Good afternoon. My name is Courtney, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands’ 2014 Fourth Quarter and Year-End Earnings Results. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Brian Lantz, Vice President, Investor Relations and Corporate Communications, you may begin your conference.

Good afternoon, everyone, and welcome to the Fortune Brands Home and Security quarterly investor conference call and webcast. We are pleased to be here today to provide an update on our progress during the fourth quarter of 2014 and provide our 2015 guidance. 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 can be found in the Investor section of our fbhs.com website. I want to remind everyone that the forward-looking statements we make on the call today either 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 profit, 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. Also tool storage results have now been reflected as a discontinued operation in all periods and are therefore excluded from the results discussed on today's call. Quarterly results for 2013 and 2014 on a continuing operations basis are now posted on our website. 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 ample time to address any questions that you may have. I will now turn the call over to Chris.

Thank you, Brian, and thanks to everyone for joining us today. Our teams delivered solid growth in the fourth quarter in the face of tough comps. For the full year, we posted meaningful growth in a market that ran below our original planning assumptions. We continue to gain share, our mix continues to improve, and our core businesses are performing well. In 2014, we also took actions to refine our portfolio and invested in capacity and capabilities to prepare for additional growth, as we expect our markets to continue to improve in 2015 and beyond. Let me first take you through some of the fourth quarter highlights. Then, I will briefly discuss some of the steps we are taking to reposition our portfolio for additional growth. And last, I will discuss our 2015 outlook for top line growth. For the quarter, sales were up 8% and EPS was $0.44, up 38% from a year ago. This performance is particularly strong given the challenging comparison to the prior year quarter when sales increased 20% for our home segments. Let me give you some highlights by segment. Sales for our cabinets business were even with the prior year quarter. Excluding the exit of the builder direct business in the west, the builder and dealer channels grew double-digits, while Canada increased 9% due to the exchange rate movements. We again gained share in the dealer channel where we continued to see growth across all price points and a better mix as new products and finishes are selling well. Our share gains are coming from deeper relationships with existing customers as well as new dealerships. In 2014, we had 300 new dealer relationships, all of which have now begun to order. Our new product launches, including the new Omega frameless custom line for dealers,…

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. Also, tool storage results are now reflected as a discontinued operation and are therefore excluded from continuing operations for all periods. As a result, our previous full-year guidance range of $1.84 to $1.86 should be adjusted to a range of $1.73 to $1.75 for a better comparison of performance. As Brian mentioned, quarterly results for 2013 and 2014 on a continuing operations basis are now posted on our website. Let me start with our fourth quarter results. Sales were $1.04 billion, up 8% from a year ago. Consolidated operating income for the quarter was $104 million, up 25% or $21 million compared to the same quarter last year. EPS were $0.44 for the quarter versus $0.32 the same quarter last year, an increase of 38%. Now, let me provide more color on segment results. Our cabinet sales were $456 million, flat to the prior year quarter, which had a 34% increase. Excluding the impact of the planned exit of the builder west business, that was $13 million last year. Builder channel sales increased 10%. Dealer channel sales also increased 10% in the quarter as we continue to gain share, while Canadian sales declined 9% compared to last year due to the exchange rate moments. While operating income for the cabinet segment increased 6% over the prior year quarter with an improved operating margin of 7.8%, it’s was depressed approximately $12 million by inefficiencies related to implementing capacity expansion actions that were then magnified by demand surges in certain product lines such as Diamond [indiscernible] and Aristokraft. While these actions impacted profit in the second half of 2014 and may linger into the first…

Thanks, Lee. That concludes our prepared remarks for the fourth quarter of 2014 and the full year 2015 guidance. We will now begin taking your questions and we'll continue as time allows. Since there maybe a number of you that 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 will now turn the call back over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Your first question comes from the line of Dennis McGill for Zelman and Associates. Your line is open.

Hello, guys. Thank you.

Hi, Dennis.

