Whirlpool Corporation (WHR) Q3 2012 Earnings Call Transcript

Joseph Lovechio - Senior Director of Investor Relations Jeff M. Fettig - Chairman and Chief Executive Officer Marc R. Bitzer - President of Whirlpool - North America Michael A. Todman - Director and President of Whirlpool International Operations Larry M. Venturelli - Chief Financial Officer

Sam Darkatsh - Raymond James & Associates, Inc., Research Division Joshua Pollard - Goldman Sachs Group Inc., Research Division David S. MacGregor - Longbow Research LLC Eric Bosshard - Cleveland Research Company Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division Michael Jason Rehaut - JP Morgan Chase & Co, Research Division

Good morning, and welcome to Whirlpool Corporation's Third Quarter 2012 Earnings Release Call. Today's call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Senior Director of Investor Relations, Joe Lovechio.

Thank you, and good morning. Welcome to the Whirlpool Corporation Third Quarter 2012 Conference Call. Joining me today are Jeff Fettig, our Chairman and CEO; Mike Todman, President of Whirlpool International; Marc Bitzer, President of Whirlpool North America; and Larry Venturelli, our Chief Financial Officer. Our remarks today track with the presentation available on the Investors section of our website at whirlpoolcorp.com. Before we begin, let me remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Whirlpool Corporation's future expectations. Our actual results could differ materially from these statements due to many factors discussed in our latest 8-K, 10-K and 10-Q, as well as in the Appendix of this presentation. Turning to Slide 3. We want to remind you that today's presentation includes non-GAAP measures. We believe that these measures are important indicators of our operation as they exclude items that may not be indicative of or are unrelated to results from our ongoing business operations. We also think that the adjusted measures will provide you with a better baseline for analyzing trends in our ongoing business operation. Listeners are directed to the Appendix section of our presentation, beginning on Slide 31 for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. With that, let me turn the call over to Jeff. Jeff M. Fettig: Well, good morning, everyone, and thank you for joining us today. Let me start by noting that we delivered significant improvement in our third quarter operating results driven by our North America, Latin America and Asia regions. Year to date, we're delivering on our commitments to expand our operating margins, and we've significantly strengthened our free cash flow. In fact, these results marked the third consecutive quarter of year-over-year operating margin improvement this year. Overall, our actions have more than offset higher material cost inflation and unfavorable foreign currency. Our cost and capacity reduction initiatives are on track to deliver the expected $200 million of cost savings benefits for this year. And very importantly, we continue to see strong price and mix improvement during the quarter driven by a strong cadence of new product introduction and our strong global consumer brand portfolio, which is enabling us to mix up in most markets around the world. As a result, we're increasing our full year ongoing business operation guidance for EPS to $6.90 to $7.10 per share and our free cash flow to between $125 million and $175 million. Turning to Slide 6. You'll see that overall revenues were up 5%, excluding the impact of foreign currency and BEFIEX. This revenue growth was driven by our strong price and mix. Our diluted earnings per share from ongoing business operations improved 6x what they were last year to $1.80 per share compared to $0.29 in the prior year. And our underlying free cash flow improved significantly year-over-year from our ongoing business operations. Turning to Slide 7, you can see our industry demand assumptions for the year. Globally, we continue to expect second half industry demand to improve from first half levels. And although while industry demand remains in many markets relatively weak, we are optimistic about some growth that we're seeing in some particular markets, and particularly trends that we're seeing in the U.S. housing market. Additionally, our ongoing business performance shift continue to improve because of our strong pipeline of new product innovations coming to the market and the benefit of our cost savings initiatives that we've already announced. On Slide 8, you can clearly see our positive price and mix and margin expansion trends over the last several quarters. Year-to-date, we made very strong progress towards our full year margin, and we fully expect to reach our full year operating profit margin guidance of between 5.5% and 6%. At this point in time, I'd like to turn it over to Marc Bitzer for his review of our North America operations. Marc R. Bitzer: Thanks, Jeff, and good morning, everyone. Let me begin by reviewing North America's performance in the third quarter. Starting on Slide 10. Both revenues and margins for the region grew during the quarter. And our strong operating margins exceed 9% for the quarter and were driven by price and mix. Our continuous investment in innovation, coupled with strong market execution, drove significant product improvement. Turning to Slide 11. You see the net sales of $2.4 billion increased slightly over 