2020 was a challenging year for all of us as the virus started reshaping our lives, our economy, and our business we established 3 priorities to guide us throughout the year.
Number 1, keep our employees safe; 2, meet the needs of our customers; and 3, position Masco to outperform the recovery.
Turning to slide 4, our top line increased 12% excluding the impact of currency in the 4th quarter.
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.
In regards to capital allocation, we resumed our share repurchase program by repurchasing 2.3 million shares for $125 million during the quarter.
And we executed 3 bolt-on acquisitions, which we expect to contribute approximately 3% top line growth in 2021.
Also in our plumbing segment, Hansgrohe in January acquired a 70% interest in easy sanitary solutions or ESS, a Netherlands based developer and manufacturer of high-style linear drain solutions.
For the full year, sales grew 7%, led by double-digit growth from Delta faucet, Behr paint and Liberty Hardware.
This resulted in full-year growth of over 20% in DIY paint.
While total company sales grew 7%, operating profit increased 18% as we leveraged the strong volume growth and enacted significant cost reduction across the organization including hiring and wage freeze for part of the year, significantly lower brand and marketing spend, a freeze on certain growth investments for part of the year, and obviously drastically reduced travel and entertainment expense.
These actions coupled with our strong volume leverage resulted in significant operating margin expansion of 170 basis points in 2020.
Our strong cash generation allowed us to deploy nearly $1.1 billion in capital during the year.
We repurchased $727 million of our stock at an average price of approximately $39 per share.
We returned approximately $145 million in dividends to shareholders.
We completed 4 bolt-on acquisitions for $227 million and we finished the year with over $1.3 billion in cash on hand and net leverage of one-time.
This strong operating profit growth combined with our significant capital deployment resulted in exceptional financial results, 37% earnings-per-share growth to $3.12 per share exceeding our 2019 Investor Day guidance for 2021, a full year earlier than planned.
Free cash flow of over $1 billion with a conversion rate of 118% and a return on invested capital of approximately 42%.
Home price appreciation was up nearly 30% in December and existing home sales were up over 22% compared to prior year.
Based on these assumptions and our expectation that we will continue to gain share and outperform the market, we anticipate Masco's growth to be in the range of 5% to 9% excluding currency for 2021, and 7% to 11% including currency.
This is based on expected organic growth of 2% to 6% excluding currency, growth from our completed acquisitions of approximately 3%, and growth from foreign currency translation of approximately 2%.
We expect margins to be approximately 17% and earnings per share to be in the range of $3.25 to $3.45 for 2021.
Our Board announced its intention to increase our annual dividend to $0.94 per share beginning in the second quarter of 2021, a 68% increase.
As we have raised our targeted dividend payout ratio from 20% to 30% based on the strength of our business model and cash generation capabilities.
In addition to announcing its intention to increase our annual dividend, our Board also approved a new $2 billion share repurchase authorization.
Our strategy remains unchanged to deploy our free cash flow after dividends to share repurchase or acquisitions and based on our strong liquidity position of over $1.3 billion in cash at year-end and then our projected free cash flow, we expect to deploy approximately $800 million to share repurchases or acquisitions in 2021.
Fourth quarter sales increased a robust 12% excluding currency.
In local currency, North American sales increased 13%.
In local currency, international sales increased 8%.
Gross margin was 35.6% in the quarter, up 100 basis points as we leveraged increased volume, partially offset by higher rebates and program costs.
Our SG&A as a percentage of sales was 19% in the quarter.
We delivered a strong 4th 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 4th quarter earnings per share 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 US lowered our normalized tax rate to 25%.
As this change was retroactive, restated adjusted earnings per share numbers for 2019 and the first 3 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 international sales decreased 1% as many European markets were slower to recover from the impacts of COVID-19.
Our SG&A as a percentage of sales decreased 100 basis points to 17.9% for the full year as a result of our rapid pandemic related cost containment.
For the full year, operating profit increased $196 million or 18% with operating margins expanding 170 basis points to 18.2%.
Lastly, our earnings per share increased 37% to $3.12 for the full year.
