Whirlpool Corporation (WHR) Q4 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

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

Good morning, and welcome to Whirlpool Corporation's Fourth Quarter 2012 and Year-End 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 Fourth 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 operations 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 41 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: Good morning, everyone, and thank you again for joining us today. As you saw in our earning release from earlier this morning, our actions in 2012 have delivered a record year of margin expansion. If you recall, in October 2011, we outlined several business priorities and accompanying actions that we said we would execute throughout 2012 to improve our operating margins and lower our fixed cost. These included realizing cost-based pricing actions, an increased level of new product innovation driving enhanced mix, reducing our fixed cost structure and delivering ongoing cost productivity from our global operating programs. And as a result, this last quarter marks the fourth consecutive quarter of year-over-year ongoing business operations margin expansion and, for the full year, generates strong levels of underlying free cash flow. These actions and this momentum, combined with favorable trends that we see in U.S. housing and growth opportunities that we see in emerging markets, have created positive momentum as we have headed into 2013. Our full year results are summarized on Slide 6, and you'll see overall revenues were up approximately 3%, excluding the impact of foreign currency and BEFIEX, as our strong price and mix continued throughout the year. And in line with our previously increased guidance, diluted earnings per share from ongoing business operations improved $5 per share to $7.05 for 2012 compared to $2.05 in the prior year. Our underlying cash flow generation from ongoing business operations also improved significantly year-over-year by over $550 million. Turning to Slide 7 and 8, we highlight our business priorities for 2013 and how we expect them to impact our results. These priorities are well aligned with our long-term growth strategy and build upon the success and the foundation we've built in 2012. For the year, we expect our ongoing business performance and margins to continue to improve as we launch new product innovations, accelerate growth and higher-margin adjacent businesses, continue our expansion in emerging markets, realize additional benefits from our cost and capacity reduction initiatives and execute our ongoing cost productivity programs. We believe these positive drivers will more than offset the expected increases in material and oil-related costs. We also expect to see positive global demand, as we outlined on Slide 9. In the U.S., we expect demand to be up 2% to 3% for the year, as we are increasingly optimistic about a more structural demand recovery, and we do continue to see very positive trends in U.S. housing. In Brazil and other Latin America countries, we continue to see strong underlying economic fundamentals, and we're forecasting demand growth in the region from 3% to 5% for the year. In Europe, we're forecasting a flat industry for the full year as consumer confidence in the Eurozone remains weak within this still challenging economic environment. And finally, we expect a modest recovery and modest growth of 3% to 5% for Asia across the region for the full year. Finally, turning to Slide 10, we continue to execute these actions to expand our margins with enhanced price/mix through innovative products and our cost and capacity reductions. Combined, these actions, along with the revenue growth, we expect to deliver GAAP EPS in the range of $9.80 to $10.30 per share and overall positive free cash flow of $600 million to $650 million. In our ongoing business operational guidance for 2013 is $9.25 a share to $9.75 per share, and our cash flow from our ongoing operations is forecasted to be $950 million to $1 billion. So at this point in time, I'll turn it over to Marc Bitzer to review our North America operations. Marc R. Bitzer: Thanks, Jeff, and good morning, everyone. Let me begin by reviewing North America's performance in the fourth quarter, starting with Slide 12. Our consistent and disciplined execution of the actions we laid out last year resulted in the fifth quarter of year-over-year ongoing business operations margin improvement. And our operating margins exceeded 9% for the quarter. A continued investment in innovation and a strong market execution drove a significant part of the improvement. Cost productivity was also a positive driver as we more than offset material cost