Mike Wagnes - Allegion Plc David D. Petratis - Allegion Plc Patrick S. Shannon - Allegion Plc

Joshua Pokrzywinski - The Buckingham Research Group, Inc. Andrew Burris Obin - Bank of America Merrill Lynch Rich M. Kwas - Wells Fargo Securities LLC Timothy Ronald Wojs - Robert W. Baird & Co., Inc. Robert Barry - Susquehanna Financial Group LLLP Brandon Rollé - Longbow Research LLC Jeffrey T. Sprague - Vertical Research Partners LLC Joe Ritchie - Goldman Sachs & Co. Julian Mitchell - Credit Suisse Securities (USA) LLC Jeremie Capron - CLSA Americas LLC Saliq Jamil Khan - Imperial Capital LLC Steven E. Winoker - Sanford C. Bernstein & Co. LLC

Good day, and welcome to the Allegion Q4 and Full Year 2016 Earnings Call. Please note that this event is being recorded. I would now like to turn the conference over to Mike Wagnes, Vice President, Treasurer, Investor Relations. Please go ahead. Mike Wagnes - Allegion Plc: Thank you, Daniel. Good morning, everyone. Welcome, and thank you for joining us for the Allegion fourth quarter and full year 2016 earnings call. With me today are 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 allegion.com. This will be recorded and archived on our website. Please go to Slide number 2. 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 law. 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. Please go to Slide number 3. Our release and today's commentary include non-GAAP financial measures, which exclude the impact of restructuring, impairment, acquisition and divestiture expenses and charges in current year and 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 2016 results and provide 2017 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 number 4, and I'll turn the call over to Dave. David D. Petratis - Allegion Plc: Thanks, Mike. Good morning, and thank you for joining us today. Allegion posted another strong quarter of operational results and closed out a very strong year. The high level of execution and performance is driven by one of the most engaged and safest workforce in the security industry. For the fourth quarter, revenue came in at $569.7 million, growing 5.2% on an organic basis. Total revenue increased 4.4% over prior year, reflecting the impact of divestitures and foreign currency partially offsetting the organic growth. Our strong organic growth was led by the Americas, which grew 7% in the quarter, as both non-residential and residential business expanded nicely. EMEIA organic revenues grew at 1.4%, and our Asia-Pacific business saw organic revenue decline by 0.7%. Adjusted operating income of $102 million decreased 1.4% versus the prior year. Adjusted operating margin declined by 110 basis points. These declines were driven by a $15 million environmental remediation charge taken in the fourth quarter, which reduced the adjusted operating margin by 260 basis points. The operating performance, excluding the environmental charge, reflect continued price realization and solid leverage on an incremental volume, which more than offset the 70 basis points headwinds from incremental investments. Europe and Asia-Pacific saw significant improvement in adjusted operating margin. The environmental remediation charge did cause the Americas' overall operating margin to decline. Adjusted earnings per share of $0.81 decreased $0.08 or 9% versus the prior year. This includes the environmental remediation charge, which had a $0.10 per share impact. Overall, I am pleased with the strong revenue growth and solid operational performance in the fourth quarter. I'd like to briefly talk about the environmental remediation charge taken in the quarter. At Allegion, we help keep people safe and secure where they live and work, while safeguarding our environment at the same time. In the fourth quarter of 2016, with the collaboration and approval of state regulators, we launched a proactive alternative approach to remediate two sites in the United States. This approach will allow us to be more aggressive in addressing the environmental conditions at these sites and reduce the impact of potential changes in regulatory requirements. As a result, we recorded a $15 million charge from environmental remediation in the fourth quarter. We value the importance of a cleaner world. We are committed to being a responsible member of our global communities, and the actions we are taking at these sites benefit both Allegion and the environment. Please go to Slide 5. Now, I'd like to talk about Allegion's accomplishments in 2016. We continue to have an exceptional occupational safety record and continue to be a safety leader in the industry. We delivered high organic growth, led by our Americas and Asia-Pacific regions. We've executed our channel-led business strategy and continued to focus on innovation, helping to drive organic growth and increase our vitality index. In addition, we've seen continued strong operating leverage and expansion of adjusted operating margins in all of our regions. We delivered a 10.2% increase in full year adjusted earnings per share and had a record year from cash flow, as our available cash flow increased to $335 million, an increase of $112.8 million or 50.8% over last year. Please go to Slide 6. In 2016, our pioneering brand launched a range of new products across the globe in a variety of markets and verticals. On this slide, you can see a sampling of those newest electronic and mechanical innovations. In the Americas, we launched Schlage Control Smart Interconnected Locks for the multi-family market, allowing cloud-based mobile app control for property managers and phone credential capabilities for residents. Late in the year, we introduced the Everest 29 SL cylinder by Schlage, which allows commercial buildings on multiple key systems to be brought into one unified restricted key system without replacing current door hardware. In Europe, the Briton 571 EL is a new commercial exit device that integrates with electronic access control systems, meaning, it offers both panic exit functionality and can be monitored remotely. In fact, it can be paired with the SimonsVoss MobileKey, our new app-based access control solution for medium to large buildings that can control up to 20 doors and assign access to 100 users at a time. In the Asia-Pacific, Milre added five new electronic locks like the MI-480s that draws on the latest residential market design trends to offer homeowners a sleek rim lock with keyless entry via a smartcard or passcode opening. As a result of our focus on innovation and investing in new product development, we have been able to increase our vitality index, which was single digits in 2014 to high teens in 2016 with a goal of approximately 25% in 2018. As a result, this will continue to drive organic growth and help leverage our connected platforms across the region. Patrick will now walk you through the financial results, and I'll be back to update you on our full year 2017 guidance. Patrick S. Shannon - Allegion Plc: Thanks, Dave, and good morning, everyone. Thank you for joining the call this morning. Please go to Slide number 7. This slide depicts the components of our revenue growth for both the fourth quarter and the full year. I'll focus on the total Allegion results and cover the regions on their respective slides. As indicated, we delivered 5.2% and 5.8% organic growth in the fourth quarter and full year, respectively. The strong organic growth reflects improved markets, the introduction of new products and the company's channel initiatives. Pricing was favorable in the quarter in all regions, as the company remains disciplined in taking necessary pricing actions to help mitigate the impacts of rising commodity prices. Foreign currency was a headwind in the quarter, particularly in the EMEIA region. During the quarter, divestitures were a slight headwind, which offset the impact of acquisitions. For the year, all three regions were favorable on price and saw headwinds from foreign currencies. Acquisitions more than offset the impact of divestitures. Please go to slide number eight. Reported net revenues for the quarter were $569.7 million. This reflects an increase of 4.4% versus the prior year, up 5.2% on an organic basis. I was particularly pleased with the outstanding organic revenue growth from Americas, which had strong growth in both the non-residential and residential businesses off a tough comparison from the prior year. We continue to make significant progress with our new product introductions and channel strategies. We had improved pricing in the quarter, offsetting the currency headwinds seen in EMEIA. In the fourth quarter, we lapped the large acquisitions completed during 2015. As such, during the quarter, the incremental contribution from acquisitions was offset by the impact of the divestiture of the system integration business in the fourth quarter of 2015. Adjusted operating income of $102 million and adjusted operating margin of 17.9% declined 1.4% and 110 basis points, respectively, when compared to the prior year. Included in these numbers is the environmental remediation charge of $15 million, which had a 260 basis point impact on the adjusted operating margin in the quarter. Excluding the environmental charge, the underlying operational improvement was driven by solid incremental volume leverage and continued progress on our EMEIA margin transformation. During the quarter, price and productivity more than offset the impacts of inflation and incremental investments. Our EBITDA margin of 20.5% was a 110 basis point decline versus the prior year but, similar to adjusted operating margin mentioned earlier, includes the 260 basis point impact of the environmental remediation charge. Excluding the charge, all regions improved during the quarter. The business continues to execute at a high level, demonstrating both strong organic growth and operational margin improvement, while continuing to make investments for future profitable growth. Please go to slide number 9. This slide reflects our EPS reconciliation for the fourth quarter. For the fourth quarter 2015, reported EPS was $0.74. Adjusting $0.15 for the prior-year restructuring expenses and integration costs, related acquisitions and divestitures, the 2015 adjusted EPS was $0.89. Operational results increased EPS by $0.16, as favorable price, operating leverage and productivity more than offset inflationary impacts. As noted previously, the environmental remediation charge drove a $0.10 reduction. Next, interest and other income were a net $0.07 reduction. This was driven primarily by the positive impact from the sale of non-strategic marketable securities during the fourth quarter of 2015 that did not repeat in Q4 of 2016. The increase in the adjusted effective tax rate drove $0.03 per share reduction versus the prior year. The increase in rate is primarily due to unfavorable changes in the mix of income earned in lower tax rate jurisdictions, partially offset by the impact of new accounting standard for stock-based compensation and reductions in certain countries' statutory tax rates. The adjusted effective tax rate for the fourth quarter 2016 was lower than anticipated due to favorable resolutions of uncertain tax positions and changes in certain countries' statutory tax rates. Incremental investments related to ongoing growth opportunities for new product development and channel strategies were a $0.03 reduction. Acquisitions, net of divestitures, subtracted $0.01 in the quarter. This results in adjusted fourth quarter 2016 EPS of $0.81 per