Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands Home & Security Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] Mr. Brian Lantz, you may begin your conference call.

Thank you. Good afternoon, everyone, and welcome to the Fortune Brands Home & Security quarterly investor conference call and webcast. We are pleased to be here today to provide an update on our progress during the fourth quarter of 2012 and 2013 guidance. Hopefully, everyone has had a chance to review the news release we issued earlier. The news release and the audio replay of the webcast of this call can be found in the Investors section of our fbhs.com website. I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in the associated question-and-answer session are based on current expectations and the market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. These risks are detailed in the various filings with the SEC, such as our annual report on 10-K. The company does not undertake to update or revise any forward-looking statements, which speak only to the time at which they are made. Also, any references to operating profit, earnings per share or cash flow on today's call will focus on the results on a before-charges-and-gains basis as described in today's news release unless otherwise specified. With me on the call today are Chris Klein, our Chief Executive Officer; and Lee Wyatt, our Chief Financial Officer. Following our prepared remarks, we have allowed ample time to address any questions that you may have. I will now turn the call over to Chris.

Thank you, Brian, and thanks to everyone for joining us today. We had an excellent fourth quarter and a terrific first full year as an independent public company. Our quarter performance was driven by strong sales and profit growth, which came in slightly ahead of our expectations. We again outperformed the market for our products and continued to drive profitable growth as the market recovers. Let me first spend some time on the fourth quarter highlights and then I'll discuss our 2013 guidance. First, with regard to the market, new construction was again strong in both single-family and multifamily starts, and the pace of Repair & Remodel continued in the same 3% to 4% range despite consumer caution for big-ticket purchases like cabinets and windows. Importantly, we feel confident about our performance in this market and the execution of our strategies as we enter 2013. Turning to our performance in the quarter. Sales were up 8% and EPS was up 35% from a year ago with all segments performing well. Cabinet sales grew 12% ahead of our estimates for cabinet market growth in the fourth quarter driven by new construction. Importantly, our profits in cabinets were up $15 million in the quarter and more than doubled for the full year. Moen continued its strong performance with sales growth of 15%, slightly stronger than the prior 2 quarters, and profit was up 7%. Windows & Door sales were up 1% and as expected, the segment generated strong profit gains. Security & Storage sales were down 4% while profit was up 22%. Taking out the benefit of 53rd week in 2011, segment sales were flat to prior year, and security sales were up mid-single digits. Now let me give you some top line highlights by segment. Sales for our Cabinet business were…

Thanks, Chris. As Brian mentioned, the majority of my comments will focus on income before charges and gains, which best reflects ongoing business performance. Let me start with our fourth quarter results. Sales were $948 million, up 8% from a year ago. Consolidated operating income for the quarter was $61 million, up $17 million or 39% compared to the same quarter last year. EPS were $0.23 for the fourth quarter, up $0.06 or 35% versus the same quarter last year. Now let me provide a little color on segment results. Our Cabinet sales were $340 million, up $38 million or 12% over the prior year quarter. Operating income for the segment was $12 million versus a $3 million loss in the prior year, up $15 million as we benefited from higher sales volume running through our continually improving supply chain. Full year operating income for the segment was $40 million, more than double the prior year. Our strategy of disciplined sales growth is working as planned as we continue to exceed the overall cabinet market growth while improving profitability. Plumbing sales for the fourth quarter were $296 million, up $38 million or 15% versus the prior year quarter. Operating income, which was negatively impacted by approximately $6 million of increased spending related to the MotionSense launch and timing of overall brand spend, was $42 million, up 7%. Operating margin was 14%. All channels performed well with both the U.S. wholesale and China businesses experiencing double-digit sales growth. Windows & Doors sales were $156 million, up $2 million or 1% from the prior year quarter. Within the segment, the Door business experienced mid-single digit growth, while Windows business declined 2%. Operating income for this segment was $4 million, $2 million more than last year as we achieved strong operating leverage on…

Thanks, Lee. With the successful close of the fourth quarter, we mark the end of our first fiscal year as an independent company. I'm excited about how well our business teams are performing, how well we are positioned in our markets and the strength and flexibility of our balance sheet. All these elements should enable us to continue to drive profitable growth. As we turn to 2013, we are appear to be facing market conditions much like 2012 and I'm confident that we will again outperform our market delivering solid sales and profit growth. And longer term, we believe consumer caution for large-ticket purchases should eventually subside and consumers will act on pent-up demand to provide even more growth opportunities in years to come. I'll now turn the call back to Brian.

