Good morning, ladies and gentlemen. Welcome to Masco Corporation’s Fourth Quarter and Full Year 2020 Conference Call. My name is Michelle and I will be your operator for today’s call. As a reminder, today’s conference call is being recorded for playback purposes. [Operator Instructions] I will now turn the call over to David Chaika, Vice President, Treasurer of Investor Relations. You may begin.

Thank you, Michelle and good morning. Welcome to Masco Corporation’s 2020 fourth quarter and full year conference call. With me today are Keith Allman, President and CEO of Masco and John Sznewajs, Masco’s Vice President and Chief Financial Officer. Our fourth quarter earnings release and the presentation slides that we will refer to today are available on our website under Investor Relations. Following our remarks, we will open the call for analyst questions. Please limit yourself to one question with one follow-up. If we can’t take your question now, please call me directly at 313-792-5500. Our statements today will include our views about our future performance, which constitute forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We describe these risks and uncertainties and our risk factors and other disclosures in our Form 10-K and our Form 10-Q that we filed with the Securities and Exchange Commission. Our statements will also include non-GAAP financial metrics. Our references to operating profit and earnings per share will be as adjusted, unless otherwise noted. We reconcile these adjusted metrics to GAAP in our earnings release and presentation slides, which are available on our website under Investor Relations. With that, I now turn the call over to Keith.

Thank you, Dave. Good morning, everyone and thank you for joining us today. I hope you and your families are safe and healthy. 2020 was a challenging year for all of us. As the virus started reshaping our lives, our economy and our business, we established three priorities to guide us throughout the year. Number one, keep our employees safe; two, meet the needs of our customers; and three, position Masco to outperform the recovery. Our employees across our business units did a tremendous job to deliver on all of these priorities. Our performance in 2020 was a testament to Masco’s culture of solving problems, serving customers and delivering better solutions. I want to thank all our 18,000 employees across the globe for their outstanding efforts throughout 2020. Now, let me provide you with some brief comments on our fourth quarter before I turn to our full year results and conclude with our thoughts on 2021. Turning to Slide 4, our top line increased 12%, excluding the impact of currency in the fourth quarter. We saw growth across our entire portfolio, led by strong growth in North American plumbing, international plumbing and our paint business. Operating profit increased 20% and our operating margin expanded 90 basis points to 16.6% in the quarter as we leveraged our strong volume growth. Our earnings per share for the quarter increased an outstanding 36%. Turning to our segments, plumbing grew 12%, excluding currency, with 14% growth in North American plumbing and 8% growth in international plumbing. North American plumbing was led by Delta Faucet Company, with 18% growth. Our spa business also achieved growth in the fourth quarter as we continued to effectively manage COVID-related restrictions. Hansgrohe drove strong growth in Germany and China, as those markets have recovered nicely from earlier in the…

Thank you, Keith and good morning everyone. As Dave mentioned, most of my comments will focus on adjusted performance from continuing operations, excluding the impact of rationalization and other one-time items. Turning to Slide 7, we delivered a strong finish to a record year. Fourth quarter sales increased a robust 12%, excluding currency. In local currency, North American sales increased 13%. This outstanding performance was mainly driven by strong volume growth in North American faucets and showers as well as DIY paint. In local currency, international sales increased 8%. Gross margin was 35.6% in the quarter, up 100 basis points as we leverage increased volume partially offset by higher rebates and program costs. Our SG&A as a percentage of sales was 19% in the quarter. This was primarily due to increases in certain variable costs such as incentive compensation, program costs, advertising and legal accruals. We delivered strong fourth quarter operating profit of $309 million, up $52 million or 20% from last year, with operating margins expanding 90 basis points to 16.6%. Our fourth quarter EPS increased 36% to $0.75. Please note that this performance is based on a normalized tax rate of 25% versus the previously guided 26% tax rate. Changes to IRS guidance in late 2020 and how certain foreign income is taxed in the U.S. lowered our normalized tax rate to 25%. As this change was retroactive, restated adjusted EPS numbers for 2019 and the first three quarters of 2020 can be found in the appendix on Slide 28. Turning to the full year 2020, sales increased 7%, excluding currency. Foreign currency translation favorably impacted the full year by $13 million. In local currency, North American sales increased 9% and the international sales decreased 1%, as many European markets were slower to recover from the impacts of…

