Good morning, ladies and gentlemen. Welcome to Masco Corporation's Third Quarter 2018 Conference Call. My name is Zetania and I will be your operator for today's call. As a reminder, today's conference call is being recorded for replay purposes. I will now turn the call over to David Chaika, Vice President, Treasurer and Investor Relations. You may begin.

Thank you and good morning. Welcome to Masco Corporation's 2018 third quarter 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 third quarter earnings release and the presentation slides 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 risk and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We describe these risk and uncertainties in 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 measures. Our references to operating profit and earnings per share will be as adjusted, unless otherwise noted. We reconcile these adjusted measurements to GAAP in our earnings release and the presentation slides, which are available on our website under Investor Relations. With that, I'll now turn the call over to Keith.

Thank you, Dave. Good morning, everyone, and thank you for joining us today. Please turn to slide 4. In the third quarter, our top line increased 9% excluding the impact of currency, driven by strong growth in our North American Plumbing operations, our Cabinet business and our acquisition of Kichler Lighting earlier this year. Excluding the impact of currency, acquisitions and divestitures, sales grew 4%. Operating profit grew $10 million and we achieved 15.2% operating margin in the quarter due to higher volume, price and disciplined cost control. Our EPS increased 25% to $0.65 per share. Turning to our segment performance, our Plumbing segment grew 4% or 5% in local currency, driven by outstanding North American Plumbing growth of 9%. Delta had a record sales quarter with strong growth across all channels and price points. Our upper price point Brizo products, our entry-level Peerless products, bathing fixtures and toilets, all experienced strong growth. Additionally, Watkins continued its strong performance due to model refreshes in its dealer channel and an expanded product offering in the retail channel. While North American Plumbing was strong this quarter, international Plumbing declined 1% in local currency, primarily due to softness in Central Europe. This was partially offset by continued strength in China. In our Decorative Architectural segment, sales grew 20%. Excluding our acquisition of Kichler Lighting, sales grew 1%, with high single-digit growth in pro paint and strong performance in decorative hardware, largely offset by a decline in DIY paint. While the DIY paint market was softer than expected, we believe our competitive advantage of having the highest quality, best value paint sold exclusively at The Home Depot positions us well. Moving on to Cabinetry, our Cabinet segment delivered robust 11% growth excluding the divestiture of Moores. This growth was led by our repair and…

Thank you, Keith, and good morning, everyone. As Dave mentioned, most of my comments will focus on adjusted performance excluding the impact of rationalization charges, inventory step-up related to purchase accounting for the Kichler acquisition and other one-time items. Also, as a reminder, any prior period comparisons have been adjusted to reflect the adoption of the new revenue recognition and pension accounting rules. Turning to slide 6, we delivered solid top line and earnings per share growth in the third quarter. On a reported basis, sales increased 8% or 9% in local currency. Excluding acquisitions and divestiture, sales increased 3% or 4% in local currency. Foreign currency translation negatively impacted our third quarter revenue by approximately $12 million. In local currency, North American sales increased 12% in the quarter or 5% excluding acquisitions. We believe the outlook for our repair and remodel demand remains healthy, and we continue to experience solid demand for many of our industry-leading repair and remodeling products. As a reminder, repair/remodel activity represents approximately 84% of our total sales. In local currencies, international sales decreased 6% in the quarter. Excluding the divestiture of Moores, international sales decreased 2%, driven by market softness in our international operations, particularly in the UK and Central Europe, partially offset by continued strong growth in China. Gross margins were 32.7%, down 110 basis points, largely due to the acquisition of Kichler. Our SG&A as a percent of sales improved 40 basis points to 17.5%, as we continue to leverage our SG&A, while making strategic investments to drive profitable growth. Our operating profit increased 3% to $320 million with operating margins of 15.2%. As we discussed on last quarter's call, operating margins were impacted in the third quarter by ERP costs and continued inefficiencies in our Windows business. We also experienced strong…