inflation in the fourth quarter. Turning to Slide 13. Net sales of $2.5 billion decreased 3% from last year as a weak economic environment continued in the U.S. amid uncertainty with government policies. Concerns over consumer reactions to the fiscal cliff loomed during the month of December, and retailers responded by maintaining low inventory levels, resulting in lower industry selling during the quarter. As we have previously stated, our priority has been and will be margin improvement. We have increased our balance of sale in the higher-priced segments across most products, driven by innovation as evidenced by our very strong positive mix. Ongoing business operating profit was $233 million, which more than doubled as compared to $106 million in 2011. Overall, ongoing business operating margin was up over 5 points year-over-year. In addition to a very strong price and mix improvement, the year-over-year progress was, to a lesser extent, driven by the benefit of our cost and capacity reduction initiatives, as well as our ongoing cost productivity program. Turning to Slide 14. You can see just a few examples of our innovative products. The small domestic appliance you see here is just an example of how we're growing our adjacent businesses. Let me take a moment and talk briefly about North America in 2013 as shown on Slide 15. We will remain focused on actions driving margin expansion, including growing our high-end margin core and adjacent businesses, continuing to deliver cost and capacity reduction initiatives and realizing positive net cost productivity. As Jeff mentioned earlier, we expect the U.S. industry to increase 2% to 3% in 2013 as the market demand grows throughout the year. We believe that consumers will remain cautious in the early part of the year as fallout of fiscal cliff negotiations are understood and budget debates continue in Washington. As we continue the year, we'll remain optimistic that the home building recovery and remodeling will continue to strengthen its momentum and that consumers will gain confidence as federal government policies become clearer. Also, the normal replacement cycle of appliance continues, which is particularly important given the peak appliance industry years that occurred before the recession. Let me just close with some comments on the recent ruling by the ITC on our anti-dumping petition. Last week, the U.S. International Trade Commission, or ITC, confirmed an unanimous 6-0 vote that unlawful pricing by Samsung and LG caused injury to the U.S. domestic appliance industry. The positive vote was the ITC's final ruling in the anti-dumping investigation related to clothes washers from South Korea and Mexico. As a result of the vote, the U.S. government will impose trade remedies on the imports of the unlawfully traded washers. The decision is a great victory for the U.S. appliance industry and is an important stride towards enforcing laws that enable a balanced, competitive marketplace for U.S. manufacturers, employees and customers. It is not yet clear how the competitor will respond to this decision and therefore, it is difficult to fully gauge the commercial implications of this. However, we clearly said that in a level competitive playing field, we are very well positioned to win. With this in mind, this decision is clearly a net positive for Whirlpool. 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 17. Overall, our international operations were led by strong performances in our Latin America and Asia regions, as well as a return to profitability in Europe. We delivered improved price and mix across all of our international business as we continue to launch consumer-relevant innovations in every product category around the world. Productivity also drove favorable results as our ongoing cost productivity programs more than offset material cost inflation and currency for the quarter. If you turn to Slide 18, you'll see our Latin America fourth quarter results. Sales, excluding currency and BEFIEX, increased 14% on higher volumes and improved mix. GAAP operating profit for the quarter totaled $134 million compared to $155 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 $119 million compared to $96 million, a 24% improvement year-over-year. Improved price, mix and ongoing cost productivity programs more than offset the raw material inflation. Turning to Slide 19, we saw good market demand in Brazil and a share gain in our core 3 appliances, which are higher margin and contributed to our positive mix. I now want to highlight a few points regarding our Latin America region. On Slide 20, we compare a few economic indicators for 2 portions of our Latin American appliance business, Brazil and what we referred to as LAR International. As