Good day, ladies and gentlemen and thank you for standing by. Welcome to the Allegion First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer-session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I’d now like to introduce your host for today’s presentation Mr. Tom Martineau, Director, of Investor Relations. Sir, please begin.

Thank you, Howard. Good morning, welcome and thank for joining us for the first quarter 2015 Allegion earnings call. With me today is Dave Petratis, Chairman, President and Chief Executive Officer; and Patrick Shannon, Senior Vice President and Chief Financial Officer of Allegion. Our earnings release which was issued earlier this morning and the presentation which we will refer to you in today’s call are available on our Web site at www.allegion.com. This call will be recorded and archived on our Web site. 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. Our release and today’s commentary includes non-GAAP financial measures which exclude restructuring and spin expenses from prior year results. Excluded from the current quarter results is a remeasurement of monetary assets and inventory charge reflecting a change from the Venezuela SICAD II exchange rate to using the Venezuelan government’s market-based SIMADI exchange rate. 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 first quarter 2015 results, which will be followed by a Q&A session. For the Q&A we’d like to ask each caller to limit themselves to one question and then reenter the queue. We will do our best to get to everyone given the time allotted. Please go to Slide 3, and I'll turn the call over to Dave.

Thanks, Tom. Good morning and thank you for joining us today. Allegion posted another solid quarter of organic revenue and EPS growth. We continue to make progress on our capital allocation plan and are beginning to realize the early benefits of our new product and channel initiative. Revenues of $458 million grew 5.9% on an organic basis. Total revenue declined 1.7% reflecting the negative impact of foreign currency. All regions posted positive organic growth. Of note, the Americas segment grew 7.7% organically driven by strength in the non-residential business. Adjusted operating income of $75.2 million, decreased 2.5% versus last year and as we mentioned in the previous earnings call, incremental investments were a headwind to margins in the first quarter which declined by 10 basis points. The investment impact was approximately 170 basis points. Adjusted earnings per share of $0.51 increased 15.9% versus the prior year driven primarily from improved operating performance and a lower effective tax rate offset by incremental investments in foreign exchange impact. This is our third straight quarter of double-digit earnings per share growth. In the quarter, we repurchased approximately 500,000 Allegion shares, which more than offset dilution related to incentive plans. We are affirming our full-year 2015 adjusted EPS guidance of $2.65 to $2.75 or $2.61 to $2.71 on a reported basis which reflects the first quarter Venezuelan devaluation charge that Tom mentioned previously. Please go to Slide 4. As you know opportunistic acquisitions is one of Allegion’s five strategic pillars. Aligned with this we’ve recently announced two acquisitions and I’d like to welcome Zero International and Brio to the Allegion team. We remain focused on acquiring great businesses and these strategic acquisitions will expand our product portfolio and provide opportunity to expand globally. Zero International is a recognized leader in door and window products for commercial applications. These product lines include premium ceiling systems for sound control, fire and smoke protection, and threshold applications. The high-quality product portfolio from Zero expands our customer offerings which can be leveraged through our existing specification capability in channels. The acquisition of Brio expected to close in the second quarter at sliding and holding door hardware to Allegion’s portfolio that provides opportunity to expand globally. Brio’s suite of products include door hardware systems and accessories for interior sliding and folding doors, weather fold exterior folding doors, straight-sliding, top-hung and bottom-roller doors and retractable insect screens. We’ve made significant progress in building the relationships and capability necessary to execute on our acquisition strategy. We continue to work the pipeline and are confident we are building this as a core competency. Patrick will now walk you through the financial results and I will be back to discuss our full-year 2015 guidance.

Thanks, Dave, and good morning, everyone. Thank you for joining the call this morning. Please go to Slide Number 5. This slide depicts the components of our revenue growth in the first quarter as well as our growth by regional segments. As indicated, we delivered 5.9% organic growth in the first quarter, supported by incremental volume reflecting improving market fundamentals, modest price improvements, and early traction on our key organic investments in products and channels. We saw good growth across most product segments and continue to experience favorable traction on our electronic products portfolio. All segments reported positive organic revenue growth for the quarter. Currency rates continue to be a headwind to revenue growth as reflected by negative 7.4% decline. All reporting segments were impacted. Most notably, the weaker euro in EMEA and softer Canadian dollar and Venezuelan Bolívar devaluation impact in Americas results. In Asia-Pacific, the impact of weaker Australian, New Zealand dollars were offset by Prior year acquisition. As a result of unfavorable exchange rates, reported revenue decreased 1.7% compared to the prior year period. Please go to Slide Number 6. Reported net revenues for the quarter were $458.7 million. This reflects a decrease of 1.7% versus the prior year, up 5.9% on an organic basis. We realized 2.6% growth in the Americas, up 7.7% on an organic basis. U.S non-residential grew high single digits and residential segments X Venezuela increased low single digits. EMEA revenues were down 17.6% driven by currency headwind. Asia-Pacific revenues were up 3.2% with good traction on residential electronic locks. Adjusted operating income was $75.2 million, decreased 2.5% compared to the prior year. The decline was driven by increased investment spending in unfavorable foreign currency exchange rate movements. Adjusted operating margin of 16.4% reflects a decrease of 10 basis points versus the prior…