My first question just has to do with as we think about the guidance in 2015 and particularly on the cost side. If I’m running the right, it seems like the incremental implied is something around 20% on a core basis. And you just did something much stronger than that in the fourth quarter even with some of the one-time hits you’re not noted in cabinets and some system [ph] plumbing, so can you maybe bridge what's impacting that and how we should think about that as we move through the year?

Yeah, when you look at 2015, if you look at it on an operating segment basis, each of the operating companies in the home space are around 24%, 25% incremental margins. And even Master Lock piece in the security side is around 25%. SentrySafe is the one thing, because we’re still integrating, we still have some acquisition items going through there is the thing that takes us down. So if you look at Fortune and then the other pieces where we are adding some corporate cost that we had taken out in 2014. So if you look at operating leverage on incremental sales, a pure calculation of FBHS is about 19%. If you add back the SentrySafe impact, you get to 22%. And if you take the $8 million to $9 million that we are putting back in corporate that we took out, you get to about 25%. So we feel good about the leverage given that we are adding some cost into the business and the operating companies in 2015, but we are still getting around 25% incremental margin. And on the operating margin line, we move up about at the midpoint of the guidance around 11.5% this year, compared to 10.7% in 2014. So we think - we are still investing, we’ve got some upfront cost going in. We feel pretty good about the overall leverage. And then as you move into 2016 and 2017, we’ve got those costs in and we will leverage them even more in 2016, 2017, 2018.

So along those lines, the leverage didn’t go above what you would consider to be normal in 2016 because you are pulling that forward into 2015?

I think, it could, yes, and in 2017 as well because when we invest in this capacity then you get a couple of things happening, we won’t invest ahead, we won’t have to invest as much in the future and any of the inefficiencies or destructive cost that we put in now tend to go away.

Okay. And then when you spoke about the guidance through the year, it was an accelerating phase, but 1Q last year was pretty rough in general from weather and I think you guys went to a lot of lengths to kind of detail out for your business and I would think even though you’ve got some momentum in new construction just building and you’d have that easy comp and kind of the inefficiencies from the weather to comp against, so how do you kind of juggle those two aspects as you look at the first quarter?

Yeah. We’ll see how it unfolds. I think we saw pretty good momentum exiting the year coming into the first quarter. So far, we’re sitting here, early February, pretty good order patterns, pretty good traffic and yet there is a lag relative to new construction, our products come in later in the cycle. So that’s where we see continuing momentum to build through the year. So second, third, fourth quarter you should see much more momentum than the first quarter. We certainly would have some benefits relative to a tough year last year, but we’re not kind of calling out that it’s going to be that much higher. So I just expect that we’re going build it over the year. I think more broadly what we’re looking at is we brought in capacity, we invested in 2014 to position the business really for the next three year and that is our focus is on that longer-term horizon. And I think we kind of look at 2015 as the on ramp to another phase of three-year growth and so we’re just saying first quarter, first half relative to second half, it’s going to get stronger as the year unfolds and it’s going to get stronger in 2016 and that’s the way we’ve kind of positioned the business and put the cost structure into the business.

Okay, appreciate it. Thanks, Chris.

Your next question comes from the line of Bob Wetenhall with RBC Capital Market. Your line of open.

Hey, thanks for taking the question. Hey, Chris, you were pretty busy last year selling and buying some stuff. What’s your assessment of the condition of the portfolio and what are you thinking about from the M&A front as you go into 2015?

Yeah. So, we were busy last year, I think we took advantage of the year to really position the business and focus on the growth segments and where we saw really accelerating the business. As the market is going to recover over the next three years, we want to really maximize growth and then lever that as things unfolded. I’d say on the - kind of discontinued side of the business, I don’t look at anything beyond what we’re working on. We just announced that we’re in the process of working on Waterloo, obviously did something with Simonton, so I think the portfolio in the segments that we've got, look at from that standpoint, and we're looking at a number of different acquisition opportunities in the segments. And I’d say, there is things that we’re looking at plumbing, there is things we could look at cabinets, in the door and exterior segment. And then with Master Lock, they’re busy integrating Sentry. It doesn’t mean we are not looking at stuff, but they’re working pretty hard on that. So we’re going to make sure that we get that fully integrated, put to bed, if something comes along we’ll take a look at it. I’d say in general, the pace looks good. I’d say it’s been steady really since kind of second quarter last year, so it continues to move through, we have stuff coming at us and we are looking at everything and I can never predict we will be successful, but I’d like to make sure that we are busy and looking at things and I’d say that we are and I expect we will do some things in 2015.

