Whirlpool Corporation (WHR) Q1 2013 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 Resources Larry M. Venturelli - Chief Financial Officer and Executive Vice President

Sam Darkatsh - Raymond James & Associates, Inc., Research Division Eric Bosshard - Cleveland Research Company Denise Chai - BofA Merrill Lynch, Research Division William Wong David S. MacGregor - Longbow Research LLC Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division

Good morning, and welcome to Whirlpool Corporation's First Quarter 2013 Earnings Release Call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Senior Director of Investor Relations, Joe Lovechio.

Thank you, and good morning. Welcome to the Whirlpool Corporation First Quarter 2013 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 operation. 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: Good morning, everyone, and thank you for joining us today. As you saw in our earnings release from earlier this morning, our first quarter results were in line with our expectations as we continue to expand our margins and improve our operating results. We are on track to deliver our operating profit margin, EPS and free cash flow guidance for 2013, primarily due to the strong execution of our business priorities. We've outlined these priorities over the last several quarters and they remain unchanged. We expect to realize cost-based pricing actions. We continue to introduce mix-enhancing new product innovation and products. We continue to reduce our fixed cost structure. And we're delivering on ongoing cost productivity programs. The first quarter results marked the fifth consecutive quarter of year-over-year ongoing business operations margin expansions, and we expect continued margin expansion, higher revenue growth and higher cash generation as we progress throughout the year. If you turn to Slide 6, you can see our first quarter results are summarized there. As expected, excluding the impact of foreign currency and BEFIEX, our revenues were essentially flat versus the first quarter of last year. Our diluted earnings per share from ongoing business operations improved $0.56 per share or 40% to $1.97 compared to the $1.41 last year. And first quarter cash flow usage improved from last year, and we are on track to meet our full year guidance as cash generation ramps up during the second half of the year. Turning to Slide 7. You can see our global industry demand assumptions, which we believe are -- continue to be -- will be positive for the full year. Overall, our outlook remains unchanged as we expect to see moderately higher growth going forward due to the strength of U.S. housing and improving demand trends internationally. In North America, we expect industry demand to be up 2% to 3% as we continue to see the positive trends in housing, and we see this becoming even more structurally strong during the second half of this year. For Brazil and other Latin American countries, we're forecasting industry demand growth ranging from 3% to 5%. In Europe, we still expect a flat industry for the full year as weak economic environment continues across the Eurozone. And finally, we're forecasting moderate growth of 3% to 5% in Asian regions. At this point in time, I'll turn it over to Marc Bitzer to review in more detail our North America operations. Marc R. Bitzer: Thanks, Jeff, and good morning to everyone. Let me begin on Slide 9 by reviewing North America's performance in the first quarter, starting with the top line. First of all, if you recall, in December of last year, U.S. retailers' concern over consumer reaction to a fiscal cliff maintained very low inventory levels. On this first quarter 2013, retailers increased their inventory levels, particularly driven by addition of brands in their stores. The result was that industry sell-in was quite a bit better than sell-through for the quarter. Industry sell-through for the quarter was actually in line with our expectations and our full year industry guidance of plus 2% to plus 3%. As expected, our market share was down versus last year as we comped against our highest market share quarter of last year. Sequentially, however, compared to Q4, our market share was up. Out of U.S., we saw continued industry demand softness in Canada and Mexico, and as a result, our net sales of $2.2 billion for North America were essentially flat from last year. We do expect, however, higher revenue growth as we progress throughout the year. As we have previously stated, our priority has been and will remain margin expansion. Our operating margins were 9.7% for the quarter, and operating profit was $218 million as compared to $151 million in 2012. Overall, our operating margins expanded by 3 points year-over-year. Strong market execution and innovative consumer products continue to drive increase in price and mix, and the benefit of our cost and