Fortune Brands Innovations, Inc. (FBIN) Q1 2016 Earnings Report, Transcript and Summary

Good afternoon. My name is Sally, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands' First Quarter 2016 Earnings Results Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. Brian Lantz, Vice President of Investor Relations & Corporate Communications. Please go ahead, sir.

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 first quarter of 2016. Hopefully, everyone has had a chance to review the news release issued earlier. The news release and the audio replay of the webcast of this call could 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 a 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 our 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. Any references to operating income, earnings per share or cash flow on today's call will focus on our results on a before charges and gains basis for continuing operations with the exception of cash flow 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've allowed time to address 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. Our teams drove strong sales and profit gains in the first quarter as the home products market continued to grow at the pace that we expected. Our core businesses performed well across all segments and we remain focused on driving profitable growth. Based on the solid first quarter performance, the momentum we have inside of our businesses and our recent share repurchases, we are increasing our full-year EPS outlook. Let me first spend some time on our view of the U.S. home products market. Next I'll provide my perspective on our business performance in the first quarter. Lee will then provide more details on our first quarter performance and 2016 outlook. Starting with our view of the U.S. home products market. In the first quarter, the market for our home products continued to grow at the pace that we expected it would. We estimate that repair and remodel activity grew over 5% and new construction grew low double-digits. Repair and remodel activity remained steady with consumers continuing to demonstrate an appetite for more on-trend styling, product differentiation, and project complexity. We see the impact of these trends in the improving mix across our categories. As anticipated, new construction demand is growing at a low double-digit rate and we expect single-family to grow faster than multifamily, as single-family entry-level activity is beginning to accelerate. Additionally, we saw added strength for more days of good weather in the first quarter. And more broadly, our basket of near-term indicators point to stronger underlying demand and continued market momentum as we head into the busier seasons of the year for home products. In fact, we think there could be some upside to market growth assumptions. As R&R and new construction demand look strong, financing at affordable rates is more accessible, and builders and contractors seem to be making progress on attracting more labor into the industry. In spite of these positive indicators, we think it's too early to revise our full year market outlook higher. So our overall assumption remains that the U.S. home products market, which impacts 70% of our sales, grows at a combined 6% to 7% rate for the full year 2016. However, we are closely monitoring market activity as we move through the spring season and we will determine any further upside to our market assumptions as the year unfolds. Within that overall assumption, the pace of repair and remodel demand is assumed to grow at around 5% rate and new home construction is assumed to grow around 10%. Now let me provide some perspective on our business performance. For the first quarter, sales increased 16% in total and 20% for our U.S. home products businesses. Importantly, total company operating margin increased 180 basis points to 9.5% with solid performance across all operating segments. Starting with our Cabinet segment, we continue to follow a disciplined strategy focused on profitable growth. Our consistent pace of product innovation and our high levels of reliable service to our channel partners continue to drive strong performance. In the first quarter, our overall Cabinet sales were up 34% over the prior year, and increased 12% excluding the Norcraft acquisition with broad growth across all channels. Specifically, sales in our largest channel, dealers, grew 62% and 16% excluding the Norcraft acquisition. Our share gains are coming from our new construction product lines in this channel and deeper multi-line relationships with existing customers. We're beginning to cross-sell more of our product lines across our recently expanded dealer network. Our home center in-stock cabinets and vanity sales grew mid-single-digits due largely to sell-through of new programs and product upgrades that we launched last year. Our Cabinet team has been focused on partnering with our customers to consistently balance inventory levels with production to further enhance service and manufacturing efficiency. The remaining 25% of our Cabinets business, which includes home center semi-custom, builder direct in select markets, and Canada, grew strong double-digits. We're disciplined in our approach to these segments as we focus on where we can partner with customers to capture profitable growth. With our focused approach, we grew share in these segments and drove strong margin improvement. We are especially pleased with our home center special order business where our partnership approach is working well and driving nice growth. The