Cool. That’s very helpful. Lee, if you could kind of breakout your top line guidance. That was some terrific detail you gave. I think you’re talking about revenue growth of 9% to 11%, what’s the split there between organic that you already have and kind of SentrySafe coming in, how should we be thinking about that? Thanks very much and good luck.

We see SentrySafe probably in the $150 million sales range next year, that’s coming off of - less than half of that this year as we acquired it just in the second half of the year. So feel like we’ll get some growth there. I think the rest of it is pretty much organic growth at this point. So if you take the midpoint of 9% to 11%, sales growth or 15% and call it, 10%, we probably get two points of growth out of SentrySafe and then everything else is organic.

Okay. Thanks very much.

Your next question comes from the line of Mike Wood with Macquarie Group. Your line is open.

Hi, thanks. Can you give some more detail on the corporate costs, the $19 million that you said you are adding back and also what happens with the $0.11 that you had called out earlier about the 2014 investments, whether or not they go away and how input costs contribute? Thank you.

Sure. So corporate, really the increase is $8 million to $9 million versus 14%. You only have to look at our corporate cost over the last three year since the spin. So in 2013, total corporate cost was $68 million. In 2014, we spent very little, matter of fact, we took it down to $56 million as we were focused more on kind of this internal restructuring and candidly we didn’t hit our plan in 2014, so we didn’t pay out a target bonus, so that took it down some in 2014 as well. So we went from $68 million in 2013 to $56 million in 2014. We’re talking a back up $8 million to $9 million that gets us back to around $65 million, still lower than the 2013 level, but a few things in there. If you get a couple of million more cost in taking the bonus target back up to 100% of target, there is little more depreciation. So there is not a lot of headcount ads. We don’t have a big corporate group here, so a little over a100 people.

Yeah, little over a 100 people in corporate for a business that employees almost 20,000 people, so we’re pretty lean and I’d say as Lee is describing it, last year we had very little in the way of external support for development activities and those sorts of things. So we’re just assuming that we’ll return to a more normal pace as we were in prior periods.

Thank you. And is the most likely use of the proceeds - if you end up selling the Waterloo business for M&A or would it be invested in share buybacks?

Some combination of both. I think we were committed to being efficient with our cash and so we look at acquisitions as they come available or as we’re able to generate them and we’ve got plenty of flexibility there in terms of balance sheet and then we are looking for opportunities to buyback shares and we will steadily increase the dividends. I’d say it’s not specifically earmarked for anything, I’d say we will be efficient with the proceeds and make sure that we create a lot of value. So that’s kind of what we’ve been doing for the last three and half years and we’re going to keep doing it.

Okay, thanks.

You had also have asked about investments. So from an EPS perspective as we described earlier in the year and last quarter, we’ll spend about $0.12 on investments in 2014 from an EPS perspective. We kind of think in 2015 that will go down to about $0.08, we’ll shift from more investments in cabinets in 2014 more to Moen and some indoors in 2015. But we’ll pick up about $0.04 tailwind there.

Your next question comes from the line of Michael Dahl with Credit Suisse. Your line is open.

Hi, thanks for taking my question. Wanted to follow on the Waterloo side of things, I guess, if you could walk us through your decision process on that, I think you had an 8-K out towards the end of the year, talking about the restructuring to enhance the profitability and now just over a month later discontinuing the operations. So I guess what became so obvious that even with the restructuring, the profitability or the profile was such that, it no longer belonged as part of the portfolio?