Thanks, Patrick. Please go to Slide 13. Looking at full-year revenue guidance, we are increasing our organic growth expectations, but decreasing our overall revenue growth based on increased exchange rate headwinds. The incremental organic growth is from the Americas region and reflects continued optimism in 2015 markets and ongoing traction of our growth initiatives. We continue to monitor institutional market recovery, the given health of state budget surpluses and potential impacts of energy sector slowdown on construction markets; it's too early to call more than a moderate recovery for the year. Overall, inorganic revenue headwind in the Americas is unchanged, has a slight increase from the Zero acquisition offset to an increase in Canadian currency headwind. The most notable change in the EMEA region -- is the EMEA region, although organic projections remain unchanged, currency movements have created another six points of headwind. Inclusive of the revenue update, we are affirming our full-year adjusted EPS from continuing operations of $2.65 to $2.75 and reported EPS of $2.61 to $2.71, which incorporates the first quarter Venezuela devaluation impact of $0.04 per share. We continue to project full-year margin growth in all regions, with incremental operating leverage being used to support growth investments. Please go to Slide 14. Let me finish by reiterating that I was pleased with the first quarter results. We delivered organic revenue growth of 5.9%, held adjusted margins relatively flat while absorbing investments in currency pressure and grew EPS by nearly 16%. We are executing on our margin improvement efforts in Europe and continue to deliver a flexible and balanced capital allocation plan with both share repurchases and acquisitions announced in the quarter. And finally, we remain on track to deliver our original EPS guidance. Now Patrick and I’ll be happy to take your questions.

Thank you. [Operator Instructions] Our first question or comment comes from the line of Robert Berry from Susquehanna. Your line is open.

Hey guys, good morning.

Good morning, Rob.

Good morning.

Nice quarter. Congrats.

Thank you.

David I wanted to just follow-up on your comments on the revised outlook for the Americas segment. I can certainly understand wanting to have some caution, but given the quarter you just put up I think to get to the midpoint of your revised organic growth range implies a pretty material slowdown in the volume for the next few quarters. So are you seeing evidence of some of those headwinds that you flagged as reasons for caution or just how are you thinking about the evolution of the core growth for the rest of the year in Americas? Thanks.

So we are net positive as reflected in my comments on core growth. We see modest recovery in the institutional and commercial. We are cautioned by the weak GDP growth. We are mindful that recovery in our mind is capped by the available investment dollars, especially in institutional and capped by the amount of labor. So as we talked and evaluated on the year, we like to see another quarter and make any adjustments or save with our current guidance at that point.

Hey Robert, I'll just also add in the first quarter the comparisons were a little bit easier. You may recall last year of Q1 with the weather impact was a little bit softer. And so the 7.7% growth in Americas reflects a stronger year-over-year comparison, but also keep in mind seriously going forward we have pretty good growth last year Q3, Q4 around 5% in Americas. So the comparisons get a little bit more difficult. But as Dave indicated, a little caution here like the start to the year getting really good traction on our investments, particularly, in the channel lead business, discretionary market as well as some of the NPD initiatives. So feel good about that.

Okay. Fair enough. I will get back in the queue. Thanks.

Okay.

Thank you. Our next question or comment comes from the line of Jeff Kessler from -- I'm sorry, next question or comment comes from the line of Timothy Wojs from RW. Baird. Your line is open.

Hi, guys. Good morning.

Hi, Tim.

Good morning, Tim.

I guess, just -- the question for me is just on Americas on pricing. I think in the 10Q pricing was up a little bit on the top line, but it didn’t cover inflation. So, I’m just curious, is that due to timing just because wages went up a little bit more in the first? How should we think of the pricing and inflation dynamic this year? And then maybe just a little color on how you guys think about raw material inflation as we progress?

