惠而浦 (WHR) 2011 Q1 法說會逐字稿

Good morning and welcome to Whirlpool Corporation's first-quarter 2011 earnings release call.

Today's call is being recorded.

For opening remarks and introductions, I would like to turn the call over to the Director of Investor Relations, Greg Fritz.

Please go ahead.

Thank you, Misty, and good morning, everyone.

Welcome to the Whirlpool Corporation first-quarter 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, Corporate Controller and Chief Financial Officer for Whirlpool International.

Roy Templin, our Chief Financial Officer, is unable to join the call today because of a family and medical emergency that requires his attention.

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's future expectations.

Our actual results could differ materially from these statements due to the manufacturers discussed in our latest 10-K and 10-Q.

Turning to slide 2, 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 our core operating results.

We also think that the adjusted measures will provide you with a better baseline for analyzing trends in our underlying business.

Listeners are directed to the Appendix section of our presentation on slide 26 for the reconciliation of the non-GAAP items to the most directly comparable GAAP measures.

Our remarks today track with the presentation available on the Investor section of our website at WhirlpoolCorp.com.

With that, let me turn the call over to Jeff.

Well, good morning, everyone, and thank you for joining us today.

As you saw earlier this morning, we released our first-quarter financial results and these results can be seen on slide 4.

For the quarter, our sales grew to $4.4 billion in revenues which was a 3% increase from last year.

Our earnings-per-share were $2.17 versus 2.13% -- $2.13 a year ago.

Our first-quarter results do reflect a number of factors impacting our business operations and I would like to summarize those factors.

First is demand.

Overall global demand was largely in line with our expectations with our shipments being impacted by a very positive response by consumers to our new product innovations.

Second, material and oil-related increases were significantly higher and had a negative impact on our margins.

And lastly, our price margin realization was down 2.3 points versus last year, but did improve by 9/10 of a point versus the fourth quarter quarter in 2010.

Overall, our margins and sales were largely in line with our expectations for the quarter.

Our ongoing cost reduction efforts and continued innovation of investments during the quarter positively impact our results.

These actions helped to mitigate the significant material cost inflation that we saw.

I think it is important to note that on a sequential basis, as I mentioned, our price mix was positive and our margins expanded by 1.2 points versus the fourth quarter last year.

And we clearly expect to build on this trend throughout the balance of the year.

I will now turn to slide 5 where I'd like to review our industry demand expectations in our key markets around the world.

In the US, first-quarter demand was slightly negative with industry shipments declining about 1%.

This is essentially in line with our previous expectation of negative demand in the first half of the year followed by positive demand in the second half of the year.

As we mentioned on the last call, this is largely due to the first half 2010 comparisons, which had higher demand driven by both the Cash For Appliances program and the Housing Credit program.

We will be comping against the strongest months versus last year in April/May.

And as such, we expect to see negative US industry shipments trends during the second quarter followed by year-over-year growth improvements in demand in the second half of the year.

And for the full year, we still keep the same growth forecast that we talked about before.

Turning to Europe, we continue to see steady industry demand growth in the 2% to 4% range.

In Latin America, the first-quarter demand was flat versus last year.

We here too had some challenging comparables, particularly in Brazil, as the appliance tax holiday ended during the first quarter of 2010.

We continue to expect full-year industry demand to increase in the 5% to 10% range.

And in Asia, we saw continued growth although we did see some slowing in the growth rate of demand during the first quarter as we saw unseasonably cool weather in India, which is the largest market for us in Asia, which impacted our shipments during the quarter.

Overall, however, we continue to see good demand fundamentals across the region and we expect this will result in a [whole year bond may increase] in the 6% to 8% range.

Turning to slide 6, I would like to discuss the key drivers which we see affecting our business for the full year in 2011.

As we mentioned last time, we continue to see -- face a challenging macroeconomic environment in terms of raw material costs.

We are now forecast -- expect raw materials and oil-related cost inflation to be in the $400 million to $450 million range.

This represents a $150 million increase from our previous expectation.

We do expect to fully offset these increases by continued strong and improving productivity throughout the year.

As you know, and as we have seen in the past, many of our productivity initiatives ramp up through the year, and we expect to have very strong second-half results from these productivity initiatives and other cost reduction actions.

The second factor which will enable us to offset these material cost increases are some of the -- are many of our previously announced global cost-based pricing increases which take place are going to affect largely throughout the second quarter of this year.

