惠而浦 (WHR) 2013 Q1 法說會逐字稿

Good morning and welcome to Whirlpool Corporation's first-quarter 2013 earnings release call.

Today's call is being recorded.

For opening remarks and introductions I would like to turn the call over to Senior Director of Investor Relations, Joe Lovechio.

Thank you and good morning.

Welcome to the Whirlpool Corporation first-quarter 2013 conference call.

Joining me today are Jeff Fettig, our Chairman and CEO; Mike Todman, President of Whirlpool International; Marc Bitzer, President of Whirlpool North America; and Larry Venturelli, our Chief Financial Officer.

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

Before we begin, let me remind you that as we conduct this call we will be making forward-looking statements to assist you in understanding Whirlpool Corporation's future expectations.

Our actual results could differ materially from these statements due to many factors discussed in our latest 8-K, 10-K, and 10-Q as well as in the Appendix of this presentation.

Turning to slide 3, we want to remind you that today's presentation includes non-GAAP measures.

We believe that these measures are important indicators of our operations as they exclude items that may not be indicative of or are unrelated to results from our ongoing business operations.

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

Listeners are directed to the Appendix section of our presentation beginning on slide 31 for the reconciliation of non-GAAP items to the most directly comparable GAAP measures.

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

Good morning, everyone, and thank you for joining us today.

As you saw in our earnings release from earlier this morning, our first-quarter results were inline with our expectations as we continue to expand our margins and improve our operating results.

We are on track to deliver our operating profit margin, EPS, and free cash flow guidance for 2013 primarily due to the strong execution of our business priorities.

We've outlined these priorities over the last several quarters and they remain unchanged.

We expect to realize cost based pricing actions, we continue to introduce mix enhancing new product innovation and products, we continue to reduce our fixed cost structure, and we're delivering on ongoing cost productivity programs.

The first-quarter results marks the fifth consecutive quarter of year-over-year ongoing business operations margin expansions.

And we expect continued margin expansion, higher revenue growth, and higher cash generation as we progress throughout the year.

If you turn to slide 6, you can see our first-quarter results are summarized there.

As expected, excluding the impact of foreign currency and BPX, our revenues were essentially flat versus the first quarter of last year.

Our diluted earnings per share from ongoing business operations improved $0.56 per share or 40% to $1.97 compared to $1.41 last year.

And first-quarter cash flow usage improved from last year and we are on track to meet our full-year guidance as cash generation ramps up during the second half of the year.

Turning to slide 7, you can see our global industry demand assumptions which we believe continue to be will be positive for the full year.

Overall, our outlook remains unchanged as we expect to see moderately higher growth going forward due to the strength of US housing and improving demand trends internationally.

In North America, we expect industry demand to be up 2% to 3% as we continue to see the positive trends in housing.

And we see this becoming even more structurally strong during the second half of this year.

For Brazil and other Latin American countries, we're forecasting industry demand growth ranging from 3% to 5%.

In Europe, we still expect a flat industry for the full year as a weak economic environment continues across the Eurozone.

And, finally, we're forecasting moderate growth of 3% to 5% in Asian regions.

At this point time, I'll turn it over to Marc Bitzer to review more detail on North America operations.

Thanks, Jeff, and good morning to everyone.

Let me begin on slide 9 by reviewing North American's performance in the first quarter.

Starting with the top line.

First of all, if you recall in December of last year, US retailers concerned over consumer reaction to the fiscal cliff maintained very low inventory levels.

Now in first-quarter 2013, retailers increased their inventory levels particularly driven by additional brands in their stores.

The result was that industry sell-in was quite a bit better than sell-through for the quarter.

Industry sell-through over quarter was actually inline for our expectations and our full year industry guidance of plus 2% to plus 3%.

As expected, our market share was down versus last year as we comp against our highest market share quarter of last year.

Sequentially, however, compared to Q4 our market share was up.

Outside the US, we saw continued industry demand softness in Canada and Mexico and, as a result, our net sales of $2.2 billion for North America were essentially flat from last year.

We do expect, however, higher revenue growth as we progress throughout the year.

As we've previously stated, our priority has been and will remain margin expansion.

Our operating margins were 9.7% for the quarter and operating profit was $218 million as compared to $151 million in 2012.

Overall, our operating margins expanded by 3 points year-over-year.

Strong market execution and innovative consumer products continued to drive increase in price and mix and the benefit of our cost and capacity reduction initiative was also a positive driver in the first quarter.