Thanks, Chris. That concludes our prepared remarks for the fourth quarter and 2013 full year guidance. So we will now begin taking your questions and we'll continue as time allows. [Operator Instructions] I will now turn the call back over to the operator to begin the question-and-answer session. Mike?

[Operator Instructions] Your first question comes from the line of Dennis McGill from Zelman. Dennis McGill - Zelman & Associates, LLC: The first question just on the cabinet side, you ran through some of these numbers quickly, but if you were to split out just the dealer business, what was that growth on a year-over-year basis in the quarter?

We don't disclose that, but it was pretty strong. Dennis McGill - Zelman & Associates, LLC: So it's above the segment average?

It was pretty strong. Dennis McGill - Zelman & Associates, LLC: Well, I guess if you think about the dealer business, you kind of alluded to it almost in the discussion of new construction, but is it wrong to assume that, that is a combination of remodel and new construction?

Yes, it is. It's -- yes, you look at the dealer market -- or you look at the new construction market, part of that market is served direct to builders, especially to larger builders. The rest of market actually goes through the dealer channel. And so I guess a reasonable approximation, because this guy's, I think, aristocrat dealer, builder branded cabinets going into new construction, but some of the builders, especially on the higher end, will also take some of the semi-custom line. So the dealer is being influenced by new construction. We're just so strong there that we're getting kind of a lot of pickup in a lot of different places. Dennis McGill - Zelman & Associates, LLC: But your comments on the remodeling customer for cabinets not yet coming back, is that driven by what you see directly at retail or even beyond the home centers?

It's the home center and some of that kind of R&R business we track through a dealer. It's up, we know it's positive for the year, it was positive for the quarter. It's just lagging where we think the overall R&R market is at maybe 3% to 4%. We think that it's positive but it's still lower single digits and eventually, it will catch up but it's just taking its time. Dennis McGill - Zelman & Associates, LLC: Okay. That's helpful. And then similarly, along the lines for the window segment, so you gave the numbers for the quarter. For the year, the Windows & Doors was up 6%, how would that split between the 2?

Doors are a bit stronger than windows. So the door business, again, heavily influenced by new construction and our distribution there goes into new construction quite strongly. Our window business is much more of an R&R window business. We do have some new construction exposure. But we're at a higher price point than most kind of builder, especially entry grade, vinyl windows are going in that. And so we only appeal to that kind of higher segment of the new construction site. Dennis McGill - Zelman & Associates, LLC: What is that mix roughly? And do you have any ambitions to get into a price point that would benefit from the new construction market?

No, we're not going to -- it's hard for us to kind of take quality out of our product. The way we are producing that product in terms of just the quality of linear, the quality of assembly, the quality of service, the whole propositional line is up to a higher price point. We're okay there. We think eventually the R&R market comes back and there's a stronger construction market on that side of the market. So we'll pick up some construction side in windows, we're just not going to track on the window side to where the whole new construction market is. And surprisingly, the quality of some of the windows that goes -- that go into new construction across the country isn't as high as what you might think. Dennis McGill - Zelman & Associates, LLC: Okay. And then last question, which I have to ask I feel like every quarter, but from a cash flow standpoint, at what point do you sort of get frustrated by holding too much, just from a capital allocation standpoint and I guess kind of wrapped into that, it looks like there was an acquisition in the quarter. If you could maybe just talk about that, too.