Yeah, I’d really say it’s been a long road, kind of a multi-year effort as the key, because customer in that segment has been in decline, big retailer and so we’re making these [indiscernible] and are the leader in that category. I think we’ve done a lot to restructure over the years. As we looked at it in the fall, we said okay, we’re going to take one more bigger step toward restructuring and started consolidating around one domestic facility, looking that product line and making sure that we were generating best returns out of that product line. I think it became apparent that the growth prospects were rough even as the market leaders that it wasn’t going to have the same profiles as what we have in the rest of the business. So that really caused us to say let’s look at other alternatives for the business. We think it’s viable but it’s a business that could belong in the right hands or it doesn’t fit in terms of growth profile with the balance of our businesses. So that’s really a process we work through from our restructuring to a kind of longer-term. Is this going to have a growth profile consistent with the rest of our business? As we look at the rest of our businesses, we’re heading into kind of a multi-year growth phase, a very healthy high-growth share gaining business. We really wanted to focus on that and within specifically that storage security segment bringing SentrySafe in and integrating it into Master Lock. That creates really a forward looking growth segment. And we can focus on home security and the devices that are locks that are safes and moving more toward electronic and investing. We see some pretty good strong growth profile there and increasingly that tool storage business didn’t fit that profit. So that was the thought process that went into it. There is growing concerns, we’re not liquidating the business, and we’ll look at what’s the best thing to do with that to generate the most shareholder value.

Okay, thanks. And shifting gears to the M&A side. I appreciate the color you gave earlier. It seems like there was a change in personnel on the business development side. How should we interpret that as we think about the M&A pipeline, was it just a difference in strategic vision or was it just a lack of opportunities coming to fruition? Any color you could provide there would be helpful.

Yeah, I wouldn’t link it directly to that. I’d just say, overtime we’ll look to kind of put the best folks in place. We’ve pretty high standards. We have a very strong management team here and so we’re just looking to put the right people in place. The person that was in that role did a terrific job of building up capabilities. There is a strong team there that remains and they continue to go through. I was increasingly spending more and more on that and I will continue to spend more time on that and overtime, we’ll put somebody else in that role. So I wouldn’t directly link that to a change if you will in our outlook, it’s more of a broader philosophy around making sure we got the best people in the right roles and they are all aligned on what we’re trying to do going forward. So we’re busy. I mean, on the M&A side we got lot of activity going on and our team spending time there and I’m involved in all those discussions. So I’d say there is no transition in terms of the pace that we’re operating at and we’re going to continue to roll.

Okay. That’s helpful. Thank you.

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

Afternoon, gentlemen.

Hi.

Your growth forecast, if you could perhaps give us a little more flavor for perhaps front half, back half given the comps that you guys were talking about and perhaps by magnitude of business as there is different, obviously, growth rates that we’re seeing on an organic basis within doors, cabinets et cetera.

Sure. I’ll give you kind of a broader look and then Lee will give you in a more deal, but I’d say more broadly, we’re pretty optimistic about the next three years and I’ll just start with that. We think the market is setting up to have a very strong three year growth profile. Given our leadership positions in each of these segments, our share positions in cabinets and in faucets and entry doors, we’re going to benefit from that growth even if it’s relatively modest we see a lot of volume coming at us are share gains. And so I’d say, that’s the setup. 2015 is kind of a ramp up over the next three years and that’s kind of how we thought about it. We lag a quarter or two on the new construction cycle, so as you start to see activity coming in 2015, we’ll lag a little bit and then we’re going to kind of hit the stride coming through. So that was really the way of thinking about pacing it. If we weren’t talking about a single year, we’re talking about three years, we’d say, that’s just kind of consistent trajectory going from 2015 into 2016 and 2017. By business, we’re forecasting pretty strong year for the three segments that you’ve mentioned. I think within cabinets, we’re seeing some very, very good growth in the dealer side of the market, some pretty impressive gains we’ve made. We added over 300 dealerships in 2014 and we went deeper in a lot of our existing relationships. Home centers will continue to just drive new product, strong service. And in the builder side of the market, out of the markets that we exited, we’re seeing good growth there. So MBCI is setting up for a very good 2015 into 2016. Moen continues to perform well both in the wholesale and retail side. And there, as we see new construction, Moen is really going see some strong leverage. And on the doors, you can finally see the strength of the door business. I get a lot of questions on doors when we were selling Simonton why are you keeping doors. Well, now we have two quarters and everybody can see what I’ve been looking out for a long time, which is some great top line growth there and some pretty strong leverage. They’ve got a lot of expansion especially in the South, Southwest, West, where a lot of construction activity is going on. So that’s what’s really driving the results that we see. Lee, I don’t know if you want to give a little more detail?