Norcraft acquisition is on track. Cost savings are running ahead of initial projections. We're adding capabilities, and we're beginning to see some sales benefits as well. It's a wonderful combination and the teams are working well together. Overall for Cabinets, we continue to execute well across multiple facets of a complex category. Our plants are increasingly more efficient and we are pleased we added capacity when we did to handle the growth that is now being realized. On the front end of the business, we're performing particularly well as we build share in the most attractive segments of the market by deepening our partnerships with dealers, home centers, and builders. The impact of our consistent execution can be seen in our share gains, our stronger mix, and our improving margins. For our Plumbing segment, sales were up 2% for the quarter with solid mix and strong operating margin. Sales increased 6%, excluding the negative impact of currency and some channel inventory reductions by select wholesale and retail customers who drew down inventory in the quarter as we expected. We remain on track for our Plumbing sales to increase mid to high single-digits for the full year. In the first quarter, POS growth ran at mid-single-digits across U.S. wholesale and retail. So far in the second quarter, customer orders are running ahead of POS levels and we have a number of product introductions that are flowing into the market coupled with investments we have made in showroom displays and marketing programs. Across our markets, we continue to see consumers trade up and our mix improve as innovation and design, finish and function attract consumers who trust our brand. In the coming quarters, we have a strong lineup of new products which include additional Magnetix, easy-docking, easy-releasing showerheads, pull-down and pull-out faucets with Reflex center, Kendall, Glenshire and [indiscernible] Dartmoor bath suites targeting builders and wholesale showrooms. Sales in Canada were down low single-digits to the prior year, but were up high single-digits excluding the negative impact of currency. China sales increased low single-digits versus prior year, but were up mid-single-digits in local currency, driven primarily by our retail stores and e-commerce. We remain optimistic about both our long-term business model in China and the growth potential and are encouraged by their R&R activity that we are seeing. Doors reported sales were up 13% for the quarter, Door products again saw sales growth driven by gains in both new construction and retail. Mix continued to improve. The consumer is more frequently choosing our decorative glass designs and premium upgrades. Like our recently launched Classic-Craft doors that capitalize on the growing trend toward taller doors and wider openings. In addition to innovative new products, furniture is benefiting from last year's rollout of our refreshed retail strategy. That includes an enhanced product lineup, simpler more intuitive displays, and better sales support for our customers' associates. And in wholesale, we continue to benefit from strong new construction placements and our enhanced distribution in the Western United States. In Security segment, sales increased 1% from the prior-year quarter and were up approximately 3.5% excluding the negative impact of currency and exited Sentry product lines. The growth was driven by mid-single-digit increases in both Master Lock U.S. retail and U.S. commercial. These increases were somewhat offset by the planned exit of some less profitable Sentry Safe product lines as part of the broader Sentry integration. We continue to be excited about the opportunities we see between our Master Lock and Sentry businesses over the next few years. And the integration of Sentry into Master Lock is on track to be completed this summer. So to recap the quarter, results were strong. We again executed well in the U.S. home products market that is continuing to grow as we expected. Our teams are delivering profitable growth on that momentum. Before I wrap up, let me comment on our efforts to drive long-term growth. We continue to believe that we can create meaningful incremental shareholder value by using our strong cash flow and balance sheet to make strategic acquisitions, repurchase our shares and increase our dividend. Right now, we're busy evaluating a healthy pipeline of potential acquisitions. We're assessing a number of opportunities. And while we cannot guarantee success in any one situation, I'm encouraged with the number of things we're looking at and the quality of these businesses. Meanwhile in the first quarter, we were again successful at repurchasing some of our shares at very attractive prices. It's important to note that we repurchased our shares as part of a process, which highlights when a significant disconnect is occurring between the equity markets valuation and our expected long-term business performance. Over the next three years, we continue to believe that we have the potential to deploy more than $2 billion to drive incremental growth and shareholder value. To sum up, the demand for our home products remained strong as we expected, and we continue to grow faster than our market. Our strong brands, management teams and capital structure provide flexibility to both focus on profitable organic growth, and drive incremental shareholder value with our balance sheet and strong free cash flow. Now I'd like to turn the call over to Lee who will review our financial performance and provide detail on our increased EPS outlook for 2016.