Thank you, John. 2020 was a disruptive year on many fronts and these uncertain times are far from over. While there is clearly much focus on these short-term dynamics, let me share with you how we are thinking about Masco for the long-term. Please turn to Slide 12. The repair and remodel industry is attractive with favorable fundamentals. Growth on average is approximately GDP plus 1% to 2% and is less cyclical than the new home construction market. Favorable demographics will help drive repair and remodel demand and we are on the leading edge of the large millennial cohort forming households. Older homes require more repair and remodel spending and the average age of housing has increased due to significant under-building of homes since the downturn of 2008 and the COVID-19 pandemic has clearly increased the desire for more enjoyable living space, which has led to increased home demand and remodeling expenditures. Masco is a low ticket repair and remodel focused business with market leading brands with product and geographic diversification, which provides growth and stability through an economic cycle. We leverage our customer insights, broad channel relationships, scale, diversification and our Masco operating system to drive innovation and make our businesses better. With our market leading brands, history of innovation, strong management teams and focus on serving our customers in this attractive industry, combined with our strong free cash flow and capital deployment, our long-term expectation is to grow earnings per share on average by approximately 10% each year. This is comprised of above market organic growth in the range of 3% to 5% annually, growth from acquisitions in the range of 1% to 3%, and margin expansion each year through cost productivity and volume leverage, and continued capital deployment in the form of share buybacks, which should contribute approximately 2% to 4% EPS growth, and dividends which should add approximately 1% to 2% return on top of the EPS growth. While 2020 was an extremely challenging year, we responded exceptionally well and are poised to continue to drive shareholder value creation in the future. Now with that, we will turn the call over to Q&A.

Thank you. [Operator Instructions] Your first question will come from Matthew Bouley from Barclays. Your line is open.

Hey, good morning. Thanks for taking the questions. The first one I will ask on the plumbing margin guide of 18%, it sounded like between that additional investment spending and the purchase amortization that mostly bridges us to there from 2020. I guess my question is what else might be contemplated in that margin guide, thinking about metals inflation, pricing in this environment and all that? Thank you.

Yes. Good morning, Matthew. It’s John. I think you hit the nail on the head with your analysis. You are right, the two big things that are causing the decline in year-over-year plumbing margins are some of the spend that’s coming back in as well as the impacts of the two acquisitions in the segment for 2021. What else could impact it to bridge the difference? There might be – there is probably a little bit of headwind from commodity inflation, because as you know we don’t always perfectly match the timing of any pricing or any other actions we may take to offset commodity inflation with actually feeling the inflation through our P&L. So, that’s probably, but I would say that’s a pretty small impact overall.

Okay. Thanks for that, John. Second one, the long-term guide of 10% annual EPS growth, you are talking to, it sounds like annual margin expansion. My question is to the extent you are guiding 21% to 17% in total, are you conceptually saying that, that can continue to move higher? And the reason I ask is specifically because of Decorative at 19%, it’s still kind of above the older range you once gave. So, should we assume that I am not looking for specific ‘22 guidance, but conceptually, your expectation is that a 17% margin can continue to move higher?

That’s right, Matthew. We have our Masco operating system that has proven itself in terms of productivity and total cost productivity across our business units. We obviously expect continued good solid drop-down on incremental volume. So yes, our expectation would be that we would continue to expand margins. I think one point I would like to make, Matthew, is if you look at our margin and you factor out, let’s say, from – obviously 2020 was a very unique year. But if you look at how we performed ‘19 and our estimated guide in 2021 and you factor out some of that investment accounting for acquisition – or excuse me purchase accounting that John talked about, when you look at, say the middle of our of our guide, the drop-down that we are anticipating on this incremental volume is right in there in that 25%, 30% range that we have talked about. So clearly, 2020 was a unique kind of perfect storm for margin if you will, where we had good leverage on our incremental volume. We cut way back on some costs that we – as I have talked about before, we know that those cutbacks weren’t going to continue and that we need to continue to invest in areas like channel penetration, e-commerce, long-term connected home and those sorts of things. And we are going to continue to do that and we are going to continue to invest in our brands because it works. But yes, you are exactly right, we expect continued margin expansion.

And Matthew, maybe one thing I will add to Keith’s comments is – well, maybe two things. One is that as you think about the continued margin expansion, I think about it in the context of tens of basis points, not hundreds of basis points of continued margin expansion. And then second specifically with respect to your thoughts around the Decorative Architectural segment, recall that our Kichler business we have indicated that, that business we are turning around in a lot of the good work that the team has done over the course of the last year, year and a half there, will start to bear fruit in 2021. And supplementing that good work will also be some reduced amortization from the acquisition of that in the range of $7 million or $8 million on an annual basis. So, I think that also helps explain a little bit of the higher margins in Decorative Architectural.