you can see, LAR International, which is made up of over 35 markets outside Brazil, is comparable to Brazil in size, GDP and number of households. Our appliance business in these markets is approximately 1/3 of the size of our appliance business in Brazil but has been growing over the past few years. Our Latin American international business continues to have a significant growth opportunity. In fact, we had record sales and operating profit in this portion of the business again this year. In summary, in addition to Brazil, we also have an opportunity for growth and strong margin contribution in many other countries in Latin America and the Caribbean. Slide 21 highlights the growth potential in our Latin American region, given current penetration rates of appliances in Latin America compared to the United States. Now turning to the fourth quarter results of Europe, Middle East and Africa on Slide 22, we returned to profitability in the quarter, driven by the actions we outlined last quarter. The region had an operating profit of $8 million compared to a $32 million loss in the prior year period. Favorable price/mix, the benefits of cost and capacity reduction initiatives and ongoing cost productivity positively impacted results. Our fourth quarter results in the Asia region are shown on Slide 23. During the quarter, we gained market share and expanded our margins across the region despite weak consumer demand, material cost inflation and unfavorable currency. Net sales increased 1% during the quarter to $203 million, up from $200 million in the prior year period. Excluding the impact of currency, sales increased approximately 4%. The region's operating profit was $7 million, up from $2 million in the prior year due to favorable price and mix and ongoing cost productivity. Slide 24 shows just a few examples of our new products in 2012. To continue to capitalize on the growth -- on the opportunities for growth, we expect to launch over 200 new products in our Latin America region alone in 2013. Our international priorities are outlined on Slide 25. In 2013, we expect to leverage new product launches and grow adjacent businesses, continue cost and capacity reduction initiatives and execute ongoing cost productivity programs. These actions, combined with stabilization in Europe and growth opportunities in emerging markets, have us well positioned to perform in 2013. Now I'd like to turn it over to Larry Venturelli. Larry M. Venturelli: Thanks, Mike, and good morning, everyone. Let me start by making some comments on our fourth quarter results and then I'll transition to guidance for 2013. Beginning on Slide 27, you'll note that we continued to deliver on our margin expansion initiatives. For the quarter, we had approximately a 400-basis-point improvement. Ongoing operating profit margin increased to 6.5%, driven by price/mix, which is up approximately 4 points, and resulted from both cost base price increases as well as favorable mix. Another positive margin contributor has been benefits associated with our cost and capacity reduction program, which contributed about 1 point of year-over-year margin improvement. Material cost inflation was approximately $73 million. As expected, we saw cost productivity ramp up, more than offsetting our material headwinds, resulting in positive net cost productivity. Overall, our fourth quarter and full year margins were firmly on track with expectations. Now turning to free cash flow on Slide 28. We generated cash of $230 million compared to a free cash flow use of $55 million last year. Adjusting for items impacting comparability, our underlying ongoing business cash flow improved by over $550 million compared to last year, largely driven by an improved margin structure. Now let me spend a couple of minutes on some general topics embedded in our fourth quarter results. Before I do that, as a general reminder, Slides 42 through 45 in the Appendix will provide you with a reconciliation of our reported GAAP operating profit and EPS to ongoing business operations. As you can see, we have removed the impact of restructuring expense and BEFIEX tax credits, as well as the impacts from legal resolutions and an intangible impairment. Turning back to the financial summary on Slides 29 and 30, let me provide a couple of observations. It's important to note that net sales in constant currencies, excluding BEFIEX credits, were up approximately 2%. Monetization of BEFIEX tax credits were $15 million compared to $59 million last year. For the year, $37 million of credits were recognized and, at the end of the year, $184 million remain. Regarding interest and sundry expense, in the quarter, we recorded an expense of $17 million for antitrust resolutions. This is adjusted