These increases, coupled with the benefits of margin improvements from our new product innovations, will result in improved price mix results in the second quarter and positive year-over-year price margin realization in the second half of the year.

So in summary, putting all these factors together, we are reconfirming our previous full-year earnings guidance of $12 to $13 a share and free cash flow guidance of $400 million to $500 million.

As I stated earlier the year I believe we had a very strong foundation in our global operations and I believe more opportunities than ever before to create value for our shareholders.

Over the last couple of years, as we have emerged from the global recession, we have significantly strengthened our financial position and expect to continue to do this, continue to improve upon this in 2011.

Based on this strong financial position, last week, we increased our dividends to shareholders by 16%.

This is a reflection that increasing our returns to shareholders is clearly in our business priorities in 2011 and beyond.

At this point in time, I would like to turn it over to Marc Bitzer for his review of our North America operations.

Thanks, Jeff, and good morning, everyone.

Let me start by giving my perspective on North America's performance for the quarter.

As shown on slide 8, we saw our unit shipments up 4% from the first quarter against an industry which was down slightly less than 1%.

During the quarter, we saw continued healthy momentum in our branded and overall market share.

And also during the quarter, we have somewhat reduced our promotion intensity and we have implemented our cost-based price increase, which has been in effect since April 7th.

Despite low production levels to correct high inventory, we had solid productivity gains in Q1.

On slide 9, you'll see North America's performance in the first quarter.

Net sales of $2.3 billion were up slightly from the prior year and our adjusted operating margin was 2.3%, compared to 6.2% in the prior year.

Results were favorably impacted by cost reduction/productivity initiative and foreign exchange fluctuations.

The factors offsetting results were 1, lower year-over-year product price mix and 2, higher material costs.

It is important to note that we had favorable price mix on sequential Q4 to Q1 base.

On slide 10, you can see just a few of our new products that we launched during the quarter.

Before I highlight these new launches, I would like to briefly discuss some recent product leadership recognition.

In January as evidence of our North American leadership position, we received top ratings for 11 of our latest top- and front-loading washing models by a leading consumer publication.

The Whirlpool brand Duet and Vantage washers are rated number one in France and top-loading categories respectively, the Maytag Maxima taking the number 2 spot in front loads.

In addition, our cooking categories saw the ratings sweep of the number one and recommended double oven freestanding ranges in the recent rankings by leading consumer publications.

Our Whirlpool, Maytag, and KitchenAid brands received three powerful ratings from a leading consumer magazine, [Fabre].

We have seen top ratings on select double oven range models.

Now turning back to some of our recent new product launches.

These include the Whirlpool brand induction cooktop, which utilizes electromagnetic energy to generate instant heat (inaudible) and to only have cookware touching its surface.

Occasionally, brand Four-Door French-Door bottom mount refrigerator, featuring an external refrigerator drawer and the largest of its kind.

Also shown here is our KitchenAid dual fuel range that launched in the fourth quarter and was just named the number one 30 inch dual fuel range by a leading consumer publication.

I am also pleased to tell you that that the Harris code has just identified KitchenAid as the brand of the year for major appliance and small appliance brands, based on the study of 25,000 US consumers.

These recent rankings just serve as evidence not only of the strength of our brand portfolio, but also of value we bring to consumers through consumer-relevant innovations designed to meet their specific needs.

Now before I turn over to Mike, let me highlight what we're focused on the remainder of the year.

As Jeff mentioned, our full year US industry forecast for 2% to 3% growth is unchanged.

We expect Q2 industry demand will show slight year-over-year declines, largely due to challenging comps, given the cash flow appliances program in the previous year.

We continue to expect positive comps as we move into the second half of the year.

Our Q1 operating margin improved on a sequential base and we remain focused on continuing and accelerating this trend through the pricing actions, which we have previously announced, and a strong focus on driving additional productivity gains.

Now I'd like to turn it over to Mike for his review of international operations.

Thanks, Marc.

Let me start with the first-quarter 2011 review of our international business on slide 12.

During the quarter, we saw the following trends for our regional businesses.

In our Europe, Middle East, and Africa region we saw continued gradual improvement in the market conditions although the market in Western Europe remains challenging.

In Latin America, unit volumes were essentially flat due to the comparison of the IPI tax holiday, which ended during the first quarter of last year.

We therefore expect the volume trend to improve in the second quarter and the remainder of the year.

