惠而浦 (WHR) 2002 Q4 法說會逐字稿

Good day, everyone, and welcome to the Whirlpool Corporation fourth quarter earnings release conference call.

Today's conference is being recorded.

For opening remarks and introductions, I would like to turn the call over to the Director of Investor Relations, Mr. Thomas Filstrup.

Please go ahead, sir.

Thank you.

Good morning.

I'd like to welcome all of you to our year end conference call.

Our opening remarks will refer to a slide presentation which is available on our investor Web page.

This call and a slide presentation will also be archived on our Web page for your convenience.

During our call we'll be making forward-looking statements to assist in your understanding of our company's future expectations, our actual results could differ materially from these statements due to many factors which can be found in our latest 10-Q.

Now I'd like to turn the call over to our Chairman and Chief Executive Officer, David Whitwam, for his opening remarks.

David?

Thank you for joining us.

With me today is Jeff Fettig, our President, and Steve Barrett, our Chief Financial Officer.

And I will have some comments a bit later.

Earlier this morning we issued our fourth quarter and full year 2002 earnings release.

I'm very pleased with our company's solid fourth quarter and full year core operating perform which were at record levels by many measures.

As has been our practice, we've included a chart in the body of our earnings release which reconciles and details the differences between core earnings from operations and net GAAP earnings.

We believe that both numbers are relevant to our shareholders is as the detailed identification of the one-time charges that are not included in the core operating earnings.

We'll talk about those in detail as Jeff and Steve go through their presentations later.

The net GAAP earnings statement captures the full accounting of management's decision as it relates to those nonrecurring charges and their impact on both other shareholders as well as on our future performance and competitiveness.

As I have indicated to you previously, in these conversations, during the year 2003 and beyond, we will issue only net GAAP earnings statements and we will manage any restructuring costs within our regular P&L.

If you would go to Slide 3 now, as I look at this underlying performance of our business for the fourth quarter in all of 2002, let me offer several observations.

First, on balance, I believe that we have a solid fourth quarter and full year operating performance.

Let me highlight a few of these full year achievements.

We delivered fourth quarter core earnings per share of $1.64 which is at record levels.

Our revenues exceeded $11 billion for the first time to record levels and a 6.5 percent increase over 2001.

Excluding acquisition revenues and the effects of currency, net sales increased a solid 5 percent and again to record levels.

Earnings per share from ongoing operations totaled a record $6.07 a share up 11 percent from last year.

We had strong operating cash flow of $290 million which exceeded the target that we communicated to you earlier in the year.

In total we delivered record levels of total cost productivity, our working capital at 11.2 percent of revenues is at record low levels and we developed and delivered to the market globally the largest innovations product portfolio in our history and that I believe we are being recognized externally as the innovation leader in our industry and Jeff's going to highlight some of those innovations later with you.

We successfully made and intergrated the Mexican Vitromatic and Central European Polara acquisitions which are strategically very important to our businesses and they will accretive in the year 2003.

And lastly, we successfully executed and have taken the last charge for the large scale restructuring effort.

We have done this with without business interruptions or any operating issues in the business.

The charges total 373 million.

Our head count reduction from this activity will total 7,200 people.

Our savings will exceed $200 million.

And as we have said in the past this restructuring has a heavier focus on Europe than any place else and savings in Europe from this restructuring will total some $95 million.

These performance achievements were delivered despite difficult economic and competitive environments in most of our markets around the globe.

I believe our people took the necessary and appropriate steps to deal with that especially environment which allowed them to deliver these levels of performance.

If you go to Slide 5, as we look now to the new year, we believe we will see a continuation of many of the conditions we experienced in 2002.

Jeff Fettig will shortly provide you with the details, our industry forecast region by region but in total we believe we have taken the appropriate cost side actions to deal with the expected environment and the industry as we forecast it today and we will deliver performance improvements in all of our businesses for 2003.

Many of you have questioned our ability to drive performance improvement this year given that we have a year-over-year negative delta of approximately $1.35 a share for pension costs and the reduction of the Brazilian export tax credits.

Again, we have taken the necessary cost side steps and total cost productivity actions when combined with the savings from our recent restructuring activities, that will allow to us deliver earnings performance improvement across our businesses.

In addition, we will again in 2003 deliver unprecedented levels of product innovations to the market and continue to invest in our brand leadership positions.

We ended 2002 with the Whirlpool brand continuing to be the number one consumer appliance brand in the world.

We are the market leader in the United States, Canada, Latin America, Central Europe and India.

We hold the number 2 market position in Mexico and the number 3 spot in Western Europe and we also continue to build a strong and growing presence in China.

From this platform, and these initiatives, based upon our current economic forecasts, we expect to deliver earnings improvements to the $6.20 to $6.40 range on a per-share for 2003.

We expect that the first quarter will be flat to up modestly from last year levels.

Again, ladies and gentlemen, this projection is based upon our current economic and industry forecasts around the world.

As we all know, there are certain events which could alter that picture and impact not only Whirlpool but most companies across the globe.

Lastly, we are projecting full year free cash flow of $350 million and again our definition is after dividends and after capital expenditures.

Let me now turn this over to Jeff Fettig for a detailed look at our regional business performance as well as our view on the industry forecast for each of our markets for the year 2003.

Jeff?

Good morning.

I'll begin with Slide 6 which shows our fourth quarter global operating performance.

As Dave mentioned we recorded very strong revenue growth with revenues coming in at over 2.9 billion, up a little over 11 percent versus last year.

Core net earnings increased by 3.7 percent and our core EPS was $1.64 per share, up 3.8 percent.

On Slide 7, I would summarize our performance as well balanced around the world where we really did have positive contributions from every region.

Just to highlight, North America had record revenues during the quarter.

We continue to make improvements in our European operations.

Latin America, despite the ongoing volatility that that region has, had an outstanding quarter of operating results and in Asia we posted both record sales and quarterly operating profit.

As I look at these performances around the world they really were driven by some several common factors.

First, solid business execution in which every market in the world was challenging as we ended 2002.

Secondly, by bringing a continuous stream of consumer relevant innovation to the market in all parts of the world.

Third is to aggressively deliver total cost productivity in all parts of our business.

And finally, we have been realizing the savings of our restructuring activities.

And with that I'll provide you now more detail with our fourth quarter and outlook for 2003 for our regional businesses.

Beginning on Slide 8 with North America, where our revenues grew by 15.9 percent.

This strong growth did include our Mexico acquisition.

Revenue growth without the acquisition was up 9 percent in a market which was up 7 percent for the quarter.