capacity reduction initiative was also positive driver in the first quarter. The consistent and disciplined execution of our actions resulted in a sixth quarter of year-over-year ongoing business operations margin improvement. Turning to Slide 10. You can see just a few examples of our innovative products: the Whirlpool Gold refrigerator, the new Jenn-Air Accolade ventilation system and the Maytag Maxima XL front-load steam washer. Let me just take a moment to talk about our expectation for the rest of the year as shown on Slide 11. Q1 was in line with our expectations, and we expect revenue growth to build throughout the year. And with regard to the industry demand as we continue the year, we remain optimistic about the continued strength in U.S. housing and the consumers' regained confidence as federal government policies become clearer. And also, the normal replacement cycle of appliance continues, which is particularly important given the peak appliance industry years that occurred well before the recession. With regard to our business priorities, we remain focused on action, driving margin expansion, including investing innovative new products, continuing to deliver cost and capacity reduction initiatives, realizing positive net cost productivity and growing beyond our core product categories. Now I'd like to turn it over to Mike for his review of international operations. Michael A. Todman: Thanks, Marc. Turning to Slide 13. Overall, our international operations were led by another strong performance in our Latin America region as margins continue to expand. Our Europe, Middle East and Africa region was negatively impacted by the continued weak environment across the Eurozone. In Asia, we gained market share and drove favorable product price and mix, which was offset by unfavorable currency, a weaker industry and higher material costs. If you turn to Slide 14, you'll see our Latin America first quarter results. Sales, excluding currency and BEFIEX, increased 2% on improved pricing and mix but lower volumes. As you recall, Q1 last year was the first full quarter of the IPI tax holiday in Brazil. Beginning in February of this year, the IPI tax holiday changed, making Q1 the toughest industry comp. We expect industry demand to grow from here. GAAP operating profit for the quarter totaled $130 million compared to $121 million in the prior year. The year-over-year increase was driven by higher monetization of tax credits, but on an adjusted basis, excluding Brazilian BEFIEX tax credits, our operating profit for the quarter, which totaled $114 million, was equal to the prior year. Improved product price and mix offsetting higher material costs and unfavorable currency continue to drive margin expansion again this quarter as our ongoing business operating margin increased 0.5 point to 9.6%. Our first quarter results of Europe, Middle East and Africa on Slide 15 reflect the very challenging market environment in the Eurozone. First quarter sales decreased 3% year-over-year to $668 million. Foreign currency did not have a significant impact on net sales compared to last year. The region had an operating loss of $8 million compared to a $4 million profit in the prior year period. Weak demand and country mix, as well as higher material costs, more than offset benefits from cost and capacity reduction initiatives. Also note that Q1 is historically our lowest volume quarter of the year. Given the current economic conditions, we continue to evaluate demand and assess additional cost reduction actions required to adjust for demand. Our first quarter results in the Asia region are shown on Slide 16. Net sales decreased 8% during the quarter to $187 million, down from $202 million in the prior year period. Excluding the impact of currency, sales decreased approximately 4% as we saw weaker industry demand, particularly in India. The region's operating profit was $3 million, down from $9 million in the prior year. Market share gains and favorable product price and mix from new product innovation were more than offset by weaker industry demand, unfavorable currency and higher material cost. Slide 17 shows a few examples of our international product leadership in the first quarter and how we continue to capitalize on the opportunities for growth. We've highlighted the Whirlpool brand Stainwasher in India, Brazil brand's Ative! dishwasher and an induction oven in Europe for the Whirlpool and Bauknecht brands. On Slide 18, in 2013, we expect improving demand trends in emerging markets throughout the year. Latin America is expected to ramp throughout the year due to the strong underlying fundamentals in the region. For Asia, we see current strengthening in China and India improving throughout the year. And we continue to focus on our business priorities, which are leveraging new product launches and growing beyond our core businesses, continuing