The consistent and disciplined execution of our actions resulted in the sixth quarter of year-over-year ongoing business operations margin improvement.

Turning to slide 10, you can see just a few examples of our innovative products, the Whirlpool Gold refrigerator, the new Jenn-Air Accolade ventilation system, and the Maytag Maxima XL frontload steam washer.

Let me just take a moment to talk about our expectations for the rest of the year as shown on slide 11.

Q1 was inline with our expectations and we expect revenue growth to build throughout the year.

And with regard to industry demand, as we continue the year we'll remain optimistic about the continued strength in US housing and that consumers regain confidence as federal government policies become clearer, and also the normal replacement cycle of appliances continues which is particularly important given the peak appliance industry years that occurred well before recession.

In regards to our business priorities, we will remain focused on actions driving margin expansion including investing in innovative new products, continuing to deliver cost and capacity reduction initiatives, realizing positive net cost productivity, and growing beyond our core product categories.

Now I'd like to turn it over to Mike for his review of International Operations.

Thanks, Marc.

Turning to slide 13, overall, our International Operations were lead by another strong performance in our Latin America region as margins continued to expand.

Our Europe, Middle East, and Africa region was negatively impacted by the continued weak environment across the Eurozone.

In Asia, we gained market share and drove favorable product price and mix which was offset by unfavorable currency, a weaker industry, and higher material costs.

If you turn to slide 14, you'll see our Latin America first-quarter results.

Sales, excluding currency and BPX, increased 2% on improved pricing and mix but lower volumes.

As you recall, Q1 last year was the first full quarter of the IPI tax holiday in Brazil.

Beginning in February of this year, the IPI tax holiday changed making Q1 the toughest industry comp.

We expect industry demand to grow from here.

GAAP operating profit for the quarter totaled $130 million compared to $121 million in the prior year.

The year-over-year increase was driven by higher monetization of tax credits but on an adjusted basis, excluding Brazilian BPX tax credits, our operating profit for the quarter, which totaled $114 million, was equal to the prior year.

Improved product price and mix offsetting higher material costs and unfavorable currency continued to drive margin expansion again this quarter as our ongoing business operating margin increased 0.5 points to 9.6%.

Our first-quarter results of Europe, Middle East, and Africa on slide 15 reflect the very challenging market environment in the Eurozone.

First-quarter sales decreased 3% year-over-year to $668 million.

Foreign currency did not have a significant impact on net sales compared to last year.

The region had an operating loss of $8 million compared to a $4 million profit in the prior-year period.

Weak demand and country mix as well as higher material costs more than offset benefits from cost and capacity reduction initiatives.

Also note that Q1 is historically our lowest volume quarter of the year.

Given the current economic conditions, we continue to evaluate demand and assess additional cost reduction actions required to adjust for demand.

Our first-quarter results in the Asia region are shown on slide 16.

Net sales decreased 8% during the quarter to $187 million down from $202 million in the prior-year period.

Excluding the impact of currency, sales decreased approximately 4% as we saw weaker industry demand, particularly in India.

The region's operating profit was $3 million down from $9 million in the prior year.

Market share gains and favorable product price and mix from new product innovation were more than offset by weaker industry demand, unfavorable currency, and higher material costs.

Slide 17 shows a few examples of our international product leadership in the first quarter and how we continue to capitalize on the opportunities for growth.

We've highlighted the Whirlpool brand Stainwasher in India, Brazil brand's Ative!

dishwasher, and an induction oven in Europe for the Whirlpool and Bauknecht brands.

On slide 18, in 2013 we expect improving demand trends in emerging markets throughout the year.

Latin America is expected to ramp throughout the year due to the strong underlying fundamentals in the region.

For Asia, we see current strengthening in China and India improving throughout the year.

And we continue to focus on our business priorities, which are leveraging new product launches and growing beyond our core businesses, continuing cost and capacity reduction initiatives, and executing ongoing cost productivity programs.

Now I'd like to turn it over to Larry Venturelli.

Thanks, Mike, and good morning, everyone.

Our first-quarter results are consistent with expectations entering the year and have us on plan to deliver our annual guidance which we are reconfirming today.

On slide 20, you can see we expect to deliver annual GAAP EPS in the range of $9.80 to $10.30 per share and annual ongoing business operations of $9.25 to $9.75 per share.

Our 2013 free cash flow is expected to be in the range of $600 million to $650 million.