2% from last year, driven by favorable price from lower volumes. And as we've previously stated, our priority is margin improvement. We have gained share in the higher price segment across most products, driven by innovation, as evidenced by our positive mix. Our ongoing business operating profit was $227 million, which more than tripled as compared to $62 million in 2011. This means overall ongoing business operating margin was up almost 7 points year-over-year. In addition to price and mix, the year-over-year improvement was also driven by the benefit of our cost and capacity reduction initiatives. Turning to Slide 12. You can just see just one example of a new innovation that is driving improved price and mix. The photo shows our new Whirlpool brand, White Ice Collection. Lastly, as I mentioned on our last call, shown on Slide 13. It is important to point out that there is good upside for the business as underlying industry demand improves. And as we've already stated during our last earnings call, we continue to see some early but consistent signs of housing recovery, which makes us increasingly optimistic about a more structural demand recovery. And now, I'd like to turn it over to Mike for his review of our international operations. Michael A. Todman: Thanks, Marc. Turning to Slide 15. Overall, our international operations were led by strong performances in our Latin America and Asia regions, which more than offset the effect of unfavorable currency and the weak economic environment in Europe. We delivered improved price and mix across our international business, as we continue to launch consumer-relevant innovations in every product category around the world. If you turn to Slide 16, you'll see our Latin America third quarter results. Sales of $1.2 billion were flat to the prior year. Excluding currency and BEFIEX, sales increased more than 21% on higher volumes and improved mix. Operating profit for the quarter totaled $118 million compared to $147 million in the prior year. The year-over-year decline was driven primarily by lower monetization of tax credits. On an adjusted basis, excluding Brazilian tax credits, our operating profit for the quarter totaled $105 million compared to $85 million, a 24% improvement year-over-year. We saw good market demand in Brazil and across the entire Latin America region. Turning to Slide 17. We gained share in our core 3 appliances with a positive price and mix, offsetting the adverse effects of higher material cost. For our Latin America business outside of Brazil, we had a record operating profit across the region and our adjusted margin increased more than 1 point. Turning to Slide 18. During the quarter, we faced continued weak consumer demand across the Eurozone, negative conversion due to reduced production, unfavorable currency and high raw material cost. Our Europe, Middle East and Africa sales declined to $703 million, with unit shipments down 9% compared to the prior period. Excluding the impact of currency, sales decreased approximately 10%. The region had an operating loss of $35 million compared to the $12 million loss in the prior year period. Given the environment, we have taken appropriate actions to position the business for a return to profitability during the fourth quarter as we realize benefits from our cost and capacity-reduction initiatives, benefit from higher seasonal volumes during the fourth quarter, improved price and mix within key countries and across our distribution, supported by new product innovations and realize the benefits from our ongoing productivity initiatives, which will ramp up in the fourth quarter. We will further accelerate these actions to ensure we move to a profitable position despite a continued negative environment. Our third quarter results in the Asia region are shown on Slide 19. During the quarter, we gained market share in India and expanded our margins across the region despite weak consumer demand and unfavorable currency. Net sales decreased 6% during the quarter to $201 million, down from $215 million in the prior-year period. Excluding the impact of currency, sales increased 2%. The region's operating profit was $7 million, up from $4 million in the prior year. In local currency, we are on track for a record year of performance in India despite lower industry volumes and higher material costs. Slide 20 shows the continued strong cadence of new international product launches and design awards during the quarter. Now, I'd like to turn it over to Larry Venturelli. Larry M. Venturelli: Thanks, Mike, and good morning, everyone. As Jeff mentioned and as shown on Slide 22, given our strong year-to-date operating performance and trends, entering the fourth quarter, we are increasing our annual ongoing business operations EPS range to $6.90 to $7.10 per share compared to the previous range of $6.50 to $7. We're also increasing our free cash flow guidance to between $125 million and $175 million. As you can see on Slide 23, we continue to expect the 5.5% to 6% ongoing operating profit margin for the full year. This translates into a 300 basis point improvement. Our ongoing operating profit margins increased to approximately 6% during the third quarter and is expected to continue increasing in the fourth quarter, given higher seasonal volumes, benefits from our cost and capacity-reduction initiatives and continued sequential productivity