Yes, so on the pricing front as we had indicated last call, we’re still anticipating little under 1% on pricing. Now you didn’t see that full benefit in the quarter accelerate a little bit in the back half of the year, but getting pretty good traction on the non-residential products. It’s the residential side that we commented was a little softer than anticipated and some of that is just moving out older product to make room for the high demand of our new electronic products, so a little pressure from that. Relative to your inflation question you’re exactly right, I mean in the commodity area, steel, brass, copper, zinc, all the things inputs are going to our products, seen a decline year-over-year. We’re not yet seeing the full impact of that, because as part of our policy we lock into suppler hedge contracts and so, we look out 12 months and we kind of hedge some of that. So, you’d see some more that in the back half of the year. But potentially it’s some upside if the prices stay where they are today.

Great. Thanks for taking the question.

Yes.

Thank you. Our next question or comment comes from the line of Jeff Kessler from Imperial Capital. Your line is open.

Thank you. See I made it in this time. Thank you. Can you get a little more granular on the investments that you’re making particularly in the Americas with regard to both building up the channel, and your channel investments as to which way that is going as well as a traction or any new product introductions that you’re coming out within the -- in the spear of the NPD technology area, and if that is going to be addition additive to revenues or will there be some cannibalization this year?

Yes, so you may recall just from a -- just to recalibrate everyone we did reflect our Analyst Day incremental investments year-over-year full year basis, $0.15 to $0.20 and you saw $0.06 headwind in Q1 relative to the prior year period. The majority of that is Americas related probably two third, the remaining one third would be tied to our corporate, what we call infrastructure investments tied back to our M&A building capability, taxes, systems, those type of things. As it relates specific to Americas, I’d say two thirds probably NPD related on both residential and non-residential products. One third being channel, related to this discretionary market which we think is a huge upside for us in the future. If you relate that relative to the benefits we’re seeing, I would say in the organic revenue growth for Americas which was close to 8% for the quarter, you’re probably getting one to two points tied back to those specific initiatives. So, I think pretty good traction really on that should hopefully accelerate. We like what we’re seeing in the market place. So, on a full year basis I would see that maybe improving a little bit, but getting good I’d say return from those investments.

I would add from a new product standpoint we will continue to rollout products that complement our ENGAGE technology and that communication interface, connected interface complements our strong mechanical base and then announced rollouts August, September in the residential space along connectivity.

Okay. Thank you very much.

Thank you. Our next question or comment comes from the line of Jeremie Capron from CLSA. Your line is open.

Hi, this is Grace Lee sitting in for Jeremie Capron. We have two questions. One is, it’s nice to see some acquisitions in Asia. Can you give us an update on acquisition pipeline there, and also we’re wondering how this ongoing acquisition would impact the margin improvement initiatives in the region? The second question is about, 1% to 2% organic growth you just mentioned which is tied to the channel initiative. I’m just wondering whether that’s to do with the initiative of growing the U.S. repair and retrofit initiative.

So, after quarterly review we took time to access our success on the acquisition pipeline. I’d remind you that when we created the company we’re dormant, more active globally and pleased with the progress and investments that we’re driving. The Brio acquisition is from the Asia Pacific region we see great opportunities to leverage that hardware capability globally in warm weather climates that use accordion style doors. We see the pipeline opportunities in Asia continue to build as we develop the relationships in that are important to be successful in building the successful acquisition plan. So, very pleased with that progress. Second.

So, relative to your question on the margin, so the acquisition of Brio would lift the margin in that region. It hasn’t closed yet. We do anticipate it’s a close in Q2. So you’d start seeing some of that improvement hopefully in the back half of the year. I mean there is integration cost and step up of inventory. It has a little pressure this year, so not a significant impact. But clearly in 2016, it operates at a much higher margin, so it would weigh favorably to the overall Asia Pacific results. And last one, the one to two points in the channel and new product, channel initiatives included in that.

So two observations on channel development. Our highest priority is in the Americas, specifically the U.S. We see opportunities to be -- to grow organically in the light commercial R&R space. We saw traction in that in Q1, and it benefited us. But as we sharpen our channel strategies we’re leveraging that learning into the Asia Pacific region in Europe. We think there is good opportunity to bring good channel management techniques to the company that will unleash growth opportunities in the regions we operate.

Thank you.

Thank you. Our next question or comment comes from the line of Josh Pokrzywinski from Buckingham Research. Your line is open.