Slides 31 through 39 in the Appendix provide you with a reconciliation of our reported GAAP operating profit and EPS to ongoing business operations for both 2013 and 2012.

Turning back to slide 21, you'll note that we continued to deliver on our margin expansion initiatives for the first quarter driving a 130 basis point improvement in operating profit margin.

Ongoing operating profit margin increased to 6.6% during the quarter driven by price mix which was up 1.5 points.

And we continue to expect to realize approximately 1 point for the year.

Our cost and capacity reduction program contributed another point consistent with our full-year guidance.

As expected, net cost productivity was slightly negative as material cost inflation was $46 million during the quarter.

Our cost productivity is on track to ramp up throughout the year, fully offsetting approximately $150 million to $200 million of year-over-year material cost inflation, and is expected to deliver a positive 0.5 point of margin for 2013.

In addition, as planned we increased our marketing technology and product investments during the quarter reducing margins by less than 1 point.

Overall, our first-quarter margins were firmly on track with expectations and consistent with our expected full year improvement.

Moving to the financial summary on slide 22, as expected, reported net sales were $4.2 billion compared to $4.3 billion last year.

Excluding the impact of both foreign currency and BPX, sales were flat to the prior year.

As Jeff, Mike, and Marc mentioned we expect revenue growth to progress throughout the year.

Monetization of BPX tax credits were $16 million compared to $7 million last year.

As of March 31, $177 million in BPX tax credits remain.

Turning to slide 23, the income tax benefit in this quarter primarily relates to the recognition of $84 million for the US energy tax credit program related to 2012 and Q1 2013 production.

As we noted previously, our 2013 full year GAAP earnings guidance includes $120 million of expected benefit from the US energy tax credits.

Our full year 2013 ongoing tax rate assumption remains 24% and our GAAP tax rate assumption adjusted primarily for energy tax credits remains 9% for the year.

The graph on slide 24 illustrates expenses associated with our cost and capacity reduction program.

We continue to expect our program expense to be approximately $185 million this year and the program remains on track to deliver $175 million of benefit in 2013.

On slide 25, you see our cash flow priorities remain funding the business including capital expenditures, debt maturities and pension contributions, return to shareholders, and M&A.

This month we raised our annual dividend by 25% to $2.50 per share and we continue to evaluate M&A opportunities and share repurchases.

During the quarter, S&P upgraded our credit rating to BBB marking solid progress toward returning our credit ratings to pre-recession levels.

We will continue to balance funding all aspects of our business to ensure the best long-term value creation for our shareholders.

Now I'll turn it back over to Jeff.

Turning to slide 27, I would summarize by saying that we are on track to deliver our operating margins, our EPS, and free cash flow goals for 2013.

We will continue to invest in innovative consumer solutions for the home.

We do expect higher revenue growth with the continued strength we're seeing in US housing and improving demand trends internationally, and we do remain focused on delivering at least 8% operating profit margins during 2014.

Finally, turning to slide 28, I would just say that we are confident in opportunities that we have for revenue growth and cash generation as we progress throughout the year.

These revenue growth opportunities will come through new and emerging markets, our consumer relevant innovations which are going very well, our expansion into higher-margin faster growing adjacent businesses which are growing at good rates, and the advancement of our overall global product leadership position.

We have been and we expect to continue to perform at levels that will create more value for our shareholders.

So, with this I'd stop our formal remarks and then open it up for Q&A.

Thank you, sir.

(Operator Instructions)

Our first question from the line of Sam Darkatsh.

Good morning Jeff, Larry, Mike, Marc.

How are you?

A couple questions.

First off, and I apologize if this was in the prepared remarks and I missed it, was there market share commentary around Latin America and Europe?

I missed it if there was.

Sam, this is Mike.

No, I didn't make market share commentary, but in Latin America actually our market share was stable, so we maintained.

And in Europe, actually we saw a slight increase in our market share.

Okay.

And then my primary question, you said that you're expecting sales growth to build as the year progresses in North America and Latin America.

Could you decompose that a bit into units versus price mix as the year progresses?

And then the follow-up to that would be, how do you see market share playing out in the United States particularly if industry pricing gets a little bit more challenging?

Yes, Sam.

It's Jeff.

Let me take that at the global level.

First of all, we had Q1 revenues were basically flat when you take out foreign currency.

And we've been the big currency devaluations happened in March and early April of last year, so we anniversaried those things.