improvement. Our year-over-year margin improvement drivers for Q3 were price/mix, which was up approximately 4 points and is trending higher than original expectations. Driven by both cost-based price increases, as well as favorable mix, we continue to expect positive year-over-year price and mix for the balance of the year. Another positive margin contributor has been benefits associated with our cost and capacity reduction program, contributing over a point to our year-over-year margin improvement during the quarter. Material cost inflation was approximately $60 million in the third quarter. While we did benefit from sequential improvement in productivity from the second quarter, our productivity was somewhat impacted due to continued weakness in demand, primarily within Western Europe. Now turning to free cash flow on Slide 24. Consistent with our expectations, we did have cash outflow through the first 9 months of the year of $435 million, significantly better than the $740 million of outflow last year. Adjusting for items impacting comparability, our underlying ongoing business cash flow improved by over $450 million compared to this time last year. Let me spend a couple of minutes on some general topics embedded in our third quarter results and 2012 guidance. Before I do that, as a general reminder, Slide 33 and 34 in the Appendix will provide you with a reconciliation of our reported GAAP operating profits and EPS to ongoing business operations for 2012 and 2011. Included in this table, our third quarter 2012 adjustments to drive our ongoing business operation performance, removing the impact of restructuring, tax credits, as well as the impacts from legal resolutions and an adjustment to normalize the third quarter tax rate to reflect the rate of 25% which is consistent with our full year tax rate assumption. Turning to the financial summary on Slides 25 and 26, let me provide a couple of important observations. It's important to note that net sales in constant currencies and excluding, BEFIEX credits, were up approximately 5%. Monetization of BEFIEX tax credits were $13 million compared to $62 million last year as a result of the IPI tax holiday in Brazil. As of September 30, $202 million of credits remain. The IPI tax holiday in Brazil was recently extended to December 31, and we now expect to monetize approximately $40 million to $45 million for the full year. Regarding interest and sundry. In the third quarter, we resolved some nonrecurring legal items. The net impact of these, $22 million in expense was recorded in interest and sundry for the quarter and is adjusted from ongoing business operations to provide better clarity of our underlying business results. Slide 27 illustrates our cost and capacity reduction charges. The program is progressing very well. We are on track to deliver $200 million of benefit in 2012, with an additional $200 million of benefit in 2013. In closing, 2012 is shaping up to be a very solid year of margin improvement. We have a vast majority of our legacy legal liability payments behind us, and our underlying operating cash flow is strong. During the fourth quarter, the company completes its annual planning process, including contract negotiation with key stakeholders. Consistent with prior year's practice, we will provide guidance for 2013 during our next conference call in late January, early February. Now I'll turn it back over to Jeff. Jeff M. Fettig: Thanks, Larry. Let me sum up by turning to Slide 29 and just highlight the following points. Again, we are delivering our margin expansion and cash flow commitments for the year. We continue to increase our cadence of new product innovation in the marketplace. We are realizing the benefit of our cost and capacity reduction initiatives, and we're beginning to see some positive growth trends, in particular recent U.S. housing trends. So overall, we're pleased with our progress, and we expect to finish this year strong. Given our improving operating margins, we're upwardly revising our ongoing business operations and free cash flow guidance. And as we enter the fourth quarter, we are on track for the year to realize our full year operating margin target of 5.5% to 6%. I believe this will, we will achieve a record year for margin expansion across our global business. And we certainly believe at this point in time we are on track towards delivering our midterm 8% operating margin target. As Larry mentioned, we're not giving 2013 guidance today, but we do fully expect our positive momentum to carry over into 2013 as we realize an even greater benefit from our restructuring and cost initiatives, as well as a continued strong cadence of new product introductions. Finally on Slide 30. I'm increasingly confident in our opportunities that we see to grow in our business. These opportunities for us will come through our investments and consumer-relevant innovations. We see appliance growth opportunities in both developed and emerging markets. We are making good progress in expanding into higher margins, faster-growing adjacent businesses, and we continue to strengthen our global brand portfolio. We continue to make progress on our roadmap for growth. And more importantly we're performing at levels, and we'll continue to increase those levels to create value for our shareholders. So with that, I'm going to close in on our formal remarks and open this up for questions.