The fundamental drivers in Latin America remain intact.

And in Asia demand remains positive, although we will continue to monitor the impact inflation has on consumer spending.

In addition, unseasonably cold weather in India has delayed purchases of air treatment products and refrigerators.

Given the significant material cost inflation we are experiencing, I wanted to discuss our price mix trends across the international businesses.

On a year-over-year basis, we did experience a modest decline in price mix.

However, on a sequential basis, our price mix improved by over a full percentage point.

This improvement reflects our strong focus on managing our key operational levers to mitigate the challenging cost inflation environment.

Turning to slide 13, in the first quarter our Europe, Middle East and Africa sales improved 1% year over year to $743 million with unit shipments increasing 2%.

The region reported an operating profit of $25 million during the first quarter compared to an operating profit of $27 million in the previous year.

Results were unfavorably impacted by lower product price mix and higher material costs, partially offset by cost reduction and productivity initiatives.

On a sequential basis, we experienced an improvement in price mix despite the expected year-over-year decline.

Slide 14 shows a summary of our Latin America first-quarter results.

The region reported sales of $1.2 billion, an 8% increase from the prior year period with appliance unit shipments essentially flat from the prior year period.

Excluding the impact from currency, sales increased approximately 2%.

Operating profit totaled $174 million compared to $167 million in the prior year.

The profitability improvement is primarily related to increased monetization of certain tax credits and cost reduction/productivity initiatives.

These favorable items were offset by higher material costs.

Our first-quarter results in Asia are shown on slide 15.

Net sales increased 8% during the quarter to $208 million, up from $192 million in the prior year period as unit shipments increased 3%.

Excluding the impact of currency, sales increased approximately 6%.

Operating profit of $11 million for the quarter was essentially equal to the prior year period.

Favorable volume growth and product price mix was offset by higher material costs.

Turning to slide 16, you'll see just a few of our international product launches during the quarter.

These products have been well received in the marketplace and we expect the rapid pace of innovation to continue throughout the rest of the year.

A line of Brastemp brand Retro refrigerators and ranges in Latin America featuring the distinctive visual appeal of the 1950s with modern functionality and sensibility; the Whirlpool brand Ceres washing machine in China featuring deep cleaning performance and LED lighting in the washer tub for nighttime use; and a Whirlpool brand three-door refrigerator in China featuring a consumer designed red glass door and a Class I energy label.

Now I'd like to turn the call over to Larry Venturelli for his financial review.

Thanks, Mike, and good morning, everyone.

Beginning on slide 18, I would like to summarize our first-quarter results.

For the quarter, our sales grew 3% to $4.4 billion.

Appliance unit volume increased 2.7% from the prior year, led by North America.

We continued to benefit from higher productivity and cost reduction initiatives during the quarter.

The rate of improvement, however, was unfavorably impacted by lower production levels as we work to balance inventory levels.

We monetized $66 million of BEFIEX credits compared to $41 million in the prior year.

It is important to note, however, that during the prior year, we experienced a reduction in BEFIEX monetization due to the IPI tax holiday legislated by the Brazilian government, which expired on February 1 of 2010.

These favorable effects were more than offset by lower price mix and higher material costs.

Turning to the income statement on slide 19, you'll note that our gross margin contracted 90 basis points to 14.1%.

The most significant unfavorable impacts on our gross margin were lower product price mix and higher material costs.

These were partially offset by cost take-out and productivity actions and, as I previously mentioned, higher BEFIEX credit monetization.

SG&A expensed totaled $380 million compared with $371 million in the prior year.

The majority of the dollar increase in SG&A was related to foreign currency translation.

As a percentage of sales, SG&A was down slightly from the prior year.

Restructuring expenses totaled $8 million during the quarter and resulted from cost reduction actions in Europe and North America.

For 2011, we continue to expect to record restructuring charges of between $75 million and $100 million.

Our GAAP reported operating margin declined approximately 40 basis points to 5.2%, and on an adjusted basis our operating margins contracted approximately 1.7 points.

There is one additional item I would like to highlight.

During the quarter, we recorded a $7 million benefit as a result of lower than expected cost, associated with the product recall we announced in 2010.

This resulted in a benefit of $0.06 per diluted share in the quarter.

Turning to slide 20, I wanted to briefly discuss interest and sundry expense while several individual line items roll into this caption on the income statement, the key year-over-year variances was lower foreign currency exchange gains in the current year quarter.

