in that region because of the acquisitions. EBITDA margins would be in the neighborhood of mid to high teens, which is a fairly significant and kind of in line with our peer group in the region. Peter Richard Lennox-King - Sanford C. Bernstein & Co. LLC: Okay. Thanks very much.

Our next question is from Julian Mitchell, Credit Suisse. Please go ahead.

Hey, guys, Ron Weiss in for Julian. I just... David D. Petratis - Chairman, President & Chief Executive Officer: Hey, Ron.

How you are doing? I just want to touch on the Asian-Pacific market. Now that the Bocom divestiture is complete, can we expect the margins there to kind of accelerate as we saw them accelerate in Q4 for all of 2016 or how should we think about the margin progression there for the year? David D. Petratis - Chairman, President & Chief Executive Officer: Yeah. I would look at that business going forward. You saw in the full year negative margins. A lot of that or all of that is due to the Bocom business. That of course is going to be peeled away going forward, and the acquisitions we've done in the region in the Pacific Rim have been very accretive to the regional results. And so you're looking at a business there, call it a little over $100 million mid single-digit. (35:12) margins is kind of the expectation going forward. And we'll continue to chip away in the margins through productivity and those type of things. But anticipate to see good progress, particularly year-over-year, in that region of the world for 2016. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: I would add that Bocom was a distraction for us in the region. A focused Asia-Pacific team, building on the acquisitions that we've made there, has got a bright future and look for us to continue to drive improvement with that portfolio.

Got it. And then just on the balance sheet, the goal is to bring the net debt-to-EBITDA down for the year. But if the right deal came along, where would you guys feel comfortable pushing that kind of leverage ratio up to for the year? David D. Petratis - Chairman, President & Chief Executive Officer: Yeah. So we highlighted the expectation without any large acquisitions because of the strong cash flow generation EBITDA growth and the mandatory principal reductions. We're going to delever fairly quickly. But we've always commented for the right transactions, again given the strong cash flow generation, wouldn't have a problem of going up to four times, maybe a little bit higher for the right transaction. And so I think we've got a lot of flexibility there, not only basis of the free cash flow generation, but the ability to add some incremental debt if we needed to.

Great. Thanks, guys.

Our next question is from the Rich M. Kwas of Wells Fargo. Please go ahead. David D. Petratis - Chairman, President & Chief Executive Officer: Hi, Rich.

Hey, this is Ron Jewsikow on for Rich Kwas. I was just wondering if you could provide a little more detail on the Safe Schools. You mentioned state priorities are reflecting the need for this. But are you seeing anything in budgeting specifically, or is it still kind of just more commentary? David D. Petratis - Chairman, President & Chief Executive Officer: No. I commented on this last quarter. I spent some time in Southern California and there's specific investments going in for schools. In particular, in rooms that have over five inhabitants, they've got to have visual locking capabilities, which is our CO-220, so that from across the room, you can determine whether it's secure or not. And I think the overall momentum in the market of state budgets, local budgets improve, their investments are going in. So we see activity, and I think it will continue to improve over the next 36 months.

Thanks for that. And then just a quick kind of modeling question on the incremental investment headwinds. There was only $0.01 in the fourth quarter. How should we think about the cadence of that in 2016? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah, I would look at it fairly evenly ratably throughout the course of the year. There is some flexibility, variability there. But specific to new products, which is more kind of engineering-related that kind of is people related cost and that would kind of be steady state. And then on the channel initiative, again as Dave indicated, getting really good traction on the repair of retrofit markets here in North America, and we're going to continue to ratchet that up to take advantage of that opportunity. So that might be a little bit more kind of backend loaded, but for modeling purposes, steady state.

Okay. That's very helpful, and thanks for taking my questions, guys. David D. Petratis - Chairman, President & Chief Executive Officer: Thank you.

Our next question is from Josh Pokrzywinski of Buckingham Research. Please go ahead.

Hi, good morning, guys. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Hi, Josh.

Just a follow-up on the earlier question, and maybe I missed it. Did you guys point out what you think EMEIA margins should be running at for the entirety of 2016? Obviously there is seasonality there. But did you explicitly say that? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah. We've commented that we anticipated around low double digits.

Okay. I guess... Patrick S. Shannon - Chief Financial Officer & Senior Vice President: With the EBITDA margins in the mid-teens to high teens.