from ongoing business operations to provide better clarity of our underlying business results. Slide 31 illustrates expense associated with our cost and capacity reduction program. We continue to expect our total program expense to be approximately $500 million through 2013. The program is progressing very well, and we delivered $227 million of benefit in 2012 and expect an additional $175 million of benefit in 2013 for a total of $400 million, which is consistent with our previous guidance. As Jeff introduced earlier on the call, our 2013 guidance is shown on Slide 32. We expect to deliver annual GAAP diluted EPS in the range of $9.80 to $10.30 per share and annual ongoing business operations EPS of $9.25 to $9.75. Our 2013 free cash flow guidance is $600 million to $650 million. To provide further clarity and comparability between our GAAP guidance and our ongoing business operation guidance, we have included a table on Slide 33, which I'd like to provide some comments and perspective on. Consistent with 2012, we will continue to adjust GAAP EPS for both BEFIEX tax credits and restructuring expenses. As you recall, in October 2011, we announced the largest restructuring program in company history. Restructuring expense is expected to be $185 million or $1.75 per share this year. In 2013, we expect to monetize approximately $60 million to $70 million of BEFIEX tax credits. Lastly, recent legislation in the U.S. has extended the energy tax credit program. You'll note that our 2013 GAAP earnings guidance includes $120 million in energy credits. We will continue to exclude these from our ongoing business operations. Our 2013 ongoing tax rate guidance is 24% and 2013 GAAP tax rate guidance is 9%. And this primarily reflects the energy tax credits. On Slide 34, we highlight the main drivers of our expected year-over-year ongoing business operating performance improvement. During 2013, we expect 1 point of margin improvement from price/mix, largely driven from the mix impact of innovative new product launches and adjacent business growth; approximately 1 point of margin from our cost and capacity reduction program. We also expect to deliver approximately 0.5 point of margin expansion from our normal cost productivity, and this includes fully offsetting approximately $150 million to $200 million of year-over-year material cost headwinds. And finally, higher marketing and technology investments are expected to reduce margins by approximately 1 point during 2013. On Slide 35, you'll note we generated $230 million in free cash flow during 2012 and are guiding to $600 million to $650 million, largely driven by cash earnings. It is important to note that we now expect the bulk of our restructuring program cash outflow during 2013, as well as higher capital spending, which is expected to be $600 million to $650 million, compared to approximately $475 million in 2012. The underlying ongoing business operations free cash flow we are generating through operations takes into account short-lived cash requirements and continues to be close to $1 billion. Before I close, I want to discuss our short-term cash allocation priorities outlined on Slide 36, which include funding the business, including capital expenditures; debt maturities and pension contributions; return to shareholders; and M&A. We are planning to refinance our $500 million 5.5% long-term debt, which matures on March 1 in the public debt markets. Now I'll turn it back over to Jeff. Jeff M. Fettig: Thanks, Larry. Well, let me summarize. I'll start with Slide 38. Overall, we were pleased with the performance and progress that we made in 2012. We delivered record margin expansion across our global business, which in turn generated very strong underlying free cash flow. These actions, as I mentioned, combined with what we see are positive trends in U.S. housing and our growth in emerging markets, do position us well coming into the year. Our actions have clearly produced the expected results, and we remain committed to delivering at least 8% operating margins by 2014. Turning to Slide 39, I am confident in the opportunities that we see to grow the business worldwide. And these opportunities, in summary, will come through: appliance growth in new and emerging markets; our stepped up in investment in the consumer-relevant innovations; our expansion into higher-margin, faster-growing adjacent businesses; and advancement of our overall global product leadership. So we continue to make great progress on our road map for growth with our great brands and great products. And more importantly, we're performing at levels that will continue to create value for our shareholders. So with that, I'm going to conclude our formal remarks and open it up to Q&A.