Great. Thank you for all the color. Very helpful.

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

Hey, guys. Thank you for taking my questions as well. Maybe just starting with Decorative Architectural and the 0% to 5% organic outlook for top line, can you help us understand maybe some of the drivers that could get us to the higher end of that range?

Well, I am sorry, you broke up a little bit, John, you had asked for some of the drivers that would get...

I apologize, yes. So yes, I was wondering, it’s a fairly wide range. Just curious what realizing that the comps are tough, what could get you to the higher end of that 5% organic range?

Really, it’s about the consumer and continued demand driving the desire to freshen their homes, to spend more time in their homes and to have their homes look better and the fact that we are hitting that sweet spot with a relatively low price point. So fundamentally, the high end of that range would come from DIY paint and continued growth there.

Got it. And then on Watkins, it sounds like the backlog is very encouraging. Curious though, how close to 100% cap are you guys now and what’s your ability to sort of execute on that backlog in 2021?

We are doing pretty well. We are getting better and better at dialing in our factories given some of the restrictions. Who knows where these restrictions will go. I suspect that they will start to ease as globally the pandemic starts to wane, but we don’t know that for sure. But fundamentally, we are doing a good job. We are looking at growth in this business. And we had growth in the fourth quarter. So it’s – we are really happy with how the business and our spa business in general, has responded.

Yes, John. The one thing I would add to Keith’s comments is that to his point, Mike and the team down there have reacted just tremendously to the conditions that have been dealt or the conditions dealt to them. That said, because of the strong backlog, we do expect double-digit growth from that unit in here in ‘21 compared to ‘20, so very optimistic about how that business unit should perform.

Thank you, guys.

Your next question will come from Stephen Kim from Evercore ISI. Your line is open.

Yes. Thanks very much. I just wanted to follow-up on John’s question there on that 0 to 5 organic for Dec Arc. Just wanted to make sure that we got a sense for how that might flow quarterly? I mean, Dec Arc basically, obviously, benefited from the pandemic on DIY. But you had pretty strong organic growth pretty much throughout the year in almost every quarter. So just want to get a sense for like how big of a Delta are we talking about in terms of growth rates from, let’s say, the front half of the year to the back half of the year? Or any other kind of help you can give us about the quarterly trajectory.

Yes, Stephen, it’s John. And you’re right. I mean, we did experience very strong growth in the Decorative Architectural segment and specifically in 2020. In most quarters, I mean, if you think about – even in the first quarter of 2020, the segment was up 9% and our paint sales were up kind of high-teens percent. And what we’re expecting now, Stephen, is on a run rate basis, kind of the strong growth that the paint has been enjoying in the last couple of quarters to extend in the first half of the year. And then, obviously, as we get up against the tough comps of Q3 and Q4, that growth dials back a bit. And really, Keith’s point, what drives us to the higher end of the range is consumer demand. If we see continued strength from the consumer and repayment activity, that could push us to the very high end of the range. If it doesn’t materialize, it could kind of in the midpoint to the lower end of that range.

Got it. Yes, okay. That helps in understanding the degree of conservatism in there. Second question, Keith, I believe you made a comment about – maybe it was you, John, about the $800 million in share repurchases. I believe you said in $800 million in share repurchase or acquisition. So I just want to clarify are you saying that you intend to do $800 million in buybacks and then any acquisitions that you do would be incremental to that or is the $800 million going to be like all that you are allocating for both and you will sort of see how the acquisition shape up over the course of the year?

No change in how we’ve talked about it, Steve. That’s for both. So we view those funds as fungible. And that if there’s an acquisition that we see that meets our criteria, as I said we are focused more on bolt-ons and close to the core. I think what we talked about with these 3 acquisitions is a good indication of where we’re focused and what our strategy is. But fundamentally, it’s that $800 million that’s fungible between acquisitions and share repurchases. And with our strong balance sheet, we have room. If there was something bigger from an acquisition standpoint that we wanted to go after, we certainly have the capability and the dry powder to do that. But fundamentally, we haven’t changed about how we’re thinking at it in terms of reallocating free cash flow.

Okay, great. Thank you very much guys.