share. Continuing on, we have a negative $0.04 per share reduction for acquisition and restructuring charges. After giving effect to these one-time items, you arrive at fourth quarter 2016 reported EPS of $0.77. Please go to slide number 10. Fourth quarter revenues for the Americas region were $410 million, up 7% on both a reported and organic basis. Strong organic growth reflects above-market performance, driven by our new products and channel initiatives. As noted on the chart, we experienced solid, high-single digit growth in the non-residential products driven by strength in our premium brands and mid-single digit growth in residential products, with solid performance in both our retail and builder channels. Revenue growth was strong across most product categories with continued momentum in electronics. Americas' adjusted operating income of $96.7 million declined slightly versus the prior-year period as a result of the $15 million environmental remediation charge mentioned earlier. Excluding the charge, operationally, Americas' adjusted operating income increased due to incremental volume leverage, favorable mix and positive impact from foreign currency. Overall, price and productivity offset inflation and incremental investments. Pricing realization improved sequentially in the quarter with good performance in both commercial and residential markets. Adjusted operating margin for the quarter decreased 260 basis points, driven by the 370 basis point impact from the environmental charge. The operational increase, while absorbing the incremental investment spend, demonstrates excellent performance by the entire Americas team. Please go to slide number 11. Fourth quarter revenues for the EMEIA region were $129.4 million, up 0.2%, or up 1.4% on an organic basis. The reported revenue growth was driven by the impact of the organic growth and acquisitions, partially offset by currency headwinds. In particular, the portable security and SimonsVoss businesses saw solid growth. EMEIA adjusted operating income of $19.9 million increased 13.1% versus the prior-year period. Adjusted operating margin for the quarter increased 180 basis points, reflecting continued improvements in the ongoing business transformation, more than offsetting currency headwinds. Although it isn't reflected on the slide, the full year adjusted operating margin for EMEIA was 9.3%. At the time of the spin-off, adjusted operating margin for this business was approximately 1%. This is a significant improvement in operational results driven by an extremely dedicated EMEIA team. Please go to Slide number 12. Fourth quarter revenues for the Asia-Pacific region were $30.3 million, down 8.5% versus the prior year. Organic revenue declined 0.7% and was impacted by the timing of orders and large non-recurring projects in 2015. Total revenue declines are attributable to the divestiture of the system integration business in 2015. Our Australia and New Zealand markets continued to be strong along with Southeast Asia. Asia-Pacific adjusted operating income of $2.3 million was up 4.5%. Adjusted operating margin for the quarter was up 100 basis points, reflecting favorability in price and productivity along with the impacts of divesting the system integration business. Please go to Slide number 13. Available cash flow for 2016 was $335 million, an increase of $112.8 million or 50.8% compared to the prior-year period. The increase in year-over-year available cash flow is primarily attributable to higher net earnings. Working capital as a percent of revenues and the ratio for the cash conversion cycle increased in 2016. The increase was primarily driven by planned increases in inventory levels in certain areas to improve customer fulfillment requirements. As discussed later in the presentation, we made a $50 million discretionary contribution to our U.S. pension plan in January 2017. This contribution significantly improved the plan's funded status, while also reducing future cash payments to the plan and reducing anticipated increases in pension expense for future years. This outflow is included in the guidance of available cash flow for 2017. Please go to Slide number 14. Since the spin, we stated our capital allocation strategy is one that defines a balanced and flexible approach, which remains a primary focus today. We ended the year with a gross debt to adjusted EBITDA of 2.9 times, in the middle of our targeted range of 2.75 times to 3.25 times. If you recall, we ended 2015 with a 3.5 times gross debt to adjusted EBITDA. This reduction reflects growth in EBITDA during the year, as well as mandatory principal payments made on our secured credit facility. Our net debt to adjusted EBITDA ended the year at 2.3 times. As Dave will discuss later in the guidance, we continue to see opportunity to fund incremental investments for channel strategies, new product development and demand creation to accelerate core market expansion. Supported by our 2016 performance, we believe these investments will enable the company to continue to grow at an accelerated pace and faster than the broader market as well as provide superior returns on invested capital. We also remain focused on growing our portfolio through acquisitions. We plan to keep our flexibility and our balance sheet optionality available for potential M&A opportunities. While we did not close as many transactions during 2016 as we did in 2015, the M&A pipeline remains active, as evidenced by the recent announcement of our acquisition of Republic Doors. And lastly, we have the opportunity to provide shareholder distributions through increased dividends that reflects strength and confidence in our cash flow. In addition, we will continue to repurchase shares to offset dilution and to be opportunistic when appropriate. Last week, we announced a 33% increase in our quarterly dividend and also announced a new $500 million share repurchase authorization. During the fourth quarter of 2016, we repurchased 850,000 shares for approximately $55 million under our previous share repurchase authorization. In summary, we have many options to deploy capital for the benefit of our shareholders. This is driven by our ability to generate consistent, high cash flow. I will now hand it back over to Dave for an update on our full year 2017 guidance. David D. Petratis - Allegion Plc: Thank you, Patrick. Please go to Slide 15. We expect continued growth in our primary markets in 2017. And it's our expectations that the organic growth investments, combined with our ability to execute, will deliver better than market growth. In addition, we believe the mechanical to electromechanical convergence will help stimulate the growth of our business, as we are well positioned to take advantage of this industry trend. In the Americas, we see positive indicators in key verticals within the non-residential and residential businesses. On the institutional markets, we continue to expect solid growth. Safe school initiatives and the need for school security upgrades is evident when you review state legislative priorities. The outlook for healthcare is also positive, especially in the special care senior living care facilities. We expect growth in the commercial markets, as our channel initiatives gain traction and end markets continue to cooperate. Overall, we anticipate mid-single digit organic growth for the non-residential segment. We expect the U.S. residential markets will increase mid-single digits, driven by both builder and retail segments in 2017. Single-family home construction will continue to be strong, although there will be some variance in this segment driven by labor and land availability. The multi-family segment will continue to remain solid, but we expect a deceleration in the rate of growth as compared to the last few years. Consolidating the market outlooks, we project organic revenue growth in the Americas of 6% to 7% and reported revenue growth of 7% to 8%, reflecting the recent acquisition of Republic Doors. For the EMEIA region, we anticipate flat to low-single digit market growth overall. Confidence in investments throughout Europe are being affected by the uncertainty surrounding the impact of Brexit. As such, we expect the UK construction market to be lower in 2017. We expect continued growth in Germany. For the region, we project organic growth of 1% to 3%. When we combine the impact of currency, we project reported revenue of negative 1% to positive 1% for the year. The Asia-Pacific market continues to show mid-single digit growth in residential and non-residential segments. We expect to drive above-market growth, as we focus our effort on key vertical markets where we are strong. Organic growth in the region is estimated to be 10% to 12%, and total revenue growth is estimated to be 7% to 9%, which reflects currency impact. All in, we are projecting total growth and organic growth both at 5.5% to 6.5%. We anticipate improved price realization across all regions to help mitigate inflationary pressures in 2017. Please go to Slide 16. Our 2017 adjusted earnings per share range is $3.55 to $3.70, an increase of 6.3% to 10.8%. The earnings increase is primarily driven by revenue growth and operational improvements, partially offset by investments in the business, currency headwinds, other income and a higher effective tax rate assumed to be between 19% and 20% for the year. We also have a net $0.02 drag associated with the 2016 impact of the sale of marketable securities, net of the environmental remediation charge mentioned earlier. We are not expected to recur this year. We are forecasting strong organic growth and margin expansion in all reported regions. Incremental investments will be focused on new products and channel development, which we believe enables us to deliver above-market growth. Our guidance assume outstanding diluted shares of approximately 96 million, which reflects the company's goal to at least offset share dilution with repurchases. The guidance does not include any impacts from restructuring and acquisition expenses during the year. As a result, reported EPS is also $3.55 to $3.70. We are also projecting our available cash flow for 2017 to be in the $300 million to $320 million range, inclusive of a $50 million voluntary pension funding that Patrick mentioned earlier. Please go to Slide 17. We are very pleased with our 2016 results that delivered organic revenue growth of 5.8% and increased our operating margin by 40 basis points, net of the 70 basis point impact of the environmental remediation charge taken in the fourth quarter. The growth of both revenue and margin, while making investments in our business, demonstrates our disciplined approach to our business. We are recognizing solid growth from our organic investments and continuing to make progress on our vitality index, while we continue to generate robust cash flows. We've made tremendous progress improving our European profitability from slightly positive three years ago to almost 10% today. It's a truly great accomplishment by the entire team to achieve these results in Europe. As we look to 2017, we look to build on the momentum of our prior results. We look to generate strong organic revenue, drive a solid increase in adjusted earnings per share and look to generate substantial available cash flow even after a discretionary pension funding payment. We have a safe and strong team in place committed to our vision to make the world safer, securing the places where people thrive. Now, Patrick and I will be happy to take your questions.