[Operator Instructions] And we'll take our first question, listening from the site of Ken Zener with KeyBanc Capital. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Can you address the trends in 2013, Marc? And I think you were touching like why investors shouldn't be concerned about the North American GAAP volume that you guys are reporting for, say, AHAM 6, so negative 5 versus negative 2 in the fourth quarter. And talk about North American margins and your view on discounting in 2013. You guys said you'd be discounting, it's part of the landscape, but it's going to be disciplined. If you can expand on those 2 comments. Marc R. Bitzer: Ken, its Marc Bitzer. So let me try to break it out into 2 pieces, the volume, and I think you had a question about the Q4 2012 industry volume [indiscernible] then I come to discounting. First of all, on the Q4 volumes, I would say, overall, the full year industry volume in Q4 largely came within the range of what we've guided to, provided in the previous quarters. Slightly below. We always had 0 to minus 2. Full year industry was minus 2.3. That was largely driven by a weaker-than-expected December. As I mentioned before, the trade sale in December was pretty low. Everybody took inventory down. Probably, a lot had to do with the uncertainty coming out of Washington. But I would say, overall, at the very low end of our guidance. And the only -- if at all [indiscernible] December 1. On our 2013 guidance, Jeff indicated and I indicated it's a plus 2% to plus 3%, which we expect to build throughout the year. We expect some uncertainty in the market, certainly in the first quarter, depending on the whole fiscal cliff discussion. But the underlying trends remain robust. The housing trends is, I would say, in a very healthy shape. If you look at the housing starts, very positive trends, the completion are meant -- just a definition of time, about 6 to 8 months later. That is a strong momentum. I also referred to what is still a very important part of our business replacement cycle. You're basically cycling now against almost a peak of the appliance demand in 2004 and 2005, and that is also an underlying growth driver. So we're pretty confident behind this plus 2% to plus 3%.Now on your comments on the discounts. I was referring to our course has been and will be margin expansion. And as such, we kind of -- I mean, I can only comment on our Q4. We don't make forward comments on planned promotions on Q4. We'll stay the course. We participated when there was value creation, and we did not participate when there was no value creation for us. And that is the course you will see. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: And then my second question, some of the recent analysis that we've done in terms of modeling forward demand, if AHAM 6 is around 36 million units in 2012, we kind of forecasted a rate of 42 million units in 2015. And what surprised us is starts were to be normalizing towards 1.5 million units. Approximately half of that growth of 3 million units would have -- would come from new construction. And I believe you guys have roughly a 40% share there; GE, 45%. So if our analysis, what I described, is correct, could you kind of describe the operating leverage that you're going to see and why this wouldn't result in meaningful growth for Whirlpool North America above the industry shipments? Larry M. Venturelli: Yes. Ken, this is Larry. A couple of things. Certainly, during this time period, the recessionary time period, we've taken down our fixed cost structure significantly. We're very well positioned as volume comes back from a leverage perspective. So on an incremental margin perspective, you're probably thinking about -- if you think about 90% of our cost of goods sold approximately is variable and 40% is SG&A, we'd have a nice volume leverage as volume comes back. And as Marc indicated, certainly, the housing completions and existing home sales are a stimulus for us, combined with the increased share we've had over the last couple of years. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Okay. I guess just wondering if I -- one more question. On the marketing, technology and product innovations that we see in 2013, the 100 basis points, is that a normalized rate of investment that we should think about, that needs to be met by positives such as price/mix, cost and productivity? Jeff M. Fettig: Well, again, as we outlined, we are stepping up investments in -- beginning with our new product introductions. So our -- both capital and technology investments because we're getting paid for these in the marketplace. Innovation sells, and that's -- that's our view of how to grow faster and win in the marketplace, is through product innovation, not through price cutting. So that's one. Two, brand investment. With new products, you need to, through all the different mediums, communicate to consumers. And we're at a level where we're going to increase that substantially. And our systems investment is really to help us drive productivity through our global operations. So it's not -- we have a lot of levers that will offset that increased investment, but it's a combination of continued PMR; getting paid for innovation; the restructuring, which we're completely on track to delivery; and we're very optimistic we're going to have positive net productivity. So we're balancing all those, expanding our margins, growing our business. If the market is better, we'll do better.

