Good morning, ladies and gentlemen. Welcome to Masco Corporation’s 2019 Fourth Quarter and Full Year Conference Call. My name is Regina, and I will be your operator for today’s call. As a reminder, today’s conference call is being recorded for replay purposes. [Operator Instructions] I will now turn the call over to David Chaika, Vice President, Treasurer and Investor Relations. You may begin.

Thank you, Regina, and good morning. Welcome to Masco Corporation’s 2019 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 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 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. Finally, please note that we have accounted for our Windows and Cabinetry businesses as discontinued operations for all periods presented. With that, I’ll now turn the call over to Keith.

Thank you, Dave. Good morning, everyone. And thank you for joining us today. I’ll begin with some brief comments on our fourth quarter, before I turn to our full year results, and conclude with our thoughts on 2020. As Dave mentioned, our financial results have been restated to reflect Cabinetry and Windows as discontinued operations for all periods presented. Turning to slide four. In the fourth quarter, our topline increased 1%, excluding the impact of currency, driven by solid growth in North American plumbing and paint. In line with our expectations, operating profit was down and our operating margin was 15.7% in the quarter. As we’ve previously communicated, this was due to higher input costs due to the full impact of tariffs and an increase in variable cost as compared to the fourth quarter of 2018. Our earnings per share for the quarter matched prior year at $0.54 per share. Turning to our segments. Plumbing growth in the fourth quarter was led by our North American plumbing business which grew 5%. This was driven by record sales for both Delta and Watkins. Delta experienced growth in trade, retail and e-commerce in the fourth quarter, and Watkins continued to outperform the market with its industry-leading portfolio of products across price points and channels. In our Decorative Architectural segment, Behr continued to perform well with mid-single-digit pro paint growth and low-single-digit DIY growth. This was aided by increased year-end ordering that pulled forward sales from Q1 of 2020, similar to what we experienced last year. We saw good results from the recently reset Color Solution Centers, as well as other new innovations such as our easy-pour paint can and our new Behr Ultra Scuff Defense paint. Our paint growth was offset by lower sales in our lighting business, an industry that has…

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 onetime items. Turning to slide seven, we finished the year on plan. Fourth quarter sales matched the prior year and increased 1% in local currency. Currency translation unfavorably impacted sales in the quarter at approximately $7 million. In local currency, North American sales increased 1% in the quarter, driven by pricing actions and volume growth in our plumbing and paint businesses. This was partially offset by lower volumes in our lighting business. In local currency, international sales decreased 1% in the quarter, driven by unfavorable mix, partially offset by pricing actions. We reported operating income of $257 million with operating margins of 15.7%. Operating profit was impacted by mix and unfavorable price cost relationship and higher variable costs. For the fourth quarter, our EPS matched prior year at $0.54 per share. Please note that this performance is based on a normalized tax rate of 26% versus the previously guided 25% tax rate, prior to discontinued operations. Due to the move of Cabinetry and Windows segments to discontinued operations and a change in the tax rate, we have provided restated adjusted EPS numbers for 2018 and the first three quarters of 2019 in the appendix on slide 22. Turning to the full year 2019. Sales increased 1% and grew 2% in local currency. Currency translation unfairly impacted the full year by $77 million. In local currency, North American sales increased 2%. This performance was driven by disciplined pricing actions across both segments, partially offset by lower volumes. In local currency, international sales matched the prior year. While we experienced some international market softness in 2019, Hansgrohe continued to drive share gains in…

Thank you, John. 2019 was a dynamic and transformational year for Masco. We mitigated significant tariff headwinds faced by our plumbing, lighting and hardware businesses. We continue to grow our plumbing segment with record sales at Delta, Hansgrohe, and Watkins. We continue to gain share and pro and DIY paint with our leading Behr brand. We simplified our portfolio with the divestitures of our Windows businesses and signed an agreement to sell our Cabinet business. And we continue to execute on our capital allocation strategy. As we enter 2020, the fundamentals of our business in our core repair and remodel market are healthy. Consumers remain confident and wages are growing. Home price appreciation is increasing. Housing stock continues to age. Existing home sales have improved and household formations have steadily increased. With these favorable fundamentals and our continued focus on executing our strategy, coupled with our strong balance sheet and liquidity, we will continue to create shareholder value in 2020 and are well-positioned to deliver on our 2021 EPS target of $2.80 to $3 that we put forth at our Investor Day last September. With that we’ll now open the calls up for Q&A.