We will now begin the question-and-answer session. Our first question comes from Joshua Pokrzywinski with Buckingham Research Group. Please go ahead. Joshua Pokrzywinski - The Buckingham Research Group, Inc.: Hi. Good morning, guys. David D. Petratis - Allegion Plc: Good morning, Josh. Joshua Pokrzywinski - The Buckingham Research Group, Inc.: Just to maybe follow up on some of your comments you made, Dave, on the pricing environment and how we should think about that kind of 4Q into 2017. Presumably, this higher organic growth than you would typically start the year with includes a good amount of price. Could you maybe remind us, I guess, Patrick, how that looked in the fourth quarter? I know you mentioned on the third quarter call that there would be a bit of a price-cost drag because you couldn't get all the increases out there right away as fast as materials were going up. And how we should think about that in 2017? So, I know a lot of questions there. But basically, kind of, follow the narrative for me on price and costs 4Q into 2017, if you could. Patrick S. Shannon - Allegion Plc: Yes. So, as you mentioned, Q4 pricing was favorable. If you kind of look at it, relative to the prior quarter, it sequentially improved. We did go out with a price increase at the beginning of the quarter, and our commercial segment of the business saw really good traction there. I think it demonstrates that we've continued to grow in our discipline and focus in this area. Saw good improvement in the residential business as well, which was really positive. We believe that momentum will continue into 2017. And so, the price-cost equation, as we look into kind of the full year basis of where commodity prices trade today, most of the price should offset the commodity headwind. It is a significant, kind of, change if you look at the cost side of the equation. Commodity prices, like steel for example, is up 40%, 50% over the average rate for 2016. So, we are anticipating more price movement in 2017 to offset the increase in the commodity costs. Joshua Pokrzywinski - The Buckingham Research Group, Inc.: But of that 6% to 7% that you have in Americas' organic, how much of that is price? And if I were to look back in the way you start off most years, how would you have thought about that historically? Patrick S. Shannon - Allegion Plc: So, in Q4, it was about 150 basis points improvement year-over-year. As we look in kind of the full year, 2016 I think across the globe was about 1% price improvement, which is fairly consistent over the prior couple of years. 2017 will be north of that. You're probably looking at 1% to 1.5% improvement. So, the rest of the organic growth would be volume related and we would characterize that as growing at market plus. We would expect, given our channel initiatives, new product development, the traction we've gained, some of the new initiatives, new products coming out for 2017, that we would grow above market of, say, 1% to 2% is our expectation. And that's why you're seeing a fairly robust anticipation of revenue growth for 2017, as well as strong markets. Joshua Pokrzywinski - The Buckingham Research Group, Inc.: Terrific. Thanks for the call. I'll get back in queue. Patrick S. Shannon - Allegion Plc: You bet.