And we'll take our next question, listening from the site of Michael Rehaut with JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: First question I had was on the productivity and material cost guidance for the upcoming year. Little surprised with the expectation for that $150 million to $250 million headwind in the materials, given right now, at least both steel and oil are tracking down year-over-year as we end the year. So I was wondering if you could give commentary around that? And also, the productivity side, if that offset is being driven more by volume leverage? If that's what's included as part of that productivity? Or if there are incremental actions, more like kind of cost actions, that also help that productivity offset? Jeff M. Fettig: Yes, Michael. This is Jeff. Our guidance of $150 million to $250 million, it is still more inflation of raw materials, lower than we've had obviously the last 2 years. But if you look at our main drivers of raw materials are steel, resins, base metals, strategic components and so on, and I'd add currency because we've had a currency impact on this as well. So we feel pretty good about our position going in the year. Resins are much higher and have a material impact, as well as some of the strategic components and currency. So this is a balance. We think it's a fair snapshot for where we are right here. It is a lot of inflation given the global environment, but we're -- we've been pretty accurate in tracking these things over the last couple of years. As it relates to productivity, the lion's share -- we have very little volume built into our cost productivity because even last year, we're -- we had dampened production levels as we both dealt with market demand, a negative situation in some key regions, as well as managing very tightly our inventory. So there is a very small amount of volume built into that. It is largely through our cost programs; lean manufacturing; product redesign process and a supply chain optimization that we're very confident in our ability to drive productivity, which will offset this and contribute to our margins. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: So if the cost productivity doesn't include volume leverage, is that just a source of upside to margins relative to your guidance? Jeff M. Fettig: As I said, if we have better demand, it'll affect us both in the top line, and it'll affect us on the productivity level. And if we have higher demand than what we're showing, we'll do better. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: All right. And then just a clarification on 4Q results. I think it was referred to before that your shipments were down 5% versus negative 2% in the quarter for the AHAM 6. Is that correct? And how are you thinking about your shipments versus the industry for 2013? Marc R. Bitzer: Michael, it's Marc Bitzer. And again, what is correct from these numbers are year-over-year volume and market share has been down. However, if you compare it to Q3, we basically had an essentially market share with Q3. And given that Q4 is typically a quarter where you have higher promotion because of the holiday period, and given our policy to expand margin as the out course, I actually feel pretty comfortable that it's a steady market share coming out of Q3 and Q4. And also, if you peel back the onion, we actually have pretty good share gains in the higher-end segments where we have a lot of innovation, and we feel very good about it. And as usual, we can't give a market share forecast for next year, that is driven by a number of factors, but we will stay our overall course here.

Next to the site of Sam Darkatsh with Raymond James. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Two primary questions. One, the last time that the energy tax credit program was in effect, whether this is related or unrelated, your inventories swelled. And I'm noticing that you have a very large productivity expectation for 2013. What should we expect inventories to do by year end? And how much of your productivity, that you're factoring in, comes from trying to maximize these credits from a production standpoint? Larry M. Venturelli: Sam, this is Larry. A couple of things to keep in consideration. We are not building inventory for energy tax credits. These appliances, these high-efficiency appliances, have very quick -- have very low days of inventory. They're some of the fastest-selling products in the marketplace. Our productivity is based on what we normally do in each and every year to generate productivity. And year-end inventories, I would say I would expect our year-end inventories to be right around where they're at this time next year as where they ended up in December. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: And my next question, you mentioned 1 point of price/mix expected for '13. I think you might have said mostly mix. If we were to go around by region, how would that differ regionally, that 1 point? Jeff M. Fettig: We expect to see positive price/mix everywhere, Sam. Think of it this way. There's really 3 drivers, again, this is as of where we are today. We've got some good carryover coming over from last year from actions we took throughout the year. We clearly are seeing positive mix with better margins virtually everywhere, and that should continue because we continue to -- or we're ramping up our launches, we're ramping up our investment, so we expect that piece to continue. And in our high-inflation or high-devaluation markets, we've already announced, such as Brazil and India and a few others, new price increases this year to cope for the kind of inflation we're seeing in this market. So it's a combination of all. But we expect positive price/mix everywhere. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: And as a follow-up, Jeff, I know last year you were real demonstrative, and still remain so, that price and margin expansion will supersede market share. Should we then read your comments today you are every bit as resolute going forward? Or is market share going to be a bit more of an important factor for you going forward than it was last year? Jeff M. Fettig: Sam, our primary objective is create value. There's been a number of questions about market share. We had some, what I would describe as marginal market share losses, primarily around the area where we had significant, large, appropriate cost-based price increases last year. Everybody's got their own objectives, and I can't speak for others. I would just say that it is not abnormal for us to lose some market share during those periods of time. I would say that we have gained market share where we've wanted, which is in higher-value, innovation-driven areas. We're not in the business to chase market share based on price. We try to earn it with customers every day, and I guess I'm -- we're very pleased with what we're doing in earning our market share in areas that create value.