Thanks, Chris. As Brian mentioned, to best reflect ongoing business performance, the majority of my comments will focus on income before charges and gains from continuing operations. Let me start with our first quarter results. Sales were $1.1 billion, up 16% from a year ago. As Chris mentioned, sales increased 20% for our U.S. home products businesses. Consolidated operating income for the quarter was $105 million, up 43%, or $32 million compared to the same quarter last year. EPS were $0.39 for the quarter versus $0.28 the same quarter last year, increasing nearly 40% and were ahead of plan due to more days of good weather, timing of expenses and recent share repurchases. And now let me provide more color on the segment results. Our Cabinet sales were $550 million, up $139 million, or 34% versus the prior year quarter. Norcraft added $89 million of the sales growth. Dealer sales were $273 million, and increased 62% from the prior year. In-stock Cabinets and vanity sales of $110 million increased 6%. The remaining sales for home center, semi-custom, builder-direct and Canada increased 23%, excluding the negative impact of approximately $4 million from Canadian currency. Operating income for the Cabinet segment nearly tripled, increasing $24 million over the prior year quarter, with Norcraft adding $5 million of the increase. Operating margin for the quarter doubled to 6.8%. Operating leverage excluding Norcraft was 37%, as our recently added capacity continues to become more efficient. For the full year, we continue to expect an operating margin approaching 11% compared to 9% in 2015. Turning to Plumbing, sales for the first quarter were $339 million, up $5 million or 2% led by U.S. retail and wholesale, and China. Excluding the negative impact of currency of $6 million, and U.S. channel inventory reductions, total Plumbing sales increased approximately 6%, Canadian sales increased 8%, and China sales increased 6%. Operating income increased $7 million to $72 million, up 11%. Operating margin for the segment was 21.2%, up 180 basis points from the prior year quarter. For the full year 2016, operating margin could be above 20%. Door sales were $94 million, up $11 million or 13% from the prior year quarter. Operating income increased $5 million, and operating margin for this segment was 4.5%. Full year operating margin for this segment could be at least 11%. Security sales were $124 million in the first quarter, up 1% to the prior year, and up approximately 3.5% excluding the negative impact of currency of $1 million and the planned exit of less profitable SentrySafe product lines as part of the broader Sentry integration. Segment operating income increased to $12 million, and the segment operating margin was 9.3%, up 120 basis points from the prior year. To sum up consolidated first quarter performance, sales increased 16%, and EPS was ahead of plan at $0.39. Our total company operating margin was 9.5%, up 180 basis points from the prior year, with an incremental margin excluding acquisitions of 40%. We're squarely on track to reach our long-term goal of approaching 15% operating margin when the housing market returns to steady-state. Before turning to the balance sheet, let me comment on the cumulative impact of currency. The strengthening U.S. dollar reduced our total first quarter sales by approximately $11 million with Canada being the primary source. The EPS impact was around $0.01. We expect to continue to experience headwinds from currency until the second half of the year. Now turning to the balance sheet. On March 31, balance sheet remained solid with cash of $254 million, debt of $1.6 billion, and our net debt-to-EBITDA leverage is two times. By year end, we expect leverage to be about 1.4 times. We currently have $450 million drawn on our $975 million revolving credit facility as a result of recent share repurchases. In the first quarter, we repurchased more than 7.6 million shares for approximately $363 million. The share repurchases positively impacted first quarter EPS by $0.01 and could provide an incremental $0.06 of EPS for the full year 2016 and $0.02 in the first quarter of 2017. At an average purchase price of $47.43, we already see a significant return on the first quarter share repurchases, and we have $285 million remaining on our current share repurchase authorization. Turning last to the details of our outlook for 2016. While our basket of market indicators is biased to the upside, we continue to assume 6% to 7% U.S. home products market growth and total global market growth of 5% to 6% with share gains and additional second quarter sales from the Norcraft acquisition. We continue to expect full year 2016 sales to increase 10% to 12% compared to 2015. However, we've increased our full year EPS outlook based on our recent share repurchases and our strong first quarter performance. Our outlook for 2016 EPS is now in the range of $2.50 to $2.60 with the midpoint reflecting a 23% increase over the prior year. We continue to expect 2016 free cash flow to be $350 million to $375 million with a conversion rate of over 90%. The annual EPS outlook includes the following assumptions. Interest expense of around $50 million, a tax rate of 33%, average fully diluted shares of approximately 157 million, a positive impact from commodity cost that will partially offset both a negative impact from currency in the first half of 2016 and a double-digit increase in healthcare cost. In summary, we're off to a strong start to 2016. First quarter market growth was as expected, and we delivered strong sales and profit growth. We were also able to again opportunistically repurchase our shares at attractive prices, and we remain focused on using our balance sheet and cash flow to drive incremental shareholder value through acquisitions and share repurchases. I'll now pass the call back to Brian.