Our next question comes from Andrew Obin with Bank of America. Please go ahead. Andrew Burris Obin - Bank of America Merrill Lynch: Good morning, guys. David D. Petratis - Allegion Plc: Hey, Andrew. Andrew Burris Obin - Bank of America Merrill Lynch: Just a question. As I look at the outlook for 2017, I would argue that probably top line is quite a bit stronger than a lot of us have been thinking and probably a lot of outgrowth there. But at the same time, you do have these incremental investments. And the question I have in regards to investments, how should we think about them because they are eating into what should be very strong operating leverage? Is this remediating underinvestment under your prior corporate ownership? Or are we sort of banking outgrowth? I know that it's a fine line between the two, but just if you could expound on that a little bit. David D. Petratis - Allegion Plc: So, Andrew, I would think of it like this. As a market leader, particularly, in the U.S., we see opportunities to segment the market and invest for growth. We've talked about this as part of our channel initiatives that I think has delivered above-market growth today. We continue to see opportunities to segment that market, but it takes people, number one. Number two, we believe very strongly in this electromechanical convergence. Again, it takes investment in product development engineering, which is fueling our vitality index which we think gives good returns. So, we're confident in our ability to execute and deliver on those investments that will give us above-market growth as we go forward. Andrew Burris Obin - Bank of America Merrill Lynch: So, we should get – we should also get continued improved return on invested capital going forward from these initiatives as well, right? David D. Petratis - Allegion Plc: I think that's what we've proven. It's important that we're accountable, and we see that opportunity globally. I think Asia-Pacific would be a good example in our segmentation and adjustments there. More work to do in Europe to fuel that growth. And again, it's people driving specification with great products. Patrick S. Shannon - Allegion Plc: Yeah. I would just add, too, Andrew, if you kind of look at these in terms of capital deployment alternatives, you have to look at it over a longer time horizon. And these, historically, over the last couple of years, have provided an outstanding return on invested capital. And so, we kind of – we look at the opportunities. As Dave said, we're a learning organization, as we look at opportunities to expand our market segmentation, and areas where we're underserved today just provides really good growth opportunities. And we're going to manage the equation so that the incremental investments, we can make those, still grow the top line and expand our margins in the region where we make the investments. Andrew Burris Obin - Bank of America Merrill Lynch: Terrific. Thank you very much. Patrick S. Shannon - Allegion Plc: Yeah.