Thank you, John. 2018 has been a dynamic year and we expect to grow our earnings per share approximately 25% in spite of raw material and logistics inflation and tariff challenges. We're executing to address these cost challenges and remain focused on leveraging our industry-leading brands, innovation pipelines and channel expertise, and we are driving top and bottom line growth. We believe that the fundamentals of the repair and remodel market are supportive of solid long-term growth. Demographics should drive household formations for housing for years to come, as the large millennial generation has started forming households. Home price appreciation, which has a strong correlation with repair and remodel spending, remains strong at nearly 6% year-over-year. The average age of the housing stock continues to increase, as 65% of the U.S. housing stock is now over 30 years old, and older homes have more repair and remodel spending per home than newer homes. GDP growth rate is at a four-year high. Unemployment is at a 50-year low and consumer confidence remains at a 15-year high. We continue to see strong growth in many of our product categories and believe that a strong economy has the greatest correlation with sales of our repair and remodel products. We will continue to execute our strategies against these favorable market fundamentals and will deploy our strong cash flow in a disciplined and balanced approach between acquisitions with the right fit and return, share repurchases and dividends to create value for our shareholders. With that, we'll now open the call for Q&A.

Your first question comes from the line of Stephen Kim of Evercore ISI.

Thanks very much, guys, and thanks for all the information. It was very helpful. The outlook seems reasonable. I guess I just wanted to ask a question to start off about the U.S. business generally. You talked about the fact – the factors that would drive continued strength in R&R, and certainly, the economy is what matters most. However, one of the things that's recently been impacting our whole space is the rising rates, and an aspect of that has been some concerns that you would see a slowdown in mobility, effectively that folks who have a low mortgage rate on their home – on their mortgage product are choosing not to move because they don't want to give that low rate up. And I was curious if you could talk a little bit about how you see this issue affecting your company, the demand for R&R generally in your company specifically over the next few years. Do you think this is much ado about nothing? Do you think that there are reasons to believe that people who stay will spend more on remodeling than when they look to move or other dynamics like that, if you could just talk about the issue?

Stephen, we think that our R&R concentration, which as we've talked is about 85% of our revenue, puts us in a place where we can take advantage of these trends. Without a doubt, the rising rates and the increase in home price appreciation is putting a bit of a pinch on affordability. However, when you look at the dynamic of what happens when people choose to stay in their home, be it because of overall affordability, the need to move to another house at a higher mortgage rate, et cetera, oftentimes what they see – and it's somewhat of a countercyclical trend between R&R and new construction – is that when they stay in their home, they'll now pull the trigger on a major remodel. So, much like home price appreciation, where home price appreciation can tend to dampen a little bit on – the movement on a new construction, home price appreciation is very tightly correlated, one of the best correlations that we see, to R&R spend. So, as home prices increase, people feel better about pulling the ticket on an R&R project. As people tend to stay in their house longer, they feel better about an R&R spend. So, overall, when we look at the repair and remodeling market, we think it's strong because fundamentally it's consumer-driven and the consumer's strong.

Got it. And with respect to that as kind of a follow-up, I was curious as to how you felt like some of the different segments that you operate in might be – might experience this dynamic differently. Would it be more beneficial to Cabinets, let's say, relative to Decorative Architecture? And sort of wrapped up around that, in Dec Arch, you talked about paint being softer this quarter. I was curious as to how much weather may have impacted the sales this quarter. Was it – did you see primarily a slowdown in outdoor paint, because I know it's been unbelievably wet here in the Northeast at least? It probably would have been very difficult to do a lot of outdoor painting jobs.

In terms of the segment impact as it relates to people staying in their homes longer, really we don't see a material change segment to segment. Really, it's a question of big ticket versus small ticket. And when you are committed to staying in your home longer, that generally bodes well for pulling the trigger on a bigger ticket item. But when we look at the data and we look at our expectations, there's really not a material difference as it relates to segment impact. We think the DIY market is strong. We're strong in DIY across all segments, and therefore, it's pretty consistent. With regard to weather, we didn't call it out specifically, tend not to do that. But yeah, when we look at August/September and we look at the heat map, if you will, around the country, the West was okay. But boy, the East Coast was really wet and it was very hot as well. So, yeah, that probably had a little bit of an impact.

Okay, thank you.

Your next question comes from Doug Clark of Goldman Sachs. Doug Clark - Goldman Sachs & Co. LLC: Hey, thanks for taking my question and good morning. My first question is on tariffs, and thanks for all the detail that you've provided there. I'm curious in terms of how long you would expect the time lag to be between kind of the imposition of a 25% tariff to the extent that it takes place and how quickly you could kind of right-size that in terms of the pricing and cost and/or the other actions that you mentioned.