Yes, I think we've been consistent in saying we're going to invest in our business. We're going to look to return cash to shareholders through a combination of share repurchase and eventually put a dividend in place and then we'll look at acquisitions. And so we're still pursuing kind of all fronts. I think we're early in terms of where we see acquisitions coming back. We think that market will come back more in the next 12, 18, 24 months. But we're looking at all other options on the cash front as well. We did a small acquisition on the safety side of the market within the Master Lock business and that really is to support that business we've been growing pretty rapidly. It's actually a service platform around the safety business that we think will complement the products that we sell in there. So we'll talk more about that as it becomes more meaningful, but it's relatively small. But we're committed as we've talked about, being efficient with cash and our objective is not to stockpile. It's just that we've had strong performance in the second half of the year, and so we find ourselves in a pretty good spot.

Your next question comes from the line of Stephen East from ISI Group.

A lot of the same questions that I had were already answered here, but if you can talk a little bit more, Chris, on the M&A environment and how long would you feel comfortable riding your balance sheet and letting the cash grow and net debt turn negative, et cetera, before you really felt that it's time to put something in place?

I don't have much more to say in the M&A market. I think things are starting to get a little more active and we'll be disciplined, but as we see attractive opportunities, we'll take advantage of them. In terms of other uses of cash, it's safe to say the board is actively looking at it, and we'll take action as we kind of look at where the market firms up across-the-board. I think new construction is in very good shape coming into the year and all trends look positive. As we said R&R still kind of moving through 3% to 4% and the big-ticket lagging that. And yes, I think as we think about our dividend, we want to make sure the consistency of earnings flowing through and signs look good, but we'll be deliberate in taking any actions that we take. But we're not going to -- our strategy is not just to accumulate stockpile cash, we'll be efficient with that and you'll see us do things throughout the year.

Okay. And just looking at your guidance, your revenue assumptions underlying, it seemed to be fairly conservative given that the housing construction, least a lot all of the builders are reporting, seem to be accelerating fairly aggressively. I guess, one, could you just sort of talk about how you came back -- I understand where you -- ultimately, you said $1.5 million, $1.6 million in 2016, but just how you came to your underlying assumptions today and then on the cost side, what you're seeing in raw materials, et cetera, that impact your guidance for 2012 -- for 2013.

Sure. I mean, we start with the outlook on the market itself. So if we look at the market, the home product market, we call it 6% to 8% That's a combination of new construction kind of in the low-20s, which I think is relatively consistent where you see the -- I mean some estimates will take you up into the mid-20s or higher than that, but we're currently calling it low 20s. And then R&R market at 3% to 4%, pretty consistent, I think. The big issue for us would be growth in the bigger ticket items. So if it's going a little bit slower than 3% to 4% there, that will impact us. So today, we're running about 70% R&R, 30% new construction. Obviously the busier we are in new construction, the more that mix will shift over time, but that's kind of where it's at today. So you just got to net that all that out and that's how you get to 6% to 8%. We'll grow in our home business a couple percent better than that. And then we've got our Security & Storage business, which will kind of grow at roughly GDP. So you kind of roll all that together. I think it's reasonable for what we see. Obviously if the market performs a little bit better or folks have a different outlook on the market that is more aggressive, then we should perform better than that, but what I'm trying to do is just kind of give you the transparency around here is the market that we see, here is how we're planning and therefore, here's how we should perform. On commodity -- on the commodity side, a little bit of plus, a little bit of minus kind of nets it out to 0. I don't know if you want to add anything else, Lee, but there's not much going on. It's a fairly stable market right now. You want to anything, Lee?

Yes, I would just close out '12 by saying we came on right on top of where we had to do you that we had may be a $15 million to $20 min -- $20 million tailwind in '12 and that's about where we came on. And as Chris said, as we think about guidance, we're thinking about pretty modest inflation in '13, and any of that will be covered by a very modest price increase. So fairly flat impact in '13 at the net.