Our next question comes from Rich Kwas with Wells Fargo Securities. Please go ahead. Rich M. Kwas - Wells Fargo Securities LLC: Hi. Good morning, everyone. Just a couple of questions here on – as it relates to M&A so cash balance building, I know you outlined your gross debt to EBITDA and where you are versus targets, but it's been a little while since some deals have been done. Dave, how should we think about what's going on in the market? And is this a valuation issue? It doesn't seem like it's an opportunity issue in terms of number of opportunities. But what's kind of holding back in terms of the execution? David D. Petratis - Allegion Plc: I think we haven't revealed those deals we didn't do, which I think were disciplined capital allocation decisions. The pipeline in my mind is fruitful. We continue to work it extremely hard. We think the industry consolidates. We did just knock off a small deal with Republic Doors, which we think advances the Americas. And this is kind of the nature of M&A. It had ebbs and flows, and we think there's plenty of opportunity as we move through the year. Rich M. Kwas - Wells Fargo Securities LLC: So, we shouldn't read too much into the higher cash balance in normal, there's nothing pending here that is pretty significant necessarily. David D. Petratis - Allegion Plc: I will just smile and look at our ability to generate the cash that we did in this company in 2016. It's important to us, and we're going to deploy it in a flexible manner. Rich M. Kwas - Wells Fargo Securities LLC: Okay. And just a real quick follow-up just on – this relates to near-term stuff. So, Patrick, on Q1, last year, the ERP implementation, that hurt sales and you had the rebound in Q2. How should we think about – I know you don't give quarterly guidance. But how should we think about modeling this on a year-over-year basis and the puts and takes for Q1? Patrick S. Shannon - Allegion Plc: Yeah. From a seasonal perspective, I think you probably have to look at – go back to 2015 and look at kind of the split there from top line perspective. It may be back into, kind of, the first half of 2016 and assume kind of revenue growth and margin expansion in both quarters year-over-year. Rich M. Kwas - Wells Fargo Securities LLC: Okay. Patrick S. Shannon - Allegion Plc: But you're right, the comparisons were easier in Q1 just because of the blip we had last year. David D. Petratis - Allegion Plc: On an annualized basis, our team went through a very challenging ERP implementation in Indy Ops and grew that business nicely year-over-year. Rich M. Kwas - Wells Fargo Securities LLC: All right, all right. Thank you.