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

Hey, guys. Congrats on a strong quarter. It sounds like you have pretty good line of sight in the first quarter and easier comps in 2Q. But if come in at the high end of your guide, do you see the opportunity for upside more back half weighted because you’re assuming some moderation?

Yes, Phil, I think that’s the way to think about it. Like you said, we got better visibility in the first part of the year. It’s going to be tough to see. It’s a little tough to see right now how exactly things play out in the back half of the year. There’s a number of moving pieces, and it all depends on really how the pandemic and the vaccines unfold. And so – and then how that ultimately ends up driving consumer behavior and consumer demand. So you are right, more clarity in the first part of the year, less clarity in the second half.

Got it. It sounds like you are not seeing any slowdown year-to-date, so that’s pretty encouraging. And then implicit in your guide, what type of inflation are you assuming and how do you plan on tackling that? It looks like Behr Paint prices, based on some AR scrape have started to move up already. So, do you expect that price cost squeeze in DAP to kind of be more neutral in 1Q? And any handholding you can provide on the shape of the margin profile for plumbing because there is a lot of moving pieces there?

Yes. So I will start off maybe a little bit and then Keith can supplement my remarks. So first comment, maybe I will take a step back, Phil and talk more broadly about the commodity basket that we are facing and then talk about them in the shape of the plumbing margins. So you should take a look at the various raw materials that impact our financial statements, obviously, copper and zinc have started to inflate really in the back half of the year, but really have been pretty strong since the middle of the fourth quarter, kind of the November timeframe, really started to see copper and zinc inflate. And at the same time, if you think about the input costs or the input basket that goes into paint, which are really twofold, one is titanium dioxide and the other are the more of the petroleum linked engineered resins, we have started to see inflation in both, probably more so on the engineered resin side than in TiO2. But TiO2 recently is starting to inflate. And as a matter of fact, as I think about the inflation as it hits the raws and paint, engineered resins have probably even accelerated more in the last several weeks. And so the way we are going to approach this is the way we’ve historically approached our raw materials. One, obviously, we think, in total, Phil, that, that raw material inflation will be kind of a low-single digits range on us during the course of the year. But we’ll go after it in the way we typically do. And that is, we negotiate with our suppliers. We work out our internal cost productivity. And then we also, to the extent that’s required, we will take pricing actions. There is – I think you will recall we tend to be price cost-neutral over time. That said, we can’t always perfectly time these things. So you might see a quarter or so of margin contraction because of us feeling the pricing impact or the cost impact of the raw material inflation before we’re able to implement price, but that should level out over time. So Keith, I don’t know if there is anything else you want to add?

No, I think you hit that. We are experiencing some commodity pressures and some cost pressures. If you think about it, let’s say, mid-single-digit type inflation in our paint basket and probably lower than that. In our plumbing basket logistics, we are seeing some pressure there. But logistics is a low-single-digit cost for us, so that’s not such a big impact. And this is nothing that’s new to us. I’ve been in the seat now going on 7 years, and we have seen this several different cycles of this kind of thing. And we go at it with productivity improvements through our Masco operating system. We go at it with supplier negotiations. And because of our consistent investment innovation in brands, we are able to when we need to, go after it with price. So over time, as we’ve talked about, we are neutral as it relates to price cost. And there are some leads and lags in that, and that can go both ways. But fundamentally, we don’t view that as changing at all. We don’t expect it to change going into ‘21.

Okay. Super helpful.

So, with respect to your second question, related to kind of how we are thinking about plumbing margins through the year. Similar to a couple of the other answers we’ve already given in that probably a little bit better more of a benefit in the first part of the year because it’s just a way that margin shaped up in 2020. And then, obviously, we face much more significant margins in the second half of the year. And so that will – as a comp in the back half of 2020, I think our margins in Q3 last year were 23%, 24%. And so those tough margins will be tough to comp against and so probably not as good of margins in the back half of the year.

Okay. Thanks a lot. Really helpful.

Yes.

And your next question will come from Nishu Sood from UBS. Your line is open.

Thanks. So first question I wanted to ask was about the guidance and the acquisitions. You mentioned that the acquisitions will contribute about, I think, you said 3% in revenue growth. Is there an EPS impact as well? I know there’s some amortization, so maybe that’s happen, nothing. But how will it – how is it a part of the EPS guidance for ‘21?

Yes. It’s a relatively small piece of the overall EPS guide, Nishu, because if you think about circa $15 million of amortization on these businesses, it’s probably a couple of cents.