Next to the site of Eric Bosshard with Cleveland Research. Eric Bosshard - Cleveland Research Company: Two things. First of all, in terms of the environment, obviously, you're focus in '12 works, being more focused on margin and a little bit less focused on share, but certainly aware of share. I'm just interested in how 4Q played out. And as you're having discussions with your customers and in the channel in 2013, if you feel like that stance of the environment is going to be different? 2012 is a year obviously where it was much less promotional, and that helped. How do you feel, or what do you see within what retailers are wanting to do competitively in 2013 in that area? Jeff M. Fettig: Eric, it probably varies a little bit but not a lot around the world. This -- and I'll take the U.S. for example. This industry got into a lot of trouble when there was a recovery in early 2010, a lot of it by stimulus-driven things off of a low base. And we had very fast volume recovery. And then it stopped. And then a very negative reaction in terms of aggressive promotions and price discounting at levels never seen before in this industry. And there was tremendous value destroyed at every level. Manufacture, retail, et cetera. And the background is it didn't change demand at all. And so as we said 2 years ago, we're in the appropriate level of promotion that makes sense with the business, to offer values in the marketplace and so on. But the kind of stuff we saw earlier, I don't see us -- there's no economic value to doing that. It does not attract demand. We're still in a largely replacement market. Even with housing coming back, that's a new construction market. I would say the weakest part of the market in between is the pure discretionary. So it isn't like we're in an environment where people are coming to the marketplace because they see a discount or a price promotion. They're coming to the marketplace because they need a new product. And so we're -- we kind of see a -- the focus you will see from us is largely built around letting consumers know about our new products. And I think that's the way to attract customers in the marketplace in this kind of environment. Eric Bosshard - Cleveland Research Company: Okay. Secondly, the volume expectation for '13, up 2% to 3% in North America, is a material improvement for what we saw in '12. Housing seems robust in '12 and seems robust in '13. What's different in '13 that allows the category to perform much better with what looks to be a similar new housing environment? Marc R. Bitzer: Eric, it's Marc. Yes, with plus 2% to 3%, it seems different than this year. In the grander scheme of things, it's still on a very low absolute level and we're still far, far away from the peak levels where we -- which we experienced in 2006, 2007. Again, as I said before, I think despite the uncertainty which was driven a little bit around consumer and trade confidence towards the end of the year, which will have some spillover off into Q1, there's a couple of underlying drivers which are just healthy and strong. One is the housing. Keep also this one in mind, we are in the housing completion side, not necessarily in the housing starts side. The housing completions in 2012 are still very low, below 600. By the starts now come right into the market. I mean, many people expect housing starts next year to be between 950, 970. So you add -- you took maybe 6 months or 8 months completion. You can do the math. I mean, it's still various momentums building the market and the housing side. And if you further zoom out, our business is not only driven by the new housing. Existing homes is still the #1 driver for appliance sales. Inventories are low. We're probably more supply constrained right now. We expect the inventories -- or supply coming back into the market, and that gives us a healthy confidence in existing home sales. And the third element, which is really maybe one of the most important one, and particular that it is still in a replacement market, we are cycling against the peak demand levels of 2002 to 2005. So you add your typical 10 years, "life of an appliance" in there, you are entering now some pretty healthy replacement cycles. So you put all of these 3 factors together, that has us lead a very strong momentum in the market. Now it maybe dampened in the short term by some consumer confidence issues, but it doesn't structurally change our view on a slow but very steady recovery of industry demand. Eric Bosshard - Cleveland Research Company: And then one follow-up. You spoke earlier of the incremental marketing, technology, product investment, the 1-point margin hit in '13. Could you just explain a little bit better? It seemed like you've been make investments in these areas in the past. Is there a reason or a little bit better color for why it's such a material step up in '13, which seem to be a reasonable level of investment in the past? Jeff M. Fettig: Well, Eric, I would say we have had reasonable levels. But number one, we've never had as many new products to come in the marketplace. And so as I said earlier, I think letting consumers know about a lot of this innovation is a value-creating activity. So we have higher capital and higher brand and market launch expense, which I see is a very good investment. The systems investment, which is not trivial, is to further help us on the productivity side. So we line all these up against returns. Okay? And so if we don't see the returns coming, we'll scale them back. But we think these are healthy investments for the business. They will accelerate our revenue growth in the right areas, therefore, margins. And this gets us at a level where we think is commensurate with the kind of things we bring in the marketplace.