The next question comes from Tim Wojs with Baird. Please go ahead. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Hey, guys. Nice job on the growth. David D. Petratis - Allegion Plc: Thank you, Tim. Good to hear from you. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Yeah. I guess, just – I'll ask a border adjustability question. If you guys could just talk a little bit about how we should think about some of the tax policies that have been put forth out there. And then, just internally what type of exposure you might have to Mexican manufacturing and then how that relates to the industry. And then, any sort of contingencies that you guys might be thinking about? David D. Petratis - Allegion Plc: So, any changes along the border that could affect imports into the countries, I think you got to think about it in multiple dimensions. Number one, our greatest exposure is to our resi business. And as we think about the resi, we're in the boat with all competitors and – however, that – tide rises. We think any tariffs would be passed along. Nobody is going to be able to change overnight. So, that's our biggest exposure. On the commercial institutional, you know that, here in the U.S., we've got a very strong U.S.-based manufacturing base that leads to industry profitability. So, we think we navigate through that okay. Third, I think this industry has good pricing disciplines. We do import component parts along with others. Again, we think we could pass that along. So, in a world of uncertainty, we have I think a lot of flexibility. And I'd emphasize, as you have been through our factories, our manufacturing excellence has a lot of ability to flex and move where we needed to be. I think we're probably at a better state of readiness than anybody in the industry to be able to adapt to change. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Great. Well, good luck on 2017. David D. Petratis - Allegion Plc: Thank you.

The next question comes from Robert Barry with Susquehanna. Please go ahead. Robert Barry - Susquehanna Financial Group LLLP: Hey. Guys, good morning. David D. Petratis - Allegion Plc: Good morning. Robert Barry - Susquehanna Financial Group LLLP: Can you hear me? David D. Petratis - Allegion Plc: Yeah. Robert Barry - Susquehanna Financial Group LLLP: Yeah. So, I guess, I just wanted to clarify on whether you expect the Americas' margin to be up in 2017 kind of materially so, especially if you exclude the charge in 2016. It sounds like price, you think, will just kind of offset cost. Investment spending looks like it will be up a fair amount, but you'll have good volume leverage. But the net of all that seems to me, roughly, I don't know, flattish or only modest margin expansion. So, how are you thinking about that? Patrick S. Shannon - Allegion Plc: So, we'll continue to see margin expansion. The pricing is going to be stronger. As you said, that should offset a lot of the commodity cost increase. We continue to get outstanding volume leverage on the incremental volume. And so, that should continue to move forward. Productivity improvements will continue to drive margin performance as well. So, the margin expectation is, we'll manage the incremental investments to ensure that we get top line growth. So, we're still getting margin accretion in Americas and that should be fairly steady throughout the course of the year. Robert Barry - Susquehanna Financial Group LLLP: Got you. Just a quick follow-up, a housekeeping item. Did you mention what the electronics growth was in the quarter or could you? Patrick S. Shannon - Allegion Plc: So, we didn't mention it in the quarter. Well, for the full year, kind of, low-double digits growth. Q4 was kind of similar type of range. It continues to grow faster than the traditional mechanical business. A good trend for us. As you know, electronic products sell at a higher average selling price, similar margin, more EBIT dollars, cash flow. So, good trend, and that's something we're investing in to take advantage of that electromechanical convergence. Robert Barry - Susquehanna Financial Group LLLP: Okay. Thank you.

The next question comes from David McGregor from Longbow Research. Please go ahead. Brandon Rollé - Longbow Research LLC: Hi. This is Brandon Rollé on for David McGregor. I was hoping that you could give some color on the non-residential segment and what you're seeing in specified institutional markets versus commercial distributor businesses and how growth compared for each? And to follow up on that, how do you expect these growth patterns to extend into the first half of 2017? Thank you. David D. Petratis - Allegion Plc: So, we're net positive on what we would describe as total institutional growth as we move into 2017. I think the overall environment that we'll leave in 2016 was positive. I think we called that a year ago. We work hard to understand the drivers. But we would see total education stronger in 2017 than it was in 2016. We'd see healthcare stronger in 2017 than it was in 2016. Some changings in terms of hospitals. The hospital model is changing. We know we don't see as many big institutions, but we see a lot of more walk-in cares, imaging cares that fall right into our wheelhouse. So, we like this institutional space. I think, if you also dive into bond issues that were improved in the fourth quarter of 2016, it was net positive. There's a need for infrastructure, school security. We like our position.

Our next question comes from Jeff Sprague with Vertical Research. Please go ahead. Jeffrey T. Sprague - Vertical Research Partners LLC: Thank you. Good morning, gentlemen. Just a quick one on growth spend, and I apologize if you went through this. I've been bouncing back and forth here a little bit. But obviously, it's paying off with the organic growth. But just give us a sense of really what you're targeting in 2017 and what the trajectory of growth spend might be going forward. Should we expect it to continue to incrementally ratchet up meaningfully, or do we kind of settle down into a pattern where it's kind of growing in line with sales? Thank you. Patrick S. Shannon - Allegion Plc: Yes. So, I would anticipate – well, first of all, the step-up here is all related to specific opportunities that we see specific around the market segmentation that Dave talked about, expansion of the channel, discretionary market opportunity, new product development, those type of things. The other thing that's fueling that a little bit is, when we acquire companies, I mean, there's opportunities that, in order to fully realize that investment and take advantage of that, investments are needed to kind of expand the capabilities of that. Republic Door would be a good example of that, where we need some infrastructure spending, if you will, to fully take advantage of that acquisition and to fill out the regional distribution capabilities for fulfillment for customers. So, really, it's going to be dependent upon what's taking place in the industry, acquisitions, et cetera. But I would say, going forward, long term, $0.15 to $0.20 I would say is probably a peak. How much it will taper down from there is hard to say. But each year, we'll kind of look at it individually. But I think the critical thing is that, when we evaluate these, we ensure that there's good revenue growth opportunity that we can execute on it, the risk of doing that isn't significant and it's – we got to demonstrate a proof-of-concept in the marketplace before we put a bunch of capital behind it. So, we've got levers we can pull. If we can't execute, we can swaddle back a little bit. David D. Petratis - Allegion Plc: I would just add to that, too, as we moved into 2017, a hard squeeze on what I call back-office costs and any increase in investments in things that we believe that will produce growth for us going forward in the future, including new products. Jeffrey T. Sprague - Vertical Research Partners LLC: Thank you very much.