Yeah, let me just talk about segments a little bit more, starting with total FBHS, 8.4% sales in 2014 full year, 9% to 11% is our guidance for 2015, so nice improvement there. I think when you look at the segments, cabinet business grew 9% sales in 2014, but a good piece of that was the WoodCrafters in the first half - was incremental in the first half of 2014. So you could see MBCI growing at that same rate in 2015, but it’s all organic at this point, so that could be strong. So Moen grew about 3.4% in 2014, I think - and a big piece of that was the wholesalers for the first three quarters were taking down inventory, which impacted sales and the first quarter was a little challenging from a weather perspective. I think you could see that increase significantly to kind of high single-digit range. Doors grew 11.4%. That’s a big number. If they do that again, that would be good, but they had nice potential. So I think you could see our home business growing nicely and primarily organically versus little less organic in 2014. So that’s very positive. I think you can see the Master Lock piece excluding SentrySafe grew 3% in 2014. I think you could see it doing a little bit better than that in 2015 and that’s more of a GDP business and we are getting incremental volume in SentrySafe, because we will have a full year now in 2015 of them, so we feel pretty good about the volume growth here. And a significant portion of it is organic, so that’s good.

Thank you for that clarification.

I think this is when Chris talks about we’ve repositioned our portfolio for higher growth, I think that’s what you see here with the kind of repositioning he’s done.

Thank you.

Your next question comes from the line of Steve East with Evercore. Your line is open.

Hi, guys. This is Truman Patterson on for Stephen East. How are you doing?

Good.

Thanks for the color on the individual segment growth. I guess as you are looking out into 2015 into your sales and EPS outlook, which segment would you say that you have the most confidence in performing going forward either on a revenue growth or an operating margin perspective? Could you go into some of the dynamics? Why is it kind of end-market related? Or management specific action that’s driving it? And then on the flipside, for my follow-up, just which segment - identical question, but which segment do you have the least confidence in?

I’d say, kind of across the board, as Lee highlighted, I feel good about all our segments. I think, there is different dynamics going on inside of each, I think. In our cabinet segment, we continue to just execute kind of incrementally quarter to quarter and gaining share and that momentum keeps rolling and frankly we are setup really well in the market right now and a lot of things are going really well. A lot of it’s the basics. I mean, they are really focused on executing everyday lot of service. I feel good about the consistency of it because it’s across so many fronts and I think that they’ve got great momentum coming into the year. With Moen, it comes back to kind of on the wholesale side, we’ve got strong relationships with big builders and those are multi-year relationships and good share, especially the top 50, top 75, so there it is tied to new construction on the wholesale side and if you see some decent growth and we are looking at kind of maybe low teens in new construction, Moen will perform. I mean it’s - they are locked in there. So we just need some volume to come through that side of the market. And in retail, we’ve got a lot of good placements coming in this year. So I feel good about that and it’s pretty consistent business. ThermaTru, I think that is - that too is consistent around growth because of their expansion and distribution and we’ve brought new product in. We’ve also focused on home center in a new line up there and we saw some of that strength come through especially second half of the year. And with Master Lock, I think it’s a lower growth business, but it is pretty…

All right, thank you.

Your next question comes from the line of Garik Shmois with Longbow Research. Your line is open.

Hi, thank you. You provided incremental margin guidance by segment, thanks for that. But I was just wondering how you’re thinking about that in the context of potentially lower input costs with hardwood leveling off and the decline in energy related and diesel related costs, is that going to be a potential tailwind for you at all?