Now turning to our tax rate, we recorded an income tax credit of $24 million corresponding to an effective tax benefit of approximately 15.5%.

The first quarter benefit was greater than the prior year due to higher tax credits.

And during the first quarter we recorded $54 million of energy tax credits, and for the full year, we expect between $300 million to $350 million of tax credits and expect to record an effective tax benefit at approximately the same level as our full year 2010 benefit.

Finally, we reported diluted EPS of $2.17 per share compared to $2.13 per share in the prior year.

And on an adjusted basis diluted EPS was $2.11 per share compared with $2.51 per share in the prior year.

Moving to our free cash flow results on slide 21, we reported a free cash flow use of $336 million during the first quarter compared to $74 million in the prior year.

The main variances from the prior year relate to lower cash earnings and unfavorable working capital variances.

The working capital variances, compared with the first quarter of 2010, were predominately the result of unfavorable accounts payable variances due to production reductions implemented to reduce our inventory balances.

These unfavorable variances were partially offset by lower capital spending which totaled $115 million and was 21% below the prior year level.

The reduction was largely due to the higher level of major product launches that occurred in the first quarter of 2010.

For 2011, we continue to anticipate our capital spending to be between $600 million and $650 million.

Now turning to slide 22, I'd like to discuss our 2011 outlook.

As you read this morning in our press release, our EPS and free cash flow outlook is unchanged.

While there are many moving parts in our outlook, the most significant and favorable trends have been in the areas of material and order-related costs.

The market prices for base metal and order-related commodities have risen sharply since the beginning of February.

Assuming that the recent price levels hold, we would anticipate an unfavorable impact approximately $150 million greater than our prior outlook.

We expect to offset this increase in commodity costs through higher productivity and cost reduction initiatives.

Overall, our volume assumptions and price mix assumptions remain relatively unchanged from our prior guidance in February.

Turning to free cash flow, we continue to expect to generate free cash flow in the range of $400 million to $500 million during 2011.

Our assumptions of US cash pension contributions of approximately $300 million also remains unchanged, and we made a significant portion of this contribution at the beginning of April.

Finally, turning to slide 23, I will close my remarks by discussing the cash flow priorities for the business.

As you may have noted, we continue to make strong progress towards our near-term goal of returning to the BBB rating level.

In fact Fitch raised our rating to BBB during the first quarter and Moody's increased our outlook to positive.

Given this progress in our current outlook, we raised our quarterly dividend by over 16%.

We will continue to balance funding all aspects of our business, including capital expenditures, return to shareholders, pension contributions, term debt maturities and potential legal contingencies to ensure the best long-term value creation for our shareholders.

Now I'll turn it back over to Jeff.

Thank you, Larry.

To summarize, through the first quarter I would say that we are largely on track to deliver our full-year 2011 forecast which, when achieved, would represent record performance for our Company.

As I previously mentioned we do still see a rather volatile global economy with changes taking place in all parts of the world.

Overall, demand trends are choppy as they have been for the last couple of quarters, but with a continued overall upward improvement trend.

Material and oil-related costs as we had mentioned here have rapidly escalated and in many cases to new high levels.

This is despite an overall moderation in global growth.

These cost trends remain our primary challenge in 2011 and, again, to address these trends, we continue to drive very strong productivity and cost reduction actions and we are very confident we'll have another very strong year of productivity improvements.

At the same time, we have announced price increases in most parts of the world and expect these actions will have a positive impact on our business beginning in the second quarter and increasing through the second half of the year.

And finally and I think very importantly we remain very committed to growing our revenue through our continued strong [kings] of new product introduction under our leading global brands.

We see even in today's environment consumers want and will pay for truly relevant innovation.

These actions, we believe, will enable us to achieve or exceed our revenue growth target of 5% to 7% and earnings growth target of 10% to 15%.

In addition, we expect to deliver another strong year of free cash flow in 2011.

Achieving this will enable us to deliver a record level of overall performance for our shareholders.

At this point in time, I would like to open this up for any questions that you may have.

(Operator Instructions).

Ken Zener with KeyBanc Capital.

Good morning.

Marc, you mentioned reducing promotion.

Can you just kind of walk us through perhaps the different levers that you are likely to see or we are likely to see as consumers?

So, we might still see the same 10%, 15% at retail, the discount but perhaps the price is higher or perhaps the manufacturer is not contributing as much to that retail effort.