Operating profit for the quarter was down by 2 percent which really reflects three things that we absorbed in terms of costs during the quarter.

The first was increased pension costs year-over-year of about $7 million.

Secondly, we did increase brand investments and supporting our complete innovation launches which cost us about $13 million in the quarter.

And we had a quarter over quarter reduction in production volumes of about 300,000 units to reduce inventories as we see some in this uncertain environment.

At year end in North America our finished good inventories were reduced by 11 percent versus the previous year and now we do believe trade inventories as well as our inventories are well balanced with current sales as we started this new year.

During the quarter, we also fully integrated our Mexico acquisition into our global operating platform which will become increasingly important manufacturing asset for our global sales network.

And we also continue to see excellent growth opportunities in the domestic Mexico market. 2002 as Dave mentioned we had a record number of very impactful product innovations in the market.

On Slide 9, you can see what I would call only a partial listing of the number of consumer relevant new product introductions that we did bring to the North America market in 2002.

This list includes our top-selling Duet washer/dryer pair, the Personal Valet, which as I have mentioned before is a whole new clothes revitalization category for us, Polara, which is the world's first refrigerator and cooking appliance and several new KitchenAid offerings, our new Proline series, Tall Tough dishwasher and Briva, the world's first in-sink dishwasher.

These Innovations are both fueling our growth and our we're seeing are also creating demand in the marketplace.

On Slide 10 you'll see just one example of how we believe our innovation is both creating demand, growing the market and evidence that consumers will pay for value if the innovation is truly relevant to them.

In the last 24-month, we have introduced two new washing machine designs which deliver superior clothes treatment and cleaning performance.

They have 67 percent better energy-efficiency and over 50 percent less water usage.

And I would say our truly unique in terms of designs, performance and technology.

These products have changed laundry demand in the US market.

Even though these two products are nearly two to three times the average selling price in the marketplace for a washing machine, they now represent 12 percent of the market, up 33 percent from a year ago, quarter over quarter.

Our share in this market is now up over 60 percent and that given the fact that we've been production-constrained ever sense we introduced our new Duet models.

We do believe that consumers clearly see value in this innovation and we expect that this segment will continue to grow to over 20 percent of the market in terms of units and over 40 percent in terms of revenue.

We believe this is truly evidence that unique consumer-relevant innovation coupled with strong and trusted brands can change what consumers want and what they do buy.

In 2003, this tenuous flow of innovation will expand.

In fact, last month at the houseware shows in Chicago, our KitchenAid small appliance group launched our new KitchenAid Proline series of countertop appliances shown on Slide 11.

This new eight-product lineup of truly premium small appliances has KitchenAid once again redefining what premium quality countertop appliances are in the marketplace.

These products which had great reception by our customers will be priced at retail in the range from $200 to over $1,000 for these appliances.

At the international builders show also last month, we launched two major new room innovations.

The Family Studio which is shown on slide 12, is a natural extension of our fabric fair leadership working together with leading architects, designers and home builders, we have created a family studio room which really does transform traditional laundry space.

This modular approach allows builders and remodelers to bring together a full range of fabric care products as you see in this picture which includes our Duet washer and dryer, our Personal Valet, our newly introduced fabric drying closet and ironing station, and several other innovating fabric care products.

We also are expanding our position in the garage by introducing the new Gladiator GarageWorks brand which brings together a unique line of innovative storage systems and appliances which you can see on Slide 13.

The early response by builders, remodelers, home improvement channels and most importantly consumers has been overwhelming to date.

We expect to have a full national rollout for this product line during the course of 2003.

In 2003, in North America, we do continue to see a somewhat uncertain environment.

We're forecasting that the industry demand for the year will grow by around 2 percent for the year.

We expect that our business will grow to 4 to 5 percent and if you take out the Mexico acquisition, that would be about 2 percent growth net of acquisition.

And we will moderately improve our earnings after absorbing all the increases for pension and healthcare costs that Dave mentioned earlier and we also expect to deliver strong cash flow from North America.

Our focus in North America will be to continue to execute well against all the elements of our strategy which really are focused around building strong consumer-desired brands, bringing consumer-relevant and frequent continuous product innovation to the marketplace, building partnerships with our value-added trade distribution, and aggressively managing total cost productivity in every part of our business.

And with this continued focus, we are confident we'll deliver another record year performance in our North American business.

Now I'll turn to Slide 15 and talk about Europe where we did deliver a solid quarter of improvement.

Revenues grew by 13 percent benefitting from the Euro/dollar translation, absent that revenues grew by 2 percent in operating margins came in at 4.1 percent up 1.2 points versus last year.

As I mentioned last time, this operating profit improvement was below our expectations of 5 1/2 to 6 percent and this difference was due to weaker-than-expected demand in the quarter, significant industry ongoing industry price erosion, and we did reduce our production volumes to adjust to this environment.

Our European operations have significantly improved their working capital and asset utilization and for the year, we delivered a strong level of positive cash flow from the region.

We have made progress in repositioning our European business over the last 12 to 24 months to create value in a very challenging environment.

The focus of these efforts really is around four areas which are shown on Slide 16.

The first has been to continue to create a strong brand portfolio of few but very strong consumer desired brands across Europe.

Secondly, to expand our key market leadership position in the markets we have prioritized across Europe.

Third, is the leverage more rapidly our global product innovation into the European markets and finally to structurally increase the level of annual total cost productivity that we can gain across our business.

Turning to Slide 17, you will see our brand portfolios and today we do have the portfolio of few but very strong brands in Europe.

The Whirlpool brand continues to expand its leadership position and is the number one brand accross Europe.

Today, 70 percent of our revunues in Europe come under the Whirlpool brand.

And I think very importantly, the consumer preference has doubled in the last 5 years.

We continue to gain market share with the Whirlpool brand across Europe while at the same time increaseing our price level positioning in the market place.

Turning to slide 18.

We also continue to prioritize and focus our growth with key markets where we can either gain or expand our leadership market position.

In 2002, we did gain the number one position in France.

We significantly expanded our leadership position in central Europe and in particular in Poland, with our Polar acquisition.

And finally we continue to grow our leadership position in Belgium in the Netherlands.

Looking ahead we not only expect to grow from these current positions in these markets but we also see excellent growth opportunities for us in the UK, Italy and Russia.

Another key area of growth in margin expansion for us is to accelerate our global product innovation into the European marketplace.

You can see examples of that on Slide 19.

We have leveraged our global pipeline to launch the European version of our Whirlpool Duet washer.