We’ve seen in terms of commodity inflation this year and 2014, seen it kind of low single digits, pretty consistent through the year. Diesel has started coming off obviously later in the fourth quarter. That should be a tailwind for us into 2015. The other side, we don’t really know about yet is the FX side, because FX cost us $0.05 in 2014, and in 2015, in this guidance, we’ve got about $0.02. So I think we could get - on the diesel could get us $0.03 or $0.04 depending on when it starts coming back and the prices start coming back up. $0.03 or $0.04 there. And then, FX could be a little bit of a risk that could offset a piece of that. So we’re working hard to make sure we get those reduced logistics cost and diesel cost, but you have to really work hard to get those out there and come out by themselves. So we’re doing that and it should be some tailwind.

Okay, thanks. And then, I’m not sure if I missed it, but the $0.08 in incremental investments for 2015, did you break out how that looks by segment?

What we said was $0.12 and EPS was the incremental investment in 2014 and the majority of that was cabinets as we accelerated the investments there. In 2015, it’s going to going down to $0.08 EPS with Moen be the bigger piece and then there is a little bit of a door investment as well, but cabinets will be much lower in 2015, Moen will be higher but net-net, it will be down about $0.04.

Okay, thanks so much.

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

Hi guys, good afternoon.

Hello

I’m just curious in the dealer channel with in the cabinets business, did you see any sort of change or improvement just call it activity traffic, anything just in Q4 maybe and into Q1, any color around that would be helpful?

I think we saw a pretty good traffic in the second half of the year and then it always quiets down a little bit around the holidays and so we’re just now in the start of the season and we’re reporting that there is good traffic in the showrooms. The designers are working. The orders are starting to come in, but it will really pick up here as we enter into mid and late February and March, that’s kind of where we really start to see that traffic. So I’d say it’s good but there is no reason for us not to kind of believe what we had in terms of assumption coming into the year, but it’s early, it’s just kind of we are just starting to get ramped up on it. So I’d say, no surprises.

Okay. And then Lee, on the FX impact, I think you said $0.02 to $0.03 to EPS. I’m just curious, in the 9% to 11% sales growth forecast, what’s baked in there for FX for 2015?

Yeah. It’s not significant on - it’s probably 50 basis points of sales negative or probably even less than 50 basis points of sales negative in 2015. It was about a 70 basis point hit on FX in 2014 sales.

Okay, great. Thank you.

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

Thank you. Just going back to raw materials for a second, a couple of questions on that, how much are you assuming in terms any relief in the guidance and specifically, have you seen any relief in recent weeks on hardwood inputs?

We have seen some. Middle of the year we were seeing kind of mid single-digits inflation in hardwood and molded wood and some particle board. We’ve kind of seen that soften, some now. It’s more in low single-digits now. So it has reduced some, but it’s still probably the highest piece of inflation we have in our business, but it has come down some.

And I guess one final question. This should be the last quarter where the cabinet business that you walked away from the West Coast will affect the numbers. Can you give us a rough idea how much that hurt in dollars in the quarter?

Yeah. In the fourth quarter of 2014, it was $13 million. For the full year, it was $53 million and it’s over now. Thank goodness.

All right, thank you.

Your next question comes from the line of Stephen Kim with Barclays. Your line is open.

Thanks very much. I had a couple. My first question, there were two things I heard regarding sales growth that puzzled me a little bit. I was wondering if you could help me out. The first thing is you mentioned that partly and due to the fact that you had somewhat growth this year, you accelerated your plans for investment in cabinets for example and I was puzzled. Wouldn’t you be more like to accelerate those investments in a situation where your sales growth you were experiencing was higher than you expected rather like than lower? And the second question relates to your guidance on sales growth next year. I think you indicated that are looking 9% to 11%, but that it was going to be more heavily weighted to 2Q, 3Q and 4Q, but in 1Q you had pretty impact from weather, I think that you had expressed that in terms of - I think I had $0.08 or something like that or $40 million of sales headwind last year and so it would just seem like you would be seeing much greater sales growth in 1Q rather than 2Q, 3Q and4Q. So I was curious if you could help me out with two issues?