[Operator Instructions] Our first question will come from the line of Stephen Kim with Evercore ISI.

Yes. Thanks very much, guys, and appreciate all the detail here. I guess, first question really relates to the margin guidance that you’ve given. I’m curious first of all, when you look at the Kichler business, I guess within Dec Arc, can you give a sense for what kind of a margin impact you think this private label program being discontinued at your retail partner? What that is representing and how much you think some of the margin guidance you’re looking for, particularly here in the first quarter is being driven by other impact to the margin?

Yes. Steve, good morning. It’s John. I think, the margin impact from the loss of a private label business is relatively modest, because it is indeed a private label program. I think, the bigger impact on the margin in the segment is due to absorbing the full cost of the tariffs here in the first part of the year.

Thanks. And then, I guess, might as well stay on the Dec Arc segment and particularly Kichler, I’m curious, as you look at that business, obviously there is a lot that’s happened, the tariffs coming in shortly after the acquisition was an unfortunate event. And there’s continuing to be issues in China due to the coronavirus, one can imagine affecting your supply chain. I’m curious, I guess, number one, are you -- I don’t believe you mentioned anything with the coronavirus, but if you could maybe talk about how that might be factoring into your outlook at all? And then, two, if you believe that there is any adjustment or has there been any adjustment in your improvement plan in Kichler, in light of what’s happened as you’ve watched things develop over the last three months, since the last time we spoke to you? Has there been any change in your strategic thinking around how to approach improving the results in that business, given the changing world?

Stephen, this is Keith. I’ll take that and will talk about the coronavirus first. When you think about the revenue that we have in China, it’s about 3% of our revenue. So, I want to keep that in perspective. Obviously, China plays an important role in our supply chain. So, it’s important to us and it represents about 3% of our revenue. As of now and it is a fluid situation without a doubt, we are not expecting a material impact on our performance from the coronavirus. It is a fluid situation, as I mentioned. When you think about, first of all, in terms of our factories and where we stand, I guess, most importantly, none of our employees, as we know, sitting here this morning, have been infected by the virus, and we’re very thankful for that. We’ve instituted significance, precautions, travel restriction, hygiene guidelines, we’ve eliminated gathering and meetings. We have a small manufacturing force that started -- about 15% of our biggest factory that started yesterday and will be ramping that up throughout the week. So that represents about a one week delay from what we had anticipated due to the Lunar New Year. So, not a significant delay, but definitely a slower ramp-up than we anticipated. From a supply chain perspective, a very similar story with our biggest suppliers where they are ramping up, they’re bringing people back from the countryside where they were out on Chinese New Year, and they’re coming back. And there’s a planful ramp-up. So, right now, as I’ve talked to our biggest suppliers and to our own factories, we are cautiously optimistic, but it is a fluid situation. In terms of the demand over there in China, again, that’s 3% of our volume. And as you may know, a lot of…

Your next question comes from the line of Matthew Bouley with Barclays.

I wanted to follow up on the decorative side, just around that Q1 guidance for the 300 basis-point decline. It sounded like you’re saying that that’s largely reflective of the tariffs flowing through. And obviously, your full year guidance suggests that the margins will recover through the balance of the year. So, I guess, my question is more cadence-wise. Are you expecting kind of a steady improvement sequentially through the year, or is that margin improvement, kind of more waited to the end of the year as you anniversary those tariffs? Thank you.