[Operator Instructions] We'll take our first question from the site of Sam Darkatsh with Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Two questions. First off, market share in North America and Europe look to be sharply lower. I know some of that's by design. When do you expect that to stabilize? And how important is it to you as opposed to incremental returns on capital? And the second question would be regarding sequential price versus mix. Can you throw a little color, specifically around the world, as to what you're seeing sequentially with price and mix as opposed to them combined? Marc R. Bitzer: Sam, it's Marc Bitzer. Let me try to answer both questions for North America. First of all on market share, and let me give you a broader context. I mean we've said all along, I think over the last 5 or 6 earnings calls, that our focus is on restoring operating margin. And why? Very simply because it doesn't make sense to push for volume when you have sub-par margin. I think it's more than fair to say what we've delivered on that promise. We outperformed our competitors by a long shot in our operating margin in North America. With that in mind, our share loss actually is fairly small. And I think more important, and I'm coming to you coming on by line is if you break down the component of the share movement. We actually gained share in the higher end segment. That is evidenced by the strong, I mean with the exceptionally strong product mix, price/mix which we got in Q3. And obviously you wouldn't get that kind of mix if you don't gain share in the higher end segment. At the same time, and that's by design element, we kind of -- we did not go up to a certain unprofitable low end market shares. [indiscernible] by design, and I would say that has certainly stabilized now. So I don't expect -- even as you know we don't give forward guidance, but I would consider that right now as a stable market share, and we're pretty comfortable with the levels right now. Pretty good. On your second part of your question, the sequential pricing. Actually, as Larry indicated, the global price in Q3 was 4%, slightly above 4% year-over-year. North America was quite a bit above that, which basically also tells you sequentially we were stable, which I would say given that we've kind of -- going to anniversary of the price increase of last year is a very strong performance. And again, as I mentioned before, it's largely mix driven, because obviously the like-for-like price impact basic levels of [indiscernible] anniversary for price increases. Larry M. Venturelli: Sam, let me address your first question on Europe market share. We did lose some market share, although not significant in Europe. But again, it's clearly focused on making sure that we go after the share that really counts for our business. And so we don't expect that to continue. As a matter of fact, what we saw in September is that we started to recover share in key categories that we wanted to, and we expect that to continue as we go into the fourth quarter. In terms of your second question on sequential price/mix. For the overall international region, we were stable. And then region to region, it was more or less stable in most of the regions I think slightly down in Europe, but everywhere else it was stable. Jeff M. Fettig: Yes, Sam. From both Marc and Larry's comment from a global perspective sequentially, price/mix all look very, very well. We did have some nice margin improvement coming from restructuring productivity between Q2 and Q3. And as far as what we'd expect in Q4 due to the seasonality of the business, we'd expect the mix-up again in Q4.