And given today's currency levels, that should not be a drag on revenues.

The second thing I would say is if you step back and look at the global appliance business, at a global level, largely speaking, the Q1 was probably marginally slightly better or slightly worse than it's been the last six to nine month, meaning there's been no real material change in the global market.

The individual markets there's been a lot of change.

Some up, some down.

So, we're kind of tracking at the rate we've been, the activities we've been putting in place have been expanding margins, and we continue to ramp up investments in new product innovation.

So, as our comments are that with revenues in essence being flat in the first quarter, we do expect revenue growth to begin to ramp up as we go out through the year.

If you look at our demand forecast, you can see that largely speaking we still expect it to be positive.

And I think you will see our new product innovations working well in the marketplace.

So, that's why we are sitting here today going feeling good about our revenue growth opportunities.

Specifically, North America, I'll let Marc speak to that.

It's Marc Bitzer.

And I made my earlier comment about the revenue growth which we're expecting.

And first of all, as you know, we are not giving revenue or price mix guidance by region, certainly not.

So, let me try to be vague within these guardrails.

First of all on revenue growth, I wouldn't say I expect it if we don't see trends supporting that and if we don't have a strong degree of confidence that revenue growth will materialize.

And we're very confident.

Obviously, in particular as you compare year-over-year, revenue numbers, and also as you keep in mind we're cycling through several price increases, mix changes.

The baseline of comparisons change and as such the price volume equation by definition will change, that's just a reflection of baseline and what we're doing about this one.

I think the important thing, and that's what's probably implicit in your question, is based on the past industry trends we have not changed our view on promotional policy.

We feel based on what happens in the first quarter that our view has been confirmed as evidenced by these operating margins.

I'd also say that we remain committed to our strong margins and margin expansion.

And that has also been evident in Q4 and Q1, we're playing now with more and more levers.

In the past year we played strongly in the price margins.

Now it's price margin and cost.

And we increasingly also will have volume opportunities and that ultimately will support our margin expansion.

Sam, let me give you a little bit of color on Latin America.

If we just remember, and I had this in the prepared remarks, the first quarter was the toughest comp quarter for Latin America.

And so, in general, the industry is down because it was up so high last year because of the IPI tax, the first quarter of the IPI tax in production and then the change in IPI tax.

But our expectations is that the demand environment in Brazil in fact is going to grow.

And we're already seeing that in April as we begin to comp over slightly lower numbers from last year and we see positive trends in the economic environment.

One of the comments, Sam, this is Larry, if you look at the guidance we provided throughout the year which everybody's reiterating today, if you look at just the industry guidance by itself would indicate 2.5% approximately improvement in unit volume which would translate into at least that amount of sales for the year.

To answer your question.

Okay.

If I could sneak more one more in here real quick, Marc, you mentioned that US POS was less than that of the sell-in.

Do you anticipate a bit of a correction or a softer Q2 as a result of that versus what we saw in Q1?

For the industry?

Let me first, Sam, Marc again, first re-explain what I mentioned about Q1.

As we entered the first quarter, the industry of the trade inventory levels were low.

I would say unusually low and there was largely driven by the uncertainty which was around the fiscal cliff and everything else in December.

As the quarter progressed, I would say both consumer and trade confidence, in particular trade confidence, increased and their inventory levels went up.

Coupled, or I would say particularly also driven, as you know there have been some retail landscape changes and there have bee some new plants and floors which always drive some initial load inventory but just the nature whenever you have new flooring.

That was an unusual Q1 expect.

The underlying sell through data, which as you know, there is no solid source available but we have a pretty good sense about this one, is I would say almost spot on what we had in mind for our full year guidance.

I also see that pretty stable to maybe slightly increasing as the year progresses into Q2, it feels stable right now.

Compared to Q1 trends, not stable in absolute terms.

Thank you.

We'll take our next question from the line of Eric Bosshard.

Good morning.

Curious for you to speak a little bit more, you clearly are committed to making great progress on margins.

I'm interested in how you're thinking about market share relative to that?

I know you've talked in the past of some decisions you've made on market share relative to margin, but interested in how you're thinking your commitment to that?

And then also within the market share performance, if you're seeing changes at any different piece of the market at the high end relative to the low-end within your performance?

And if you have different strategies or thoughts about defending or pursuing market share across the portfolio?

Specifically talking about North America?

Eric, again, it's Marc Bitzer.