We have introduced the first-ever European-sized side-by-side refrigerator and we continue to lead the market in innovations for microwaves, both countertops and built-ins.

And we will accelerate these introductions as we go forward in 2003.

Finally, given the economic and industry environment that we have seen for some time in Europe, productivity at this time is absolutely critical to create and sustain value in this region.

And we have accelerated our efforts on all fronts as it relates to productivity and you can see that on slide 20.

But in essence, we have -- we are realizing our savings from restructuring activities that we have taken.

We do have Six Sigma lean manufacturing skills and capabilities in all of our operations across Europe and around the world which will help us to sustain these productivity improvements.

We do continue and will gain even more benefits from our global product designs and our global procurement leverage and very importantly we are now accelerating the migration of our manufacturing to low cost production locations which are Poland , China ,Silvokia, Brazil and Mexico.

These moves have been enabled by our restructering activities and they will continue to gain momentum going forward.

To give you an idea of the impact in 2001, 12 percent of our production for sales in Europe came from these low-cost locations.

This year in 2003, 26 percent of our production for sales in Europe will come from these locations.

And by 2005, our plans call for over 50 percent of our production will be produced in these countries.

And just to give you a general guideline, these moves reduce our product costs for like-for-like products by the magnitude of 10 to 15 percent, even after absorbing higher transport costs.

Together, these combined actions are enabling to us achieve and sustain a new and higher level of productivity in Europe for the next several years.

In 2003, we do expect the current market conditions to continue and we're forecasting for the year market decline in Europe of 1 to 2 percent.

Our business plans to have modest revenue growth in Euros and we do expect significant operating profit improvement in 2003 based on the actions that I just summarized.

Turning to Slide 21, our Latin-American business had strong performance in the quarter in a very challenging economic environment.

Revenues in dollars declined by 12 percent in local currency they rose by 9 percent in a market where demand was flat.

Despite this environment.

We had strong operating profit performance with profit margin expanding by over 3 points to 13.9 percent.

This performance was driven by our ability due to our strong brand and market position to successfully pass through price increases which are necessitated by the currency devaluation cycle.

We were able to improve our product mix as a result of our continuous flow of product innovation to the market, and we were able to significantly grow our exports out of Brazil which reflects the competitiveness of our Brazil manufacturing position.

That combined with our increasing number of global product platforms which were now able to competitively export to North America, Europe, Asia, and other countries within Latin America.

And finally, we also did continue to deliver strong operating performance in our compressor operations.

Again, together, these actions enabled to us strengthen our position in the region and deliver strong results.

For 2003, we expect to continue to see economic challenges and we're expecting market demand to be flat.

Our operating performance will continue to improve in 2003 and we will offset the elimination of BVX tax credits during the year and we'll do this by continuing to improve our price realization, we'll deliver strong levels of total cost productivity, and we will once again significantly increase exports from Brazil to our other global markets.

Turning to Slide 2 2 in Asia, we had a strong fourth quarter where sales and profit margins were at record levels.

Revenues grew by 13 percent and profits were up 43 percent as margins expanded by 1.4 points.

This performance was driven by strong growth in China and India where we continue to extend our market leadership position.

For the year, we expect -- for 2003, we expect market demand to grow modestly.

We will continue to expand our presence throughout the region and expand our manufacturing and product capabilities in the region to provide more export products to the -- to our global sales/distribution network.

To sum up 2002, despite economic challenges and competitive challenges around the world, our global operations delivered a record level of operating performance.

And I would say our global position continues to get stronger and is yielding benefits to all the markets that we serve.

In 2003, we will continue to invest in our brands and in consumer-relevant innovation.

We'll ten to develop strong partnerships with added value trade partners around the world and we will drive record levels of productivity from our global operating platform.

The benefits from the restructuring actions and our productivity savings will ramp up and accelerate during the course of the year.

So we believe that through this continued focus on executing our strategy we will deliver another record year of operating performance in 2003.

So with that I'm going to turn it over to Steve Barrett to give you an update on our financial performance.

Stephen Barrett, Jr.: Thanks, Jeff, and good morning.

If you can move to slide number 23, I'll talk you through some of the accounting line items from operating profit to net earnings.

Interest income and sundry expense and account classification encompassing numerous miscellaneous nonoperating items as reflecting a modest $3 million improvement.

For interest expense, this cost was only up slightly despite a higher level of debt related to acquisitions.

Lower overall interest rates and very strong cash flow from operations helped to mitigate the acquisition impact.

On income taxes, the quarterly effective tax rate is 34.5 percent, and equal to the fiscal year average in both 2002 and the prior year.

Now this appears as a slightly higher rate than the year-ago quarter which reflected a balancing adjustment.

Note that we anticipate the 2003 fiscal tax rate at about 36 percent.

Up from 34.5 percent and reflecting previously announced reduced utilization of Brazilian tax credits.

Moving now from core earnings to GAAP P&L, please turn to slide number 24.

On a GAAP basis, we recorded a fourth quarter loss of 29 million.

The key reconciling items to core earnings profit of $113 million include the following.

A 43 million after-tax charge in discontinued operations reflecting the previously announced write-off of our United Airline aircraft leases.

An 84 million after-tax charge related to the restructuring program that we announced in December 2000.

I'll have more to say on this in a moment.

A $6 million after tax final charge related to our prior year microwave oven recall and finally, a 9 million after-tax charge to write off new goodwill.

Goodwill which was created when our China joint venture laundry partner exercised a put option and we took our control to 100 percent.

With that reconciliation complete, I'd like to turn to slide number 25 and briefly recap our restructuring initiative.

As noted, we recorded a fourth quarter charge for restructuring and related costs equal to 84 million or 107 million pre-tax.

This charge effectively closes out the major restructuring initiative that we announced back in December of 2000, a total investment of $373 million with close to half of this concentrated in Europe.

Now, as to benefits, this initiative is on track to deliver savings in excess of $200 million with about $50 million incremental to 2003.

Finally, although we close out this program, ongoing restructuring is part of life and is necessary to remain cost-competitive and to fund our strategies.

Looking forward, restructuring opportunities in this area will be planned for, sequenced and managed as part of our overall operating portfolio and we will no longer be reporting results with a pro forma core versus GAAP distinction.

Slide number 26 shows several key financial measures.

As a percent of sales, working capital has improved by 40 basis points to 11.2 percent.

This is a record low for the corporation greatly impacted by inventory management in North America but with Europe and Latin America, also recording significant progress.

For perspective, networking capital is now one half billion dollars lower than five years ago a period over which our sales have also increased.