Our next question is from the site of Joshua Pollard from Goldman Sachs. Joshua Pollard - Goldman Sachs Group Inc., Research Division: My first one is on your 2013 restructuring benefit. I sort of think of your productivity and restructuring in 2 separate buckets. There's the ongoing piece, which is pretty hard to see in your margins. And then there's what you guys have done over the last year, which is obviously showing up in your margins. When you say restructuring for 2013, the benefit to be $200 million, which of those 2 buckets does it fall into? Should we see that in your margins? And if so, in what regions? Jeff M. Fettig: Josh, this is Jeff. Absolutely. And we communicated it in 2 buckets. The restructuring benefits relate to the announcements we made 1 year ago at this time, where we said we were going to reduce our fixed cost. We were going to take out unprofitable capacity, and that we would deliver $200 million in net benefits to our P&L in 2012 and another $200 million net benefits to our P&L in 2013. And that's still the plan, and we're on track to do that. Separate from that is our ongoing net cost productivity, which takes into account material inflation, et cetera, et cetera, and then the productivity actions that we take to offset that. This year we continue to have, given the GDP around the world, very high raw material cost inflation. We had very high salary and benefits and electricity and things like that around the world. We did have a good -- we are having a good year of gross productivity. But that's an area where we have not been able to fully offset that inflation in our net productivity. Going into next year, we will see when we give guidance in late January, early February. We'll give you our assumptions on that but typically, we would try to offset all of that and have positive net productivity, particularly if we had stable or modestly growing volume. Larry M. Venturelli: And then Josh, this is Larry. As far as the restructuring in the margin. An approximation, you'd see about 85% of restructuring flow-through. Gross margin, 25% -- 15% would be within the SG&A area. The regional split, 75% North America. Europe would be 15% to 20%, and the rest of the world will be the balance. Joshua Pollard - Goldman Sachs Group Inc., Research Division: My second one is on your volumes by end market. I guess this question is going to be for Marc. Can you talk about your volumes in the contractor channel versus retail? And then within the retail, can you talk about how long it's going to take you guys before you lap sort of the market share losses that you guys have blatantly taken this year? In other words, should we expect relative to AHAM 6 that your retail volumes are sort of 5 to 6 points below the industry for the next 4 quarters? Or is it some shorter period of time? Marc R. Bitzer: It's Marc Bitzer. First of all, when you look at our Q3 volumes, there's one additional comment which we need to make. There was a specific impact due to an exceptionally weak Mexican market, which had an impact on the overall quarter. But having said that, our volumes also in U.S. have been down in Q3. Now to answer your question about the split of retail versus contract if you want to make that simplification. Obviously, to date the weight of so-called contract to build the channel is significantly lower [indiscernible]. We're talking about a factor of 3. Now what has happened in the meantime is, I would say, significant strength in our position in that contract to build the channel and are therefore, in our view, very well positioned to an upturn in that market. Given the recent trends in the housing market, it is yet too early to see that impact in our numbers. Yet, you see an increase in the building contract channels, but it's not to a magnitude that has had significant weight in our overall business. Having said that, with ongoing good news in the housing market, I expect that positive momentum to more and more show up in our overall numbers. Joshua Pollard - Goldman Sachs Group Inc., Research Division: What was the difference in the growth between retail and contractor for the quarter? Marc R. Bitzer: What I said, Josh, is that the contract channel in terms of impact or size [indiscernible] is down by a factor of 3 pretty much versus the 6. I mean we're talking about a very, very significant market. Jeff M. Fettig: Year-over-year, Josh, absolutely we're seeing increase in the contract shipments year-over-year in strong double digits as we have all year. But I think Marc's point was it's just a small part of the total market.

We'll move next to that site of David MacGregor with Longbow Research. David S. MacGregor - Longbow Research LLC: I guess you still have a few billion dollars of unrecovered cost inflation over the past decade. Just what's the opportunity to continue leveraging innovation to get pricing and rebuild margins? I guess that'll be the first question. Jeff M. Fettig: David, we absolutely agree with you. Despite generally difficult economic conditions around the world, we continue to see every day the consumers pay for real innovation. And that's why our focus is and has been all through this downturn -- we never have stopped to reduce our level of investment in new product innovation or R&D. If anything, we've been increasing it of late. So you would expect the cadence of innovation from us to continue and probably at an increasing rate. Because that is -- that with strong brands is how you can sell and create value in our business, at least in our business model. But we don't take our productivity. That's why a year ago we said we did not know when global demand levels would return or what the new norm was. And that we were going to reduce our fixed costs by $400 million to adjust to this -- today's level of demand and expand our operating margins. And we'll have that again $200 million, which is almost a full point or is a full point going into next year that we fully expect to