First of all, just to provide the facts as I indicated already, our Q1 market share was year-over-year down and sequentially slightly up, which pretty much confirms our current trends and the decisions which we've taken in Q4.

Obviously, I can't give a quarterly guidance on market share.

But let me try to maybe put it more in generic terms.

The way how we look at market share is there's a certain portion, the biggest portion of our market share which I call is everyday earned in the trade flow for great products.

As you can imagine, we're exceptionally committed to great innovative products to earn that every day and we will work incredibly hard to never let that go.

There's another portion of the market which is call it promotion market share, which sometimes is a little bit like quicksand and you need to make a decision, A, how big is that?

In the past couple years we said we don't need that promotional market is too big and, two, what a return on investment like is, i.e., how much does it cost me to buy that market share in simple terms?

I'm simplifying.

And that is where we have not changed our view on this one.

But don't confuse that with us not being committed to drive our market shares with great products and novelty innovative products.

We'll remain exceptionally committed and we will remain so.

And Eric, I will just add to that.

We are investing in what we think is sustainable market share which is new product innovation.

And where we brought out really great new product innovation, we are actually gaining market share.

To Marc's point, we do not believe, if you look at the elements that construct demand in the marketplace, it's primarily replacement.

We're now seeing a really nice growth vector in new construction, we're starting to see the pickup from existing home sales, but the pure, pure discretionary is still very, very weak.

And given that environment, we don't think what I call uneconomical promotions drives any more demand.

So, that's the same position we've had for some time now.

And it's in this position we have today.

Just to follow-up, I totally understand your comment that uneconomical promotions don't drive demand but they may influence market share.

And so what I'm curious is if you seen LG and Samsung go into Depot and Lowe's, how that has impacting your market share there, and how you're seeing the landscape change?

I know you've also won market share at Home Depot with the Whirlpool brand but my follow-up is how you're seeing that market share position evolve as those new players have arrived?

Again, Eric, I can't really speak about competitors but if you look at last couple of years, when there were these heavy promotions, we would lose some share and a month or two months later we'd be in the right back to where we are, so we think it's transitory.

And I haven't seen any change in the environment today.

Okay.

Thank you.

We'll go next to the line of Denise Chai.

Great, thank you very much.

I had a question on the growth in the North American contractor channel that you saw in the first quarter just year-on-year and also quarter-on-quarter?

And then my second question's about how you see the raw material price outlook and really how that factors into your thinking on price and margins going forward?

Thank you.

Hi Denise, it's Marc Bitzer.

Let me first take the question on the North American prospect channel.

Yes, it's correct, we've seen strong, robust and sustained growth and progress in the first quarter.

I would also like to refer back to some comments that we made in Q3 and Q4.

The size of the contract channel is still off a very low base so that's not yet weighed as big as it would have done four or five years ago.

But, again, I would say growth, and without giving you specific numbers, strong double-digit growth and we've not seen that for sustained period, and we do expect that even to grow further as the year progresses.

Denise, regarding raw materials, costs, clearly the last couple weeks there's been some change in sentiment.

Certainly reported and in some prices of pure commodities, for the year we don't see a material change.

We've guided early on in February to $150 million to $200 million for the year.

I would say if current trends hold, we're probably heading towards the lower end of that range as opposed to the higher.

And we still have some big materials like resins and that are significantly higher on a year-over-year basis.

And the other thing we have some very high inflationary markets like India and Brazil where they're not reflecting the global commodity trends that you're talking about.

But overall we're comfortable.

We have a significant portion of our business hedged.

We will benefit at these current prices hold of reducing that range.

Which will just help our net productivity.

Great.

Thank you.

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

It's actually Will Wong on for Mike.

How are you guys?

Regarding your 2014 outlook in terms of the operating margin getting back to about at least 8% operating margins, you guys are looking at maybe about 7% looking at the midpoint of the range this year, what are the main drivers of getting back to that 8% plus in 2014?

Well, for the full year 2014 we're clearly not getting forecast yet, but the 8% plus is what we've been indicating really for the last three years of what the way we're going to drive our business to rebuild healthy margins, invest in the things that will drive growth.

And, so, we've been executing now to those plans and with great detail for some time.

If you just look at the margin progression in the last five quarters, in the drivers of it you kind of see all the pieces.

Fundamentally, we have four big levers that we're driving.

Three that we're driving and one that is external.

First is demand.

We do think demand is going to improve.

