Good afternoon. My name is Jessie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands' Second Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Mr. Brian Lantz, Senior Vice President of Communications and Corporate Administration. You may begin your conference call. Brian C. Lantz - Fortune Brands Home & Security, Inc.: Good afternoon, everyone, and welcome to the Fortune Brands Home & Security quarterly investor conference call and webcast. We're pleased to be here today to provide an update on our progress during the second quarter of 2017. 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 Investors section of our FBHS.com website. I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in an associated question-and-answer session, are based on current expectations and 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 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. With…

Thank you. Your first question comes from Scott Rednor with Zelman & Associates. Your line is open. Scott Rednor - Zelman & Associates: Hi. Good morning or good afternoon. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Hey, Scott. Scott Rednor - Zelman & Associates: Chris, I wanted to ask first on Cabinets. On the dealer side, obviously, some of the growth is going up against tough comps. So, I was just curious what are you hearing specifically from your customers that supports the optimism that you laid out for the balance of the year? Christopher J. Klein - Fortune Brands Home & Security, Inc.: Yeah. First of all, we've got some pretty favorable comps in the second half. Last year, second half Cabinets was relatively weak. So, I think if you kind of do the math and look at kind of where we are seeing orders trending and the demand we see in the market, we're pretty comfortable with second half growing to the point where overall Cabinets are going to be in mid-single digits. So, I think there is stability all the way across. The only thing that we are seeing backing up and we saw some of this in the second quarter was as we talked to our customers, designers are very busy and there's kind of a queue waiting to get time with the designer and then installers, carpenters, trade labor are pretty booked up right now too. So, some of that is pushing some of the activity into the second half. There's good underlying demand. It's just getting more sequenced. So, that's the only hesitation we saw in the second quarter coming through. I talked a little bit about premium. We've been talking about premium through second half of last year, it's improving.…

Your next question comes from Bob Wetenhall with RBC Capital Markets. Your line is open.

Hey, good afternoon. Congrats on a very strong quarter and increase to the low end of the guidance range. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Thanks, Bob.

As I'm looking at the quarterly results, it looks like this is about material margin expansion across the portfolio. And I noticed that GPG is growing ahead of the 12% target rate and it looks like you're on track to do $450 million in free cash flow. So kind of given the current trajectory you outlined in your prepared remarks, what's the thinking behind the free cash flow you have and use of balance sheet at this cycle? What's the M&A pipeline look like? You did a great job of outlining what the runway is in the second half of the year, and I'm just trying to think on a multi-year basis, what are you trying to get to kind of by the end of 2018 or 2019, how does M&A play into that? Christopher J. Klein - Fortune Brands Home & Security, Inc.: Yeah. We've got a number of things underway on the M&A side, and I can never predict the timing because there is obviously, it takes two to tango, so there is somebody on the other side of everything we're doing. And I'd say it's a fairly deliberate effort across all four parts of our business in addition to looking at whether there is a fifth category that we might go into. But as we've done everything since we've been a public company six years ago, fairly deliberate, straight-forward, disciplined in our approach. But I'd say, we're looking at we've got over $2 billion to deploy. And if I looked out over the next three-plus years, I'd say that's going to go into a combination of acquisitions and some share repurchase as well as supporting the dividend. I'd say there is a balance or a bias toward acquisition because if it's the right one, it's going to…

Good. It sounds like you're encouraged and maybe, closer to completing some M&A. The other question, Chris, I wanted to ask is, you're getting great margin expansion and Patrick outlined some pretty clean targets for the end of 2017 where you want the businesses to be in terms of profitability. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Yeah.

Do you see into 2018 and 2019 if the current volume environment persists getting additional margin expansion through most of the portfolio? Christopher J. Klein - Fortune Brands Home & Security, Inc.: Yeah. I think if you look at total company, you're going to see us – our target over the next three years would be mid-teens. So 2015, 2016 across. You look at Plumbing and we're going to grow above market there and target 21%. If there is a little bit of upside I'm not going to be troubled by that, we're growing above the market. Within Cabinets, we're targeting mid-teens, 15%. We're on a good path there. We're growing in the attractive parts of the market. We're taking share in the attractive parts of the market, other parts of the market which might be more heavily promoted or what have you. We're not troubled by the growth in that part of the market. So we think we're going to be growing at the market about 15% share. Doors will be mid-teens, maybe a little bit bias up there. We continue to get a great mix coming through that business. In Security's we're not going to be mid-teens and I think really as we expand that through acquisition and through some internal product development, that mix will determine whether it runs a little bit higher than that. So again, we're pretty disciplined around looking at profitable growth not just grabbing share or grabbing growth wherever it is. And so if we're sitting here three years with some strong underlying market growth, we're going to see a really attractive margin structure around the total business.