Got it. Thanks. And then the second question, on Decorative Architectural, in the – in your third quarter call with some visibility into price cost, etcetera, you’d expected the margins to be 17%. Obviously, they came in somewhat short of that. What drove that? I mean you highlighted price cost, but it’s obviously notable that you’re expecting very strong margins in your Decorative Architectural division in ‘21. So I just wanted to understand what drove the downside that will reverse and still allow margins to be pretty nice in ‘21?

Yes. Nishu, I think it’s pretty straightforward answer. I think what drove the margin down in the fourth quarter was kind of a couple of things. One was we had higher variable costs, just a higher incentive compensation cost, I should say, due to just the outstanding performance that the segment enjoyed. And then the other piece of it is we trued up some legal accruals. The two of those in aggregate, kind of came in at about $10 million. So if you have kind of view those as onetime in nature, you’re kind of right there as to where you would expect us to be.

Got it. Okay. Great, thanks.

The next question will come from Michael Rehaut from JPMorgan. Your line is open.

Thanks. Good morning everyone. First, I wanted to go into the pain outlook for 2021. And if I heard it right, you’re expecting your own DIY business to be flat versus the market to be down low to mid-single digits, Pro to be up high-single digits versus your outlook for the market to be up mid-single. So I was wondering if you could just give us a little more detail in terms of what’s driving your outlook for the share gains in both of those businesses in ‘21?

Really, it’s demonstrated performance. We’ve got our strong brand – brands really when you think about kills as well as Behr. We have had and demonstrated that our investments in the Pro Paint area, is working and we are going to continue to make those investments. So, it’s really demonstrated performance on well our investments in brand innovation and Pro Paint growth, are working.

Okay. I was just – I appreciate that, Keith. I guess I was just wondering if this is share gains by Home Depot or some new products. I mean, anything that’s kind of more, let’s say, specific to 2021 in terms of any catalysts or initiatives.

Yes, absolutely. It’s more of what you’ve seen in the past. So absolutely, new products and our new product rollout for 2021 is strong, and we’re going to continue to invest in that. The brand and the brand strength, as it relates to advertising and various programs that we are rolling out both on – in DIY as well as Pro. And then continued investment and feet on the street and driving growth specifically with Pro. So it’s more of the same recipe of brand service and innovation.

Okay. No, I appreciate that. I guess, secondly, I just wanted to circle back to the comments around the operating margins for the businesses. And if you go back to the Analyst Day, at that time, you’re kind of looking at long-term margin targets that were plus or minus right in line with the performance the margins that you were achieving at that time. So in other words, you’re looking at a margin outlook that was roughly in parity with the level of probability you are generating. Now it sounds like you’re saying something a little different that you’re expecting some amount of margin improvement going forward. And John, I appreciate your comments saying maybe in the tens of basis points, not the hundreds. And – but talking about an incremental margin being above the margin that you’re currently generating. So I just wanted to understand maybe what changed between then and now? It was my understanding that the outlook given at the last Analyst Day was more driven by the fact that you certainly have kind of a level of reinvestment in the business and investment for growth, investment in your channel partners, and that was what was more keeping it at the range that it was. So just trying to get a better sense of what’s different in the margin outlook today versus back then?

Yes, Mike. I’ll kick this one-off and then Keith might add some other color to this one. But I think the principal difference between what you heard from us at our 2019 Investor Day and what we’re talking about now in terms of both growth and margin profile has to do with our underlying assumptions for the market. We – and in 2019, outlined fairly muted market growth going forward, through the period of ‘21, which is really what we outlined. And obviously, things have played out much different than that. And even if you consider what we’re laying out for 2021 today, it’s better growth than we would have forecasted back in the fall of 2019. And so I think that’s the principal difference. Have – our business is doing everything else that we would expect to do. Yes, the driving innovation? Absolutely. Are they pushing for share gains? Yes. Are they doing all the right things in terms of their service and delivery capability? Yes. So, all those good things are happening, but I think fundamentally, the big difference is our perspective on market growth. Keith, I don’t know if there’s anything else you want to add?

Yes. I think you hit it, John. We had a different perspective on top line growth as the main driver when you compare the difference between our Investor Day in ‘19 and where we sit today, but it’s also a combination of continuing our total cost productivity and leveraging our Masco operating system. So, long-term, a little bit different outlook ‘19 versus where we sit today. We’re committed to organic growth in that 3% to 5% range. I think we can add another 1% to 3% in acquisitions, buyback in that 2% to 4% range, and that’s how we see that long-term 10% growth in EPS. And then, of course, the 1% to 2% dividend yield on top of that. So that’s fundamentally how we are looking at it.