Let me give you a little bit of color here. So, if you think about how the tariffs impacted us starting in 2019 and how they phased through our P&L through the course of the tail end of 2019 and going into 2020. We have about $60 million of incremental tariff costs impact to P&L in 2019. We expect another incremental $90 million to impact the P&L in 2020. And most of that $90 million should be in the first half the year. If you consider that $60 million started to flow through our P&L, kind of the middle of the third quarter and really hit us, the full effect hit us in the fourth quarter of 2020. So, we should experience the full impact in the first two quarters of the year. And then, it continued a little bit in the third quarter and this then should dissipate as we get into the fourth quarter of this year. So, we’ve implemented the pricing to mitigate the full $150 million of tariffs. But, we’re also continuing to work on margin recovery efforts through cost-out opportunities, supplier negotiations, and looking at other resourcing opportunities that we may have. The one thing that I should point out is we might face a little bit of margin compression, because what we are experiencing is cost recovery on these tariffs. So, we don’t have necessarily margin dropping to the bottom line. That said, we should expect to resume some margin expansion in the back half of the year, once the tariffs work their way through the P&L. So, hopefully, that’s helpful to you.

It is. Thank you for that. And then secondly, just kind of bigger picture around Kichler. Just hoping you could elaborate a bit around kind of a longer term growth plans? I mean, kind of how you envision this business positioned from a channel perspective, or what I guess needs to change that that you think would allow this business to kind of return to growth after you’ve moved past some of these near term losses? Thank you.

Similar answer to how I answered Stephen’s question. I think there was specific events that occurred in this business as it relates to tariffs and some losses in private label business and inventory rebalancing by a significant customer. As those things, particularly the tariffs begin to -- the loss of the private label rather begins to flow out through the year, this business will be on solid footing to return to growth. In terms of the specific strategies, it’s really about leveraging the strong brand and the deep channel relationships that we have in Kichler. And Kichler is one of the few businesses in this industry that have a broad presence across all channels. So, it is a multi-channel strategy for us. And fundamentally, at the root of that strategy is good products and great service. And we’re working through different programs, as I highlighted earlier, in terms of new product launches and commercial programs to drive incentives and to align -- not unlike what we did, as we revamped several years ago when we were down at Delta and went through this process, to revamp our product development, shore up our assortment, and make sure that our incentives were aligned to the specific needs of the channel. A little bit unique here in lighting is the movement to the e-commerce channel. And we have put in a leadership team, actually several players from Delta Faucet Company that were instrumental in driving our share leadership in e-business down to Kichler. We have a great team down there. And we’re focused across all channels, e-business, landscape, retail and showrooms. So, it really is a multipronged approach. But at the core of it, it’s commercial programs. I’ve said it but I’ll say it again, everything we do here at Masco is focused on productivity and cost productivity, and that will continue as Kichler as well. That’s a component of the plan that we’re outperforming and we intend to continue that. So, as I mentioned on my earlier answer, no significant change to the strategy. There were some defined events that happened to this business and we’re going to get through it. And at the end of the year, we’re going to be on solid footing, and we’re going to continue to grow.

Your next question comes from the line of Michael Wood with Nomura Instinet.

I wanted to see if you can elaborate a bit more on the incentives that you called out impacting paint profitability in the presentation. And what are you seeing in terms of consumer reaction to these incentives? And if you could just talk about, maybe what’s changed in the industry in terms of how competitors are behaving with pricing incentives in paint?

Mike, I think, there might be a slight misinterpretation. It’s incentives between ourselves and our retail partners, it’s not necessarily consumer-based incentives.

Understand. So just to clarify that, you’re saying that the actual price and incentives offered at the store have not necessarily changed. This is between you and large customers?

That’s correct. Yes. Largely due to volume rebates that we have with our major customers.

Great. And in terms of the market share gains that we should expect going forward for the business overall, if I do just rough back of the envelope math for the end market assumptions overlaid to your business, I get a roughly 2% growth rate and you’re calling for 2% to 3%. Is that the typical share gain that you’d expect, or is there something kind of impacting that that’s preventing it from being larger?

No. I mean, it’s -- the share gains we’re expecting -- as you recall, we’ve got now a pro paint businesses that’s now [technical difficulty] dollars. And so, it’s harder as -- when you get to the law of large numbers, and it’s harder to gain share off of that that base at the same rate that you are gaining share at when it was a much smaller business. But, we continue to invest behind that business. Our channel partner Home Depot continues to invest behind that business. We think we have established a very successful and winning model to attract the pro contractor into their stores and to buy paints. It’s -- and to focus them on one of the highest ranked quality brands in the industry. So, between ourselves and Home Depot, we think we’ve established a terrific business model here.