Year-on-year debt levels are up 62 million.

However, if you exclude the debt assumed with the Vitromatic and Polar acquisitions, total debt would have been $275 million lower than last year.

On debt-to-capital, this shows a large year-on-year increase.

However, of this 17 percentage point increase, the FAS 142 goodwill write-off explains virtually all of it.

Excluding this, and the acquisitions made at midyear, this ratio would have actually declined.

Our interest coverage ratio has been strong over the entire fiscal year reflecting strong operating performance and lower interest expense, which declined about 12 percent year on year.

Now looking at the two return measures, return on equity and return on total capital, the overall picture is one of improving results.

But since there are a number of unusual things impacting the GAAP-based measures, we have also presented these statistics on a comparable apples-apples basis.

Now, some of the key adjustments that we have made to eliminate the distortive effects of both unusual nonrecurring P&L charges and the related impacts on our equity/capital base include the previously discussed FAS 142 charge, the pension related equity charge, the aircraft lease write-down, and other one-time items, and finally the last tron.

Of our December 2000 restructuring initiative. [INAUDIBLE] for all of these items our return on equity improved by five points year on year from 22 to 27 percent.

Now looking to the future, we will not see these kinds of P&L and equity impacts again.

Importantly, we are in very strong financial condition going forward.

Turning to the last slide before questions, Slide 27, I'll briefly summarize our outlook for fiscal 2003.

First, and as Dave said at the out sit, we expect to deliver EPS in the range of $6.20 to $6.40 per share.

This would represent a net increase in the range of plus 2 to 5 percent.

However, what you don't see in the net change is our need to overcome the hurdle of two significant year-on-year impacts.

Those being the significant increase in pension expense and a reduction in the utilization of the Brazilian export tax credits.

Those two items as Dave said are equivalent to $1.33 per share in the year-to-year comparison.

In this light, then, the 6.20 to 6.40 guide dance suggests a really strong performance on most operating measures.

Our key assumptions call for profitable revenue growth driven by our innovations and brand-focused value creation strategies, continued total cost productivity performance, building from year end 2002 results; incremental restructuring benefits as discussed; and very strong cash flow resulting in lower financing costs.

That's the overall picture and reasons to believe.

With that, I'll turn the call back to Dave.

Thank you, Steve.

Now we would like to turn the call over to all of you for any questions or comments you may have.

Thank you.

The question-and-answer session will be conducted electronically today.

If you would like to ask a question, you can signal us by pressing Star 1 on your touch-tone telephone.

If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment.

We will proceed in the order that you signal us, and take as many questions as time permits.

Once again, that is Star 1 to ask a question.

Our first question will come from Michael Regan with CS First Boston.

Thanks.

Good morning.

A few questions.

Number one, is there any anticipation or what's the anticipation for absorbing restructuring charges in 2003 kind of above the line?

What kind of level are you dialing into your guidance?

There is a modest amount of restructuring built into 2003, Michael.

You know, we have just come off the major activity.

You know, as we look forward, I would suspect that you ought to all be thinking about regular restructuring and on -- on and on going basis that's required to maintain competitiveness in the $35 to $50 million range.

Okay so that's kind of the base to think that you'll absorb going forward and is that the --

'03 is significantly lower than that.

Again, we have just come off the major restructuring activity.

No, I understand that I just want to get a sense of the magnitude.

If I could just address two of the geographic markets.

First, Jeff, you know, in North America, all of the issues that you highlighted in terms of impact on margins were things that you expected going into the fourth quarter.

Is that fair?

Not in the production reduction.

The 300,000 unit production reduction despite the strong sales we had, we actually felt like we had commitments and forecasts even higher than that, and as we particularly progressed through the quarter, we saw that that wasn't going to occur and we took that 300,000 out probably starting early November through December.

That had about a $12 million impact on profitability.

Right.

So you went into the quarter expecting 1 percent industry growth, uhm, you got 7, and you still felt the need to take 300,000 units out, is that the way to describe it?

Uhm, yeah.

We had, uhm, some orders reduced by a major customer and during the quarter, and that's why we took that down and we managed that flow very closely as well as we did take the decision given the uncertainty coming into 2003 to take inventories down lower than we had originally expected.

Okay.

And then, uhm, in Europe, you're talking about 95 million of savings from all the restructuring you've done.

I'm assuming that 95 is part of the 200, is that correct?

That's correct.

Okay.

Now, you said the 200 you expect 50 million incremental in '03.

What do you expect the incremental Europe savings, what of the 95 do you expect in '03?

It will be about half.

About half of it?

And what, Jeff, did you get, do you think, in '02?

Uhm, these savings come out '01, '02, '03 and a little bit in '04.

So -- so, you know, I would think in terms, uhm, probably -- you mean the exact amount in --

Well, just, I mean in rough -- did you get 30, 40 --

It would probably be 20 to 25 in '02.

Right.

So I guess the question I'm going to continue to ask because you continue to highlight while you're there is, uhm, you got 20, call it 25 million of the savings in Europe.

Margins ended the year significantly below where you wanted them to be on a run rate and where you have told us they need to be to have Europe make economic sense.

Right.

Meaning you gave away a lot of the cost savings so you're running fast to stay in place.

Why is that going to change?

And if it doesn't, when are you going to commit to making a decision about whether or not Europe is the place to be?

You know, Michael, uhm, yes, uhm, you know, none of that restructuring absolutely in a perfect world falls exactly to the bottom line.

We make investments.

We deal with market dynamics.

I think Jeff laid out to you a pretty -- all of you a pretty compelling story.

We've gone from what will be about 12 percent of our manufacturing in Europe in lower costs by '05, 50 percent.

And some of that takes restructuring, some of it absolutely doesn't.

We're just expanding production, you know if you look at our full prod Slovakia plant, we bought a facility that's 300,000 units output.

Today we're building over a million washers a year.

We are going to do the same kind of ramp-up in (indiscernible) -- excuse me in Poland.

So these don't take restructuring some of these as we go forward but as Jeff outlined to you, the things we're doing there, a whole different structural level of productivity that we're driving in our plants with new initiatives around lean manufacturing and Six Sigma, all of those things combined say that we're going to continue to drive that performance up.

We do need to get that business to 7 percent operating margin to have it create value.

And we understand that and the steps that Jeff outlined are going to do that for us.

And just to mention what Dave said, we have -- I think as you know, we measure our productivity as total cost productivity.

Right.

Which is -- which doesn't include inflation or any of that kind of stuff.

It's really year over year change this costs.