The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead. Joe Ritchie - Goldman Sachs & Co.: Thanks. Good morning, guys. David D. Petratis - Allegion Plc: Hey, Joe. Joe Ritchie - Goldman Sachs & Co.: So, I guess, maybe just touch on EMEIA margin. You had really nice progress this past year getting to 9.3% on an adjusted basis. I'm just wondering what's your expectation now for 2017 and beyond for the segment? David D. Petratis - Allegion Plc: So, incremental year-over-year improvement. When you come to Investor Day, we'll give you a better look at that, what we see long term, but continued step-up year-over-year. I think – as I think about Europe, it's a little bit like three-dimensional chest. We have to continue to improve our geographical position. The northern margins are better than we're – our traditional markets. Second is investment in growth on our spec writing capabilities is important. I described our core mechanical business as more of a flow goods business that wholesalers are providing. We do the best in the world where we can drive specs. So, I wish I could be more aggressive and say, hey, it's going from this point to this. We've made big moves. But as we look at ourselves versus our competitors with similar geographical regions, we're significantly above them, so we got to be realistic in terms of how it goes forward. Our ultimate goal would be mid-teens. Joe Ritchie - Goldman Sachs & Co.: Got it, got it. And then – but I guess, for 2017 specifically, I mean, is the expectation, at least, double digits this year? David D. Petratis - Allegion Plc: Yes. Joe Ritchie - Goldman Sachs & Co.: Okay. Great. Thanks, guys.

Our next question comes from Julian Mitchell with Credit Suisse. Please go ahead. Julian Mitchell - Credit Suisse Securities (USA) LLC: Hi. Good morning. I guess, one area that hasn't really been touched upon today is the Asia-Pac region. You had some timing issues on sales in Q4. You've got very bullish guidance, I guess, on the organic sales line for 2017. So, just trying to understand what your visibility is like on that double-digit growth assumption, how much is in, for example, backlog or large projects that you might be thinking about. And also, when you think about that region more broadly, what the overall ambitions are in terms of, for example, extra capital deployment, given you had been kind of shrinking in that region in the last three or four years. David D. Petratis - Allegion Plc: So, it is true we've repositioned the portfolio, I think, nicely. It's allowed us to focus on our core business. We are applying the segmented market approaches that we are in the U.S. to drive growth, and it's yielding results. We will continue to be opportunistic in terms of M&A in the region, but I'd also say patient with a flavor towards electronics. Our Milre acquisition in South Korea, growing quite nicely and we see the Asia-Pacific region, in terms of the electronic convergence, moving faster. We want to be a part of that. But overall, feel good about our execution, confident in our growth ability, more based on the segments that we're driving. We had some project wins in the fourth quarter. That's a little bit like a license to hunt. We've got to go deliver those, which we're confident we can, and continue positive on the region. Julian Mitchell - Credit Suisse Securities (USA) LLC: And just on the – and how about the sort of margin potential there longer term? Do you think you can get towards a European-type margin eventually if that's sort of mid-teens similar aspiration on the margin level? David D. Petratis - Allegion Plc: That's a good aspiration. We, again, think – the improvement year-over-year and we will go into more detail at Investor Day on how we see the next three to five years in the region. Patrick S. Shannon - Allegion Plc: Yeah. A little bit more difficult, just given the scale and size of the region. But steady improvement, kind of, like where we are now with Europe. We'd expect to leverage on top line growth and continue to drive price to exceed inflation and just steady improvement. Julian Mitchell - Credit Suisse Securities (USA) LLC: Perfect. Thank you.