realize. And then lastly, I'd add productivity. Again, even during this downturn, prolonged downturn and weak global GDP growth, we've had tremendous amount [ph] of material cost inflation. There are times, like we did this year and some last year, where it is imperative that we go out with cost-based price increases as we have. In some high inflation markets of the world, we even recently announced new price increases. So we're willing to do that. I think going back to Marc's question, we don't see a lot of value in chasing low end in our view profit, destroying pieces of the business when we have opportunities to invest in new product innovation that we get paid for. So we're committed. We're by no means done in our operating margin target that we laid out a couple of years ago for 2014, say, plus percent operating profit. We're still committed to that, and we see ample opportunities around the world to be able to achieve that. David S. MacGregor - Longbow Research LLC: I guess the question is just with -- in light of the innovation that you bring into market, can you -- does that give you the means to achieve pricing despite a flat raw material market? The flat raw material market should continue fairly couple of years. Is innovation enough to allow you to continue to improve your pricing as you go and recover a couple of billion dollars of unrecovered cost inflation? Jeff M. Fettig: Well again, I think a couple billion that you talked about, it is true that's what we absorbed. I’ll put it a different way. I do believe we can sell our new product innovation at attractive value-creating levels which will, in fact, continue to drive us to mix up. So I -- we are, nowhere in the world today are we satisfied with our operating margins. So we're taking actions on both new product innovation in parts of the world and new pricing, but certainly also focusing on cost and productivity to ensure that we have a pipeline of margin expanding activities in our system to be able to deal with whatever kind of environment we see. David S. MacGregor - Longbow Research LLC: Second question, just last question. You're talking about the $200 million of restructuring benefits and creating net P&L benefit of $200 million a year for 2 years. If we get some kind of a cyclical recovery in 2013, presumably everybody's going to beef up their ad spend, and I'm just wondering how much of that $200 million for 2013 you think you can actually take to the bottom line versus having to redeploy into a brand support? Jeff M. Fettig: Well, we've already been beefing up our brand in new product innovation investment. And as we have more and more new products to do, we'll continue to do that. So again, we're not giving 2013 guidance today. But the flip side of -- as we see recovery, we're going to have volume leverage as well. So I think there are a number of levers available to us in our business to both invest the right way to create value and to fund that while expanding our operating margins.

We'll move next to the site of Eric Bosshard of Cleveland Research. Eric Bosshard - Cleveland Research Company: Two questions. First of all, the increase in the full year guidance, it looks like Europe, you're probably going to make less money than you originally expected. So I'm interested in the moving parts within the increased guidance. That's my first question. Jeff M. Fettig: Yes, Eric. If you look at where we are year to date and again, we talk about continued seeing strong momentum as we finished the year on a full year basis, Europe is lower and North America is higher. And everywhere else is about the same. Eric Bosshard - Cleveland Research Company: And then secondly with North America, you've been focused this year on -- focused greater on profitability and less on volume and your retail partners have gone along with that. I'm curious if you think this is sustainable for an extended period of time. How you think about that as we look into 4Q and even into 2013? Marc R. Bitzer: Eric, it's Marc Bitzer. Again, let me reiterate our focus has been on margin expansion. I think the big difference in Q3 compared to prior quarters, it's more than just price/mix, but we also have now price/mix and productivity and part of that coming from the structure. I would say our margin expansion is now in better footing than it was probably in Q1, Q2, which as you know also speaks volumes about sustainability. And our ability to keep pricing up on several sequential quarters and getting cost gives us quite a bit of confidence to make it sustainable. Jeff M. Fettig: And to add to that too is our trade partners certainly expect and benefit from our new product innovation. They expect us and benefit for -- as investing in our brands, which brings customers in their doors. Selling the better mix of product for them is as helpful to them as it is to us. Eric Bosshard - Cleveland Research Company: And then lastly, the assumption for 4Q North America is an improvement in volume relative to the year-to-date and relative to 3Q. Interested in sort of what you're seeing in the business that gives you some confidence and a little bit of a step-up in volumes in 4Q? Marc R. Bitzer: Eric, it's Marc Bitzer again. As you've seen, we've kind of kept our full year volume/mix [indiscernible] or industry guidance on the same level [indiscernible]. If you mathematically would take the midpoint, that would give you a 3.5% to 4% growth. I think what is [indiscernible] affecting our guidance is at the lower end of that range, which is probably making the 1% or 2% growth in Q4. And that's pretty much what is the most probable scenario. We continue to see a lot of volatility in the market. But right now we're at, as I've said before, coming from the margin and cost take-outs, we're in very good position for Q4. Larry M. Venturelli: And the other thing I'll add is just globally for the company, Q3 to Q4. Volumes, in general, are around 15% sequentially. Jeff M. Fettig: Normal seasonality.