The plan seems to be working. Good luck in the balance of the year. Thank you. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Thank you.

Your next question comes from Phil Ng with Jefferies. Your line is open.

Hey, good afternoon, everyone. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Hi.

Growth in your Plumbing business was really strong, really nice pick-up on the organic side. Can you talk about where you're seeing the share gains? Is it some of the acquisitions you've made? Is it driven by some of the investments you've made? Just give a little more color and how should we think about that trajectory in the next few quarters? Christopher J. Klein - Fortune Brands Home & Security, Inc.: Yeah. It's always the case that when we deliver strong quarter top-line, it's usually a number of things that has been going on behind the scenes for a couple of quarters before. So it's a byproduct of investments that we've been making and accelerating product development. So we've got a lot of new products coming into the market that's innovative new products. It's also new finishes, it's some new showering. So there is strong pick-up on the new products side and some placements in the market. It's investments in the marketing that we've got, we've really upgraded the team there, brought in some great new talent and we're getting more sophisticated just in a way we're marketing a lot more digital marketing, data analytics, those sorts of things, that's why you're seeing those pay off in the market overall. So it's good execution on product, on marketing efforts, and targeting both on the retail, wholesale side. And then if you look at the acquisitions, we've got the new portfolio of brands and those groups are working really well together. So you've got kind of that crossover of taking these acquired brands and acquired products and bringing them into distribution opportunities that we've got coming out of the historic Moen franchise, and then vice-versa taking some product innovation that you could move into a product line in a Riobel or ROHL and expand where their opportunities are and we've also come together around some joint projects. So, some bigger hospitality opportunities, those sorts of things. So all that's coming together and I think you're starting to see why we put this together a year ago and I'd say there is pretty good upside over the next few years. This is a growth team, highly energized team. They're having success. They're kind of feeding on each other and we've got good margin discipline in the business with money to invest. So, it's coming together and as I answered the earlier question, I can't predict the exact pace of that spend so the margin bounce around. But look at 21% for the year, look at above market growth, project that out over the next couple of years and that's what our plans look like. And then by the way we're also looking at some acquisitions to further expand what that portfolio can look like in terms of product set and brands. So, I really like where that team is going right now.

That sounds great. And then, I guess, switching gears to your Cabinets business, with the high end of that market still little soft and faster growth coming from first time-home buyers, are you kind of re-shifting your new product portfolio to better capture that market where growth could be a little faster in the next few years? And just one last thing, curious on your view on the competitive activity in the market – you previously called out pick up in promotional activity just broadly in Cabs? Thanks. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Yeah. In Cabs, this is not dramatic. It shows up in terms of kind of the styles and the finishes that really go into new construction and I'd say it's not just entry level, but it is more significant across kind of on this construction. A lot of opaques which is painted, a lot of whites and grays, and so as we look at how we're managing capacity, we're managing capacity and we work towards those products. We've got – remember, we've got a quarter of the Cabinet business. So, we're participating in virtually every price point, every product category. And so as we look at it, it's about shifting where that capacity is, where we're making capacity investments and finishing, where we're emphasizing products that we've got and expanding it into brands and into dealers where there is that demand. So, it's kind of drawing it in, we're not necessarily having to push it. It's going to where that draw is – is where we're responding to it around capacity. In terms of promotion, it continues to be more of a kind of a retail phenomena than it is dealer phenomena and among the big guys we continue to be the least aggressive of those. We've held share there so our approach is working. I'd say, it's kind of more of the same, little bit elevated second quarter, but we held on to the share we've got and didn't chase after it. Clearly, as you saw in the margin expansion, we're not chasing after a lot of promo sale. Yeah, I mean, it is where it is as the capacity in the market gets absorbed, the bias for more promotion goes down because others will start to behave as we have which is needed to fillip your plans and we felt for a while that we remain disciplined and focus on those personal market that we see attractive margins that we'll be doing just fine and I think that's what is playing out.

Sounds good. Thanks a lot for the color. Thank you. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Thank you.