Sure. I guess on the first question, it’s helpful to look at the business and the way we run the business is over a multi-year period, not quarter-to-quarter and so the businesses that we’re in especially cabinet business is a very complex process to manufacture, service and ship the product. And so as you lookout over a multi-year period and we do this on a quarterly basis, we say, okay, what kind of share gains are we getting, what kind of market are we assuming and you got to make investments well ahead, 12 months, 18 months ahead of when you expect you’re going to need that demand to be operating at an efficient level. And that’s been true about the cabinet business for as long as I can remember. And I think our competitors have the same phenomenon rolling through. So it’s not a business that you can kind of flip on or flip off. And so as we looked at this year, while growth was slower than we expected, we looked out over the next three years and said we are gaining share in our main channels to an extraordinary extend. With a little bit of kind of market growth on top of those share gains, going by product line, we are going to run out of capacity in 2015 and so we put those investments in place in 2014 to set that up. The comment I made was referring to the fact that if we had been having to generate and manufacture as much product as we thought we were going to have to in 2014, it would have been harder to accelerate that. So when we looked at our capacity expansion plans, starting the year - at the start of 2014, it was a multi-year effort…

We did have a weather impact in the first quarter of 2014, no question. I think when we started putting our plan together and we looked at the market growth and we look at how the market increases hit us, there is always a lag and it’s a quarter or so. So if you think about an example of in the middle of 2013 when the mortgage rate started going up, new construction started slowing down. We still had a very strong second half of 2013. So there is a lag impact and so what we’re seeing here is we think the market is improving in 2015. We feel very comfortable about the long-term market, we feel comfortable that it will get better in 2015. It’s the pacing, at this point, we’re not certain about so when we did the market growth and then our growth related and our share gains related to that, it just felt like this is going to be slower in the first quarter until the momentum starts building.

We have time for one final question and that comes from the line of Michael Rehaut with JPMorgan. You line is open.

Hi, it’s actually Will Loh on for Mike. I was wondering if you can talk about the cadence of the investment spend which you say will be about $0.08 and primarily in - and plumbing will be primarily - I don’t know if they will be primarily first half weighted or back half weighted and I guess just longer term as well post the investment spend, you guys did about 19.5% operating margin in plumbing this year. Is that something that you think is sustainable longer-term?

So the investment spending of, we think about $0.08 majority being Moen will start in the first quarter actually. It has to do with capacity in our North Carolina assembly facility and actually the bigger piece is actually in our China facility for example where we need more size because Moen continues to growth and take share. So we think it’s going to kind of start, we want to get it behind us and we want to start as early as possible, so starting in the first quarter. The other question is Moen margin

Yeah.

Yeah, it’s interesting, Moen ended the year at 19.5% operating margins and they continue to take share. They added 170 basis points this year. Moen is a really strong brand, we have structural advantages that are just really strong and we closed multi-year contracts with the big builder. So with Moen, the issue around operating margin is then how high can you get it? 19.5% is pretty strong, the question with Moen is how much volume can you drive through with those same kind of margins and that’s what Chris and the team think about a lot. That’s a big focus of our long-term planning analysis and strategy over the next three year. So we don’t need to drive it higher than 19% or even 20%, we just need to find out how to drive more sales through it at that rate.

Great and then just last question. Can you remind us what percentage China is right now of Moen and also what margin profile is there, so it’s above or below company average - line average?

Yeah, Moen China is about $160 million revenue in 2014. We’re approaching a 1,000 stores there. Its operating margin is lower than Moen, but we are continuing to invest, we’re growing stores, we are doing things. 19.5% operating margin is pretty strong, pretty strong margin for anybody to be measured against. So we’re happy with the China margins. They are improving even though we continue to invest. So we like China, we like the potential there.

Great. Thank you.

Presenters, I will now turn the call back over to you.

Okay, thank you. This is Brian. I’d like to thank everybody for attending our quarterly call today and we look forward to spending more time with you in the future. Thank you.