No, no, wait. The only real impact we see is China wage inflation continues to be an issue out there that kind of 10% to 15% a year. So we continue to kind of work that side of it.

Okay. On wood side, you're not seeing a big pickup then?

No, we saw -- for example, in the fourth quarter, you saw wood and parcel board up a point -- a couple of points actually. But we had other commodities that were down so they kind of offset.

Your next question comes from the line of Bob Wetenhall from RBC.

Just wanted to share your thoughts on incremental margins in the various business units. What do you think the greatest upside is as we move into '13?

We finished '12 at right around 25% incremental operating margins on the sales growth, which is right in that 25% to 30% where we told you. And as we think about guidance, if you go through the math on it, it's the same kind of place 25% to 30% incremental growth there on margins. So kind of right in the spots where we've told you and within that range. I think you kind of see the upside in several of the segments that you see -- the cabinets, I think you see Moen and you see doors having some margin improvement, but you net all that together and it's in that 25% to 30% incremental range.

Got it. And I think you had said, it's $1.5 billion of cumulative free cash flow with the housing recovery, but you said in conjunction with the balance sheet, it could be much as $2 billion.

Yes, we took a little bit debt on so we didn't -- obviously, we don't have much debt right now. So if you ran it at the modest leverage. Incrementally, you could have $2 billion, yes.

Bob, that assumes that the housing market recovers 5-year recovery by '16 and we get back to kind of that 50-year averages for the metrics by '16, that's $1.4 billion roughly in free cash flow.

Got it. And just one final, if I could sneak it in, any thoughts to selling the Windows & Doors business as being non-core given your leadership position in Cabinets and Plumbing.

Yes, well, what I've talked about before is we've got a very strong Doors business. It leverages incredibly well in new construction. So we're at the front end of a pretty significant recovery in new construction. So I expect terrific things there. On the window side of the market, it's really downstream assembly capacity and there's still a bit of an overhang coming off of the volume we had a couple of years ago. So we're watching that market carefully, and our guys have done an exceptional job taking cost out of the business, creating a much more efficient platform, to making good money now. So I think we'll see improving situation there over the next couple of years. Obviously, we look at everything but I expect that, that's good to generate some pretty good earnings for us. So we're kind of evaluating the markets as they evolve.

Your next question comes from the line of Michael Rehaut from JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: First question, I guess on the incremental margins. Lee, you kind of mentioned that you expect a little modest inflation offset by modest price improvement to I guess to net out, but what would be the biggest drivers of perhaps getting to the higher end of that range versus maybe getting to the lower end of the range which we saw in 2012?

Yes, I think the market drives much of that. I think, for example, in Repair & Remodel, if big-ticket items start moving back and that lag starts going away, I think that would have a significant impact, and we continue to invest in productivity improvement so those should flow through the year. So it's our productivity improvements, it's -- some volume obviously helps when you're -- if you're going to grow high single digits on the sales line. So it's the leverage, it's the market, specifically, R&R and it's our productivity enhancements that we do. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: And also just going back to the balance sheet for a moment, Chris, you mentioned that this is something that is more, particularly when you think about dividend and share repurchase, something that would be reviewed with the board, can you give us some timing in terms of how that might play out this year? Obviously, things like the dividend, the dividend has been discussed and for quite some time now and it seems like every quarter I think we get closer to something on that front and also share repurchase.

Sure. Yes, I guess putting in a little bit of context, we began life as an independent company 15, 16 months ago. And so I think you kind of start there and say we started the housing recovery about the same time. And we really wanted to show some pretty good trajectory in the market overall as we thought about kind of how we are going to return cash to shareholders. So I think that's kind of the first piece is a kind of how we are in the midst of a robust recovery and therefore, is there a good trajectory established, dividend and establish a cadence for increase in that over a period of time, looking at share repurchases as well and kind of the returns on those. So I think that it's very much part of the discussion. We don't have a set time line, but we continue to talk about that and we'll be efficient as we kind of move through it. And then we'll continue to evaluate any acquisition opportunities as well. So rest assured, we're focused on it, and I think it's a high-class problem. I mean, I think it's a result of the performance that we've had in the business and the way we've managed the balance sheet and frankly, the efficiency of the business platforms that we've got that we're not -- we're seeing this kind of growth but we're not having to plow a lot back in the infrastructure. Where we are investing is in new products and in brands and in other things that we're getting pretty good returns of and we look at where we can get incremental some growth off of those things as well. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: But I guess nothing that you'd like to venture, Chris, in terms of giving a sense of timing first half of '13 versus second half of '13?