cost and capacity reduction initiatives and executing ongoing cost productivity programs. Now I'd like to turn it over to Larry Venturelli. Larry M. Venturelli: Thanks, Mike, and good morning, everyone. Our first quarter results are consistent with expectations entering the year and have us on plan to deliver our annual guidance, which we are reconfirming today. On Slide 20, you can see we expect to deliver annual GAAP EPS in the range of $9.80 to $10.30 per share and annual ongoing business operations of $9.25 to $9.75 per share. Our 2013 free cash flow is expected to be in the range of $600 million to $650 million. Slides 31 through 39 in the Appendix provide you with a reconciliation of our reported GAAP operating profit and EPS to ongoing business operations for both 2013 and 2012. Turning back to Slide 21. You will note that we continued to deliver on our margin expansion initiatives for the first quarter, driving a 130 basis point improvement in operating profit margin. Ongoing operating profit margin increased to 6.6% during the quarter, driven by price mix, which was up 1.5 points, and we continue to expect to realize approximately 1 point for the year. Our cost and capacity reduction program contributed another point, consistent with our full year guidance. As expected, net cost productivity was slightly negative as material cost inflation was $46 million during the quarter. Our cost productivity is on track to ramp up throughout the year, fully offsetting approximately $150 million to $200 million of year-over-year material cost inflation, and is expected to deliver a positive 0.5 point of margin for 2013. In addition, as planned, we increased our marketing technology and product investments during the quarter, reducing margins by less than 1 point. Overall, our first quarter margins were firmly on track with expectations and consistent with our expected full year improvement. Moving to the financial summary on Slide 22. As expected, reported net sales were $4.2 billion compared to $4.3 billion last year. Excluding the impact of both foreign currency and BEFIEX, sales were flat to the prior year. As Jeff, Mike and Marc mentioned, we expect revenue growth to progress throughout the year. Monetization of BEFIEX tax credits were $16 million compared to $7 million last year. As of March 31, $177 million in BEFIEX tax credits remain. Turning to Slide 23. The income tax benefit in this quarter primarily relates to the recognition of $84 million for the U.S. energy tax credit program related to 2012 and Q1 2013 production. As we noted previously, our 2013 full year GAAP earnings guidance includes $120 million of expected benefit from the U.S. energy tax credits. Our full year 2013 ongoing tax rate assumption remains 24%, and our GAAP tax rate assumption adjusted primarily for energy tax credits remains 9% for the year. The graph on Slide 24 illustrates expenses associated with our cost and capacity reduction program. We continue to expect our program expense to be approximately $185 million this year, and the program remains on track to deliver $175 million of benefit in 2013. On Slide 25, you see our cash flow priorities remain funding the business, including capital expenditures, debt maturities and pension contributions, return to shareholders and M&A. This month, we raised our annual dividend by 25% to $2.50 per share, and we continue to evaluate M&A opportunities and share repurchases. During the quarter, S&P upgraded our credit rating to BBB, marking solid progress toward returning our credit ratings to prerecession levels. We will continue to balance funding all aspects of our business to ensure the best long-term value creation for our shareholders. Now I'll turn it back over to Jeff. Jeff M. Fettig: Turning to Slide 27. I would summarize by saying that we are on track to deliver our operating margins, our EPS and free cash flow goals for 2013. We will continue to invest in innovative consumer solutions for the home. We do expect higher revenue growth with the continued strength we're seeing in U.S. housing and improving demand trends internationally. And we do remain focused on delivering at least 8% operating profit margins during 2014. Finally, turning to Slide 28, I would just say that we are confident in the opportunities that we have for revenue growth and cash generation as we progress throughout the year. These revenue growth opportunities will come through new and emerging markets; our consumer-relevant innovations, which are going very well; our expansion into higher margin, faster growing adjacent businesses, which are growing at good rates; and the advancement of our overall global product leadership position. We have been, and we expect to continue, to perform at levels that will create more value for our shareholders. So with this, I'll stop our formal remarks and then open it up for Q&A.