Your next question comes from Susan Maklari with Credit Suisse. Your line is open. Susan Maklari - Credit Suisse Securities (USA) LLC: Hello, good afternoon. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Hi. Susan Maklari - Credit Suisse Securities (USA) LLC: I wanted to go back to some of the share gains in Cabinets that you've seen. Can you just give us a bit more color on perhaps who you think you're taking that share from and how sustainable is that especially as we think about maybe some of the shift that's coming in terms of price points? Christopher J. Klein - Fortune Brands Home & Security, Inc.: So, it's really – our Cabinet business right now is about a quarter of the market and you can really look at a number of different segments within that business. So within in-stock, cabinets and vanities, we're a really big participant in that part of the market now. There is a couple of private companies out there that are also participants in that part of the market and there're some import product, but we've consistently taken share in that market going back to the acquisition of WoodCrafters and then building off of that platform and expending our own internal capabilities. So, where you've seen us gain share in that vanities and in stock, we've got great product; we've got great service, we've got great logistics support into retail, which is managing all that inventory at the store level with them in a great partnership and across all the big retailers. And so that's really sustainable and those are kind of just doing a lot of the fundamentals and intrinsics, and a lot of complicated business process really, really well. When you look at new construction, we targeted going back…

Your next question comes from John Lovallo with Bank of America. Your line is open.

Hey, guys. Thanks for taking my questions. The first question is, it seems like margins across your segments were either above your full-year targets or I think in the case of Security was in line with your full-year target but it seems like you're largely keeping the full-year targets the same. So I mean I'm just curious are there some timing-related expenses that got pushed that kind of boosted margins in the quarter and – or are you expecting somewhat of a slowdown in the second half, I'm just trying to understand, trying to reconcile that. Patrick Hallinan - Fortune Brands Home & Security, Inc.: So, John, this is Pat. You're right a number of things were above, most notably Plumbing, right, and as Chris mentioned, our long-term target in plumbing is 21%. It can be choppy from quarter-to-quarter. That's more about investment, and investment choices we make throughout the years. So if you look at the first half, for example, in Plumbing, it's about 21.5% for the first half and it's going to be 21% for the year. So that's an area where you're not seeing any slowdown on the year. And the other large business, we have Cabinets, the margin was 13.6%, up 70 basis point. What we see in Cabinet is seasonality, as you do in Doors. These are leveraged fixed cost manufacturing facility. So Q1, the early part of Q1 coming out of the holidays and the latter part of Q4 going into the holidays, you see those margins go down that's not because there is an issue with the business, that's just because of the seasonality of the use of fixed cost base. And then Security; Security is performing really nicely, up 160 basis points, yes, it was at 15% which is, as you point out, it's full-year guidance, nothing happening that will dilute that in the back half of the year in Security, it's just that by the latter third of the year in Security, they will start lapping their SentrySafe integration. So I think you look at Cabinets and Doors with normal seasonality. Plumbing is on track for the year and it'll slow down and in Security they'll lap the seasonality of the SentrySafe integration.

Okay. Thanks for that, Pat. And then I think you guys mentioned $0.03 of healthcare costs in the third quarter of last year or is that healthcare cost that were deferred from the second quarter of 2017 into the third quarter of 2017? Christopher J. Klein - Fortune Brands Home & Security, Inc.: It was a catch-up, a true-up of the performance of our healthcare plans in 2016. What we did in 2016 and we've continued in 2017 was, we introduced the option for our associates to elect some high deductible plans and that's typically younger folks who are quite healthy, but are compelled by health insurance, opted for high deductible plans. We're pretty conservative in our estimation of how that would play out and by the third quarter last year, we actually had to true it up and take some more income in because the expense was performing better than what we thought it would. Since then, we've got a better beat on how those perform within our overall healthcare plans and so now, it's just running at what is the projected level, so that was a one-time catch-up and now we kind of know how those plans perform.

Which segment was that in? Christopher J. Klein - Fortune Brands Home & Security, Inc.: That was across the board. So it was all U.S. employees, so we introduced higher deductible healthcare plans, all four of our businesses have got pretty healthy U.S. employee base, we're 70% U.S. employees and so that was kind of across the board. Some of those people historically might not have taken healthcare. But, so often we've got them on the healthcare rolls and we got a high deductible plan. And we don't know, okay, they got high deductible, but once the deductible goes away, they're going to be spending at some higher level above that. It turned out now it's actually more predictable than we thought.

Okay. Thanks very much.