I guess the way that shakes out then, looking at your guidance is even with all this extra investment, you guys are still delivering incremental margins well above 40%, probably closer to 50% in the Americas. Is that a fair to way think about it? And I guess, some of these investments seem like they were going to start tapering off into this year, maybe not flat, but certainly much lower year-over-year numbers. Is it that you guys are finding more opportunity? Is it that maybe markets aren't recovering as quickly, slower rollout of new products? Just help us to mention maybe when these investments start to plateau. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: So you've got two questions there. On the investments, as we highlighted in the Investor Day last year in March, we did highlight we'd expect it to start tapering down a little bit. You're correct in that. We continue to analyze that through our annual operating plans, and we believe that from a capital allocation perspective, to the extent we can drive good organic growth that have really strong returns on invested capital, we're going to make those bets. And because of the traction we've seen relative to electronic products growth and the channel initiative here in North America, we're accelerating some of those things and that's why it's down year-over-year, but maybe not as down as what you'd anticipated. But I still think it's good return on capital. Relative to your incremental margin question, I think it's a pretty good way that you're looking at it; 50% is high. We've always kind of stated this 40% type of target, and we really delivered on that in 2015. The extra benefit we're getting in this deflationary economy specific to commodities is we'll start seeing that come into our numbers a little bit more than what we saw in 2015, just given the spot rate trades relative to the average rates in 2015.

Got you. That's helpful. And then I guess a follow-up on the electronic comments, you guys were finding more areas of opportunity. It seems like some of the feedback from the channel is that the NDE with ENGAGE rollout has been perhaps a little slow or not really showing up yet. Are you guys still piloting some of that in the market? Is that maybe some lessons learned early on? Just with that product specifically, how would you gauge the rollout and the cadence from here? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: When I think about the NDE, it's not met our expectations in term of the rollout, and I would argue that we underinvested. I think the lessons learned here is we should have had a full complement of Mortise communication gateways ready to go with that product, and we're going to continue. But that's the lesson learned. That was rolling when we created the company, and I wish we would have invested more because the product has clearly got its capabilities. It will step up in growth in 2016. But that frontier of electronic locks in the commercial arena is really the mother lode of opportunity for the company.

Would you say you have what you need today, or at what point do you reach that just based on the development pipeline? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: We'll make more expansion to that portfolio in 2016 and into 2017. Key is the Mortise offering. And the other thing is our channel, the locksmiths, the installers, not as fast to adopt as you see in the residential. So those are things that we're working on. We've got specific resources, focused resource after it and it's going to bear fruit.

All right. Thanks a lot guys. I'll turn it over.

Our next question is from David MacGregor of Longbow Research. Please go ahead.

Hey, good morning, guys. This is Conor Sweeney on for David this morning. Congrats on another great quarter. I just want to go back to the Americas, and in particular, 4Q organic growth of 6.6% and the full year growth of 7.1%. Could you talk about how that compares to the industry growth for the periods? And then also can you maintain this level of growth going forward in the Americas, or do you think you'll need to maybe lean more on Europe for growth going forward? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: So I would observe if you line up some competitive landscape, we were certainly head to head with them, the world leader Assa, and outperformed the rest of the pack. Our growth initiatives, new products, channel development, we believe will continue to bear fruit and are going to continue to look to the Americas to lead that growth. As I reflect over to Europe, we see recovery in Europe, but the Northern European markets continue to perform better and we improved our position in 2015 with the acquisitions AXA, SimonsVoss. So more work to be done there. Some pretty fundamental things going on in Europe that'll help us in the future. Number one, we're profitable. Number two, developing better capabilities around specific segments of the business matched with specification capabilities. It'll help us, but it's all not going to come in a year. It's continuing on the plan that we have with investments and people and products and acquisitions that will get us where we want to be long term in Europe.

Okay. And then also as an add-on, can you talk about maybe in the residential space, the competitive conditions you're seeing in the big box aisle and to the extent that's impacting your residential margins here? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: It's no surprise among all the big box, they see the deflation of commodities and they're going after it, so the competitive's there. There's still a lot of opening price point on the new construction side. Again, we have pushed style and design and electronics, and that's helping us to expand margins. We tend to perform stronger on the replacement side of the house in residential construction, and we think that will continue to be good for us, especially with Schlage's sense like touch. Those would be my thoughts.

Thanks, guys.

Our next question is from Robert Barry of Susquehanna. Please go ahead.

Hey, guys. Good morning. David D. Petratis - Chairman, President & Chief Executive Officer: Good morning. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Hey, Robert.

So just a bucket in the guide for operational improvements is pretty big bucket. I was wondering if you could maybe parse out a little more of what's happening in there in particular around the assumptions for price and price cost. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah. So what I mentioned earlier, pretty good leverage on the incremental volume would be reflected there. Pricing, call it, and it varies by region, but in aggregate, 50 basis points to 75 basis points improvement and that would be reflective in our organic growth assumptions. We've got some improvement baked in relative to the deflationary situation on commodities. I mean, those would be the three primary drivers of why you're seeing high leverage on the incremental volume. And then of course, the continuous improvement in the European margins is also helping that as well.