Great. Thanks very much.

And your next question will come from Susan Maklari from Goldman Sachs. Your line is open.

Thank you. Good morning. My first question is, you talked a little bit in your prepared comments about the trends between DIY and Pro and the fact that you saw a little bit of a pickup in Pro in the fourth quarter, and that’s expected to continue this year. Can you just give us a bit more color on that? Exactly how that’s starting to come together and how you expect that ramp to come through over the next couple of quarters?

We certainly saw the growth pick up in the fourth quarter, and I’m not going to get into specific month-by-month here. But it’s continuing into 2021 here. And I think, by and large, it has to do with residential repaint and consumers being more comfortable with contractors and pros inside their house. And I think that’s the fundamental driver. We’re seeing it mainly in the interior side, and we would expect that from a seasonality perspective. But I think that’s, Susan, fundamentally the driver.

Got it. Okay. And then in my next question is, when we do think about the mix shift coming through, it feels like in 2020, the mix shift was incredibly favorable as we think about that mix between DIY and Pro. As we think about things normalizing as we go forward, how should we think about the impact that has on the margin profile and how you’re kind of thinking about and maybe incorporating that into the guide?

So Susan, maybe taking a step back and talking about mix broadly across our business.

Yes.

So we did see favorable mix across many of our businesses in 2020. But it was a relatively modest impact overall. We saw favorable mix, obviously, in some of our plumbing fixtures. We saw some of it in our spa business, as we saw some of our higher-end spa sale. And to your point, we saw it in paint with a little bit better mix of DI – more DIY and a little bit less Pro. As we think about that as we go into 2021, again, I don’t think mix is going to have a significant impact. Could there be a modest headwind from mix in our paint business? Yes, but it’d be relatively modest. And I would say that the negative mix that we’ve been experiencing in plumbing in Europe will probably likely continue into 2021. That’s been something we’ve been experiencing probably for about 24 months now, and we don’t see that changing too much. But again, overall, I want to make sure you take away that it’s not going to be an overall significant impact to the business.

Got it. Okay, that’s helpful. Thanks.

And your next question will come from Mike Dahl from RBC Capital Markets. Your line is open.

Hi. Thanks for taking my questions. First question, I wanted to go back to kind of the plumbing outlook from a top line standpoint. And John, I think you mentioned during the remarks that international would be low single-digits, which I presume is mostly plumbing. But I was hoping to get more of a breakdown of kind of how you see the composition of the organic growth of 4% to 7% presumably, the Watkins business is up north of that. But could you give us any sense of kind of how you are seeing Watkins, what the core North American faucet business is doing? And then if that international comment was reflective of what you expect specifically for international plumbing? That would be great.

Yes. I think you nailed it, Mike. Watkins, we are expecting really solid double-digit growth from them in 2021. As I mentioned before, the team is doing an outstanding job of maintaining our high-quality and getting our units out and obviously, that’s a good mix for us, as we have talked about. So yes, good – leading the growth story in plumbing would be Watkins for sure. You are right, in terms of international and that low single-digit guide, that’s primarily our European business and that’s a mixed bag, as you might expect. We are continuing to see strong growth in our home markets of Central Europe and China and we continue to be challenged as you might expect as is everybody in England and Italy and some other locations. So, it’s a mixed bag, but you are right on in terms of the low single-digits. When we look across North American plumbing, we will expect to see really solid continued share gains across all of our channels, but a higher growth rate in e-commerce. And I think our acquisition of Kraus, the leading digitally native brand in the space, feeds right into that and gives us a lot of flexibility and capabilities to continue to outgrow that. On the retail front, we have been the leader in share of shelf on the faucet aisle for many, many years and that’s continuing and we are continuing to invest to keep that lead. So, we expect good growth there. And obviously, between our BrassCraft and Delta, very solid brands in the plumbing wholesale trade. So we continue – we expect to continue to outgrow the market there. So you’ve hit it on the head with regards to how we are thinking about international, Watkins leading the way. Obviously, e-commerce as a channel will grow faster than others and we are going to continue to gain share across the board.