Hey, Doug. Good morning. It's John. With regard to the tariffs, we think that there might be a quarter or two lag in getting full realization of our pricing actions. So, we think we can do it fairly promptly. As I mentioned in my prepared remarks, we have already begun some of those conversations here in the fourth quarter. So, we feel pretty good about how those conversations have begun. There might be a little bit of a lag between, like I said, implementation and realization. Doug Clark - Goldman Sachs & Co. LLC: Okay, thanks. And then, I know you mentioned or talked a little bit about Plumbing and kind of your manufacturing footprint in the U.S. I'm curious on the lighting side, so with Kichler in particular, which I assume is a majority of the Dec Arch exposure there. Any differences in terms of ability to get pricing or just kind of the globalized supply chain?

You're right, Doug. The majority of the tariff impact in Dec Arch is Kichler. We design and manage assortments and source from the Far East like basically the entire industry. So, from a competitive standpoint, we think we're right in there with everybody else. So, that really should not affect our ability to get price.

And Doug, I would just add to Keith's comment. In Dec Arch, we also have Liberty Hardware, which is a builders' hardware business, largely a source and sell. And that industry is structured similarly to the lighting industry. So, there's a lot of import there and same dynamics that Keith mentioned with lighting will apply here. Doug Clark - Goldman Sachs & Co. LLC: All right, great. Thanks a lot.

Your next question comes from the line of Nishu Sood of Deutsche Bank.

Thank you. On the tariffs, you folks have shown a good ability to pass on price in terms of a rising input cost this year. 25% is a pretty large number. As you look across where the tariffs are going to raise prices ultimately, areas where it's unavoidable, how do you think – where are you concerned that it might slow demand?

Well, I think that's the million dollar question and that remains to be seen. This is a unique situation that we're in to say the least, in that the majority of our elasticity data and data analytics is around a stable market. And what we're seeing here, Nishu, is the entire – in many cases, the entire competitive space, like in lighting or hardware like we just talked about, is going to go up. Some of the issues or some of the correlation would be around overall ticket size and the overall impact as it relates to, say, a light or something more significant. So, it remains to be seen. We're going to watch the price elasticity and adjust accordingly. But now, our focus is on managing our supply chain, working with our suppliers to drive productivity, making supply chain moves, and we're focusing on margin and getting price.

Got it, got it. Okay. And then, my follow-up question was on Plumbing. A lot of the metals complex prices have begun to come down. There was some lag this quarter in price versus cost, I think, you mentioned, John, because of lower volumes in Europe. When should we expect the benefits of the lower metals prices to come through in Plumbing?

Yeah. Nishu, if you think how the base metals flow through and impact our Plumbing segment, it's generally about on a two-quarter lag that we feel it through the P&L on our financial statements. And so, given the pricing trends in both copper and zinc, which are the two that primarily impact our cost of sales, I would guess that we would start to feel the impact of the lower prices here late in the fourth quarter and the beginning of the first quarter of 2019.

Great. Thank you.

Your next question comes from John Lovallo of Bank of America.

Hey, guys. Thanks for taking my questions as well. First question is you guys are clearly still pretty bullish on the R&R cycle in the U.S, which is encouraging. What do you think is going on in DIY? Is this – in DIY paint specifically. Is this just the shift more towards do-it-for-me or is there something more structural going on here?

Well, I think paint's always – DIY paint is inherently a bit choppy quarter-to-quarter and it's difficult to call with precision exactly (00:29:33) where the market is, particularly on a quarter-to-quarter basis. There's some dynamics there. Certainly, the overall quality of the paint is improving. We've had a paint and primer-in-one that has had an effect over the past years. There's been an increase of renters versus buyers if you look at over the past several years, and renters tend to paint a little bit less. But fundamentally, we think as millennials are moving into the household formations, and when you look at the average age of that cohort and the inevitable arrival of children and that move towards household formations, we think that bodes well for the underlying demand as it relates to DIY.

Okay, that's helpful. And then, maybe just touching on the international businesses, recognizing that there was a tough comp, I think you guys did call out a little bit of softening in the market. Is there anything that you could attribute that to and what are you guys thinking about going forward there?