Thanks, Lee. That concludes our prepared remarks on the first quarter of 2016. We will now begin taking a limited number of questions. Since there may be a number of you who would like to ask a question, I will ask that you limit your initial questions to two and then reenter the queue to ask additional questions. I'll now turn the call back over to the operator to begin the question-and-answer session. Operator?

Thank you. [Operator Instructions] And your first question comes from the line of Bob Wetenhall with RBC Capital Markets. Your line is open.

Thank you. Congratulations on a fantastic quarter.

Thank you, Bob.

Just wanted to ask you, Chris, what's the theme for 2016 based on what you've seen so far? The 180 basis points of operating margin expansion was a lot more than we were anticipating. I know you've invested heavily the last couple of years in Cabinet capacity, in Doors and Plumbing. Is what we're seeing in today's results kind of the fruition of the past investments, how much more upside is left?

Yeah. I think it really is the cumulative impact of a number of things. So on the operational side, we put some capacity in and we're seeing the efficiency come through both on the Cabinets side as well as things we've done with Doors, and we're doing with faucets. Mix is improving, so we're just seeing a richer mix come through a lot of that's being driven by new products that we've introduced into the market. And so that's strong. Channel mix looks good. So I think we're on track as we've said to about a 15% operating margin at steady state, making good progress against that. And kind of I'd say the other theme for the year is keeping up with the growth. We see good indicators for the balance of the year, potentially some upside to what we've put out there as our forecast for the total year. We'll see after the spring season where we come in, but things look good. I mean, the market looks very healthy. There's a lot of demand out there both R&R and new construction. So, yeah, I guess, kind of keeping up with demand.

Okay. And for my second question, I wanted to ask you in your thought process and maybe Lee can jump in here. In making your capital allocation decision, you went on offense, your timing on the buyback was fantastic. How do we think about what you're seeing in the pipeline and the value you can create versus M&A versus what you're looking to do on buybacks and how should we be thinking about share count as we move through the year and when you would step back in the market and buy the stock versus what you have in the pipeline? Thanks and great quarter. Good luck.

First off, to the extent we see good M&A, we're going to be active there. We've got a lot of things that we're working on. I never predict the timing of those things or success rates, but I'd say we're very busy. And so we foresee deploying some capital this year in M&A. And I think that I can't predict kind of how many of those or how much. On the repurchase side, we look at this continuously running internal returns against our plan and our plan isn't just kind of a static plan. It's our plan in light of where we see the underlying demand on the market. And when there is a significant misalignment, it's an opportunistic situation and that's exactly what we saw in January and February was a misalignment there between the underlying demand driving our R&R market, driving new construction, the orders that we were seeing come in and then where the equity values were. So, it was a very good time. Not that different from summer of 2014. We did the same thing. And in 2014, we bought back 400 million plus in shares in a similar circumstance where we left out versus demand and saw similar disconnect. So that's – in a nutshell that's kind of what drove that. Lee, you can comment on the share count for the year.