No, thank you. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: All right. One last one, if I could, Lee, just a couple of bookkeeping, thoughts around the tax rate for 2013 and also corporate expense, should that drift a little higher similar to the $8 million increase in 2012?

Yes, I think with the tax rate, I plan on 33% to 34%, somewhere in that range so pick a midpoint for '13. And I think you'll see, we showed as we continue to grow, we're growing at high single digits, I think in sales. I think you'll see a little more leverage on SG&A. We've been around 25.5%, 26% here this year. I think you'll see a little bit of leverage on that. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: But in terms of the corporate expense, it was $60 million in 2012. Any thoughts around 2013? I would assume again it should drift a little higher.

No, I would say it's -- when you -- I mean, onetime items that's in there in our first year spinoff, so it'll be at that range or lower probably but...

Your next question comes from the line of Dan Oppenheim from Credit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: Just I guess going back to the whole issue sort of big-ticket items you talked about in terms of your R&R market up 3% to 4% but big-ticket lagging, what is it that you're looking for in terms of what's driving the conservatism with that? What is it that you're looking for in terms of just getting a bit more optimistic there.

When you look at the -- it's really the semi-custom marketplace across both the dealer channel and the home center channel and where are we seeing the activity and at what price points and kind of what kind of cadence are we seeing. The good thing is that promotional environment we talked a lot about at the home centers, it seems to be abating a bit. So it's getting a little bit better. I wouldn't declare a victory yet, but it is improving there. So it's a good sign that consumers are active but not needing a huge level of promotion to get them active. I think they're still dealing with the overall economy, which is improving at a fairly modest pace. And so they'll think about having to deploy cash, there's not a lot of credit out there for them to borrow against to invest in their homes yet, so a lot of what we see the investments coming into the home, in the bigger-ticket remodeling projects is coming out of savings. And frankly, it's kind of the older cohort that has got savings that moving money into the home. So eventually, you'll see a broader base of people doing remodeling. The encouraging thing is we do consumer research which suggests that there is pent-up demand. People are still aspiring to remodel their kitchens, their bathrooms. They still want to make that the showcase of the home. That's all positive. I think it's just the broader economic indicators that will drive that piece back up to really 3%, 4% and eventually 5%, 6%, 7% as the market moves into a full recovery. The other thing that will eventually help is there has historically been a correlation between new construction and the R&R market. and I think because we're coming off such a low base in new construction, the number of new houses out there, meaning people moving from either apartments or an existing house into a new house, the overall numbers are still pretty small. And so you've got to get back up to a number of single-family houses that people are relocating into and then leaving another single-family house that's getting sold to create that linkage where then they go and remodel that new existing house that was bought. So that's just going to take a little while to get rolling, but I think it's improving. It's just not there where it should be yet. So I'm not discouraged by it. but we're just being pretty realistic and how do you plan for a year and based on the activity we see, that's where we come out. Daniel Oppenheim - Crédit Suisse AG, Research Division: Got it. Okay. And then in terms of the plumbing, where do you see margins as within the costs in terms of price introductions roll-off? What do you see in terms of potential for margins in that business?

Yes, you look at the full year, we were about 15.5% operating margins. We would assume even with new product introductions, which we do on a regular basis historically, we see nice improvement in that -- in our guidance.

Your next question comes from the line of Ken Zener from KeyBanc Capital Markets.