I think in the UK, John, part of that has to do with the fact that I think we see just the economy pulling back a little bit as they are starting to contend with the Brexit issues and the unknowns that go along with that. And in Central Europe, I think it was just a bit of a pause. We've seen very good strength in our European businesses and in China over the course of the last multiple quarters. And because of the tough comp, we don't attribute any significant softening to the overall market. It's – we just think it might have been a bit of a pause.

Okay. Thanks, guys.

Your next question comes from Michael Wood of Nomura Instinet.

Hi, this is Mason Marion on for Mike. What are the trends in the pro gallon growth in paint? Are you seeing more of a competitive response than you were previously and will you need to discount more in the future?

We continue to do very well in that segment. We think we've got a very good value proposition to the targeted painters that we're going after, who are shopping at The Home Depot, and that's a big – call it a $4 billion market. And it's a better solution to not have to make a better or an additional trip to get your paint. And we have the best quality, and our service is improving and the service is very good, and we've got these outstanding points of sale in The Home Depot. So, we like our performance in paint. We're going to continue to drive that. In terms of competition, yeah, it's tough competition, there's no question about it. We're up against some very, very good competitors that I respect very much, and we're competing. But as I said, when you have the quality of the paint, the quality of the brand, the quality of the service and a great partner like we do, we like our chances of continuing to gain share.

All right, great. Thank you. And then, on the impressive growth in the Cabinet segment, was the strength broad-based or were there particular segments that were stronger than others?

I would say that this has to do with – our semi-custom business was actually quite strong, both on our – the two big-box retailers that we had traditionally served along with the new program at Menards. But then also our dealer channel saw very strong growth in the semi-custom offering. So, it was – that KraftMaid brand does really well, it resonates great with designers, and so they're great advocates for us as consumers walk into whether it's a big-box store or whether it's a local dealer. We feel really good about how KraftMaid has performed here in the third quarter of the year.

Thank you.

Your next question comes from Susan Maklari of Credit Suisse. Susan Maklari - Credit Suisse Securities (USA) LLC: Thank you. Good morning. My first question is just around the tariffs as well. Are you seeing any pull-forward of demand or any sort of shifts in terms of some of your overseas suppliers that could cause some disruptions, especially as maybe we look to the first half of next year?

Not really, Susan, I mean, not in a material way. Susan Maklari - Credit Suisse Securities (USA) LLC: Okay. And then, on the tariffs as well, you mentioned that obviously price is sort of the first step in dealing with the situation. But as we look out, you also did mention some changes to your supply chain. How should we think about that as part of the strategy? What would you need to see in order to pursue that and maybe how would it sort of come together across the different segments?

It certainly is a component. We're looking at supplier negotiations, we're looking at productivity improvements in our own shops, and certainly, we're looking at repositioning the supply chain. It could involve moving some of our assembly here. I'll remind you that we have a significant footprint in the United States across all of our segments, particularly in Plumbing and in Cabinets. So, moving all or parts of the process onshore, working with our suppliers to set up manufacturing in other locations is another option, and we've initiated these options already and it's going well. We have experience in doing this. You may recall back sometime in our Plumbing business, where we had the no-lead legislation that came at us like a freight train in terms of AB1953, and we had to go from leaded brass to non-leaded brass, and that represented about a 30% increase. So, in terms of how to drive price, how to effectively move supply chains, and importantly, how to manage it. This is very manageable, but we're paying attention to it. We have a tariff task force that we've set up. John, myself and all of our group presidents meet every week. The team is responding very well. We're taking it seriously, but we're going to work through it and we have experience to do it and we're pulling a number of levers to get it done. Susan Maklari - Credit Suisse Securities (USA) LLC: Okay, thank you.

Your next question comes from Matthew Bouley of Barclays.

Hi. Thank you for taking my questions. So, you've called out mix pressures in, I guess, both Cabinetry and Plumbing. So, Keith, I'd just love to hear your thoughts on kind of whether this customer trade-down effect is something that you're really anticipating through the cycle here. And accordingly, how should we think about the profitability of your products at different price points and assuming that that lower price point seems to be the area where there is greater demand at this point? Thank you.