Let me just try to respond to that from a North American perspective.

As we said in our previous earnings call, we expect and anticipate that during Q1 we would reduce our promotional activity compared to Q4.

I mean, Q4 obviously marked a very, very promotion-intense period beyond just the Black Friday holiday period.

We have done that and yet we have significant lower promotion expense in Q1, resulting ultimately in a slight improvement of our sequential price mix.

The effects of a price increase are obviously not captured in Q1 because that was only effective April 7 and we knew that going in.

It is obviously a bit more difficult to expect what retailers will do and they determine their own set of promotions.

At the same time, we have also announced a so-called new [map] quality with somewhat limited promotional intensity from our -- on our brand in the marketplace.

Okay, and I guess related to the dramatic -- the 54% increase that we have same in material cost from just a few months ago, can you obviously holding guidance it seems like some of the positives were that the US tax credit might have creeped up a little bit.

I assume BEFIEX is [seeming] the same at $200 million.

So can you talk about how you are able to accelerate the material or the productivity and price initiatives to offset that material cost and still hold the restructuring costs the same?

Thank you.

I'll do that.

You know first of all we said in early February that energy tax credits would be approximately $300 million.

This was based on legislation that passed very late in December.

Clearly, 2 1/2 months later, we have a better view of the models and products and how they are selling.

So we -- that is why we -- nothing has really changed other than we have a little bit better visibility to put a range around that approximately $300 million which we have, which is $300 million to $350 million.

So, but that aside, BEFIEX is in essence roughly the same.

We look to offset through operations to a $150 million increase in raw materials and it is a combination of accelerating what was already a strong level of productivity.

We think we will get even more out of that, initiating new cost reduction activities which we have either done or are putting in place.

And since we talked in February, we have announced in many markets around the world, more price increases in different markets globally.

So I think it's really the answer -- direct answer to your question is we do expect to offset that through both productivity and the additional price increases that we have announced across the world.

Thank you very much.

Sam Darkatsh with Raymond James.

Good morning.

Couple quick questions.

First off, what was the year-on-year material inflation in the quarter?

And then how does that progress, that inflation on the P&L as we go through the year?

Year over year, from a material headwinds perspective, the headwinds essentially were about $94 million on a year-over-year basis and they will essentially -- if you think about it evenly across the three quarters, it is going to be spread relatively evenly.

Yes, it's roughly -- the first half is roughly the same, in the second half it's roughly the same proportion as sales.

Probably [45, 55].

And two more quick questions.

First off, is there a chance of steel resetting in 2011 if it continues to rise?

Or is that --?

That's not an issue?

Well, steel is still largely regional marketplace and as we've discussed in the past in North America and Europe, we typically enter into annual agreements with could be a flat price, could be some parameters and so on.

Those are intact and in Latin America and Asia are daily, weekly, monthly purchases.

So I don't see anything that suggests that we'd see a radical change in our steel assumptions.

Last question and I will defer to others.

You noted in the quarter that you took some production down to get the inventories a little bit more in line.

Can you help us reconcile that with the fact that the inventories are still both on a year-on-year and sequential basis moving considerably higher than sales are?

Yes.

First of all, this is Jeff, and then I will have Larry give you the particulars; but yes, you know, we talked about the particularly somewhat slower market in the 4th quarter, particularly North America last year.

We took out a significant amount of production, which had a negative impact on our earnings in the first quarter.

I think overall, we reduced production close to 600,000 units in the quarter and exit the quarter I think in pretty good shape.

Larry, you might give them the particulars on the seasonal products and that sort of stuff.

Yes, Sam, if you look from Q4 inventories increased $150 million.

A couple of things to keep in mind is about a third of that is strictly due to foreign currency with the euro and real strengthening.

Third is, as you know, we've got higher costs and the remaining third is the seasonal inventory build, primarily in our international locations.

And you will also know that normally in the first quarter we will build between $150 million to $200 million of inventory.

You will know that we built significant -- over the last this quarter as Marc mentioned in his script we did take some down days within North America to get the North America inventories down a little bit more.

So, Larry, where would you peg inventories by year-end then?

You know, I think we're -- the targeting you know that [2 6 area] would be about where we are targeting.

Of course, depending on sales.

Depending on sales.

Yes and on costs and so on, but our inventories are in pretty good shape kind of through Q1 if -- assuming our demand assumptions are correct.