Well, I think your comments say your model is performing well. It might be modest here as we look back to 2012, with strong leverage that we saw in cabinets in the fourth quarter above that kind of 25%, 30% range. Could you give us a sense of what might cause you to get better operating leverage, might it be your exposure to the wholesale? Were you able to extract a little more price or I mean conversely, what would be some of the factors -- wood volume moving perhaps a little more volatile than people expect that might cause you to have less operating leverage, just so we can get a sense obviously if things pick up quicker than people think.

Yes, I'll make some broad comments and then maybe Lee can follow up as well. But I think you'll see some reasonably good leverage in our business as we start to run more volume through the businesses. So in the case of cabinets, you're really just kind of coming off of a breakeven position 2 years ago and into a profitable position and now we're starting to get reasonably leverage off of, really, the fixed cost and infrastructure of the business. And we're maybe moving away from dependency on a promotional environment to more of the fundamental pricing in that marketplace, which will improve overall. And I think the market will improve as capacity utilization across the whole market improves. So that's definitely a positive and you're kind of get a more sustainable outlook on that marketplace. In case of faucets, we've got a terrific position on the builder, wholesaler side of that market. And as that volume picks up, you see good margins there. We're also seeing consumers starting to trade up a little bit. So we're -- 2009, 2010 houses that were being built consumers and builders are being pretty conservative in terms of the price point. And so they were taking the base-grade product and faucets and showers and now they're starting to actually go to a maybe a first upgrade and second upgrade in that market and that's a better mix for us. Same would be true for entry doors, where you see kind of base-level products and eventually as they get building a little bit nicer houses, they're going to get an upgrade on entry doors. So what -- that mix piece factors in with better utilization to really drive that incremental margin, specifically on a...

But wouldn't it -- seemed to me like since you're coming off the bottom and you're already performing so well that given the over under you might actually be doing better than your normalized fixed cost absorption?

Well, we talked about 25% to 30% incremental margin. We feel pretty good about that over a recovery period as a company. The other thing I think you have to understand, we talked a lot about the big-ticket items in R&R. That helps drive margins obviously because you leverage that fixed cost base in cabinets when that happen. I think the other thing you see is our investments whether they're CapEx or P&L-related, the investments we're making are productivity improvement. That's a lot of our investment. It's -- we invest more in productivity in our plants than we do in just capacity. So we're always investing, we're always getting more efficient, I think that helps drive some of that as well on a macro level.

All right. Maybe thinking about it a little differently, the M&A angle. But one of your peers in the broad building products space has been quite active over the last 3 or 4 months finding deals that are based out of Europe predominantly, I would say, with some U.S. exposure. How do you think -- I know you really want to say U.S.-centric. You've talked about working in a 2-step channel that kind of mirrors the success you had in your current businesses. Can you talk about perhaps the pluses and minuses to that U.S.-centric. It sounds like a little later cycle-focus in your M&A appetite.

I'm not sure. I'm not I agree with you...

Would you go into Europe, for example? I mean there's obviously been some attractive deals for a variety of reasons over there for -- one of your competitors matches their portfolio as one reason.

I think, yes, as we look at M&A, I think we start by saying there are opportunities around our core businesses and so where that make sense, obviously, that's -- we can leverage more of what we have into an acquisition. We aren't adverse to international. I'd still say Europe is uncertain and so it's not a place that we're actively looking. It think there's more international opportunities, again, that may be leverage market positions that we already got established that we can expand and grow. So that's where I started is, let's look at where we are. We are already U.S.-centric today. That doesn't mean we're not looking internationally. It's just that we're looking internationally in places that we already are to expand that footprint. So we're active in Asian markets. We're active in South America. Could we expand that? Yes, we could. So that's how we start answering that question. And the other pieces just adjacent to the businesses that we're in gives us more leverage, more synergy, more growth opportunities. So those would be ideal. So we're pretty patient. I wouldn't say that means we're not active. I just think we're looking very carefully on the acquisition side and we're fortunate to have very strong businesses today. So maybe that makes the comparisons difficult.