Matthew, I'd start by saying that it's really – we're not seeing a customer trade-down. What we're seeing is good wins in that lower margin product. So, through good assortment win work and good commercial sales force, we went out, we won a nice program in Peerless. That's the opening price point, which does have a little bit less margin. We're seeing growth in our bathing products, which is due to a reset that we had in the big-box aisle. So, happy about that. And our toilet program, which again is a tweak to the assortment, where we're seeing good growth. So, when you think about our global Plumbing platform, we have a continuum of margin from – on the lower side, say, our bathing and our toilet products and then up through accessories and then up into the high margin faucets and shower systems. So, we're seeing good growth based on our target assortment and sales initiatives, but we're also seeing good growth up at the high-end. Our spas in our Plumbing business, high-end, very discretionary, high-end tickets are selling very well, as we talked about with Watkins Wellness. Our Axor product line, which is the high-end product line for Hansgrohe, is doing well. Our Brizo product line, which we talked about in the prepared remarks, is continuing to do well. So, we're seeing bimodal growth. It's not a shift. So, we like that. In terms of Cabinetry, as planned, the stock cabinetry at Menards will sell faster during the initial resets, because it requires significantly less training. But as we train in the associates and as we get this business rolling, that will improve. So, I'm not troubled by the mix shift. I think that's a sign of good sales work and good assortment work.

All right, that's helpful color. Thank you. Second question, just on Plumbing specifically, the guidance for the full-year for – I guess you termed it a slight decline year-over-year in operating margins – would still suggest a rather large step-up in the fourth quarter sequentially, which is unusual for that segment seasonally. So, is there any finer point you can give us on how to think about the Plumbing margins specifically as we look to the fourth quarter? Thank you.

Yeah. Matthew, just to refresh everyone's memory, in the fourth quarter of last year, we had some significant spend as it relates to some of the displays that we were putting in at Delta, which was in the amount of roughly $8 million. And so, we don't think we'll be incurring – we won't be incurring that spend in the fourth quarter of that year. So, that should contribute to a pretty significant margin improvement sequentially from Q3 to Q4.

All right. Thank you very much.

Your next question comes from Michael Rehaut of JPMorgan.

Thanks. Good morning, everyone. First question – and I apologize if I missed this earlier. In terms of the guidance reduction, I believe you kind of cited two key drivers – two or three key drivers being a little bit softer DIY, a little bit weaker international, as well as the higher commodity and logistics cost. I was hoping if you could kind of give by degree of magnitude what each of those drivers represented as part of the – in terms of the degree of magnitude of influence on the guidance reduction.

Yeah. Sure, Mike. It's John. In terms of – the way we look at it, if you think about the various components that we mentioned, if you think about the softness in the DIY paint and international Plumbing markets, that kind of aggregated probably 80%. The balance 20% was related to some of the continued cost pressures in logistics and distribution.

Great, great. And then, just more broadly, as you think about kind of the sales trends during the quarter, obviously, a lot of your peers have kind of cited some softening that occurred during the quarter, maybe particularly, I guess, in August and even more so in September. Just wanted to get your thoughts, by segment, if that's something you witnessed across the board, were there any segments that you kind of saw that more prominently than others. Obviously, paint might come to mind there. But anything in terms of how it trended during the quarter, and by segment, if any product lines or channels for that matter witnessed more of that type of deceleration than others?

Broadly speaking, there wasn't a significant difference as we look across the segments with maybe the exception of paint in August/September timeframe, when it was quite wet and there was some heat. We – obviously, when the hurricanes are coming through, we're not going to be selling a whole lot of product. But I didn't see a particular – we didn't see a particular channel-specific hit or a segment-specific hit.

And Mike, as you consider, through the quarter, we had pretty good consistency through the quarter as well. There wasn't either peaks or valleys within the quarter either.

Can I just squeeze one more in? As you're looking at the full-year for 2018, I was curious if you could give us a sense overall what you think you've been able to achieve from a pricing standpoint versus other offsets that you've put into place to combat the raw material inflation.