Turning to slide 8, Plumbing grew 12% in the quarter, excluding the impact of currency.
North American sales increased 14% in local currency led by Delta's 18% growth in the quarter.
They have a record backlog despite operating at less than 100% capacity due to ongoing government mandated employee limitations in our Mexican facilities.
International plumbing sales in the 4th quarter increased 8% in local currency.
Operating profit was $224 million in the quarter, up $44 million or 24% with margins expanding 160 basis points 19.1%.
Turning to the full year 2020, sales increased 3% excluding currency.
Foreign currency translation favorably impacted full year sales by approximately $15 million.
In local currency, North American plumbing sales grew 6% and international plumbing sales decreased 1%.
Full-year operating profit was $813 million, up $92 million or 13% with margins expanding an outstanding 160 basis points to 19.7%.
Turning to 2021, we expect plumbing segment sales growth to be in the range of 11% to 14% with 47% organic growth, another 4% growth from the recent acquisitions and given current exchange rates foreign currency to favorably benefit plumbing revenue by approximately 3% or $112 million.
We anticipate full year margins will be approximately 18% given that in 2020 we delayed approximately $40 million in costs and investments due to COVID.
We will also have increased amortization expense of approximately $11 million due to purchase accounting.
Segment operating margins will decline by approximately 60 basis points due to this incremental amortization in the 2 recent acquisitions.
Decorative Architectural grew 12% in the 4th quarter driven by mid-teens growth in our paint business.
Operating profit in the quarter increased 9% driven by incremental volume, partially offset by an unfavorable price-cost relationship as well as higher variable compensation and legal accruals of approximately $10 million.
Turning to full year 2020, sales increased 12% driven by the resurgence in DIY paint in the year.
Full-year operating income increased $98 million or 20% percent with operating margins expanding 120 basis points to 19.2%.
In 2021, we expect Decorative Architectural segment sales to grow in the range of 2% to 7% with 0% to 5% organic growth and another 1.5% from the acquisition.
We also expect segment operating margins of approximately 19%.
In addition, the acquisition completed at the end of 2020 will add approximately $3 million of incremental amortization expense due to purchase accounting.
Turning to slide 10, our year-end balance sheet was strong with net debt to EBITDA at 1 times and we ended the year with approximately $2.3 billion of balance sheet liquidity, which includes full availability of our $1 billion revolver.
Working capital as a percentage of sales finished the year at 15.2% excluding acquisitions and an improvement of 50 basis points over prior year.
With our strong operating and working capital performance, and lower than normal capex, adjusted free cash flow was extremely strong at $1 billion representing 118% of adjusted net income from continuing operations.
During 2020, we repurchased 18.8 million outstanding shares for approximately $727 million and we increased our annual dividend by 4% to $0.56 per share.
We expect overall sales growth of 7% to 11% with operating margins in the range of approximately 17%.
As a result, we will incur a non-cash settlement charge of approximately $450 million when we terminate the plans.
Additionally, we will make a final one-time cash pension contribution of approximately $140 million to settle these plans.
This amount will reduce our cash from operations, similar to the approximate $50 million of defined benefit contributions made to these plans in the past several years.
This also means that beginning in 2022 cash from operations will increase by approximately $15 million as compared to prior years improving our already strong free cash flow conversion.
Lastly, as Keith mentioned earlier, our 2021 earnings per share estimate of $3.25 to $3.45 cents represents 7% earnings per share growth at the midpoint of the range.
This assumes a 255 million average diluted share count for the year.
Growth on average is approximately GDP plus 1% to 2%, and is less cyclical than the new home construction market.
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.
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%, 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% earnings per share growth and dividends, which should add approximately 1% to 2% return on top of the earnings per share growth.

Summary:
We expect margins to be approximately 17% and earnings per share to be in the range of $3.25 to $3.45 for 2021.
Our 4th quarter earnings per share increased 36% to $0.75.
Lastly, as Keith mentioned earlier, our 2021 earnings per share estimate of $3.25 to $3.45 cents represents 7% earnings per share growth at the midpoint of the range.