Yes. So, right now, we're using a fully diluted share count of 157 million. That assumes no other purchases this year, but we'll play that by year. I think the other just comment would be that, if you look at what we've done through the end of 2015, and we've spent about $1.8 billion prior to this year, about $1.1 billion in acquisitions and about $550 million in share repurchases on an opportunistic basis as Chris defined, that's a nice mix. If we could do that going forward, that would be great. If we have different opportunities on share repurchase, we can do that. So I think the key here is its flexibility. We have a lot of capital and it's just being opportunistic. I think Chris is always very clear our major goal is just driving incremental value and maximizing that. So it's pretty flexible with us.

And your next question comes from the line of Scott Rednor with Zelman & Associates. Your line is open.

Hey, good afternoon. Nice quarter.

Thanks, Scott.

Chris, I wanted to ask, I think a couple years of age when weather was a headwind, you had mentioned that about half of the sales of the portfolio were in the Northeast and Midwest. And I was curious with given how favorable weather was this year, what the trends were in that region and how that factors into the planning assumptions?

Yeah. So we definitely had better weather and more building days than we've had over the last couple of years. And I think we saw that impact in our cabinets group as well as in Therma-Tru our door group, less so with Moen I don't think it was impacted that negatively or positively one way or the other. So I think that was positive. And I think it was running consistent with the rest of the country. So we saw strong demand, in R&R, strong demand new construction, nationally. But in the past we had, as you pointed out, we have seen big differences between the activity in Northeast, Midwest and what we're seeing in the rest of the country. This time around the whole country was looking consistently good, so on a comp basis, those markets look better.

Okay. Great. And then Lee, how should we think about the progression of incremental margins this year given the comment that there was some timing of expenses in 1Q?

Yeah. So we recall our operating margin in total last year, total company was 11.8%. Our guidance this year is built around an operating margin and it's that's about 100 basis points higher. So we said about 12.8%. So I think you'll see kind of normal progression for the balance of the three quarters of the year versus last year. I think the other thing that the takeaway here is that if we – and we are on track obviously with the first quarter up 180 basis points, but we're clearly on track on the 15% when the market gets to steady-state. We only need about 100 basis points a year to get there. So we're on track so far this year.

So just to clarify, there's no variability we should think about 2Q through 4Q relative to what you saw in 1Q?

Not a lot because the performance was fairly consistent. Second half had a little bit stronger performance last year than the first half, but I don't think that's a material difference.

Great. Thank you very much.

And your next question comes from the line of Tim Wojs with Baird. Your line is open.

Hey, guys, nice job.

Thanks, Tim.

I guess, just kind of going back to your comments on the environment, maybe a little bit of bias to the assumptions that you have embedded in guidance. Just I mean, where in some of the near-term indicators that you're looking at, I mean, is it broad-based possible upside or are there certain pockets where you're seeing better mix, more volume strength, just maybe a little bit more color on – just some of the areas where there could possibly be some upside as we go through the year?

Yeah. I think the consistency looks like in R&R, I mean, it's running ahead of where we saw it last year, but I think it's kind of as we look at it, probably 5% to 6% consistent running throughout the year. I think where we'll see a little bit more upside is in single family new constructions. So if you look at kind of overall activity there, flow from orders, which looked like they were up kind of, I don't know. 12% 13% first quarter, permits for the whole quarter in single-family up probably 14%, starts for the quarter up 22%. There's a little bit longer construction cycle, but total units under construction up for the quarter in like 19%, purchase finance applications up 18%. So those are big numbers, I mean relative to where we've been. And so, if we're lagging a quarter or two, that should turn into some more significant demand coming into late second quarter and into the second half. So that's where I'd see that variability. It's got to play through yet and the reason we haven't factored that into everything we're talking about with the guidance yet is let's see it keep flowing. If building gets backed up, not just new construction but R&R gets backed up on labor, then it won't flow as good, but if they're keeping pace with it, there really could be some additional tailwinds behind us coming into the second half of the year. I'd say builders and R&R contractors are doing better job on getting labor. If you look at the latest employment reports, construction jobs up 7%, 8% in residential construction labor. So that's running ahead of overall employment, which is only up 2% plus. So they're doing a nice job of finding labor there that's out there. But with this kind of demand coming through the system, they've got to keep that up. So I'd say let's see how it unfolds, but boy, those look like big pretty good numbers relative to what we've seen over the last few years.