[Operator Instructions] And with that, we'll take our first question from the line of Sam Darkatsh. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: A couple of questions. First off, I apologize if this was in the prepared remarks and I missed it, was there market share commentary around Latin America and Europe? I missed it if there was. Michael A. Todman: Sam, this is Mike. No, I didn't make market share commentary, but in Latin America actually, our market share was stable so we maintained. And in Europe actually, we saw a slight increase in our market share. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Okay. And then my primary question, you said that you're expecting sales growth to build as the year progresses in North America and Latin America. Could you decompose that a bit into units versus price mix as the year progresses? And then the follow-up to that would be, how do you see share, market share playing out in the United States, particularly if industry pricing gets a little bit more challenging? Jeff M. Fettig: Yes, Sam, this is Jeff. Let me maybe take that at a global level. First of all, we had -- our Q1 revenues were basically flat when you take out foreign currency. And we've been -- the big currency devaluations happened in March and early April of last year, so we kind of anniversary-ed those things. And given today's currency levels, that should not be a drag on revenues. The second thing I would say is if you step back and look at the global appliance business at a global level, largely speaking, Q1 was probably marginally slightly better or slightly worse than it's been in the last 6 to 9 months, meaning there's been no real material change in the global market. The individual markets, there's been a lot of change, some up, some down. So we're kind of tracking at the rate we've been. The activities we've been putting in place have been expanding margins, and we continue to ramp up investments in new product innovation. So our comments are that with revenues, in essence, being flat in the first quarter, we do expect revenue growth to begin to ramp up as we go out through the year. If you look at our demand forecast, you can see that, largely speaking, we still expect it to be positive. And I think you will see our new product innovations working well in the marketplace. So that's why we're sitting here today feeling good about our revenue growth opportunities. Specifically, North America, I'll let Marc speak to that. Marc R. Bitzer: Hey, Sam, it's Marc Bitzer. And I made an earlier comment about the revenue growth, which we're expecting. And first of all, as you know, we are not giving revenue or price mix guidance by region, certainly not. So let me try to be vague within the guardrails. First of all, on revenue growth, I wouldn't say I expect it if we don't see trends supporting that and if we don't have a strong degree of confidence that revenue growth will materialize, and we're very confident. Obviously, in particular as you compare year-over-year revenue numbers and also as you keep in mind, we're cycling through several price increases, mix changes, the baseline of comparisons change. And as such, the price-volume equation, by definition, will change. That's just a reflection of baseline and what we're doing about this one. I think the important thing, and that's what's probably implicit in your question, is based on the past industry trends, we have not changed our view on promotional policy. We feel, based on what happened in the first quarter, that our view has been confirmed as evidenced by these operating margins. I'd also said that we remain committed to our strong margins and margin expansion and we -- and that has also been evident in Q4 and Q1. We're playing now with more and more levers. In the past year, we played strongly in the price margins, now it's price margin and cost, and we're increasing -- also, we'll have volume opportunities and that ultimately will support our margin expansion. Michael A. Todman: Sam, let me give you a little bit of color on Latin America. If we just remember, and I had this in the prepared remarks, the first quarter was the toughest comp quarter for Latin America. And so in general, the industry is down because it was up so high last year because of the IPI tax -- the first quarter of the IPI tax introduction and then the change in IPI tax. But our expectation is that the demand environment in Brazil, in fact, is going to grow. And we're already seeing that in April as we begin to comp over slightly lower numbers from last year and we see positive trends in the economic environment. Larry M. Venturelli: One other comment, Sam, this is Larry, if you look at the guidance we provided throughout the year, which everybody is reiterating today, if you look at just the industry guidance by itself would indicate 2.5% approximately improvement in unit volume, which would translate into at least that amount of sales for the year, to answer your question. Sam Darkatsh - Raymond James & Associates, Inc., Research Division: Got it. If I could sneak one more in here real quick. Marc, you mentioned that U.S. POS was less than that of the sell-in. Do you anticipate a bit of a correction or a softer Q2 as a result of that versus what we saw in Q1 for the industry? Marc R. Bitzer: Let me first -- Sam, it's Marc again -- first reexplain what I mentioned about Q1. As we entered the first quarter, the industry -- or the trade inventory levels were low. I would say unusually low and that was largely driven by the uncertainty, which was around the fiscal cliff and everything else in December. As the quarter progressed, I would say both consumer and trade confidence, particularly trade confidence, increased and inventory levels went up, coupled -- or I would say particularly also driven there. As you know, there have been some retail landscape changes and there were some new brands and floors, which always drives some initial load inventory. That's just the nature of whenever you have new flooring. That was an unusual Q1 effect. The underlying sell-through data, which, as you know, there is no solid source available, but we have a pretty good sense about this one, is, I would say, almost spot on what we had in mind for our full year guidance. I also see that pretty stable to maybe slightly increasing as the year progresses, and for Q2, it feels stable right now. I mean compared to the Q1 trends, not stable in absolute terms.