The next question comes from Jeremie Capron from CLSA. Please go ahead. Jeremie Capron - CLSA Americas LLC: Thanks. Good morning. I wanted to, sort of, go back on EMEIA margins. Clearly, some nice improvements in profitability here in the past two years. At 9%, I think you're just 1 point short of the 10% target you presented two years ago. So, when you look back at the progress you made there, what do you think it is that held you back a bit? I know, last year, you had some issues with some of the European acquisitions. So, I wonder if you could comment also how you feel about the performance of these acquisitions in the first year also. David D. Petratis - Allegion Plc: I'd say the first headwind versus the 10% is more the challenge of redeploying our manufacturing capability. We took out over 150 jobs in Italy. We have gone to some partners in some new production sites. There's always challenges with this. And as we've said in past calls, that didn't go off exactly as we would have anticipated, but we're well positioned for 2017. In terms of – there was a pretty big transformation in the portfolio. We cut parts out. We have added, with SimonsVoss, AXA. In 2016, we established, what we call, global portable security. They're working to forward the strategies on that, which we think will fuel growth and profitability. And so, overall, we're very pleased with the improvement over the last 36 months. We have not been at this level of profitability since 2008. The other opportunity is continuing to build our specifying capability. This comes with people. It can also come with acquisitions. SimonsVoss helps us in the spec writing capability, but you have to coordinate that across the region. This takes more time, but we think our prospects going forward are positive. Jeremie Capron - CLSA Americas LLC: Okay. Thanks. And the environmental remediation work that you guys are undertaking right now, you said that's coming ahead of potential regulatory requirement. Obviously, a lot of uncertainty around the regulatory environment going forward. So, I wonder if you foresee any future similar work at other facilities around your global manufacturing footprint. David D. Petratis - Allegion Plc: I don't see any further changing needs in terms of any environmental exposures we have globally. This is another example. Over the last 36 months, we did not inherit from Ingersoll Rand an environmental department. We had to establish that, establish a review of the sites that we operate in the world. And the change or investment that we made was more driven by proven technologies. We felt that we could make that investment and remediate those sites at a faster pace versus what we were conducting. We had to work with state and local officials. And take it as our commitment to do the right thing in the places that we operate. Those will be cleaner sites. And I think we have a very good handle on what we own today. Jeremie Capron - CLSA Americas LLC: All right. Thank you.

Thank you. Our next question comes from Saliq Khan with Imperial Capital. Saliq Jamil Khan - Imperial Capital LLC: Good morning, guys. David D. Petratis - Allegion Plc: Hey, Saliq. Saliq Jamil Khan - Imperial Capital LLC: So, one question on my end, Dave. As you take a look at the facilities that you have globally, there's roughly 30 production facilities that you guys have. I just want to get better clarity on what it is that you're doing now to bring about automation, improve the production process and ultimately reduce the cost profile and bring about speed to market. David D. Petratis - Allegion Plc: So, number one, I would look at our return on invested capital and profitability margins. We're significantly ahead of the competition. Our engineered order nature and the varieties of products that we make don't necessarily leverage huge automation investments. In things like polishing, our finishing facilities, you will see a high level. But if you go down here to India ops or into the facilities at SimonsVoss in East Germany, I think we use a balance of build-to-order human hands and automation to deliver some of the best return on capital. Oftentimes, in manufacturing, it's how we eliminate non-value added work and help our people to improve quality customer satisfaction that yields our margins versus straight automation investment. It's not what I believe get us to the promised ground in terms of effective manufacturing. Saliq Jamil Khan - Imperial Capital LLC: Great. Thank you.

The next question comes from Steven Winoker with Bernstein. Please go ahead. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Thanks, guys, and thanks for fitting me in. Firstly, I mean, speaking of deals you didn't do, does dormakaba's purchase of Stanley change the competitive – or let me put it this way, how does it change the competitive dynamics in the market? Did you see it as rates of investment increase? To what extent do you feel like there is a broader strategic implication here? David D. Petratis - Allegion Plc: So, we certainly followed the Stanley movement almost from the day I arrived at the door. I think we understood our opportunity there clearly. I was not surprised at all with where that asset held up. I think you got to step back and look at it. The performance of the Stanley Mechanical Access had not grown over time, number one. Number two, kaba dorma (01:00:10) also made another move and that was called Mesker Door. And I think they are working to try and position to look more like ourselves in ASA in the North American market. I can only say bringing together companies is never easy and being able to put together the capability of distribution, specification resources are around that. Those new acquisitions and portfolio I think open up opportunities for us to grow. Change is never easy. That's my point there. And that's why we continue to segment the market and invest in the U.S. to drive our organic growth. So, I was not surprised by how those things came out and have no remorse. Steven E. Winoker - Sanford C. Bernstein & Co. LLC: Okay. Great. That's helpful. And just – you said before that electromechanical, I guess, growth was around low-double digits range this quarter. I'd just like you to, if you could, dig a little there because I know we've seen over time, as it's grown, it's gone from 20s and 30%-type growth in 2015 to now what was low-teens, mid-teens and now it seems like low-double digits, maybe lower than that in the fourth quarter. What do you see as kind of the forward growth rate here given that we still appear to be at low levels of saturation in North America? What's the opportunity? And are you seeing some kind of slow down, or is it just a function of scale? David D. Petratis - Allegion Plc: No slowdown. I think we look at this market and think 5% to 8% annual market growth. We're doing better than that. And I think the challenge is for the industry and for Allegion to accelerate the adoption. These are clearly devices that can improve home, commercial institutional security. As we connect these with mobile devices; people want to be confident in them. And in my mind, this market will continue to progress, and Allegion should be – outgrow the market in that convergence.

Thank you. That was the last question, and this concludes our question-and-answer session. I would now like to turn the conference back over to Mike Wagnes for any closing remarks. Mike Wagnes - Allegion Plc: We'd like to thank everyone for participating in today's call. And please, call me with any further questions. Have a great day.

This concludes today's conference. Thank you for joining in on the presentation. You may now disconnect.