Your next question comes from the line of Peter Lisnic from Robert W. Baird. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: I guess first question talk about plumbing and the $6 million of spend in the fourth quarter that hit that margin a little bit in the quarter. Can you give us a feel for 2013 in terms of spending both in that segment and across the business, what the incremental spend might look like and then maybe talk about what some of the key growth initiatives might be just outside of the cyclical opportunity that's emerging?

Yes, when you think about promotional spending, and we won't give you specific dollars, but I would tell you, we're just now in 2012 for say Moen and back to where we would historically have spent before we took that down because of the recession, so we feel good about that. In terms of '12 and the year, we spend over 1/3 of our total year spending in '12 in the third quarter. Did 2 things. It helped us with the MotionSense launch, it drove -- and it drives some momentum into '13. So we feel very good about that timing and that was planned and it was expected. And if you kind of balance out the timing of all that, operating margins for Moen, 15.5%, so very good and we feel good about that. You'll -- probably given now that we have a second year look at the market and in our guidance when we think the market is up 6% to 8% for our products, that equal to or greater than what we think it grew in '12, so you'll see us spend a little bit more and invest a little bit more to drive that brand. It's a very powerful brand and it's gaining a lot of momentum so we feel very good. So those are good investments. We'll get very high returns off of them. And yet, at the same time, we'll still have operating leverage of 25% to 30% in our '13 plan. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay. That's helpful on that. And then curious back to the cabinet business, strong year-over-year incremental margin, if I cut the numbers a little bit differently though, if I look at it sequentially revenue up and the out margin, down a little bit. Is there something in the mix there, you talked about some of the strong growth in a couple of channels there. Is there something in the mix there that maybe tempered the leverage as you look at it at least on a sequential basis?

No, we had nice leverage. Each of the last 2 quarters and there's a couple of things going on there and even for the year. One, we're being very disciplined, as Chris has talked about a lot, in terms of not chasing unprofitable or low-margin business. So we're not doing that. I think we're continuing to improve our productivity in our plants. We've closed a couple of plants in the last 12 months. We're continuing to invest in productivity gains and that's driving some of this. And we've also had some line expansions that were as opposed to chasing low-margin business with high-promotion dollars, we're basically broadening lines with better profit margin items. So those 3 things are actually what we're doing to drive margin and we feel pretty good about the margin improvement in the last 2 or 3 quarters. Peter Lisnic - Robert W. Baird & Co. Incorporated, Research Division: Okay. And how should we think about mix in terms of profitability in that business. I mean if new construction continues to grow, should we think about that business or grow at a pace above and in excess of R&R, should we think about that business as maybe tempering the incremental leverage that we could see out of cabinets?

Yes, the R&R for us and especially the big-ticket items, the organic remodeling as we've said is good business for us. The new construction business for the cabinet segment is a little bit lower price point item. So the good news is we're doing very well. We're leveraging very well for cabinets in terms of margins even with it being driven by new construction. As R&R comes back even stronger and gets back to that 5% to 6% annual growth and big-ticket comes back that you'll get really nice leverage because again that's 70% of our business is R&R. So we're looking forward to the future as this R&R comes back, which it typically does over a recession. Big-ticket items tend to come back a little bit later.

Your next question comes from the line of Keith Hughes from SunTrust.

Questions around plumbing, very good numbers in the quarter. You had mentioned some products, share gains and strength of wholesale market. So I'm now going to ask my question, can you give me more detail on the product introductions, and how that wholesale compared to the retail markets in the United States?