Your next question comes from the line of Michael Dahl of RBC Capital Markets.

John, just a pick-up on the last question. If we think about the paint business, that pull forward into Q4, it looks like it was probably a couple of cents, and maybe that’s borrowing from 2020 by the same amount and a point of top line in that segment I think. So, if you think about paint specifically, when you have DIY as a market flat; pro, low single to mid single flat, you’ve got that 1 point headwind. Do you expect to perform in line then with the broader paint market, even with that comp headwind, or do you still think you can outperform that those overall numbers?

Yes, Mike. So, to react to your comments you have, one, I think your mouth is largely right on the pull forward and the bottom line impact. As we think about the growth in both DIY and pro, we do think we can outpace the market in both instances. We’re still -- even though we’re a $0.5 billion business now, we still have a relatively light market here and we still think there is further share to be gained in the pro. And as we look at our performance on the DIY portion of the business, again, because of our alignment with our channel partner at the Home Depot and the growth rates that they’re experiencing and the folks they draw to their stores, we think we can outpace the DIY market growth as well in here in 2020.

Second question, also following up on another question earlier about the kind of price tariff margin impact. I think, you were answering a question in aggregate, including Plumbing and lighting, talking about that pace of margin, and kind of the recovery on tariffs. But just to clarify, is that also specifically true for Plumbing? And it looks like within Plumbing, second part of this is -- your second half margins have to be up year-on-year to get to that flat full year, if you’re down 100. And so, is that incremental actions around price, supply chain, raw materials benefiting you, or is that just pure volume leverage to get you to that?

Yes, Mike. So, again, you’re right. My prior comments were about the enterprise-wide and not specifically with respect to any single segment. As you break down the plumbing segment, you’re right. Those are -- the margin expansion that we expect in the second half of the year is required given the margin headwinds in the first half of the year due to the impacts of the tariffs. What we expect in the back half of the year is that’s largely volume-driven. We don’t expect any further pricing actions or anything else incremental outside of volume to drive that margin expansion in the back half of the year?

Your next question comes from the line of Seldon Clarke with Deutsche Bank.

Just continuing on the last question, how should we think about volume and price within your revenue guidance for plumbing and decorative?

So, if you think about volume -- I would consider most to be volume. As we indicated earlier, with the impact of the tariffs flowing through, we kind of laid out our top-line estimates. I expect modest pricing, very low impact at all on pricing, because of the pricing we put through on the tariffs back in 2019, early in 2019, I should say. And so, most of that is -- most of the growth that we have outlined for you today, both with the Decorative Architectural segment as well as the Plumbing segment and therefore the Company in total is volume-driven.

And then, just kind of continuing on the 2021, you reiterated the expectation for $2.80 or $3 of earnings. But, I think you guided to something like a 16.8% underlying margin, which obviously implies another 80 basis points improvement on top of this year. What’s like the right bridge to think about on how to get there? Is that still going to be volume-driven or are there some cost actions that you see down the line or pricing actions that you see down the line a little bit longer term?

A couple of things that would be driving our 2021 performance. Firstly, we anticipate that the tariff headwinds are behind us. In terms of the overall market, when we think about R&R as we mentioned in the earlier remarks, we expect an acceleration through 2020. And we believe that will hold into 2021, based on improving fundamentals, increase in our supply and the strong consumer. So, with the tariffs behind us, the market improving and continued growth as we talked about in terms of market share gain and pro, DIY paint and our Plumbing business with that drop down together with our planned repurchase, share repurchases in 2021, that’s what gives us confidence in that $2.80 to $3 range for 2021.

Okay. So, is 16.8 still kind of the right number to think about, roughly?

Yes, I think so.

Okay. I appreciate the time. Thanks, guys.

Your next question comes from the line is Michael Rehaut with JP Morgan.

Thanks. Good morning, everyone. First question I just had, I just wanted to break down the tariff impact. And I guess, John, you’ve said earlier that you estimated there is about a $60 million impact in 2019 and incremental $90 million in 2020. I was just trying to get a sense for the offsetting actions to those headwinds through price, cost, specifically productivity, I think is -- if you want to throw that in there, if you feel that that was either supply chain or other things that you did specifically to offset. I’m just trying to get a sense of the offsetting actions there to get to like a net headwind or such. How did you see that flow through in 2019, and how do you expect 2020 to shake out when you think of those offsetting actions?