We'll take our next question from the line of Eric Bosshard. Eric Bosshard - Cleveland Research Company: Curious for you to speak a little bit more. You clearly are committed to making great progress on margins. I'm interested in how you're thinking about market share relative to that. I know you've talked in the past of some decisions you've made on market share relative to margin. But interested in how you're thinking your commitment to that. And then also, within the market share performance, if you're seeing changes at any different piece of the market at the high end relative to the low end within your performance and if you have different strategies or thoughts about defending or pursuing market share across the portfolio, specifically talking about North America. Marc R. Bitzer: Eric, again, it's Marc Bitzer. First of all, just to provide facts, as I indicated already, our Q1 market share was year-over-year down and sequentially slightly up, which pretty much confirms our current trends and the decisions which we've taken in Q4. And obviously, I can't give a quarterly guidance on market share, but let me try to maybe put it more in generic terms. The way how we look at market share is there's a certain portion -- the biggest portion of our market share, which I call it everyday earned in the trade's local grade products. As you can imagine, we're exceptionally committed to grade and innovative products to earn that every day, and we will work incredibly hard to never let that go. There's another portion of the market, which is, call it, promotion market share, which sometimes is a little bit like quicksand and you need to make a decision, a, how big is that. In the past couple of years, we said we don't believe that promotion markets were big. And two, what return on investment do I get, i.e., how much does it cost me to buy that market share in simple terms. I'm simplifying. And that is where we have not changed our view on this one. But don't confuse that with us not being committed to drive our market shares with great products and innovative products. We remain exceptionally committed and will remain so. Jeff M. Fettig: And Eric, I would just add to that. I mean, we are investing in what we think is sustainable market share, which is new product innovation. And where we brought out really great new product innovation, we are actually gaining market share. To Marc's point, we do not believe -- if you look at the elements that construct demand in the marketplace, it's primarily replacement. We're now seeing a really nice growth factor in new construction. We're starting to see the pickup from existing home sales. But the pure, pure discretionary is still very, very weak, and given that environment, we don't think what I'd call uneconomical promotions drives any more demand. So that's the same position we've had for some time now and it's the position we have today. Eric Bosshard - Cleveland Research Company: I guess, just a follow-up. I totally understand your comment that uneconomical promotions don't drive demand, but they may influence market share. And so what I'm curious, as you have seen LG and Samsung go into Depot and Lowe's, how that is impacting your market share there and how you're seeing the landscape change. I know you've also won market share at Home Depot with the Whirlpool brand. But my follow-up is, how you're seeing that market share position evolve as those new players have arrived? Jeff M. Fettig: Again, Eric -- again, I can't really speak about competitors, but if you look at the last couple of years, when there were these heavy promotions, we would lose some share and a month or 2 months later we'd be right back to where we are. So we think it's transitory, and I haven't seen any change in the environment today.

We'll go next to the line of Denise Chai. Denise Chai - BofA Merrill Lynch, Research Division: I had a question on your -- on the growth in the North American contractor channel that you saw in the first quarter just year-on-year and also quarter-on-quarter. And then my second question is about how you see the raw material price outlook and really how that factors into your thinking on price and margins going forward. Marc R. Bitzer: Denise, it's Marc Bitzer. Let me first take the question on the North American contract channel. Yes, it's correct, we've seen strong, robust and sustained growth in contract channels in the first quarter. I would also like to refer back to some comments that we made in Q3 and Q4. The size of the contract channel is still off a very low base. So it does not yet weigh as big as it would have done 4, 5 years ago. But again, I would say growth, and without giving you specific numbers, strong double-digit growth and we've not seen that for sustained periods, and we do expect that even to grow further as the year progresses. Jeff M. Fettig: Denise, regarding raw materials cost, clearly, the last couple of weeks there's been some change in sentiment certainly reported and in some prices of pure commodities. For the year, we don't see a material change. We've guided early on in February $150 million to $200 million for the year. I would say that if current trends hold, we're probably heading towards the lower end of that range as opposed to higher. And we still have some big materials like resins and -- that are significantly higher on a year-over-year basis. And the other thing, we have some very high inflationary markets like India and Brazil where they're not reflecting the global commodity trends that you're talking about. But overall, we're comfortable, we have a significant portion of our business hedged. We will benefit if these current prices hold of reducing that range, which will just help our net productivity.