You know, we are in pretty good shape going into the second quarter.

And the other thing to remember is a year ago we had serious component shortages and we are actually under inventory particularly in North America.

Yes.

That's a great point.

As you remember, Jeff said really low inventories in Latin America and North America as we entered the year and we spent a good part of the first half of the year building inventories up for availability.

So that is another reason why you are seeing a higher year-over-year inventories.

Very helpful.

Thanks.

Josh Pollard with Goldman Sachs.

Good morning to you all.

We are all aware of the US pricing craze, but could you quantify the price increases in each of your regions and the realization that you have seen so far?

Typically we wouldn't quantify them in a dollar amount.

You know that I guess I would just say that (technical difficulties) they are varied.

You know, we talked about an 8% to 10% in the US starting in April and ramping up through the quarter.

We've had seven price increases in India already since November.

Every market is a little bit different.

You know, I guess the way I would look at it is the overall net realized price increases and the expectation of being able to drive productivity to offset material costs in the delta in our earnings would kind of give you a good idea of how much pricing you think that is.

But, certainly, it would -- we expect it for the full year to be positive.

We start off with the first quarter negative versus last year and we expect to have that positive by -- for the full year.

So without trying to -- not trying to be cute here, it's just for competitive reasons we don't give out the exact number for regional market.

(multiple speakers).

I -- go ahead.

This is Larry.

Just a little bit of color and I think Jeff and Marc mentioned this.

If you look at Q4 to Q1 and you look at price mix, you know, you saw the improvement of around 0.5 I would say you have stronger improvement within international and then in North America we saw an improvement also.

So, that will give you an indication at least sequentially and, again, these price increases are just going into effect also.

And then I guess a follow-up to that question is, are you guys willing to talk about the level of realization that you are seeing so far on your US price increase?

And then the second part of my overall question that's centered around margins is, can you walk through the three largest cost productivity measures and how much each of them are saving the Company this year?

I ask because the biggest concern among your potential investors is, how exactly the Company plans to offset the $400 million to $450 million increase in materials?

Thanks a lot.

Let me first take US pricing.

You know, as we have publicly announced, we have a price increase of 8% to 10% levels announced late January, early February [this effect] 7.

Bear in mind, net price increase does not affect every single STU and for certain OEM products, which are excluded at this point or have separate timelines.

So obviously only a portion of that falls through a net price realization.

As we announce before, we basically [invoicing] live April 7 so, yes, we do see it in the invoicing.

And we are very confident that we will stick to it.

On the cost productivity, I would make a couple of comments.

First of all, we've had now for a number of years as we have significantly improved the rate of productivity have a global cost productivity program permanently in place in all of our global operations.

So the fact of the matter is, we are getting cost productivity through every part of the business, both product, material, logistics, quality, SG&A, and so on.

So at a macro level, it's across all the US for the top 3 and I would say first and foremost is our material, because this is the biggest cost center, is material productivity.

We get this through new product designs which we are seeing a lot of.

These products, as I've said in the past, not only are better performance, better energy, better designs, but they are typically 10% to 15% less material cost content.

The second, coupled with both new product designs and existing designs is, global commonality of parts which reduces complexity, reduces inventories, reduces cost per unit.

And we continue to get great benefit from that.

The third I would say is conversion.

We could be highly productive in our factories on an equal volume-to-volume basis.

I would say we are operating at record levels of conversion productivity in most parts of the world and of course we are getting, still, benefits flowing from past restructuring actions.

So I would say our predictability in -- at a gross level, productivity is very high.

You know, the surprise early in the year has been on the raw material inflation which we've seen and we have seen coming throughout the quarter, and we've adjusted for it.

And then the last question would just be BEFIEX for the year.

You said similar, but with [$66 million] coming through in the first quarter, it seems like either there was an anomaly in the first quarter or you guys are on pace to do something substantially above $200 million.

Is there upside risk to that $200 million?

It is -- again they way BEFIEX works in Brazil, it is based on volume of certain product categories and different product categories earned or have attached to them at the IPI tax credit.

So it really depends on volume and mix of product.

And there's significant variances.

So I would just say that the Q1 was actually lower than Q4.

It was higher than last year, because we had a full month where we didn't have any.

So on a comparable basis to last year, it's about -- run rate is about the same.

So the number, the $200 million, is not an exact number to go up or down based on overall demand and mix.