We don't think it's going to -- we believe it's improving gradually.

But that's a profound change from what we've seen the previous four years where the North American market's still 25% below where it was in 2007.

European market's about 20% down and so on.

So, having even a little growth is going to be highly leverageable in our business.

The second thing has been price mix.

We made great progress in price mix last year through both cost base price actions and very positive mix from our new product innovation.

That's moderating this year as we expected.

But we still expect certainly the mix portion of that to be very important this year and going forward.

The third is our restructuring plans which we're fully on track to delivering and we've indicated this year will contribute $175 million.

And there may be a tail to that with some more benefits even next year.

And then lastly is our cost productivity.

Despite weak volumes we've been in a highly inflationary materials market.

And, so, even this year we talk about commodities going down.

They're still up for the full year and so a moderation of that will help us drive higher net productivity.

In the combination of those four things that we're managing in every part of the world, everywhere, and plus the last five quarters of track record, we believe we're going to continue to grow our margins sequentially and head into next year and when it's time, we'll give you those plans, but we've guided early on to between 6.8% and 7.2%, so 7% is a midpoint could be on high-end could be on the low-end, it's too early to tell but that was the basis for our guidance this year.

Okay.

Great.

And question regarding Europe, last year you guys made about $4 million on higher revenue and this quarter you lost about $8 million.

You talked a little bit about maybe potential further restructuring going forward.

Question, like how much of that restructuring that was previously announced was actually executed thus far?

And then in terms of profitability in Europe, how should we think about just the remainder of the year?

Do you expect to be profitable in the region going for the next couple quarters?

Yes.

Let me take that question.

First of all, if you think about how Europe went over the course of last year, what we saw is a reduction in demand over the course of the year.

And so that had an impact on our total profitability.

We've executed the bulk of the restructuring actions, but as you know in Europe it takes a little bit longer to begin to get those benefits but we are getting the restructuring benefits that we committed to and we expect to get that throughout the course of this year.

The other thing to remember is even though you've quoted the year-over-year, if we look at just sequentially, the first quarter is always our lowest quarter of volume seasonal in Europe.

So, it's about 20% lower than it is in the fourth quarter, so those are the kind of macro.

We do expect that as we go throughout the course of this year that, yes, we will drive this business to profitability.

And we will continue to assess the demand environment.

And if necessary, we will take action on our fixed costs.

But that's something that we'll observe over the course of the y ear.

Great.

And then just last question if I could, regarding the sequential improvement in margins in North America from 9.3% in 4Q to 9.7%, could you help us maybe in terms of what were the main drivers?

Was it price mix, cost in past reduction?

Maybe just give us a little bit more color on that, that would be great?

Thanks.

It's Marc Bitzer again.

First of all, typical of what you've seen in Q4 to Q1 sequential North America it's maybe less amplified as you would see for example compared to Europe which Mike just referred to.

What we took the gap in North America between Q4 and Q1 is two effects.

You have a little bit of less profitability coming from small domestic business, which is a healthy business for us, and you have the opposite effect because typically with Q4 it's a little bit more promotion.

As a net result of all this when you typically would expect Q4 to Q1 a small drop, i.e., that Q1 as flat to low operating margins, then Q4, and this year was different.

And that is a good achievement and that gives us all the confidence of this year.

Will, just one other thing to add what Marc said, realize that there's almost 20% lower volume between Q4 and Q1 and that's really typical across the Company.

As well as North America.

And margins improved.

Great.

Got it.

Thank you.

We'll go next to the line of David MacGregor.

On the North American business you mentioned that Canada and Mexico were off.

I wonder if you could just say what US grew if you exclude Canada and Mexico?

David, it's Marc Bitzer.

First of all, you probably have seen the industry shipment data which are 5.5% up from Q1.

Again, keep in mind these are sell-in data which are slightly elevated due to the inventory moves.

Again, it's difficult to quantify publicly what we think the sell-through is but it's obviously a few points below that.

But, again, supporting our full-year assumption.

Mexico in particular in Q1 had a very soft industry, double-digit down.

Okay.

You've kind of carved this thing up, I'd like to maybe talk about the use of cash.

My recollection is that you still have a share repurchase authorization remaining from many years ago.

Could you just remind us if that's correct?

And what the amount of the authorization is?

And what your inclination would be to be active here in the very near term in terms of share repurchase activity?

Yes, David, this is Larry.