Your next question comes from Tim Wojs with Baird. Your line is open. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Hey, guys. Good afternoon. Christopher J. Klein - Fortune Brands Home & Security, Inc.: Tim. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Hey, just maybe back on the cadence in the back half of the year. Just to maybe be more clear. Should we be thinking maybe something up single-digits in the third quarter from an EPS growth perspective and then maybe back to double-digits in the fourth quarter? Is that kind of the set up you guys envision? Patrick Hallinan - Fortune Brands Home & Security, Inc.: Yeah, Tim, this is Pat. We should be expecting a strong second half in general. Sales will be up towards the higher end of our guidance. The leverage will be over 25%. There will be that dichotomy in third quarter versus fourth quarter EPS, but the midpoint of our guidance, we have $0.12 in the back half and you'll see that predominantly be in the fourth quarter. So yeah, low EPS growth in the third quarter around a few cents and then the predominance of it in the fourth quarter, driven predominantly by a tax difference. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Right. Right. Patrick Hallinan - Fortune Brands Home & Security, Inc.: Not by an operating income growth difference. Timothy Ronald Wojs - Robert W. Baird & Co., Inc.: Okay. Okay. Great. And then Chris, maybe just on capital deployment, it sounds like you feel pretty good about the pipeline, maybe closing some things over the next 12 months? If there would be some acquisition activity that would maybe move into 2018, will you guys internally maybe be a little bit…

Your last question comes from Michael Rehaut with JPMorgan. Your line is open.

Great. Thanks for taking my question. First, I just wanted to drill down a little bit in terms of the components of the guidance range. I noticed in the prepared remarks that part of the assumption set now calls for a tax rate of 31%, I think previously you were at 31.5% and I think that's roughly about $0.03 a share. So when you take the raising of the midpoint of only $0.02, but at the same time you kind of talked about the raise being driven by continued strong operating margin performance and I think you even pointed to some upside in Security more than you expected, I was just trying to reconcile that because it seems again that if that tax rate change might account for slightly more of the raise by mid-points? Patrick Hallinan - Fortune Brands Home & Security, Inc.: Yeah. We raised after the first quarter and captured $0.01 to $0.02 of the tax benefit, because we came out of the first quarter with $0.06 of tax benefit versus $0.03 prior year. So you're correct, it's just that we did a chunk of that when we raised guidance in the first quarter and the raise that we're taking this quarter is based more on the operating margin.

Okay. I guess, maybe we could talk about that offline, I'm still a little confused there, but maybe just shifting to the second question. You kind of talked before about M&A and obviously that's a big part of the strategy, in particular the Plumbing segment. At the same time, you just mentioned that you have the ability to continue to buy back stock and perhaps do both, share buyback and M&A and flex-up in the near-term if you need to. So with that being said, I was kind of surprised that we didn't see a little bit more of share repurchase. This quarter you've done some year-to-date, but still perhaps, at least from a run rate perspective, this year a bit less than prior few years. So just kind of wondering about the rationale there and if this doesn't, perhaps speculating, but perhaps part of the reason is that, I'm just wondering if the M&A pipeline is something that you feel perhaps is heating up, so to speak, and you just want to have that much more flexibility over the next quarter or two? Christopher J. Klein - Fortune Brands Home & Security, Inc.: Yeah. I think it's a combination of those factors. I think we do feel good about kind of looking over the next 12 months that we think we'll be able to deploy capital into M&A. So, we're not going to be overly aggressive on share repurchase, but we'll be in the market and we'll be buying back shares at a reasonable pace. I think what we've shown is that we can do both. And so, at some point, if it extends out and it looks like, okay, we're going to get more done in the acquisition side in 2018, you'll probably see us be a little bit more aggressive in repurchase. If it looks like, yeah, things were moving forward, coming at us, especially couple things at once, then you might see us be a little less active. So, we're on it. We're focused on being efficient with our cash and our balance sheet. We're trying to be as both prudent and appropriately aggressive. We're big holders of our shares and are focused on shareholder value and so that's where we start every discussion with is how do we create more shareholder value. So, we're not trying to be conservative in stockpiling cash or paying down debt. We're looking for opportunities to deploy capital. So, I guess you can read into that what you make of it, so sorry, I can't go any farther than that.

Okay. And just to clarify, I appreciate, going back to the first question a second where Pat, you said that really the raising of guidance this quarter is by stronger operating margin performance. Again, can we just make sure which segments are we really talking about here, again you kind of alluded to Security being a little bit better and driving that I guess $0.02 up at the midpoint? Patrick Hallinan - Fortune Brands Home & Security, Inc.: I would say it's across our businesses, everybody is on or above their operating margin target. And so, certainly in Doors and Security it's probably where the highest potential beating both the targets we set for this year and getting to their longer term averages faster. But we expect everybody at this point to be delivering on or above their operating margin targets.

Great, thanks. Patrick Hallinan - Fortune Brands Home & Security, Inc.: Thank you.

That concludes all the time that we have allotted for the Q&A session today. With that, I'll turn the call back over to Brian Lantz for closing remarks. Brian C. Lantz - Fortune Brands Home & Security, Inc.: Thanks, Jessie. We'd like to thank everybody for attending our quarterly call today and look forward to speaking with many of you very soon. Thanks a lot.

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