We'll move next to the line of Michael Rehaut.

It's actually Will Wong on for Mike. Regarding your 2014 outlook in terms of the operating margin getting back to about at least 8% operating margins, you guys are looking at maybe about 7%, looking at the mid-point of the range this year. What are the main drivers of getting back to that 8% plus in 2014? Jeff M. Fettig: Well, for the full year of 2014, we're clearly not giving forecast yet. But the 8-plus percent is what we've been indicating really for the last 3 years of what -- the way we're going to drive our business to rebuild healthy margins, invest in the things that will drive growth. And so we've been executing now to that -- those plans and with great detail for some time. If you just look at the margin progression the last 5 quarters and the drivers of it, you kind of see all the pieces. Fundamentally, we have 4 big levers that we're driving -- or 3 that we're driving and 1 that is external, first is demand. We do think demand is going to improve. We don't think it's going to -- we believe it's improving gradually, but that's a profound change from what we've seen the previous 4 years where the North America market is still 25% below where it was in 2007, European market's about 20% down and so on. So having even a little growth is going to be highly leverageable in our business. The second thing has been price mix. We made great progress in price mix last year through both cost base price actions and very positive mix from our new product innovation. That's moderating this year as we expected, but we still expect certainly the mix portion of that to be very important this year and going forward. The third is our restructuring plans, which we're fully on track to delivering, and we've indicated this year it will contribute $175 million and there may be a tail to that with some more benefits even next year. And then lastly is our cost productivity. Despite weak volumes, we've been in a highly inflationary materials market. And so even this year we're talking about commodities going down, they're still up for the full year. And so a moderation of that will help us drive higher net productivity. In the combination of those 4 things that we're managing in every part of the world, everywhere and plus the 5 -- last 5 quarters of track record, we believe we're going to continue to grow our margins sequentially and head into next year, and when it's time, we'll give you those plans. But we've guided early on to between 6.8% and 7.2%. So yes, 7% is the mid-point. It could be on the high end, it could be on the low end, it's too early to tell, but that was the basis for our guidance this year.

Okay, great. And a question regarding Europe. Last year, you guys made about $4 million on higher revenue and this year -- or this quarter you lost about $8 million. You talked a little bit about maybe potential further restructuring going forward. Question, like how much of that restructuring that was previously announced was actually executed thus far? And then in terms of profitability in Europe, how should we think about just the remainder of the year? Do you expect to be profitable in the region going for the next couple of quarters? Michael A. Todman: Yes, let me take that question. First of all, if you think about how Europe went over the course of last year, what we saw was a reduction in demand over the course of the year. And so that had an impact on our total profitability. We've executed the bulk of the restructuring actions, but as you know, in Europe, it takes a little bit longer to begin to get those benefits. But we are getting the restructuring benefits that we committed to, and we expect to get that throughout the course of this year. The other thing to remember is even though you quoted the year-over-year, if we look at just sequentially, the first quarter is always our lowest quarter of volume seasonally in Europe. So it's about 20% lower than it is in the fourth quarter. So those are just kind of the macro. We do expect that as we go throughout the course of this year that, yes, we will drive this business to profitability. And we will continue to assess the demand environment, and if necessary, we will take action on our fixed cost. But that's something that we'll observe over the course of the year.

Great. And then just last question, if I could. Regarding the sequential improvement in margins in North America from 9.3% in 4Q to 9.7%, could you help us maybe in terms of what were the main drivers? Was it price mix, cost and capacity reductions? Maybe just give us a little bit more color on that, that would be great. Marc R. Bitzer: It's Marc Bitzer again. First of all, typically, what you see in Q4 to Q1 sequentially in North America is maybe less amplified as you would see, for example, compared to Europe, which Mike just referred to. What we took the gap in North America between Q4 and Q1 is 2 effects. You have a little bit less profitability coming from small domestic business, which is a healthy business for us, and you have the opposite effect because typically Q4 is a little bit more promotion intense period. As a net result of all this one, you typically would expect Q4 to Q1 a small drop, i.e. the Q1 has a slightly lower operating margin than Q4. And this year was different, and that is a good achievement and that gives us all the confidence for this year. Larry M. Venturelli: Will, just one other thing to add to what Marc said, just realize that there's almost a -- there's almost 20% lower volume between Q4 and Q1, and that's really typical across the company, as well as North America, and margins improved.