In round numbers, Mike, I’d say, let’s call it 90% of our mitigation actions were through price. So, that was the biggest lever that we pulled in 2019. So, that leaves about 10% in terms of the cost of the tariffs mitigated through supply chain resourcing, negotiations with suppliers and that sort of thing. We’ll continue to do that. The majority of our movement out of China is our existing suppliers that have established production in other low cost countries and we’ll be ramping that up, we’ll be moving some to -- in some limited cases to some new suppliers. But, that’s a longer term play for us. And it’s going to take a while to do that. So fundamentally, when you think about the mitigation, it was mostly price. And we’ve put that through aggressively and early in 2019, and hence now with the combination of the timing of the tariffs and when they hit and more importantly the flow of inventory through our system into the P&L. That’s why we had that overhang and that $90 million headwind heading into 2020.

But, Mike, I guess, as we -- maybe to supplement Keith’s comments here, as we exit 2020, we don’t think there’s going to be a net headwind. We think we’ve got between the pricing actions and the supply chains actions that Keith mentioned, we think we’ve got the impact of tariffs fully covered.

Okay. That’s helpful. Thank you. Secondly, I just wanted to circle back to circle back Kichler for a moment. And apologies, I know you’ve answered a bunch of questions. But, I’m just trying to make sure I have some of the numbers right in how to think about the business as it is, by the end of this year. John, I think you said that private label and inventory rebalancing will each be $15 million in the first couple of quarters going to five in the third quarter. Was that right?

Maybe just to be clear. Collectively, the private label and inventory rebalancing will be $15 million in each of Q1 and Q2. So, total impact in the year, Mike of 35 from both of those actions.

Okay. So, I was just trying to get a sense of, as the business has -- and I assume you had maybe a $15 million hit in 4Q. So, you’re talking somewhere in the range of 50 to 100 -- 50 to maybe 75, depending on how things traversed in 2019, of a hit to revenue from your original purchase. You’ve also talked a lot about the different types of cost actions that you’ve done to improve the business. I was just trying to get a sense of -- with all the moving pieces, how you would characterize the margins today or by the end of 2020 rather I think it’s more importantly, for that business relative to where you purchased it? Are you kind of in line, still a little bit behind or even ahead, given some of the company-specific actions and how you think about any potential further improvement in 2021?

Yes, Mike. So, with respect to the margins, we don’t break out margins by individual company. I can appreciate the question. As Keith mentioned in his comments a couple minutes ago, we continue to work and successfully work on supply chain and cost-out initiatives at Kichler. Clearly, the volume has been a little bit more of a headwind than we would have anticipated when we bought the company. But that’s about as much as we can say on that topic.

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

Just sticking with lighting here. And I don’t mean to beat a dead horse. But, just from a broader industry perspective, I’m just curious, there’s been a number of headwinds obviously, and you guys have handled them fairly well. The question is, though, is there any concern that there’s something structurally changing in the lighting industry similar to maybe what we’re seeing in cabinets and flooring as it pertains to consumer preference that is creating a headwind here?

No, we don’t view it as a structural change. If there was anything that would be approaching a structural change, it would be the shift to e-commerce. But that’s -- we’re seeing that honestly pretty broadly across a number of our product categories. So, no, it’s not a -- we don’t view it as a structural hit. It was definitely a significant change. When you talk about an industry that’s by and large imported from China, we have the kind of tariffs that we had come into there. So it’s -- that’s more of a onetime event as it relates to the change, versus a structure. There’s -- it’s a significant component of the remodel process. And it continues to be that. It certainly is a design cue, it’s very design-forward. What it takes to win in this industry, as it relates to consumer intimacy and understanding design trends and having a product -- a new product introduction, process that’s solid, those things haven’t changed. So, we know how to compete in this industry. And the change really has been that that tariffs that came in, and we’re going to put that behind us throughout the course of 2020. And then, we’re going to return to a growth rate.