Yeah. Mike, so as we think about how things developed through the course of the year, obviously, we've seen fairly significant inflation in the input costs in a variety of our products, including copper and zinc, which we touched on, on a previous question. But we've also seen some of that same inflation impact our Plumbing – or our paint business, I should say, as both TiO2 and engineered resins have increased fairly significantly through the course of the year. We're seeing TiO2 continue to be up, but not perhaps at the same rate that it was up earlier in the year. And if you're thinking about our Cabinet Products, we did experience some inflation on some of the hardwoods that go into our Cabinet Products earlier in the year, and that's continuing a little bit here. And then, here toward the middle part of the year, we saw a little bit of increase in distribution and logistics costs. So, all that inflation has hit us. As we look into – across the year, we absorbed a little bit of that inflation in the first half. As we look at the second half though, we still think we're going to be price/cost neutral for the second half the year. So, we feel like we've gotten on top of this and we're in a really good position as we enter 2019.

Great. Thank you.

Your next question comes from Mike Dahl of RBC Capital Markets.

Good morning. Thanks for taking my questions. My first question goes back to the comments early on about the Menards business and how you're experiencing some logistical challenges around that. And so, I was curious if you could provide a little more detail about what exactly those challenges are. You say they're persisting through year-end. Just give us a sense of is it just that training aspect you mentioned or how should we think about kind of the magnitude of the challenges and your ability to fix it over the next couple of quarters?

Mike, I apologize if we communicated a link between Menards and logistics. That wasn't the intention. They're separate. So, it's a Cabinet logistics cost and transportation cost escalation, not tied to Menards. And that's driven by what we've talked about before on prior calls with regards to the base fuel escalation, as well as driver availability. We have less impact on our dedicated routes. And so, it's less of a hit when we look at the big chunk of our businesses like paint, where we have more steady routes, and certainly with some bigger customers in Plumbing, where we have more steady routes. In Cabinets, where it's milk runs, it's less than truckload. It's oftentimes job site delivery. That tends to receive a little bit more pressure. So, it's broad-based Cabinet logistics pressures, not tied to Menards. The Menards program's going well.

Okay. Thanks, Keith. And yes, you're right, I may have misunderstood that, but that's helpful color. The second question, going back to the tariffs discussion and again back to Plumbing, one of the options highlighted was working with manufacturer partners to shift production to other low cost countries. I was just – could you provide a little more detail on kind of where that is on your list of priorities, and if that's the strategy going forward, how long does it take to effectively make that switch?

It's probably down in number three priority as I sit here today, just roughly speaking. Our focus is on price and is on working with our suppliers in terms of negotiation and coming up with more competitive pricing. But certainly moving the (00:46:13) supply chain is an option. I talked about in-sourcing, say, assembly into the United States. And then, specifically to your question as it relates to suppliers, many of our suppliers already have capacity set up in other – let's call it Southeast Asia, Vietnam, there's a couple other places, we have a large supply chain. And so, it's a matter of standing up capacity in those existing facilities and doing some different things there. So, that's the nature of it. I hope that color helps a little bit.

Okay. Yes, it does. Thank you.

Your next question comes from Stephen East of Wells Fargo.

Thank you and good morning. If you look first at the paint, just looking at the promo environment, you've got a retailer that's sort of changed strategy, et cetera. Are you seeing any change in the promo environment, whether on the DIY or on the pro level? And then, just could you give us an update on the hub stores effort?

Sure, Stephen. Good morning. In terms of paint promotions, it's been extremely consistent over the last multiple years, as we promote in conjunction with our channel partner, The Home Depot, very consistently four times a year. So, we're on the Spring Black Friday, we're Memorial Day, we're 4th of July and we're Labor Day. And that promotional cadence has not changed – I can't tell you – Keith, boy, it's got to be six to eight years...

Yeah.

We've been on that run, and it doesn't look like we're going to change at all going forward. In terms of the promotional environment on the pro side, again, that's been very consistent. There's not a lot of promotional activity for the pro either. The one thing I would point out though is we do fund a pro reward rebate. So, the higher volume that a pro painter achieves within The Home Depot, the bigger discount that they can get on their paint offering – or their paint consumption. So, that's been – but that has been extremely consistent as well over the years that we've been working on the pro paint program with The Home Depot. So, not a lot of change in the promotional environment on the paint side.

Okay, got you. And then, sort of a combo question. First, could you talk a little bit about the demand that you're seeing in R&R versus new construction and what you expect moving forward? And then, John, could you give us what your investment spend was in 3Q and what you think it'll be in 4Q?

Sure.