Time for one more question. We'll take that final questions from the site of David MacGregor with Longbow Research. David S. MacGregor - Longbow Research LLC: Just back to the whole discussion with operating leverage for a second. Can you just update us on where your capacity utilization rates are in North America and Latin America? Jeff M. Fettig: David, we've had this discussion before. It's really hard to give you an exact number there. I would say -- let's take North America for example. We resized the North America capacity to be profitable at 2011, 2012 demand levels. And in many cases, that's running 1 or maximum 2 shifts, 5 days a week. Okay? So on that basis, there's a capacity utilization. But the reality, and I think probably the relevant question here, is if we see an uptick in demand, or a significant change in demand, can we respond to it profitably? And the answer is absolutely yes. We've ran some of these facilities back in 2006 and '07 24/7. And so we have substantial upside capacity without any major investment or -- probably the biggest constraint to upside is just getting the rest of the supply chain ready for it, which we work on all the time. So I have -- the way I look at capacity utilization today is we're very profitable at today's levels and we can go up. In Latin America, there, as we've had nice growth for a number of years, we have had some capacity constraint issues that we continue to address through very targeted and focused investments. So it's something we -- I mean, we're -- our asset utilization and the management of assets and capital is something that's on everyday here. And so, basically, that's where we are. David S. MacGregor - Longbow Research LLC: Okay. On Latin America, Mike made the observation that you were looking to grow in the non-Brazilian markets. Is that largely distribution? Can you do that with the brands you have now? Is it organic? Or do you have to make acquisitions? Michael A. Todman: No, David. It is largely through distribution. Our brands, we market both the Whirlpool brand and KitchenAid brand in those markets, and the fact of the matter is they're very well received. We've started to increase our investment in new product innovations in those markets and we're starting to see it take. So we feel pretty good that just through investment and more distribution, we can significantly increase our share. David S. MacGregor - Longbow Research LLC: Okay. Final question, just you talk a lot about the innovation and the growth that comes along with that, which is very encouraging, but you're also exiting some underperforming business as well, as I understand, or at least some underperforming SKUs. Can you just talk about the exiting underperforming SKUs as a drag on revenue growth next year? Is it a couple of points? Is it less than that? Jeff M. Fettig: No, David. We've got -- we made an awful lot of progress in 2012. I mean, basically, we want to sell products for a profit. And if it doesn't hit that criteria, we either fix it, change it or quit selling it. And so yes, the lion's share of the marginal market share loss that we had is -- probably would fall under the categories of unprofitable businesses to sell it. And but our view is not to quit selling, it's to get better products, get better costs, that sort of thing. So it's kind of an ongoing assessment and cleansing process. But fundamentally, we are -- we believe great products sell. And if they truly are great products, we will get paid for them. And so revenue growth without profit is not a big interest to us. David S. MacGregor - Longbow Research LLC: Sounds like we -- I was the last question. You got a couple of minutes to go to the hour. Let me just ask you if you'd consider a share split? Jeff M. Fettig: David, anything like that or a return to shareholder or anything else is something that we would -- we ongoing have discussions and dialogues with our board. And if anything like that would happen, it'd be a board decision. So listen, everyone, thank you for joining us today. We really appreciate your questions on the call and we look forward to updating you the next time we get together. Thank you very much.

And this concludes today's program. Have a great day. You may disconnect at this time.