Okay. Thanks, Keith. And then, John, just on the SG&A front for $310 million in the quarter, that was up fairly meaningfully dollar basis and also as a percentage of sales. Can you just help us understand maybe some of the key drivers under that, please?

Yes. Sure, John. As you may recall, last fourth quarter is actually one of the lightest quarters we had in SG&A in a long time. So, maybe it’s more of a low SG&A comp that we are up against. The one thing that you may recall that we called out in the fourth quarter call last year as we did have a $4 million gain on a sale of a building, which did not occur, which would be a headwind against that comp. But, I think it was more just extremely tight or low SG&A last year on kind of a one-off basis as opposed to anything else.

Your next question comes from the line of Justin Speer with Zelman & Associates.

I just wanted to unpack some of your more margin forecasts. You mentioned the 300 basis-point headwind in the first quarter being more -- out of the Decorative Architectural segment being more tariff affected. But then, I’m trying to reconcile that with the fact that you obtained price. Are you just saying that it’s volume deleverage or is there something else, is there a lag in your pricing relative to the cost rolling through? Can you help me understand that? And then also, on top of that, just any tailwind from lower raw material costs across your business, or lower -- and even transport costs, any other factors that are offsets that we need to be aware of?

Yes. So just -- a couple of questions in there. Let me try to address those. So, in terms of the margin degradation from the fourth quarter to Q1, there’s a couple of things going on there. One is lower volumes, right? We referenced the fact that we lost a portion on private label program. Also with the pull forward in paint, that $20 million obviously comes out a little bit, that should indicate we have lower volumes in Q1. We’re anticipating lower volumes, I guess, I should say in Q1 in a Decorative Architectural segment, that would help drive that operating profit margin lower. In terms of raw material costs, -- the third thing I should say is, on the margin side is the tariffs, because it’s cost recovery, that will drive margins lower as well. On the offset side, obviously, we always work on cost productivity. In terms of commodity costs, specifically, the input costs to paint have moderated here in the -- since a year ago. But recall, the way things work with particularly with our paint business is that, -- we tend to be price cost neutral over time. And so, may have -- that would impact margins. So, it is really -- as prices moderate, input costs moderate, there may be some impact on pricing as well. So, I think that puts it all together. Did I hit all your questions?

Well, I guess, I’m just trying to understand because I know there’s a lot of unevenness with the paint, because last year,, I guess in the first quarter of 2019, your comps were down 7%. I know some of that was Kichler. But that was because you had pull forward the prior year. So, I would have thought that those would have kind of evened out, such that you wouldn’t have as much of an impact there from the coding side, and obviously of the Kichler business. But, I’m just trying to reconcile your comment that it’s mostly tariffs that are hitting you. Is it -- it’s not the tariff cost that you’re trying to get price and you’ve lost share as a result of that or losing business, and that’s affecting your margin profile in the Decorative Architectural segment?

I don’t know if you -- maybe I didn’t communicate right. But I think, if you go into Q1, I’d say there is going to be lost volume, we talked about the lost programs. And so, that’s going to be the main contributor to the margin degradation, followed by the tariff impact. Of the two, volume is a much greater impact than the tariffs on the margins in Q1.

That makes sense. And then, lastly for me is just who you’re losing share to in the lighting businesses? Is there perhaps another player that doesn’t source from China that’s advantaged post tariffs? Because I was under the impression that everyone was kind of in the same sandbox, so to speak, in terms of the supply chain, or is it something else?

I think, the industry is down. I think, the impact of the tariffs industry-wide has been in effect. We’re not -- we haven’t really identified any single competitor that’s particularly taking more share than another one, across the board.

Thank you, guys.

Your next question will come from the line of Keith Hughes with SunTrust.

Thank you. Can you give us, in 2019, what was North American Plumbing growth?

North American Plumbing growth was 2%, I think for the full year, Keith?

Is that all volume or is there pricing in there?

There was a little bit of pricing in there. Yes. I mean, if you consider the tariffs, actually a fair amount of pricing in there. We put in place to offset the tariff impact, Keith, probably in Q1 and Q2 of last year.

Okay. And so, you’re not expecting -- and I think you said this earlier, you’re not expecting any price in this Plumbing guidance that you’ve given us for -- again, let me ask this way, in North America, you don’t expect any price coming in, in 2020 in plumbing?