Hi, good morning guys.

Hi, Josh.

I guess I have a question on Americas margins, but maybe to help frame it up.

Josh, get closer to the phone.

Sorry. Can you hear me now?

Louder, clearly, but go ahead.

All right. Will try that.

Perfect.

Just before we -- I had a question on Americas margins, but I guess that maybe to help frame, you guys gave the mix between more the retrofit versus institutional on the non-resi side in the quarter?

So, not a big impact on the mix associated with that incremental volume for the quarter.

Okay. So just based on some of the investment spend, it looks like you guys converted the revenue growth, call it about 45% in 1Q, 45% incrementals if you back out in investment. It doesn’t sound like you got a lot of price in the quarter clearly seasonally not a lot of volume through the business. Is there something else that’s helping drive the incrementals or should we think of this as where we’re functionally at based on where the mix of the business is today?

So, I want to make sure I understand your question. You’re questioning the incremental leverage at 45% whether that’s sustainable going forward?

Right, because it looks like mix could actually get better from here. It doesn’t look like there was anything too crazy and then, price was pretty anemic. So presumably there is some room for expansion there as well.

Right. So, as reflected, the 45% see through pretty good leverage there. I would expect that to continue. As we indicated should see more favorable pricing going forward. We do have the incremental investments that will continue to be a headwind. Comparisons get easier in the back half of the year. We are still forecasting Americas margins improvement for the full year. So, as the investment headwind kind of comes down, then you see margin improvement. The other thing, if you’re looking at it just from a margin perspective, don’t forget Venezuela is weighing, I wouldn’t say heavily but it weighing on the mix relative to the margin and even with that headwind we’re seeing margin improvements. So if you look at ex-Venezuela there is pretty good margin improvement maybe 100 basis points or so.

Terrific. All right. Thanks, I’ll get back in queue.

Yes.

Thank you. Our next question or comment comes from the line of Steven Winoker from Bernstein. Your line is open.

This is Peter Lennox-King on for Steve. Could you talk a little bit about how momentum progressed through Q1 on the sales through in these regions and then I know you don’t give quarterly guidance, but maybe if you could just give an indication on how that momentum progressed into and through April what you’re seeing so far?

So I’d classify momentum in the resi space. We saw good traction in growth and what we call work probuild [ph] which supports new construction. We saw some softness in the repair and replacement on the resi side and weather impacts that. I think the South West United States in the resi market continues to be high, predictably from the weather standpoint in North East which is a good market for us with frozen. On the commercial institutional side, I would describe a generally good lift in all markets. As you think about the institutional builds, a lot of that traction gets moving in Q1 for summer activities especially in schools, universities that type of thing, and then you’ve got your normal project load. We see a step up there in resi reflected in our optimism. Hospitals under pressure, again a step up in the institutional and we’re seeing traction in our development of the channel expansion that we want to influence in the commercial R&R. And that’s probably stronger in some targeted markets. And as we roll out that full program, expect similar results.

Great. Thank you.

Thank you. Our next question or comment comes from the line of Charles Clarke from Credit Suisse. Your line is open.

Hi, guys.

Charlie.

I just had a quick question probably can't make specific comments on it, but just a headline this morning that the merger between Kaba and Dorma or at least the announcement. Just didn’t know if how that maybe changes the industry or how that changes your M&A outlook or, just anything that you could kind of talk about with respect to that?

So we certainly caught that this morning, analyzing it. We’ve got great respect for Kaba and Dorma, we’ve known then over the years. It’s I think a strong reflection of a consolidating industry. It remains heavily fragmented as we’ve talked about in our analyst presentations. And the strength of that merger is really outside of the United States and it’s a clear indicator that as we think about capital deployment, if there is good assets to bring into our portfolio we’re interested and we continue to work on it, so more to come on that as we evaluate the news in the morning.

And I would just add Charlie, it doesn’t change our strategy. We’ll continue to execute and you saw good traction in Q1. We have a lot of organic growth opportunities particularly in Americas. We’re continuing to get good improvement in European margins, all that doesn’t change and we’re going to continue to drive shareholder value through our organic growth initiatives, things we can control and as Dave said, continue to be aggressive on the capital allocation plan.

Okay, thanks. Just a quick one just on growth, for the quarter, I mean 7% Americas is a big number, so its low single digits residential, high single digits non-residential. Has institutional -- is institutional growing institutional specifically, was that up in the quarter?