In terms of the demand in R&R, new construction, as I've talked about the last call and then in the prepared remarks here, it continues to be strong for us. We're seeing that in terms of ticket, we're seeing that in terms of demand across the continuum of price, meaning entry-level and high-end, continue to see good traffic. So, feel real good about it. I think we saw a little bit of softening on the new construction side. That's 15% of our business. As we look forward to next year, we're thinking that – and we're not the only ones that are thinking this, whether it's John Burns or Harvard Center for Joint Studies, we're thinking that continued strong, call it, mid single-digit R&R growth is in the cards for us in 2019. And with our brands and our innovation pipeline and our channel work, I think we're positioned to take advantage of it.

And then, Stephen, on your investment spend question and hopefully – I'm not certain I've got the right question, but let me answer this, and if it's not, let me know. So, on the investment side, we had about $5 million in ERP spend at Delta in the third quarter and a little bit of investment in the hub stores, as we've increased the number of folks that are employed by us that participate in that. Going into Q4, obviously, we talked a little bit about – earlier about the decline in investment spend, because we had $8 million in the Plumbing segment. We'll probably have a little bit of – a very minor amount of ERP spend at Delta in Q4 and a little bit of continued hub store investment in Q4 as well, because we started hiring people in the first part of this year. So, that will just be the anniversarying of that. So, it'll be up slightly year-over-year, but that's about it. Is that the question you were asking?

That is, yeah. That's what I was looking for, what you had going forward. So, thanks.

Okay. Yeah.

Your next question comes from Justin Speer of Zelman Associates. Justin Andrew Speer - Zelman & Associates: Hi, good morning. On the cost side, with cost continuing to move higher, you have tariffs-inspired inflation coming, sizable amount of inflation you have to deal with, just particularly thinking about the Plumbing business, thinking about the margin integrity of your overall business, but particularly your Plumbing Products business. If we look back to 2014, we saw commodities collapse after that and really it's not probably coincidental that your margins really moved up post that event. Now the market seems to be concerned that we're going to retrace back to those levels at least. Maybe help us understand your view on the margin integrity and view of your – your world view and how you're responding to tariffs and cost inflation and mix down effect.

Yeah. As I said earlier, Justin, I think it remains to be seen of how the consumer is going to react to this inflation, call it, a tax on the consumer, if you will. In terms of our margin, in the short-term here, we're lapping some significant growth investment that we had in Q4. So, we're expecting our Plumbing margins to be down slightly from where they were last year. We really haven't changed our outlook on that much. Certainly, innovation and new parts – or new products come into our pipeline. That helps us continue to drive margin integrity. But long-term for this business, we feel good about our margins, and more specifically for 2019, we'll give more detailed outlook at our next call as we normally do. Justin Andrew Speer - Zelman & Associates: You indicated that what you're about to deal with, the incremental inflation, I'm guessing that's a net effect of tariffs and raw materials maybe rolling over on brass costs and things like that. But the net impact of what you're about to see across your businesses will be less than what you've already had to digest in 2018. Can you maybe help us understand what you've digested in 2018 and what you're thinking about 2019 as you snap the line today?

Yeah. If you think about the tariffs at somewhere around, what would that be, 2.7% of our cost of goods sold, and you think about in that range of 3% of inflation that we've had to deal with, then you look at some of the favorable tailwinds that we could potentially experience when we look at Plumbing and some of the – potentially the easing of the copper and zinc cost, and then you look at still continued pressure in resins in particular – TiO2 appears to have kind of stabilized a little bit. So, when you look at those net-net, it's right around that 3% range. Justin Andrew Speer - Zelman & Associates: So, we shouldn't be surprised to see at least stable to maybe even improved operating margins next year based on what you're saying and what you have kind of expressed in terms of pricing and things, but the big question is mix. And I guess from my standpoint, A, is that right? And B, on the mix side, what – if you looked at good, better, best, can you define or think through, particularly in Plumbing, how mix, on the low versus high-end, how much differential margin there is? I don't know if you can say that publicly but help us understand (00:54:08).

Yeah. We haven't really walked through with specificity the margin and the different points of the assortment as it relates to price. But generally speaking, we do tend to earn lower margin on the lower priced goods. That's still good business. It's a good return on our invested capital in those businesses, but it does tend to be a little bit lower margin, as you know. In terms of 2019, we think it's potentially shaping up okay. We've got some relief in some commodities. We're certainly focused on getting price here and the tariffs. But in terms of the detail of how we're going to look at 2019, we'll talk more about that in the next call. Justin Andrew Speer - Zelman & Associates: Thank you, guys.