So at this point in time to see anything different to change the general gains we gave which is around $200 million.

Operator, can we go to the next question please?

David MacGregor with Longbow Research.

Good morning, everyone.

I guess just as the previous question old it differently.

Your competitor in their earlier call this morning indicated they are getting 4% traction in North American pricing.

Are you doing better than that?

I can't comment on the competitor's quote on pricing.

I know what we announced and I know what we implemented April 1 and that -- or April 7 and that is so far perfectly on track.

Okay.

Could you talk about the earnings-per-share impact of the curtailments in the first quarter?

Of the curtailments, David?

Yes, please.

So you had $29 million and the -- if you went and tax affected that from a curtailment perspective it's probably about a $0.23 gain last year that we don't have this year.

Okay.

Thank you.

And on the promotional environment, Marc, you had mentioned that your intention is to dial down the promotional activity.

I wondered if you really can control that?

If we end up in more competitive sales events around Memorial Day and July 4, are you really going to be able to dial it down and risk losing share or is the share more important to you and you just have to respond to competitive actions?

First of all, [as a matter of fact], we can absolutely no way control that.

The retailer sets the pricing and we have through our co-op advertising policy certain incentives, that they adhere to what we call a MAP policy.

But they set the promotion environment, the promotion calendar.

Having said that, we now our called advertising policy have reduced the promotional activities to 10% off or 15% off in ENERGY STAR and that has gone live April 1 as we communicated.

But again a retailer can override that or change that, but they may run the risk of losing certain co-op advertising support.

Having said all that, we do expect that all these price increases that we are seeing in Q1 but some of the promotions end of Q4 has been moderated and I think within a year will show how the rest of the year will turn out.

We have been, I think, pretty clear in our earlier call and our priorities expand our operation margins.

And particularly in an environment where raw materials have been escalating like they have, we're not chasing share, we are getting our share which is, by the way, very strong in the US, through the success of our new product innovations.

And not on spot promotional activity.

So that is kind of the path we've committed to and we are going to stay to.

Last question.

Just if you could give us your thoughts on consolidation in Latin American retail and the extent to which that is expected to adversely impact your business in the second half of this year?

We actually -- the consolidation occurred actually last year and what we have done is expanded our distribution across all of retail.

So the fact of the matter is, we have been able to manage both our sales and volumes, even given the consolidation and, frankly, the new combined entity.

It is still a very strong partner for us.

And so we don't expect to see any significant change in our business because of consolidation.

So there wouldn't be any negative repercussion in terms of the profitability of that business?

They wouldn't lean on you for more promotional support or any of the other ways that this could play out?

No.

And David, also I'm not going to talk about any contract negotiation we have with them.

But the fact of the matter is we are keeping the right balance in our business across the re -- [a broad] result.

And the only thing I would add is, again, reminder Brastemp and [Consort] are the number 1 and number 2 most preferred brands in the Brazilian market and there, too, the constant kings of innovation, great preferred brands and continuous innovation are, I think, the key element to make sure that you both are able to grow your business and maintain or improve your margin.

And it's no different now than it was before.

Thanks for addressing that.

Good luck.

Thanks for that.

Michael Rehaut with JPMorgan.

Thanks.

Good morning, everyone.

First question, just want to make sure I have the numbers right on the price mix, negative year-over-year impact.

In the first quarter, could you -- in the U -- and North America and for 1Q and could you remind us for 4Q?

For North America?

Right.

On a year-over-year basis, let me walk through it for you from an operating profits perspective.

Operating profit down about 1.5 points.

Positive side of that is productivity was up over 2 points.

We mentioned earlier that we had one-time charges last year, contributing about 2 points this year.

Price mix was negative by about 4 points and then material headwinds was negative a couple points also on a year-over-year basis.

But for the overall comparison, we said for the full year over year which was our highest price mix level last year, we were down.

Right, so on a sales basis for first quarter, price mix was negative 4 points, you said?

Yes.

It was negative year-over-year 4 points and its sequential base target 0.6 roughly, or 0.7, in that ball park.

And globally it was negative 2.3 and positive 0.9 on a sequential basis.

Okay.

The second question on share.

I was wondering if you could drill down a little bit more.

So you were up 4% in volume versus the industry, slightly negative, I believe.

And so if you could maybe get a little more granular in terms of where you are getting that share?

I know in the past, obviously, the branded business has done the majority of that or all of that, but is that still the case?