The last three years we have averaged around 3 percent or so in Europe.

You saw from that given the market environment what we've been able to improve our margins with the actions that we've taken, we're looking to roughly double that level of productivity structurally as we go into this year and I think we have a pretty good level of confidence that we'll be able to do that so we have adjusted our capabilities and the level of aggressiveness given the environment we have seen.

And Dave, you know, just to -- the same question.

Now, how long is Whirlpool willing to commit to Europe if you can't get margins to a level that make that business economic?

We believe we can get that business to a margin level that makes sense economically for the shareholder.

How long are you willing to commit if you can't.

We are going -- we will get there over the course of the next 18 months.

Okay.

Thank you.

Up next from Raymond James we'll hear from Sam Darkatsh.

Yes, good morning, gentlemen.

Couple quick questions.

With the inventories drawn down, you said it was about a $12 million impact to profitability.

Going forward, is your production going to be at an even rate with your unit sales as your expectations?

Yes.

It is.

We came into the year I think in good shape.

I think we've seen in January a little bit of a softer mark North America but I think any inventory in the system has been burned through.

So we don't see any -- again, given the current environment that we're looking at in the first quarter in North America which we think is going to be flat to down a little bit, we think our production and inventories are lined up pretty well.

And the POS versus your sales, what does that look like in the first quarter?

You mean the sell-through?

The sell-through, yeah.

Within a point or so the same.

Okay.

And, uhm, you're assuming in '03 in North America no share gains.

Can you give a little bit of color into that?

Is that a channel alignment issue?

Is that a new product issue?

Is that a competitive issue?

Can you talk about that a little bit?

That's a bit of a change from what we've seen over the last couple of years.

Stephen Barrett, Jr.: You know, fell last, when we talk about our financials and Jeff talked about the industry growing at 2 percent, we have got numbers at 4 percent, you back out Mexico it gets back to industry levels.

And we've been I think in every year that we've talked to you at the beginning of the year talk about how we manage profit planning sales increase, revenue increase versus what our businesses have targets to deliver.

And we very modestly plan the revenue increase side so that we can have the proper balance on the cost side.

And we found over the years this is the best way to do it.

I would be very disappointed at the end of the year if our North American business delivered 2 percent revenue improvement if that's what the industry did but for financial planning that's the approach we take.

So this is you folks just being extra conservative with the share situation, then?

Stephen Barrett, Jr.: Well, it's conservative but it's also the way that we -- we believe we can best manage the cost platform of our businesses around the world.

Okay.

And last question, your assumption for the Mexican acquisition earnings accretion for 2003?

Steve's going to look it up here.

Probably have to give -- probably got an aggregate for Polar and Mexico but let us -- maybe we can come back with an answer after he pulls it out here.

Very good.

Thank you very much.

Moving on we'll hear from Jeff Sprague with Salomon Smith Barney.

Thanks.

Good morning.

Yeah, the first question maybe actually follows on, on that one.

You very kind of explicitly laid out the head winds for '03.

And you know, you are trying to kind of build confidence in this guidance range as you put out -- that you put out there.

I was hoping that you could be a little bit more explicit about the pluses.

I think we heard the, you know, the production -- the productivity Delta on the restructuring is 50 million.

I would be interested in what the acquisition accretion is as part of that.

And then what maybe you see in some of the below-the-line items, what's going on with interest and just to put a little color around, you know, kind of the positive offsets to the well-understood negatives.

Okay.

The 50 million is surely part of a -- part of productivity but is directly related to the restructuring costs we took.

We will have significant levels of productivity above that in our regular operations.

And again, there's no operation in the world that has less than a 3 percent target and most have significantly more total cost productivity so it's in addition to the 50 million on the restructuring side.

Steve, have you got the acquisition accretion?

Stephen Barrett, Jr.: Yeah.

The Mexican business will add 40 to $50 million in operating profit year on year for us.

And so that would be about, uhm, 25 cents.

Okay.

Stephen Barrett, Jr.: Year on year.

And then there's some offsetting financing expense to that, I take it right?

Stephen Barrett, Jr.: Yes, there is.

And in fact, both acquisitions were slightly dilutive by about $6 million net earnings in '02.

But we expect, you know both the Vitro and the Poland acquisition to be slightly accretive in 2003 net after financing.

Slightly accretive meaning 5 or 10 cents or... more than that?

Stephen Barrett, Jr.: About 10 cents.

Okay.

And then the rest of the offset, then, so the -- the majority of the offset resides in the assumption of some volume growth in the productivity that should flow through based on your initiatives, is that --

Most of it comes from $50 million restructuring savings plus the productivity in all the rest of the operations that were never reflected in the restructuring savings.

Stephen Barrett, Jr.: In modest revenue growth.

Right.

And can we just firm up some -- we're talking deltas but can we actually firm up some of the actuals?

For example, what, you know, what the pension expense actual was for '02 and what you're expecting for '03?

What the restructuring savings were in '02 and what you're expecting in '03 to get to that $50 million delta?

Sure.

Stephen Barrett, Jr.: On the pension, taking that one first, you knob, we actually recorded a pension credit in 2002 of approximately 30, $33 million.

And in 2003, we're expecting about $60 to $63 million.

So we've got about --

Expense.

Stephen Barrett, Jr.: In expense.

That's the 95 million swing there?

Stephen Barrett, Jr.: Yes, it's a 95 million swing there?

Yes, it is.

Okay.

Stephen Barrett, Jr.: And on restructuring again?

And the [INAUDIBLE] is 33.

Is that going from 33 to zero or is there -- is it --

Stephen Barrett, Jr.: No.

Some different number.

Stephen Barrett, Jr.: No.

It's going from approximately 40 in 2002 to about 7 over the course of this year.

Okay.

And then the restructuring delta -- the restructuring actual that is support the $50 million delta?

Stephen Barrett, Jr.: Yeah.

You mean on a cumulative basis is that correct, sir what you're after?

I'm kind of looking at kind of the --

Stephen Barrett, Jr.: 2002?

Yeah. 2002 versus 2003.

Stephen Barrett, Jr.: Yeah. 2002, we had approximately 60 to $70 million pre-tax.

Net year on year contribution from restructuring.

And next year, we're expecting an additional 50 or so on top of that.

Okay.

And then, uhm, also maybe just switching gears, perhaps for Jeff, could you -- you know, you've made the comment about preference in Europe.

I was wondering if you could kind of compare and contrast brand preference versus actual share, whether they're in line or there is some disconnect there that suggests that opportunity or a problem.