Couldn't agree more. I guess just turning to the Cabinets business, the comp in the first quarter was a little easier than it is the rest of the year, so just for modeling purposes, how should we think about how that growth kind of filters in the remainder of the year? I mean, should we still continue to see maybe high single-digit growth in Cabinets through the balance of 2016?

Yeah. I think you could. I think we'll anniversary in the second quarter the Norcraft acquisition. But I think you could see embedded throughout the year high single-digits organically there.

Right. Well, good luck on the rest of the year. Thanks.

Thanks, Tim.

And your next question comes from the line of Ken Zener with KeyBanc. Your line is open.

Afternoon.

Hi, Ken.

The 16% growth in Cabinets that you cited, the dealer organic, could you talk about the demand you're seeing there, and if it's outpacing what you think is the overall Cabinet market as well as try to talk about, you keep talking about favorable mix, so are we to assume half of that is volume and half is mix on your new product introductions? Thank you.

Yeah. It's probably more volume, but there's a good mix, so that's the latter part of your question. I'd say really dealer is firing across all segments. So we sell to midsize smaller builders through dealer. That business looks good so our Aristocrat product line saw some pretty good growth overall as well as the semi-custom and premium lines that go into that builder business. The remodel business looks strong. As I said earlier, kind of North, Northeast, Midwest was a bit better than it had been over the last couple of winters. But it was a lot of things that was pretty widespread. And it really reflected a lot of, we saw a lot of activity in the fourth quarter coming into the first quarter. A lot of showroom activity coming through our dealer base. We got a big dealer base. So we got 5,500 dealer customers. So when we say, hey, we see some pretty good activity coming through, we tend to believe it. And so that was happening in the fourth quarter and I think that activity started to flow through in the first quarter and should continue second quarter and through the balance of the year. So it was pretty widespread. The mix, as I said, driven by continuous pace of new product. Consumers are trading up. So they are buying our new products because it's attractive product and it's on trend. And I just think it's a trend we've seen flow through the business, but that definitely helps as you look at kind of total growth for the year.

Thank you. And the next question is a bit more macro. It's related to both your regional exposure as well as the near-term drivers that you've talked about. I think you've talked in the past about your concentration in the Northeast. If you could kind of update that numerically for us as well as Texas and maybe West. And the second component is with near-term drivers, one of which obviously being existing sales, which we think is set to slow growth year-over-year, can you talk about some of the other factors you talked about, you talked about refinancing, so I assume HELOCs? Thank you.

Yeah. In terms of balance – well, we certainly have considerable business up Northeast, Midwest, and if you look across, look at Cabinets with Norcraft, we've expanded our overall penetration. And I'd say we're strong across all North America, both the whole U.S. as well as Canada. Certainly, our Moen business has always been a solid North American as well as, obviously, China business. And Therma-Tru have strong Northeast historically, but we did a lot to expand out West in terms of distribution. And so that business is really a national U.S. business across. So I think where we had opportunities to expand West, we have. And I like the balance of the business and I don't see any part of the market that we're not capturing if it's growing, it's coming on the R&R side. Where new construction's growing in certain parts of the market, we'll be there and we'll grow. In terms of Texas, we talked a little bit last time about kind of the oil patch, more than 5%. Interestingly, our Door business we've actually seen some growth down there because we expanded some distribution, so the Door business is actually up in Texas, so we're growing faster there than we are in some of the parts of the country. I don't think we've seen anything really extraordinary. I'm sure it's growing faster than our other businesses and Cabinets or faucets in Texas relative to the rest of the country, but we haven't seen it. In the first quarter, we didn't see it fall off to any extraordinary extent.