We'll go next to the site of Ken Zener with KeyBanc Capital. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: A lot of questions already asked. If you could maybe give us a specific update on U.S. Home Depot, the pilot program. Give us a comment on Brazil, relative to your margin outlook as it relates specifically, I believe, to one of your competitors. Perhaps losing a land position to make a factory. That's the first question. Marc R. Bitzer: Ken, it's Marc Bitzer. Let me first take your Home Depot question. As you know, we have a long-standing quality of not getting specific of trade partners' strategies or actions. But obviously, it's a well-known fact that we kind of participate with the Whirlpool brand, in addition to our success with Maytag and Amana business at Home Depot, in what Home Depot put out as a pilot, what they called the [indiscernible]. I would say the only comment which we can make, we're actually very pleased with the progress so far. And it's in line or even slightly above our expectations so far. Jeff M. Fettig: And Ken to answer the question on Brazil. We feel good about our continued margin expansion in that region. We're expecting to see that progress continue in the fourth quarter. Our volumes have been very strong. As you can see in the core 3 appliances of the strategy that we deployed all year is working. And frankly, I won't speculate on what our competitors will or will not do. What we're trying to do is execute our strategy, have the right innovation in the market and ensure that consumers want our products [indiscernible]. So far, it's working. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Okay. And then I guess to the extent that you said the volume shortfall, while partly from Mexico was certainly related to walking away from some of the low end share. Marc, I believe you said that those share losses had stabilized. Would that imply to the extent you got margin growth in the third quarter due to mix, you're now not believing off share [ph] in lower margin product. Does that imply sequential margin pressure in North America? Marc R. Bitzer: Ken, it's Marc. And obviously, it's a number of question embedded in 1 big question. On the volume, Mexico had a very peculiar and very soft market, I would say, year-to-date. It's kind of [indiscernible] emerging market pattern, which we expect to stabilize going forward. That had a very significant impact or had a significant impact in our overall Q3 unit business. My comment on the low end was referring to -- and that is again the context of margin expansion. We focus on selling on innovation, particularly the higher end of the market. And we also had a significant mix growth. At the same time, we kind of -- we did not aggressively go after some low end unprofitable market segment. And that's why we vacated [ph] some share. I would say that action is behind us. It's pretty much stabilized. I don't -- from that natural trend, we don't expect a big change, and we can't comment and won't comment much about Q4 specifics. But I don't expect that massive change in market share trend so far. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: All right. I guess, and then just my last question would be taking a step back given near 600, 700 basis points margin move in the U.S. How much of the ITC petition -- there's 2 of them, obviously the refrigerator being appealed; but the current tariff in place on washers. How should we think about perhaps benefits you're already receiving from these petitions, relative to your internal actions related to price and not willing to back up? How much of the tariff benefit has already been, perhaps, incorporated? Marc R. Bitzer: Ken, it's Marc again. Simple answer is 0. I don't think we have any benefit in our current Q3 performance, which also means if there's a positive outcome, which we count on, that should be outside.