In the key markets we measure our brand preference is actually higher than our brand share and, you know, I give you an example in North America, our -- it would be the other way around.

So we view it as an opportunity both because it's growing and I think it identifies the opportunity through partnering with the value-added trade partners to convert more consumers who are positively -- have a positive image of the Whirlpool brand so we view it clearly as a positive.

And then just one final question just kind of competitive dynamics, what is your current assessment of just the indigenous Chinese manufacturers you know increasingly bringing product here, the highers, for example, how that plays out over the next year or two and how it might undermine that kind of lower middle part of the market?

Well, I wouldn't -- I would talk about it this way.

We do believe that the -- not only in the US but probably in most parts of the world that there will be an increasing amount of China-made appliances selling around the world both not only in Asia but also in Europe and the US.

And that would include ours.

Based on our manufacturing.

You know, I -- I think that is the dynamic that, in my mind, going to accelerate at an increasing rate for us and others and I think that's probably the more important dynamic as opposed to any individual competitor.

And Jeff, just, you know, if you sit back and reflect on (indiscernible) they are really the only ones that are bringing nonmicrowave products into the market play, and the challenge that they're going to have to deal with is building a brand awareness and some level of demand for the brand and then a distribution system.

We're not discounting their ability to do that over some period of time but that is the challenge.

If you look back over the last 20, 25 years, there's been several Asian manufacturers who have attempted in the -- in what I call the major appliance line, not the microwaves or air-conditioners to penetrate the market and the hurdle that they all faced and none were able to overcome is brand recognition and building a distribution system.

And just to maybe complement that from our perspective, now, our model for any low-cost country migration, manufacturing, is not at all tied to just competing in the lower price points.

We do believe in the key markets we serve.

We have to compete successfully in every price point we participate in.

But we're really coupling that with our strong brand position.

We're taking in new innovation into these factories, the quality levels are at least equal to what we have in our mature markets.

So our view is that the model doesn't change other than the fact that we have a lower cost manufacturing base to start with.

Great.

Thanks a lot.

Up next from Bank of America we'll hear from Nicole Parent.

Good morning.

I was just wondering if you could give us a little more color and granlarity on Latin-American margins as we look into '03.

The strength in the fourth quarter was obviously driven by a couple of different factors but I think you know as you look ahead how should we think about that given that the last time we saw margins at the current rate was in the early '90s?

The fourth quarter is historically the highest volume month.

It's the high season in Latin America especially Brazil.

Their operating margins were at 13 percent-plus.

You shouldn't expect to see that ongoing for the quarters in -- in the years 2003.

But again, we believe that we will expand margins despite the loss of this $33 million delta from the [INAUDIBLE] tax credit.

So if you look at how Latin America ended the year in total, and I'll just pull it out here, in a moment... year in total they were at 8.5 percent operating margin.

You should expect we will overcome the 33 million and we will deliver margin expansion from that level.

Okay, great.

And I guess could you provide a little bit more color on product performance in the quarter by category?

You noted the energy-efficient laundry did quite well but could you also give us a little bit of color by-product category

I think you're talking about North America.

It was fairly balanced for us.

I would have to say clearly that the stand out well above the marketplace was our premium laundry business in North America but basically, and again if you take out acquisition, our business was up 9 percent across the board so I would say in every category we were either at or above market across our key brands.

And particularly strong performance Whirlpool and KitchenAid brands.

I guess, you know, I think it's pretty well understood that the last week of December was unusually strong.

Was that just driven by inventory issues in the channel?

Well, no.

I think it's really driven by the calendar.

If you look when -- where the holidays fell, there was, you know, an extra day or two shipping this year versus the typical holiday period coming in the middle of the week, and consequently, a day or two less shipping in January, at least from our business, that's how it worked.

Okay.

And, uhm, in terms of Home Depot, forester just came out, we have seen the Home Depot share gains, the Forester study indicating, you know, there is a pretty even split between female shopping at Home Depot and Lowe's.

Could you just comment I guess or walk us through, is there any change in other than Home Depot expo what you might be doing there?

You know, Nicole, we continue to believe that we made the right distribution decisions.

The distribution structure we have continues to gain market share.

And as we've said from the very beginning, we can't dictate where our consumers shop.

If our consumers shop at Home Depot or any other account that we're not in, we're going to have to take a look at that and so as we look to the future, I have said many times to all of you before, this is not a never situation.

But again, as we look at the market today, our consumers today look at the level of innovation that we're bringing to the market and then the capability that the retailers need to have to properly present that innovation, we think we're well positioned and have made the right distribution decisions.

Okay.

And I guess just one last question.

In the head winds, I didn't hear you mention steel.

And it looks like there is a movement afoot to repeal the steel tariff.

Could you just comment on that as we look into '03?

Yeah, Nicole, I will.

You know, basically, we buy all of our key commodities on a global basis at any given time we have stagger contracts for this.

So only a proportion of our business is exposed.

This is not new.

We saw this in 2002.

I would just say that when Dave spoke about our productivity numbers, that included increased assumptions for steel in a proportion of our business.

So I'm not sure that, you know, I think over a longer period of time, you know, removing the tariffs would probably help but any 12-month period of time given wait we stagger our contracts it probably wouldn't have much impact either way.

In that total cost productivity number is material productivity and we will have a year-over-year reduction in absolute tariff costs.

Okay.

Thank you.

We'll hear from Eric Bosshard with Midwest Research now.

Good morning.

Hi, Eric.

Two questions.

Good morning.

First of all in terms of your assumptions in '03 you talk about 2 person North American growth.

Can you talk a little bit about the price or mix experience in 2002 and what the expectation is in that area for 2003?

Yeah, Eric.

I think there you really have to look at it by-product and by brand and by category but there's clearly continued to be a dynamic in 2002 which we've also seen in previous years that there is quite a bit of aggressiveness in the lower price point products by some competitors continuing to driving prices down.

I think there is an offset and certainly has been an offset in our business with both effectively competing there but at the same time, changing the mix and bringing more added value product to the marketplace.

So, you know, net-net, we had a -- a pretty neutral year-over-year change in pricing.

Frankly, we don't see that dynamic changing in 2003.

There -- where there is nondifferentiated products or brands there will be significant price competition.

We do think the consumer continues to tell us where there is real added value innovation.

Pricing is less of an issue.

So we're projecting basically no real change in our pricing average selling values per product in 2003.

Secondly, to return to Europe for a moment, as you look at the experience of '02 in the shortfall in profitability you talked a lot about what you're doing to address it with low-cost market initiatives and other restructurings.