We'll go next to the line of David MacGregor. David S. MacGregor - Longbow Research LLC: On the North American business, you mentioned that Canada and Mexico were off. I wonder if you could just say what U.S. grew if you exclude Canada and Mexico. Marc R. Bitzer: David, it's Marc Bitzer. I mean, first of all, you probably have seen the industry shipment data, which are 5.5% up for Q1. Again, keep in mind these are sell-in data, which are slightly elevated due to the inventory moves. Again, it's difficult to quantify publicly what we think the sell-through is, but it's obviously a few points below that, but again supporting our full year assumption. Mexico, in particular in Q1, had a very soft industry, double digit down. David S. MacGregor - Longbow Research LLC: Okay. We've kind of carved this thing up. I'd like to maybe talk about the use of cash. My recollection is that you still have a share repurchase authorization remaining from many years ago. Can you just remind us if that's correct and what the amount of the authorization is and what your inclination would be to be active here in the very near term in terms of share repurchase activity? Larry M. Venturelli: Yes, David, this is Larry. As I said in my prepared remarks, the uses of cash, funding the business, debt maturities, pension contribution, M&A, return to shareholders. We did increase the dividend pretty much in line with our historical payout ratio. We are evaluating both M&A and share repurchase. We have $350 million remaining on our authorization. And again, as I mentioned, we're continuing to evaluate both M&A, as well as share repurchase as we move forward. David S. MacGregor - Longbow Research LLC: Okay. Maybe we could talk about the M&A opportunity a bit as well. And I guess, Jeff, if you could talk a little bit about your priorities or how you're thinking about M&A opportunity and -- maybe from a valuation standpoint or geographic standpoint or -- and how can you execute acquisitions at this point in a way that doesn't disappoint the investment community? Jeff M. Fettig: Well, I guess, that would be the starting point, David, is -- well, first of all, as I've said, we're always looking at opportunities throughout the world in different parts of our business. We have strict criteria that we follow when evaluating them. There've been a number of acquisitions over the last couple of years that we've looked at and decided didn't meet our criteria. But top of the list of that criteria is creating value for our shareholders. So the simple answer is if we don't see a clear path to doing that, we won't do it. And again, the things that have worked well for us, very well in the past are what I call plug-and-plays into some of our regions, our core regions. We continue to invest in certain emerging markets where we can scale up. We continue to look at opportunities in our expanded -- extend and expand categories. But the fact that we haven't done any means that we haven't done anything that really meets our criteria. David S. MacGregor - Longbow Research LLC: Would that criteria include being accretive in the first year? Jeff M. Fettig: David, it depends. I can't answer that because it just depends on the opportunity but... Larry M. Venturelli: I think we're looking at the value creation, value creation versus [indiscernible]. David S. MacGregor - Longbow Research LLC: Right. I'm just thinking about catalysts in the story. And then, could you just maybe talk about Eastern Europe and particularly Russia? Just what is the opportunity there for Whirlpool and where would that stand in terms of your list of emerging market priorities. Michael A. Todman: Yes, David, Russia historically and continues to be a pretty volatile market. It's a market that's driven on basically one area, which is oil. And so our investments in Russia have been limited. We don't see it as a huge growth opportunity because some years it will be a boom and other years it will be a bust. And so what we're looking at is really investing in those businesses where we think we can get sustainable growth. And we don't see Russia -- we think there's opportunity, but not for huge investment. David S. MacGregor - Longbow Research LLC: And as ugly as Europe is right now, is it fair to say that at least it would be a consideration for you if there was an opportunity to play a consolidating role in Europe? Jeff M. Fettig: Right. Yes, Dave, look, we've got many things we can and are doing in our current business in Europe to improve value creation and returns to our shareholders. Europe remains a very fragmented market and consolidation is something that can and likely will happen someday. But the question is someday and I don't know when that will be.