I said in my prepared remarks the uses of cash, funding the business, debt maturities, pension contribution, M&A, and return to shareholders, we did increase the dividend.

Pretty much inline with our historical payout ratio.

We are evaluating both M&A and share repurchase.

We have $350 million remaining on our authorization.

And, again, as I mentioned we are continuing to evaluate both M&A as well as share repurchases moving forward.

Okay.

Maybe we could talk about the M&A opportunity a bit as well and I guess, Jeff, if you could talk a little bit about your priorities or how you're thinking about M&A opportunity and maybe from a valuation standpoint or geographic standpoint?

And how can you execute acquisitions at this point in a way that doesn't disappoint the investment community?

Well, I guess that would be the starting point, David, is first of all, as I've said we're always looking at opportunities throughout the world in different parts of our business.

We have strict criteria that we follow when evaluating them.

There have been a number of acquisitions over the last couple of years that we've looked at and have decided we didn't meet our criteria.

But top of the list, that criteria is creating value for our shareholders, so the simple answer is if we don't see a clear path to doing that we won't do it.

And again, the things that have worked well for us, very well in the past, are what I call plug-and-plays into some of our regions, the core regions.

We continue to invest in certain emerging markets where we can scale up.

We continue to look at opportunities in our extended and expanded categories.

But the fact that we haven't done any means that we haven't done anything that really meets our criteria.

Would that criteria included being accretive in the first year?

David, it depends -- I can't answer that because it just depends on the opportunity.

I think were looking at the value of creation.

Value creation versus application.

I'm just thinking about catalysts in the story.

And then could you maybe talk about Eastern Europe and particularly Russia, what is the opportunity there for Whirlpool and where would that stand in terms your list of emerging market priorities?

Yes, David.

Russia historically and continues to be a pretty volatile market.

So, it's a market that's driven on basically one area which is oil.

And so our investments in Russia have been limited.

We don't see it as a huge growth opportunity because some years would be a boom and other years it would be a bust.

And, so, what we're looking at is really investing in those businesses where we think we can get sustainable growth.

And we don't see Russia, we think there's opportunity but not for huge investments.

Okay.

And as ugly as Europe is right now is it fair to say that at least it would be a consideration for you if there was an opportunity to play a consolidating role in Europe?

Right.

Yes, David, look, we've got many things we can and are doing in our current business in Europe to improve value creation and returns to our shareholders.

Europe remains a very fragmented market.

And consolidation is something that can and likely will happen someday, but the question is some day.

And I don't know when that will be.

And we'll take our final question from the line of Ken Zener.

Jeff, Larry, I'm going to go back to the AHAM versus your North American shipments because it's the fundamental question today given that your margins sequentially are higher in North America which is I think outstanding.

However, we had LG report last night they were up 19% International led by US sell into Lowes, part of that product shift.

How clearly can you express to investors that you're not losing share?

Which is the fundamental pressure on the stock today, despite the excellent operating leverage sequentially that you delivered.

Again, let's be clear, first of all AHAM, we're not talking North America were talking the US.

AHAM was up roughly 5.8% and we think sell-through was about 2% to 3%.

Okay?

You talk about the competitor number up 19%.

Please remember they entered a major distribution channel during the quarter, which involves -- that has nothing to do with sellout and has everything to do with sell-in.

You also probably note in that release their margins in this category was down 2 points.

So, I guess I wouldn't make a plus 19% trade off for minus 2 points of margin.

It wouldn't be value creating for our shareholders, so our view is that we're going to earn good business every day.

We are investing significantly in a new innovation to bring into market place.

We've got great examples where we are gaining share with this innovation.

And we feel fine about where we are in the market share today.

To Marc's point, there's business you've got to earn every day and there's business that's transaction oriented.

And we do both.

And the business that you earn every day we do very well in and the transaction if it's a good transaction we do it.

But candidly as I said in the past, we could gain 2 to 3 points of market share in 90 days in the US market if we wanted to pursue certain types of business.

Today, that type of business just isn't value creating.

Jeff, that was very good and clear.

I do appreciate it.

Second question, is our forecast, if AHAM was, again, North America was 36 million units, '12 we forecast roughly 42 million in 2015 of which half of the growth comes from housing normalizing the 1.5 million starts.

Can you give investors a little more comfort that your market share, which I believe is roughly 40% nationally as well as 40% new construction, that that growth is predicated upon structural issues like your distribution channel, A, and comment on the profitability of that business relative to the segment in general?