But what would you identify as the sort of hole in the margin bucket over there that's caused to you fall so short of your targets to this point?

Very simply has been the price deterioration in the marketplace.

In 2002, the market was down in -- if you count Western Europe countries and Central European which is the basis that we participate and measure, the market was down about 3 percent.

Yet underneath that, average pricing for like-for-like product was down about 3.5 percent.

So you might think about revenue reduction for the industry of about 6 to 7 percent.

That was significantly higher than we've experienced before.

We stayed slightly above the market so we didn't go as much.

But that was the hole in our margin.

And as I said, there's two -- well, I mentioned the things -- the four years we're focusing on but the two big ones next year which we started to see a little bit this year is the benefits we get by bringing our innovation to the marketplace as we have in North America.

We're seeing similar benefit although it started later in Europe.

But the big lever for next year and going forward is significantly raising the capability of to us drive productivity.

As you look at pricing in '03 in Europe, is the assumption that you continue to see such deflation or similar deflation or is the assumption within Europe, you know, 18 months margins to 7 percent that you see more norm average selling price experience there?

We're assuming about -- we're not assuming exactly the same levels actually.

We're assuming for the industry market pricing will be down 2 percent.

Okay.

Thank you.

From Parker Hunter we'll hear from Larry Horan.

Most of my questions have been covered but I would like to you give us some insight into how you expect over the course of this year to offset the loss of the tax credits in Brazil.

Well, you know, Jeff, we -- Jeff chatted about this so did Steve.

We -- I'll take you back to midyear -- made a decision in the second quarter that we talked about with you at the end of that quarter.

We made a decision that we were the only ones who had the strength with brand positioning down there to drive a different level of economics in the industry.

I mean, we've got three competitors that we compete with there and they are the same ones all over the world, GE, [INAUDIBLE] and [INAUDIBLE] and they have not been profitable for a very long time.

We have remained profitable because of the strength of our brand.

There was a dynamic between that level of competitive activity in the retailers and it's a concentrated retail structure that we felt was unhealthy.

And so we significantly during the course of the second quarter, the third quarter and the fourth quarter raised pricing in the marketplace.

We sacrificed in the second quarter.

You all remember we lost almost 4 points of margin because we sacrificed volume to change the dynamic in the marketplace.

We told that you we would recover that in the third quarter and we largely did.

We surely made it up by the fourth quarter.

So our ability to offset that in Brazil is based on productivity.

We'll drive there just like we do every place else.

But we will also continue to take pricing to the marketplace.

Okay.

Thank you very much.

The other issue clearly there is a benefit for us to be exporting product out of that marketplace.

Given the currency.

So we have significantly increased the amount of exports of major appliances out of the Brazilian market into our other markets around the world.

On that issue, what did you export -- it was about a million in the fourth quarter?

No.

Out of Brazil?

Yeah.

Major appliances?

I don't have the exact number here, but it was maybe one-fifth of that.

Okay.

And 2003, we will begin to near a million unit of exports.

Two years ago, it was probably no more than 100,000 units.

Okay.

Thank you very much.

Our next question will come from Laura Champine with Morgan Keegan.

Good morning.

Could you quantify your top-line growth for the full year of 2002 in North America excluding the acquisitions and also excluding laundry?

No, we wouldn't break -- we already excluded the acquisitions, but we would not break out by-product category.

We think that's a competitively sensitive piece of data that we're not comfortable with that.

Stephen Barrett, Jr.: The acquisition is again was midyear, it was about $200 million in the second half.

So just take the 200 million off the total and that would be the growth.

Sure.

I guess what I'm trying to, uhm, assess is how much Duet contributed to your growth in North America.

So could you talk in a ballpark way about number of units, any sort of color I could get on the contribution of Duet to growth this year?

You know, what we've given you is the size of the industry and told you that we were 65 percent or 60 percent of that market.

Again, I think, Laura, as I sit here and think about your question, there is some real competitive sensitivity that I think we need to pay attention to.

So...

I'm not sure we can answer that.

Okay.

Thanks.

From Dorsett Management we'll hear from Tony Campbell.

Good morning, gentlemen.

Most of my questions have been answered.

What kind of margins on a go-forward basis once we get all these restructuring charges behind us which I guess I eight out of the last ten years you have taken charges and costs and it's kind of getting a little tiresome.

But can you give us an idea of where you think so we can monitor your progress where you think net margins ought to be in the next three to five years?

You know, uhm, again, you have to look at specifically the markets around the world.

We have --

Company overall.

I mean....

Well, but it also is (indiscernible) of the opportunities we have.

I think you know our North American business you saw the numbers, it's 11 percent plus operating margins for the year.

Significantly higher than any competitor in the North American marketplace.

And we will continue to improve on that margin level as we bring innovation to the marketplace (indiscernible) productivity.

Latin America we have a business that's been in the 6 percent operating margin level for a number of years now because their economic situation.

And you know, we ended the quarter at 8 percent-plus and this is a business on a normal basis if there is a normal time in Brazil that is a double-digit margin business.

And that is 10 to 11 percent level.

Europe represents the greatest opportunity for us for margin expansion relative to revenue.

And again, our view is, I have said to you earlier today, we will drive that to an EVA positive level of performance which is in that 7-plus percent range in 18 months.

And clearly, we can't stay at that level.

For this business to contribute what we expect it to, we have to grow beyond that.

And Asia represents both a revenue and margin expansion opportunity.

But the revenue -- you know, we have a business that is not yet EVA-positive.

We didn't expect it to be right now.

It's very close.

But we'll continue to invest to grow that business because it represents the most significant growth opportunity we have in the world.

The restructuring that you talked about, yes, we have had a number of restructuring activities over the course of the year.

We have said that -- years.

We have said this morning to all of you is you should expect to see none going forward that we will manage that within the P&L of the business and still hit our earnings growth targets.

And I have a follow-up question if I might.

What percentage on a go-forward basis of your production do you reckon will come from China?

You know, we are this year going to make and produce something close to 50 million appliances around the globe.

Probably 35 percent more than any other global major appliance manufacturer.

To date coming out of China we have close to 3 million units of production.

That will grow but you shouldn't expect to see 30 or 40 percent five years from now coming out of China.

There are products that make sense to export and there are some that we won't export.

What we think about is the China manufacturing base and its benefits it can bring to our Asian strategy and then the benefit it can bring to the global strategy.

We think about the China manufacturing base, the benefit it can bring on the supply side.

So there's lots of opportunities that our Asia strategy is pursuing.

Thank you very much.