Yes, in terms of new product, we had a number of new products but the biggest one would have been MotionSense, which is our hands-free electronic kitchen faucets, a big launch in the fourth quarter both at retail and in wholesale. We also backed that up with some advertising brand spend across a number of channels. So it ended up, really, kind of priming the pump. And consciously did that because we saw a pretty good demand coming into 2013. So that made good sense for us to move that spend into the quarter. We actually moved some spend out of the third quarter into the fourth quarter support that as well. So quite a bit of activity there. In terms of your question on wholesale retail, different markets. Obviously, retail is a big home center business. Some of that goes into new construction, a lot of it is R&R. The wholesale business is showrooms and then builder to builder to support new construction business. We've got a very strong share in that wholesale side of the business with some pretty robust product lines there. So that's real good business for us. It's a business we kept and supported throughout the downturn. So it's performing very well. We've got a terrific team on that side of the business. So I don't know if there's...

Yes, were the growth rates between the wholesale and retail, were they substantially different or both in this double-digit number you referred to?

No, wholesale we've been stronger, really supported by that kind of 20-plus new construction volume. So that business is growing quite strongly. Retail grew fine in the quarter, but was nowhere near growing as strong. So retail probably looked more like a little bit better than the R&R numbers because then we picked up share there, but on the wholesale side, it really is going stronger off of that new construction.

Your next question comes from the line of Eric Bosshard from Cleveland Research Company.

This is Tom Mahoney calling in for Eric this afternoon. My question is on the increase in CapEx for next year from $75 million to $100 million. What are the areas of incremental investments and what's the payback you expect from that over -- and I guess a time frame would be helpful as well.

Yes, we spent gross CapEx in '12 $75 million well below depreciation and amortization, which is a little over $100 million. So we think it's -- and we've always said we would get back to D&A kind of levels of spending when we're confident in the market. Well, we're now pretty confident in the markets so we're going to move it up to about $100 billion, so we'll increase it back to kind of this normal run rate of D&A. It's actually spread across our segments. A lot of it is investments in productivity in our supply chain and plants, a little capacity and some CapEx to kind of drive some sales. So it's -- you'll see it increasing in Cabinets in Plumbing, Security & Storage, a little less in Windows & Doors at this point, but still investments. So it's across the business. And we get strong paybacks on these returns. And you see the productivity improvements we're making when you have 25% to 30% operating margin improvements.

And our last question comes from the line of Jim Barrett from CL King & Associates. James Barrett - CL King & Associates, Inc., Research Division: Chris, could you discuss the business in China a bit about the competitive set and how the profitability there compares to your divisional average?

Sure. So, yes, we continue to have a strong performance in China. We added about 200 incremental storefronts. So we're up to about 750 storefronts there. Business there is driven off that traditional retail business, which is the Moen storefront, as well as some direct-to-builder business. So still very strong double-digit growth there. The market has slowed down a bit number but they're still building roughly 5 million housing a year. So not bad business and really the middle-class, they're trading up from pure utilitarian faucets, showering to branded product. And so we're in the right place in the right markets and we're seeing a good lift there. In terms of the competitive set, there are some local players there. We're the third largest import faucet brand. So Kohler, TOTO and then us, and then we are having strong results. We -- the brand is positioned. We built that business over the last 15 years organically and really have touted the fact that we're the #1 faucet in America, and the consumer there is increasingly looking for brands that represent quality, reliability and good value for dollar. And so they find kind of good fashion and yet they get that reliability that they get with our brands. So we like the market. We have a great team there. We're developing products specifically for that market. So we don't bring products out of North America there. There's a design team there that's making the product specifically tailored and it's -- we're having good success. In terms of profitability, as a market that's profitable for us, as we invest in that market, it depresses near-term profitability, but the older stores are profitable, the younger stores, we've got capital going into them and they're in developing marketplaces. So yes, it's profitable. Eventually, will become more profitable as we slow down the growth that. But for now, we're really looking at that as an attractive longer-term business for us. And it's certainly generating profit, which is more than a lot of folks can say about they're investments in China. So we like...

There are no further questions at this time. I turn the call back over to Mr. Lantz.

Thank you, Mike. We'd like to thank everyone for attending our quarterly call today. And we look forward to speaking with many of you again very soon. Thank you.

This concludes today's conference call. You may now disconnect.