Not much. Keith, there might be a little bit of it we put in, but not a ton. No.

Okay. That’s all. Thank you.

Your next question comes from the line of Phil Ng with Jefferies.

Hey, guys. Can you give us a sense how we should think about the pace of buybacks as you lay that in, in 2020? And then, any update on the M&A pipeline?

In terms of -- I’ll take the share repurchase question, Phil, and I’ll let Keith talk about the M&A pipeline. In terms of the way we’re thinking about it is, I think we mentioned, we’ll probably do a large portion, maybe a good chunk of the proceeds that we get from the Cabinetry transaction, surely after the proceeds are received, so. And then, through the balance of the year, we look to deploy the balance of the $500 million to $600 million that we discussed. That will probably be more opportunistic, depending on how the market plays out. In terms of M&A pipeline, Keith, why don’t you take that?

Phil, our pipeline remains solid. We continue to drive it. Overall, I would say that the M&A activity was a little bit slower in ‘19 than I expected with the global trade uncertainty and some of the business valuations being in flux because of that. But it seems to pick up -- have picked up lately. We like some of the things that we’re looking at. Most of them are fairly small. I would say that seller expectations still remain high. So, we’re going to be patient. But, solid pipeline.

Got it. And just one last one for me. On the lighting stuff, I mean, obviously, there’s some tariff dynamic and share loss. As we think about 2021, when you work through some of these issues, and you got -- as Keith mentioned you expect to return to growth. Should we expect margins in that segment, Decorative, to kind of get back to that 18% to 19% range?

Well, we’re going to continue with that growth. We have a good drop down on that incremental volume. We’ll continue to drive that. So, I would expect that margins would be improving as we compare ‘20 to ‘21.

Okay.

Phil, you may recall, we laid out 17.5% to 18% margins in that segment per our Investor Day in September. And we -- our thought process around that has not changed since September.

Our final question will come from the line of Truman Patterson with Wells Fargo.

First, I wanted to touch on the coronavirus again. Could you dig into that a little bit more? What portion of Plumbing Products have component piece sourced from China? And Keith, I believe you mentioned contingency plans as well. Just trying to understand what’s going on there. And it does seem like it’s intensifying. Could you discuss your current inventory balances and maybe an update of your supply chain, if plans actually remain shut for another week or two? Will that actually impact the product that you can get on shelves?

Our factories are coming up to speed. Really, that represents about a week of delay over what would normally be -- have been a delay related to the Chinese New Year. So, they’re coming up. They’re coming up a little bit slower than what they would normally. We have about 15% of our workforce in our biggest plant, for example. And that’s going to be coming into the course of the next week, week and a half. As I said earlier from a volume perspective, a lot of the retail home improvement malls and dealers remain close and they’ll be opening. Anticipated -- again, there’s a lot in flux here. But there’ll be a happening over the course of the next week or two. So, with China representing 3% of our revenue, as I said in an earlier answer on the Q&A session here, we’re not anticipating it to have a material impact on us. In terms of contingencies, as I said, we’re looking at premium freight to help us with some of the delivery so that we can maintain our outstanding fill rate and lead time proposition to the customers. And we’re continuing to keep an eye on it. We’re most keenly paying attention to the help our employees, and we’ve got different procedures and policies to make sure that we’re paying attention to that first and foremost. It’s a fluid situation we’re watching closely. And as I said, we’re not anticipating it to have a material impact on our results, at this time.

Okay. Thanks for that. And then, on R&R side pretty slow in 2019. It looks like your guidance has R&R picking up a little here. Are you actually seeing activity start to recover early in 2020? And if so, do you think weather has had any impact on that? I’m just trying to understand how sustainable any kind of near-term green shoots are.

I think, the weather has been pretty good, all things considered and what it could have been. We’re calling R&R at that 3% to 4% growth range and we see it accelerating towards the back half. When we’re looking at the numbers in the economic indicators that we look at, generally there’s lag from those numbers to R&R. So, we feel confident in that 3% to 4% R&R with acceleration in the back half.

Ladies and gentlemen, that will conclude today’s conference call. Thank you all for joining. And you may now disconnect.