Up next we'll hear from Stephen East with AG Edwards.

Good morning.

Just a couple of questions on Europe.

If you look at the Eastern European facilities versus the Western Europe peen, you are banking pretty heavily on moving production over.

Right now, what is the cost differential if you look at it on a margin perspective if you can give us some type of feel for how much more profitability is driven through the Eastern Europe facility than, say, a comparable one in Western Europe?

Well, today, let's say in the end of last year, in our two facilities there, we were producing over a million and a half units.

That's going to go up about a million units in the next 12 months.

The number I gave earlier, Stephen, is the same number.

It's -- there is about a -- for a like-for-like product in -- and again, we're producing like-for-like products in those factories, it is a 10 to 15 percent cost reduction on that same product, same:feature level, same quality level.

And that's landed back into the local market.

So, you know, if you do the math, that's typically cost of goods sold is typically about 60 percent of margin.

So it's in any given product, assuming you manage your price levels in the marketplace, it's 6 to 8 points of margin improvement when you move a product there.

Okay.

Okay.

And then maybe you said this and forgive me if you have, but when will you see the run rate on your restructuring costs in Europe?

They will fall out through the course of the year, but both in Europe and globally, these ramp up as we go through the year.

So it won't be even quarter by quarter.

They will increase as we go throughout the year.

Okay.

But the restructuring activities that were taken in '01 and '02, let's say then by '04, they will be at the run rate --

Absolutely.

Okay.

All right.

Thanks a lot.

Moving on, we'll hear from Vinnie Muscolino with David Babson and company.

Yes.

Hi.

I was trying to better understand the operating cash flow particularly in the quarter.

Looks like it came primarily from the liability side of the balance sheet in particular, uhm, accounts payable and other current liabilities were up above 400 million and I was just trying to understand what's going on there.

Stephen Barrett, Jr.: Well, the single largest contributor on the quarter to cash was working capital management quite frankly.

And, you know, as I said earlier, you know, we got, you know, 200 million was our going in estimate for the year.

We ended up current at 290.

Frankly, we did better than we expected.

We spent the amount of capital -- our capital expenditures were in line with what we had.

Our earnings were in line with what we had.

And it really is working capital management.

As I mentioned earlier, the effect in North America from the inventory reduction was over $50 million and we had similar effects with payables in both Europe and in Latin America.

So that was the single largest contributor.

And even with the acquisition, the ins and outs on an operating basis, in terms of either percent of sales or days of supply, our total inventory levels in terms of days went down.

Our total receivables went down.

And our payables went up.

So we really -- it was not just one element.

It was all elements of working capital.

Okay.

But on the liability side, what's driving the big jump in payables?

And again this 283 million in other current liabilities versus 121 in the third quarter?

Stephen Barrett, Jr.: Well, we -- I'll speak to the payables.

We do manage that.

We have goals for our purchasing organization.

So it's something we manage just like we manage the receivables side, inventory side.

Yeah, just, again, looking forward, you know, we're always working with our suppliers on terms, as well.

And next year, baked into our cash flow numbers by our global procurement organization is to take our days of payables up, you know, another 5 days or so.

So we're expecting another 50 to 70 million in 2003.

Stephen Barrett, Jr.: Coupled with both in 2002 and 2003, we have higher production levels which drives higher payables.

So this $283 million other current liability number, what makes that up?

Let them get their books out here.

We'll provide you with an answer.

Is there any other questions that we can come back to that?

Sure.

The only other question I had was there any tax payment that was deferred to the first quarter of '03?

No.

You may be thinking back to the tax payment that we had with the swap where we had the gain in '01 and we had the tax payout in '02.

Okay.

Yeah, I thought sometime in the -- in December there was, uhm, a charge that was going to be recorded but paid out in the first quarter.

Stephen Barrett, Jr.: Yeah, in other current liabilities, if that's your specific question, we have, you know, reclassified as part of our write-off of the four aircraft, you know, we have reclassified some deferred taxes payable to current liabilities, current taxes payable and that's an amount that we said could be up to $50 million.

So that's probably the single largest item that's in there.

I'm sorry, say that one more time?

Stephen Barrett, Jr.: The -- the reclassification of our deferred tax liability related to the leveraged lease, the four aircraft, when we took the write-off, that will in fact accelerate the tax payments against those leases.

And so we've relast fight from a long-term up to a current liability [ reclassified ] And that was about $50 million.

So when will that tax actually be paid?

Stephen Barrett, Jr.: Well, as late as possible hopefully. (Laughter).

Okay.

Great.

Thank you.

At this time, we have one question left in the queue and that will be a follow-up question from Michael Regan with CS First Boston.

Thanks.

Just trying to understand what you're doing with Gladiator.

You call it an appliance.

It actually looks like just garage storage.

Is there actually an appliance in there?

There is actually several.

It's what we call as garage storage systems and appliances, Michael.

It starts with a patented capability we have for wall paneling with allows to you have the hooking system for the storm systems.

It is all the storage products that you see there from workbemches to storage closets.

It is also appliances.

We have refrigerator appliance.

We have a compactor.

And actually a couple of others that we haven't introduced yet.

It is a wash-sink station.

There really are a whole array of both appliances, but the majority of the product line are storage items.

Okay.

And I'm assuming you're outsourcing production so I'm just wondering how to think about what kind of mar general structure we could see out of this kind of business.

I think you should -- although it's still early on, we are outsourcing everything except the appliances through -- through committed contracts.

But you should in terms of North America, in terms you should think after we ramp up at least equal to our major appliance probably higher than our major appliances in North America.

And Jeff, just finally, you know, if this product extension or, you know, series products works, if this thrust works, how big five years from now will this kind of business be just to give us some sense of how to measure, you know, success versus failure in terms of what you're thinking?

Well, you know, I mean, there are a lot of ways, as you know, to do this in terms of number of garages and penetration and so on and so forth.

You know, we have sized reasonably that this could be half a billion-dollar business.

We are in startup phase so it really is a little bit too early to tell.

But we do think that's the kind of market opportunity there.

The thing that we absolutely know is that the reaction from consumers when we show this at -- in consumer settings or builder's show or wherever we show this is, I have never seen a product category where we have had a more positive, strong reaction so early in an introduction.

Will there be an an -- an analyst discount for this kind of thing?

My garage looks like the one on the left! (Laughter).

As soon as we aren't production-constrained, we can probably do that.

Thank you.

We thank you all very much for spending this time with us.

And we look forward to talking to you in April.

That does conclude our teleconference for today.

Thank you all for your participation.