The next is the site of Michael Rehaut with JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: First question on North American margins, obviously great performance and congrats on that. Looking at the performance sequentially though, up about 180 bps, excluding the gain from 2Q on slightly lower revenue and I guess part of that as you've been talking about is mix. Is that kind of the biggest driver, in terms of the sequential improvement in margin profitability? Or are there incremental benefits coming from price, or even perhaps on a sequential basis any benefit from lower raw materials? Marc R. Bitzer: Michael, it's Marc Bitzer again. Just on your question with sequential margin. There's 2 components which you've got to look at. One is the pricing component as such, which pretty much held as an impact. However, the composition of the pricing impact has changed. And Q2 was a little bit more like-for-like and less mix. And now, it's a whole lot more mix and less like-for-like. And that's just the nature of us going through the anniversary of price increase from last year. The second component that has changed is we see cost and restructuring benefits in Q3 to a higher or much higher extent than we saw in Q2. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Okay. And also I guess looking at Europe, Mike, if you could shed some light, at least on stated revenue basis, revenues have inched up a little bit in 2Q and 3Q coming off of the first quarter. Yet margins have obviously deteriorated. Just kind of trying to understand it sequentially, in terms of -- because certainly, you've been getting some restructuring benefits from a cost side this year. But it seems like the profits have been going the other way despite higher revenues. So what's been going on there, and what's behind the confidence behind profitability in the fourth quarter? Michael A. Todman: Yes, first, Michael, just to kind of look at, although revenues have been going up, we had to take out fairly significant amount of production. And just from a seasonal perspective, you normally see kind of increases in volume quarter-over-quarter. But still, if you look at the third quarter, revenues were down about 10%. But why we're confident going forward is both on the restructuring side, in terms of the benefit as you know takes a little bit longer to ramp those up. We're going to see more of those in the fourth quarter. We see more productivity coming in the fourth quarter. We have higher seasonal revenues in the fourth quarter and we already saw -- we were already profitable in the month of September, and we see that continuing in October. So we're pretty confident that we've -- that all of the actions that we've been taking very aggressively are really starting to work. And we're beginning to see that turn in Europe. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Okay. One last question if I could sneak it in about bigger picture with product innovation. And Jeff and Marc, you've both highlighted that the shift to the higher end products, I think pitting, is that something -- I assume that's something that obviously you're counting on into '13. Just trying to get a sense of, I guess particularly on the mix side, the mix benefit, has that something that's been kind of just emerging over the last couple of quarters and you'd expect that positive mix shift in North America to flow over into '13? And if there's anything additional in terms of perhaps a volume benefit relative to the market in general from product innovation. And I guess both of these comments, I'm really centering around North America here. Jeff M. Fettig: Michael, this is Jeff. I would say this is a trend we've seen for the last several years really, with the exception of late 2008, early 2009. Consumers buy that. And given the average points last for 10-plus years, and that we are still clearly in a replacement market. When people go into stores and see our products, they see things very dramatically differently than they did 10 years earlier when they purchased whatever product we're replacing. And that value's relevant. Yes, there is a small portion of the market who can only buy the affordable -- from a price standpoint, opening price point product, but that's very low in our market compared, certainly, to other markets around the world. And what we've seen with again, only a small, less than a half a year interruption is that when you bring value to the marketplace in the form of new product innovation, given consumers' choice, they will mix themselves up because the value they're receiving is a great value. It's a value in terms of performance of the machine, the energy efficiency, the water efficiency, the design and on and on and on. So I don't see this as a 2012 trend. I see this as a structural trend. And our view is, is to increase our cadence in new product innovation, continue to offer great values in the marketplace, supported by consumer demand and strong brand preference brands and that -- and we have a portfolio that's made to mix up. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Larry, one quick question on pension. I noticed that the cash flow guidance has benefit contributions or pension contributions up to $200 million versus previously up to $250 million. Is that something that also kind of works through the income statement in that perhaps there was less "pension expense," or if you could just kind of describe what's -- what you expect to work through the income statement this year versus perhaps previously? And where you think pension contribution could be in '13 even? Marc R. Bitzer: Yes, a couple things, Michael. We did adjust the pension contributions from up to $250 million to $200 million. That's to do with the new legislation. It has no P&L impact whatsoever. The cash change that you saw, we did have the higher operating performance. You mentioned the lower pension cash, a little bit lower restructuring cash. But I also mentioned in my prepared remarks that we have lower BEFIEX credits. This has less cash. And we have these legal resolutions that also occurred in Q3. We'll have a little bit slightly higher working capital than we originally expected. We're taking out a lot of working capital to generate cash. So net-net, operationally the business is doing well from a cash perspective. From a pension expense perspective, again, both in the U.S. and foreign, we have about $50 million of pension expense. We'll provide you with additional guidance when we talk next time regarding expense. The new legislation will increase our pension expense by about $12 million next year, but I don't expect a significant increase above that. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Not even with the lower interest rates? Marc R. Bitzer: Remember, our pension plans are frozen. So we don't, on the expense side, have a lot of impact from pension for the interest rates. From a contribution perspective, we would expect to be -- to pay less cash next year. Jeff M. Fettig: Well listen, everyone, we're going to conclude the call here. Thank you again for joining us today, and we look forward to talking to you early next year.

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