I mean, is that deflationary piece relative to price kind of a significant component? Because I think just looking at the headlines on the commodities, there's been pretty substantial declines. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah. So I don't know how you define significant. It's certainly much higher than what we realized in 2015. Keep in mind, we talked about this I think on the last call. But our commodity spend relative to our total purchases, call it around 10%. So it's not a big portion for us. And secondly, we kind of have a supplier lock agreements that are kind of hedged over a period of 12 months. So we don't see the immediate benefit. When spot rates go down significantly, we don't see that effect immediately into our result. It kind of bleeds in over a period of 12 months, and so we've got a program there and we stick to the program. So we don't bet on the markets. David D. Petratis - Chairman, President & Chief Executive Officer: I would also say with 10% pure commodity, steel breadth that type have been, we've got to go and work with suppliers to wring out that value. Again, if something that we have maybe didn't stress, but when we spun out two years ago, we didn't spin out with a rich procurement capability. We've built it, and it's going to give us some opportunities in this deflationary environment.

Got you. Maybe just shifting to Asia for a second. Could you just kind of level set us what the core growth was for the year on the businesses that are remaining in the portfolio? David D. Petratis - Chairman, President & Chief Executive Officer: Probably, let's see here, I think it's around 10%. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: I would say 12%. I think our core hardware business grew 12%.

So kind of similar to what you saw in the fourth quarter? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah.

And that you see... Patrick S. Shannon - Chief Financial Officer & Senior Vice President: I will check it and get back with you, but I believe that's correct.

Got you. And so the slowdown, the five-year to seven-year forecasting, is that something mostly China? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: China clearly is slowing but it's a $100 million business, especially in China, our opportunities are really to get our products out there and focus. We like the acquisitions, Brio, Milre. These are new offerings that help us to grow in these regions. David D. Petratis - Chairman, President & Chief Executive Officer: Yeah. China, keep in mind, small business, niche market that we compete in. There's plenty of opportunity, I think, to take share from other folks.

Got you. And maybe just finally on the cash flow, it looks like you're looking for a $60 million to $80 million increase in the available cash flow. What are the big components there? I assume some is tax. What's happening with working capital? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah. Big components would be, we talked about CapEx being up roughly $10 million year-over-year. D&A (51:54) would be higher than that. Working capital would be up just given the growth in the business. We still expect to kind of maintain this 5% of revenue metric within that range, but working capital being a use of cash. The other thing to keep in mind, we've historically targeted 100% of earnings. If you run the math, you wouldn't be seeing that for 2016. The primary purpose or reason for that is because in 2015, we recorded some restructuring costs associated with the CISA manufacturing relocation, and those cash expenditures haven't yet happened. That will occur in 2016, and so that's putting a drag on that ratio. But even with that, it's still pretty good cash flow conversion and we'll put it to use in the best way possible.

Got you. So those are all drags. I mean, the working capital going up, the CapEx going up. So the increase is really just kind of the core of the EBITDA. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah. Earnings.

Yeah. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah.

Okay. Great. Thanks, guys. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Yeah. David D. Petratis - Chairman, President & Chief Executive Officer: Thank you.

Our next question is a follow-up from Tim Wojs of Baird. Please go ahead. Tim R. Wojs - Robert W. Baird & Co., Inc. (Broker): Hey guys, just following up on the last point on cash flow. There is no change to the historical 100% conversion, right? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: No. No. Again, a little pressure on 2016, but we believe it's sustainable to maintain 100% for a lot of the factors we've talked about: CapEx being lower than DNA; cash tax being equal to or lower than the book provision; and offsetting kind of the working capital increase basis on the growth of the business. So I think we can kind of maintain that going forward. That's the target. Tim R. Wojs - Robert W. Baird & Co., Inc. (Broker): Okay. And then just two housekeeping. What's the FX headwind that's embedded in just total revenue this year, and then what's corporate expense look like? Patrick S. Shannon - Chief Financial Officer & Senior Vice President: So FX headwind to the basis of current rates today could be as high as 1% would kind of be the high point of that. Tim R. Wojs - Robert W. Baird & Co., Inc. (Broker): Okay. Patrick S. Shannon - Chief Financial Officer & Senior Vice President: Our exposures are predominantly related to euro and Canadian dollar to U.S. dollar. And corporate expenditures, we ended the year in line kind of with our original guidance, and you would expect that because of some investments in the IT infrastructure, ERP programs, that's going to be up. We'll call it $60 million for the year, in that type of neighborhood. Tim R. Wojs - Robert W. Baird & Co., Inc. (Broker): Okay. Great. Thanks.

This concludes our question-and-answer session. I'd like to turn the conference back over to Tom Martineau for any closing remarks.