Your next question comes from Keith Hughes of SunTrust.

Thanks. Back to the tariffs, how much of the dollars that you've outlined in the slides, give us a feel how much of that is finished goods that you're importing or how much is it components?

We don't have that level of detail broke down, Keith.

Okay. Well, let me ask it another way. In terms of the ways to mitigate this, whether it's pricing, changing your supply chain to another foreign source, changing it domestically, is either one of those easier to deal with that versus the other? And again, source components versus finished goods.

Well, I think it's something that, as I talked about, we're not taking lightly by any means and we're organized to execute it. And there's different challenges there. There's always challenge with price for the obvious reasons. And we need to be very careful when we move our supplies around. We're doing it in a way where we're trying to leverage our existing suppliers as much as possible, and we're also doing negotiations with those suppliers. So, I don't know that any one is particularly easier per se. It's just different. And as I mentioned, we've got experience in this. Certainly, we know how to get price and that's something that we've been able to keep in terms of price commodity flush over the long-haul through the cycles. We've demonstrated where we've had these episodes of very quick change in our cost structure, i.e., going to no-lead brass, that we've been able to do that. And it was the same thing, it involved changing suppliers, changing materials, getting price, the combination of these things. So, it's a mixed bag and different in terms of difficulty.

Okay. Just final question on this, I assume, as you start this process, you're assuming that 25% is going to come January 1. Is that the stance you've taken to begin... (00:56:59)?

Correct, correct. That's our assumption and that's what our plans are based on.

Okay, thank you.

Your next question comes from Phil Ng of Jefferies.

Hey, guys. How are you guys prioritizing capital deployment going forward, just given your outlook on R&R still remains pretty favorable, as it relates to M&A and buybacks, given where the valuation of your stock is at this point?

Yeah. Phil, as always, the biggest priority for us is investing back in the business. So, CapEx and investing in the growth of the business is paramount for us, and so that's number one on our priority list. After that, you're right, it comes down to M&A and share repurchases. And as we signaled on our prepared remarks, we're thinking about $300 million of share repurchases in the fourth quarter of this year. So, that has inched up the capital deployment priority list a little bit here and just given the pullback in the share price. That said, I would tell you we continue to be very active on the M&A side. Our team is out there looking at transactions on a very regular basis, and so we're continuing to devote time and energy to that as well. So, it's kind of a balance, and at this point in the fourth quarter, share repo is going to be a little bit higher than M&A, but we're not – we're not downgrading M&A in terms of a priority by any means.

Got it. That's helpful. One of your competitors called out increased promotional activity in Cabinets. Just curious what have you seen in the marketplace? And any color on how to think about your ability to get pricing, given some of these logistic, transportation costs you called out? Is that an opportunity early next year? Thanks.

Yeah. So, Phil, we have not seen a lot of increase in promotional activity in Cabinetry. It's been pretty consistent for the last several quarters now. And are we able to get price based off of the logistics? Yes, absolutely, we're working on that here in the fourth quarter to put price into the marketplace to offset that inflation. So, we feel confident that we can do so.

Okay, thanks a lot.

And your final question comes from the line of Alex Rygiel of B. Riley FBR.

Thank you. And I apologize for coming back to the tariffs. But we've been talking a lot about sort of the cost risk and pricing and moving manufacturing around. Could you touch upon the opportunity that you see of gaining market share out there from competitors that are in a much deeper hole as it relates to tariffs than you are across all your products?

Sure. It varies by segment. But if you take Cabinets, for example, Chinese – direct Chinese import, which is 100% import, has been building strength competitively. So, I think that is helpful to us. When you look at, let's call it private label or house brands, which are 100% imported on the Plumbing side, we can have some advantage there as we can have the opportunity to utilize North American manufacturing. So, I think when you look at those two opportunities there, that's probably the ones I'd call out.

Very helpful. Thank you.

I'd like to thank all of you for joining us on the call this morning and for your continued interest in Masco. As always, please feel free to contact me at 313-792-5500 if you have any further questions. Thank you.

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