And we'll take our final question from the line of Ken Zener. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Jeff, Larry, I'm going to go back to AHAM versus your North American shipments because it's the fundamental question today given that your margins sequentially are higher in North America, which is, I think, outstanding. However, we had LG report last night. They're up 19% international, led by U.S. sell-in to Lowe's, part of that product shift. How clearly can you express to investors that you're not losing share, which is the fundamental pressure on the stock today despite the excellent operating leverage sequentially that you delivered? Jeff M. Fettig: Let's be clear, first of all, AHAM, we're not talking North America, we are talking the U.S. AHAM was up roughly 5.8, and we think sell-through was about 2 to 3, okay? You talked about the competitor number up 19%. Please remember, they entered a major distribution channel during the quarter, which involves -- that has nothing to do with sellout and has everything to do with sell-in. You also probably note in that release their margins in this category went down 2 points. So, I guess, I wouldn't make a plus 19 trade-off for minus 2 points of margin. It wouldn't be value creating for our shareholders. So our view is that we're going to earn good business every day. We are investing significantly in new innovations we're bringing to marketplace. We've got great examples where we are gaining share with this innovation. And we feel fine about where we are in market share today. To Marc's point, there's business you got to earn every day and there's business that's transaction oriented, and we do both. And the business that you earn every day we do very well in. And the transaction, if it's a good transaction, we do it. But candidly, as I've said in the past, we could gain 2 to 3 points of market share in 90 days in the U.S. market, if we want to pursue certain types of business. Today, that type of business just isn't value creating. Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division: Jeff, that was very good and clear. I do appreciate it. Second question is, our forecast, if the AHAM was -- again, North America was 36 million units '12. We forecast roughly 42 million in 2015, of which half of the growth comes from housing, normalizing the 1.5 million starts. Can you give investors a little more comfort that your market share, which I believe is roughly 40% nationally, as well as 40% new construction, that, that growth is predicated upon structural issues like your distribution channel, a, and comment on the profitability of that business relative to the segment in general? Marc R. Bitzer: Hey, Kenneth, it's Marc Bitzer. First of all, on your 2015 industry forecast, which I wouldn't confirm but I'm not disagreeing with, first of all, rightfully, you point out the 2 fundamental driver in the long-term industry demand are ongoing replacement cycle and the structural recovery in the housing/construction. You obviously also noted that all the growth, which was in housing permits, is still, and we made that point earlier, 6 to 9 months away from housing completions and when you typically get the appliance shipment. You get the appliance shipment pretty much on 2 days before the keys are handed over. So you were always at the tail end, but also means in 2013 you will still only see a certain portion of the underlying momentum being built in that channel. But again, the momentum is building strongly. Now as you look at the market share and that is -- I will say the nice thing about this channel in particular, and you asked earlier about certain other brands, that channel is a very, how should I phrase it, very captive channel that you have to earn contracts over many years. These contracts are awarded, they're signed, and it's a very difficult channel to manage and serve in the right way. It takes years of building a capability of contracts. And today, that market is, I would say, largely 2 players and the third one a little bit smaller of a branch you mentioned before are basically not having access to that channel. So we are very confident that we're in a very strong position to participate in that growth of a market in a, I would say, almost disproportionate manner. Jeff M. Fettig: And Ken, I would add to that. I mean, there is an infrastructure cost to be in that channel, a supply chain cost, service cost, coverage cost. And we're still early in the game, I think, in the housing recovery. And that infrastructure cost is highly leverageable. It's fixed. And so as that channel grows, it's not only very leverageable from a fixed cost base, but it's a great mix channel for us because the power of our brand portfolio, we give builders packaged options which they offer to consumers, and we see great mix upgrade opportunities throughout our portfolio of brands. So it's a great channel as it's getting healthy. It was an investment on our part when it was down to the levels it were with the fixed cost that we had, but it was an investment we decided to make, and we're going to benefit from the upside of that. Larry M. Venturelli: And we'll see some very strong industry growth in the future as that part of the business comes back. Jeff M. Fettig: I think that was our last question we had on the line. We appreciate everyone joining us today. We look forward to talking to you next time. Thank you.

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