Okay. Thanks, Keith. And that kind of dovetails into my second question, which is around some of the long-term strategy, specifically with respect to M&A and e-commerce. And so it’s – I mean, picked up a couple of good tuck-ins here and you are now kind of formally guiding to some contribution from M&A going forward. So two-part question is really kind of a), what are you seeing in the markets in your pipeline with respect to M&A that’s kind of giving you the confidence that this will continue to be a steady stream that you can incorporate into a long-term framework? And then second, specifically with respect to plumbing and the push and acceleration in e-commerce, how should we think about using your – using the Kraus acquisition as kind of a starting point or an acceleration point to further scale your other brands versus there being significant other acquisition opportunities, specifically within kind of the plumbing, digital or e-commerce channel?

Mike, on the M&A component and to your direct question why it gives me the confidence, it’s a couple of things. First and foremost, it’s the team, the deal team. John is leading it and the people that he has on his team are outstanding. And they have demonstrated it by what they were able to do in 2020. As you know, even though these were smallish acquisitions, the workload and the work on cultivating these isn’t any less than a big acquisition and they were able to do it exceedingly well. So I am confident in the team. Secondly, it’s the actual pipeline and our MOS process of cultivation and looking at what’s available. So, it’s still a challenge as valuations really haven’t softened that much and that informs the need to stay close to the core and that’s our strategy. As I said before, we will look at bigger ones. But fundamentally, we are looking at tuck-ins where we can bring synergies to make our return work and we are going to stay disciplined, but that combination of a good team, a good pipeline, together with the discipline is what gives us the confidence. I am sorry, Mike, your other question was on e-commerce? Go ahead.

Yes. It was e-commerce and how much we should think about is going to come from additional M&A versus using the platform you have already built and now accelerated through Kraus to scale your existing brands?.

Yes. I think there maybe opportunities for further acquisitions. And if we can acquire capabilities, where we can acquire brands in certain spaces that make sense, we will do that. But fundamentally, it’s about our existing brands and continuing to drive with the outstanding teams that we have developed and the investments that we have made as it relates to partnership with pure-play as well as the more building products associated hooked up with bricks and mortar. So we are going to continue to drive that. That’s where the lion’s share will be, but we will be opportunistic for other opportunities.

Okay. Thanks, Keith.

And your next question will come from Adam Baumgarten from Credit Suisse. Your line is open.

Hey, good morning. Thanks for taking my questions. Just sticking with paint, just if we think about promotions given sort of a more normalized growth year, should we expect those – and is that embedded in your guidance for promotions to be up in 2021 versus 2020?

Yes. Adam, we are expecting a more normalized year this year. As you may recall, we and our channel partners have pulled back on some of the promotions, particularly in some of the major summer holidays in 2020 as a result of not wanting to drive too many consumers into their stores and preventing the spread of the virus. And so what we believe now will take place in and we will see how this ultimately plays out is that 2021 reverts to a more normalized year at least at this point.

Okay, great. And then just on the Work Tools International acquisition, it looks like those brands are actually sold at Lowe’s not at Home Depot. Do you see an opportunity, just given your presence obviously in the paint isle at depot to move those brands into Home Depot over time?

I am not going to talk specifically about our plans as we roll this out. You will see them as we begin to grow. But I would say it’s consistent with what we have done in the past in terms of looking for expansion, in terms of adjacent products as well as adjacent channels and that’s something that we bring to many of these acquisitions. So, our focus is on bringing the power of our channel presence and our innovation to acquisitions and then learning from them, be it on online capabilities like with Kraus or with certain brands. So, it’s a combination.

Great. Thanks.

And your final question from today will come from Keith Hughes from Truist. Your line is open.

Thank you. Most of my question have been answered. But just switching back to international plumbing, have you seen the sales pace rate decline significantly last 6 to 8 weeks versus the fourth quarter given some of the shutdowns and things going on, particularly in Western Europe is my question?

So Keith, no, just looking at the first couple of weeks of the new year, we have seen continued strong demand in Western Europe. Obviously, some of the markets are different. But in core Central Europe, Germany and China ahead of Chinese New Year, sales have been very strong. The UK, to your point, because of the lockdown has been a little slower, but we like the performance the first couple of weeks of the new year.

Okay, thank you.

And that concludes today’s call. We would like to thank all of you for joining us this morning and for your continued interest in Masco. As always, please feel free to contact me, David Chaika, at 313-792-5500, if you have any further questions. Thank you and stay safe.

Thank you everyone. This will conclude today’s conference call. You may now disconnect.