Positive indicators, I would classify it as low to mid single digits. We’re going to do well in any kind of recovery in that space. But again, capped by labor the ability to install it and I think our bigger opportunities is pursuing our channel base strategies that gets us a bigger share of the existing market. As I said, in any type of recovery we’ll do extremely well in the Americas.

Thanks a lot, guys.

Yes.

Thank you. Our next question or comment is a follow-up from Mr. Robert Berry from Susquehanna. You line is open.

Thanks for taking the follow-up. Actually we did want to follow-up on the pricing comment earlier. I think some of the benefit you saw in commercial was being offset by the resi as you mentioned. Is that temporary, it sounded like it might be temporary if you’re clearing out inventory and how much did that weigh on kind of the net pricing in the quarter?

Yes, so I would say it’s temporary through perhaps this quarter, might see some softness as well as those programs continue. How much did it weigh, maybe 30 basis points or so.

From a business perspective, driving your style and design which means some inventory switch out and we’ve got new products entering the market from resi electronic standpoint which we think is good opportunity for us as that market converges.

Right. So, I guess that yes, so that that 30 BIP should elevate as a headwind?

Correct.

And let me just add something here too, maybe as a point of clarification. When we look at pricing impact its similar products year-over-year, when we’re up selling so with our replacement of the new electronic products, as we talked about before it comes at a higher price point which adds revenue dollars, that’s not captured in the year-over-year price improvement. So that would be captured in volume. And so the replacement does have a positive impact in terms of higher price point and as well as because the margins are similar higher OI dollars.

Okay, perfect. And if I could also just quickly follow-up on the remaining investment spending, $0.15 to $0.20, $0.06 in the quarter, the remaining call it $0.09 to $0.14. Is that going to be evenly spread over the remaining three quarters or is that weighted in some way to second quarter?

Its’ more heavily weighed Q2, Q3; Q4 falls off significantly. So there is minimal impact in Q4.

Great. Thanks, guys.

Thank you.

Thank you. Our next question or comment is a follow-up from Mr. Jeff Kessler from Imperial Capital. Your line is open.

Thank you for taking the follow-up. You’ve talked about taking your Venezuelan exchange rates to the official SIMADI rate. You obviously are aware that the black market rate or the street rate is, remains quite different than what anything the government has been able to say for the last -- actually this is consistent for the last two years. But this time we know the vision is that disparity is getting pretty big. What do you do to monitor that and how are you -- how can you manage against that, the fact that we have got something like, I’d say its more like 170 to 1 at this point as opposed to 50 or 60 to 1?

I believe our current thinking of the business we’re up in almost 200 to 1, 192. I think second if you look at what's left on the balance sheet, there’s not a lot of risk there, and we’re reflecting on our long-term position in Venezuela in considering our option.

Okay.

Jeff, even to add a little more clarity, I think any political solution in Venezuela is going to take years. And the amount of time we spend at that just trying to explain it is a distraction with the overall impact it has on the business.

Yes, I mean I’m just trying to -- I’m just trying to dispose of this as something that you have to think about every quarter, it may -- that becomes less and less meaningful but you still -- its still like there’s bug in the back of your head.

Yes.

All right. Thank you very much.

Yes.

Thank you. Our next question or comment comes from the line of Jeff Sprague from Vertical Research. Your line is open.

Hi, Jeff.

Stepping in for, Jeff. Hey this is, Brett. Hey, I just wanted to come back on the investment spending. It sounds like you guys are getting a pretty quick payback there on the new products in some of the refresh. Should we think of 2015 as really kind of a one time refresh across the portfolio? And how should that play out as we think about the model into 2016? I mean, has it become kind of a permanent fixture of the cost space or did some of that go away?

Yes, so as we talked about during the Analyst Day, you need to think about the incremental investments for both 2014, 2015 being a step up in the cost space, i.e. things like NPD, a lot of engineering spend associated with that will stay in the cost. However looking forward into 2016 beyond those level of incremental investments comes down. I think there would still be some as we continue to find growth alternatives organically. And then you may recall with the payback and the returns on those investments EBITDA margin growth starts to out pay significantly the incremental investment spend. And so, look at it as an increase in the cost space, but the level of year-over-year incremental spend coming down beginning in 2016.

Okay, great. Yes, that’s helpful. That’s all I had.

Yes. End of Q&A

Thank you. I’m showing no additional questions in the queue at this time. I’ll turn it back over to management for closing remarks.

Hi, again we’d like to thank everyone for participating in today's call. Feel free to contact me for any further questions. Have a safe day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.