And we'll take our final question from Eric Bosshard from Cleveland Research Company. Mr. Bosshard, your line is open.

Thank you. I wanted to dig into the Plumbing business if you could. It sounded like POS low single-digits in the quarter expected revenue for the segment up 5% to 9% for the year. Can you just talk about a little bit of what you're seeing in that business in terms of demand, the first thing I'd love to understand?

Sure. Yes, demand was strong for the quarter, mid-single-digit growth for the year that will be more like mid to high. We're rolling new product in and that's coming into the market now. And so we'll get some lift from that as well as overall demand. If we look just over the last five weeks, orders are running ahead of POS. So you're sitting up strong. There was some inventory, a couple of our larger customers had both retail and wholesale, coming into the year we knew that they'd be taking that down throughout the quarter, which they did. And then started bringing back up margin and we'll see that come back in April. In terms of overall demand, it's kind of the same – seeing some of the same dynamics in mix, as I talked about in Cabinets. We are getting the advantage and we're bringing out richer mix products, new products, higher price points. We're seeing consumers trade up both on new construction and R&R. And a lot of our product we're bringing in is targeting take advantage of that. So, pretty healthy market overall. Most of this is talking about North America. China actually pretty good quarter. POS running well. R&R there looks solid. The new construction direct to builder is flat, not down. It's probably a little bit better than we might have thought, doing well, retail e-commerce there. POS kind of high single-digits on the retail e-commerce side. It's actually pretty healthy relative to what everybody talks about what we might have expected. So...

That's helpful. And then secondly in Cabinets, the magnitude of your market share gains, in either the dealer or the home center channel, it sounds like the dealer channel, the share is better. Could you just frame what that looks like now and what you're expecting relative to what you accomplished in 2015?

Yes. It is strong. I think it's – we are gaining share there. Let me start with dealer. We're gaining share across accounts, we're going deeper into accounts, we brought new product in. Kind of we're cross-pollinating between Norcraft product line and BCI product line. And it's really a cumulative effect of a number of things we've done over the years that's really positioning us well. On the home center side, we've got a very good position there on special order and we think we've picked up some share there. We've been very consistent. We've talked in the past about promotions and we've been disciplined and consistent and that's really resonating. So we bring new product in. We're really focused on service. And we are consistent in whatever we're doing on the promotional side. And that combination and working with the designers really seems to be resonating. So that's going well. And on the builder side, we talked about exiting in the West some direct to builder business, but we didn't get out of the direct to builder business, we just focused on some good relationships East and Southeast. And those are going well. So in that part of that market, we're picking up share there. So it's pretty deep across a lot and it's a really complicated business as a lot of the Cabinet guys talk about and as we talk about all the time and we focus on getting all the complicated stuff right. And we got a great team. And I'd say the people are really what are responsible for executing every day and getting this stuff right. So I know it kind of sounds like, it's not easy one thing to point to, but really is it's like the conductor of an orchestra, kind of getting everything to work right. And that's what Dave Randich and our Cabinets guys do every day is get all that right. And that's resulting in share gain. And I'd say, part of your question was 2015 versus 2016, I think we're going to continue to pick up share throughout the year. We're executing really well across all these channels. And it's a good environment and we see underlying demand across the whole thing. So we're going to have a pretty good year in Cabinets.

That's helpful. Thank you very much.

Thank you, ladies and gentlemen. I will now turn the call back over to Mr. Lantz.

We'd like to thank everybody for joining us on the call today and look forward to seeing many of you again very soon. Thank you.

Thank you, ladies and gentlemen, for your participation. This concludes today's conference call. You may now disconnect.