And maybe if you go in terms of which channels you are seeing the most success in?

Without getting too much into detail, because we don't want to share everything with our competitors, just in terms of share growth overall, yes, we had a share growth in Q1 both on a sequential and year-over-year basis.

That is a similar trend like in Q4, particular almost entirely driven by our branded business.

The branded business continues very well and particularly with Whirlpool, Maytag and KitchenAid brands.

But OEM side of our business has, I would say, stabilized relative to Q4.

And we see right now all the stabilization of these brands.

So overall, yes we are very pleased with our share trends.

I don't want to get into specifics of which channels or which products, but we are -- it's predominantly still our branded business.

And our new product innovations are doing exceptionally well in this market.

Great, thanks.

One more question, if I could.

In North America, you mentioned that you've continued to reduce, or dialed back the production levels I believe in first quarter as well as you had in the fourth quarter.

Is it possible to conduct quantify what that drag was in the first quarter if, indeed, you still had dialed back those production levels what type of drag that was on the margins?

We don't typically give out -- we had a significant production takeout to balance on inventories.

We typically don't give out our dollar amount with that, but it had a significant negative impact on our conversion.

So you should expect that we stabilized production, we ought to have better margin.

And when would that -- is that going to be occurring in the second quarter?

Again, our inventories are in good shape, but we did say demand will be down.

So there won't be a material change, but I would say in the second half of the year if our demand scenario plays out, we ought to have certainly on a -- compared to the previous year, very favorable.

Great.

Thanks very much.

Thanks, Michael.

Bob Kelly with Sidoti & Company.

Good morning.

Might have missed this.

Did you quantify the benefit from cost reductions productivity gains in 1Q?

And then secondly could you maybe just talk about the phasing of your goal for this year for the next few quarters?

Yes.

Let me answer the productivity question for you.

In the quarter, productivity was positive about 2 points on the margin and the phasing ramps up throughout the year based on how our prices come through and we would expect that to increase going forward.

Given the work you've done this far, or we still thinking -- I think the goal was $270 million in productivity cost-related savings for 2011?

I don't think we ever gave a productivity number.

Okay.

Would you care to now?

What we said -- what we did say was we expected it to offset our material costs headwinds.

Okay.

Thanks.

[Tom Nickik] with Cowen and Company.

This is Tom in for Laura Champine today.

I was wondering if you guys have any sense of how much pull forward of demand there was ahead of the Q2 price increases, I guess, industrywide?

As you would normally expect of a kind of price increase which would [vend out], yes, there was some pull forward, but I would say it was nothing out of a unnormal [register] of our previous price increases.

Keep in mind, two things [ought to make] context.

First of all there are less and less retailers who can dial up and down significant inventory.

There is many retailers have -- carry very little or no inventory.

The second thing also to bear in mind that we, as reported in previous earnings call, there was quite a bit of inventory hangover coming from Q4 and Q1.

The batch with generated demand was fairly soft, so I would say these two effects together pretty much offset each other.

Okay, thanks.

And turning to BEFIEX, I'm not sure if you mentioned this, but did you give how much credits you have remaining or how many credits you have remaining?

We have $510 million remaining.

Great.

Thank you very much.

(Operator Instructions).

Todd Duvick with Merrill Lynch.

Good morning, thank you.

Had a quick question for you on -- you have got a note that's maturing in June, a $300 million note and you have plenty of cash on the balance sheet to pay it off if you choose to.

So my question is, do you plan on paying it off to work towards those upgrades as you mentioned earlier, or would you be in the market refinancing that at some point?

We are examining that now.

We don't have a definitive answer, it could be a combination of cash and debt issuances, but at this point in time we haven't made a decision.

Okay and then just one big picture question.

There's been, on the fixed income side, there has been quite a bit of, I guess, questioning as to why the Maytag bonds were just assumed by Whirlpool over the past quarter or so.

Can you provide any big picture color in terms of what was behind that action?

Was it to achieve some cost reduction efforts?

It was some internal planning activity that we had done and that is all it is.

In fact, keep in mind we've never issued anything under Maytag since the acquisition so those are just legacy bonds from the time of the acquisition.

Right.

Okay.

Thank you very much.

Well, listen, everybody, thank you again for joining us today.

We look forward to speaking with you next time.

This concludes today's conference.

You may disconnect at this time.

Thank you and have a great day.