Thank you very much.

It's Marc Bitzer.

First of all on your 2015 industry forecast which I wouldn't confirm but I'm not disagreeing with, first of all, rightfully you point out the two fundamental driver in the long-term industry demand are ongoing replacement cycle and the structural recovering in the housing slash construction.

You, obviously, also noted that all the growth which we've seen in housing permits is still, and we made that point earlier, six to nine months away from housing completions when you typically get the appliance shipments.

You get the appliance shipments pretty much on two days before the keys are handed over.

So, we're always at the tail end, that also means in 2013 you will still only see a certain portion of the underlying momentum being built in that channel.

But, again, the momentum its building strongly.

Now as you look at the market share, and that is I would say the nice thing about this channel in particular, and you asked earlier about certain other brands, that channel is a very, how shall I phrase it?

A very captive channel where you are have to earn contracts over many years, these contracts awarded, they're signed, and it's a very difficult channel to manage and serve in the right away.

It takes years of building a capability of contracts and, today, that market is I would say largely two players and a third one is a little bit smaller of a branch we mentioned before of basically not having access to that channel so we are very confident that we're in a very strong position to participate in that growth of the market and I would say almost disproportionate matter.

And, Ken, I would add to that there is an infrastructure cost to be in that channel also, supply chain cost, service cost, coverage cost.

And we're still early in the game I think in the housing recovery.

And that infrastructure cost is highly leverageable.

It's fixed.

And, so, as that channel grows it's not only a very leverageable from a fixed costs base, but it's a great mix channel for us because the power of our brand portfolio, we give builders package options which they offer to consumers and we see great mix upgrade opportunities throughout our portfolio of brands, so it's a great channel as it's getting healthy.

It was an investment on our part when it was down to the levels that were with the fixed cost that we had, but it was an investment we decided to make and we're going to benefit from the upside of that.

And we'll see some very strong industry growth in the future as that part of the business comes back

Thank you.

Well listen, I think that was our last question had on the line.

We appreciate everyone joining us today.

We look forward to talking to you next time.

Thank you.

This concludes today's program.

Have a great day.

You may disconnect at this time.

Thank you, sir.

(Operator Instructions)

Our first question from the line of Sam Darkatsh.

Good morning Jeff, Larry, Mike, Marc.

How are you?

A couple questions.

First off, and I apologize if this was in the prepared remarks and I missed it, was there market share commentary around Latin America and Europe?

I missed it if there was.

Sam, this is Mike.

No, I didn't make market share commentary, but in Latin America actually our market share was stable, so we maintained.

And in Europe, actually we saw a slight increase in our market share.

Okay.

And then my primary question, you said that you're expecting sales growth to build as the year progresses in North America and Latin America.

Could you decompose that a bit into units versus price mix as the year progresses?

And then the follow-up to that would be, how do you see market share playing out in the United States particularly if industry pricing gets a little bit more challenging?

Yes, Sam.

It's Jeff.

Let me take that at the global level.

First of all, we had Q1 revenues were basically flat when you take out foreign currency.

And we've been the big currency devaluations happened in March and early April of last year, so we anniversaried those things.

And given today's currency levels, that should not be a drag on revenues.

The second thing I would say is if you step back and look at the global appliance business, at a global level, largely speaking, the Q1 was probably marginally slightly better or slightly worse than it's been the last six to nine month, meaning there's been no real material change in the global market.

The individual markets there's been a lot of change.

Some up, some down.

So, we're kind of tracking at the rate we've been, the activities we've been putting in place have been expanding margins, and we continue to ramp up investments in new product innovation.

So, as our comments are that with revenues in essence being flat in the first quarter, we do expect revenue growth to begin to ramp up as we go out through the year.

If you look at our demand forecast, you can see that largely speaking we still expect it to be positive.

And I think you will see our new product innovations working well in the marketplace.

So, that's why we are sitting here today going feeling good about our revenue growth opportunities.

Specifically, North America, I'll let Marc speak to that.

It's Marc Bitzer.

And I made my earlier comment about the revenue growth which we're expecting.

And first of all, as you know, we are not giving revenue or price mix guidance by region, certainly not.

So, let me try to be vague within these guardrails.

First of all on revenue growth, I wouldn't say I expect it if we don't see trends supporting that and if we don't have a strong degree of confidence that revenue growth will materialize.

And we're very confident.

Obviously, in particular as you compare year-over-year, revenue numbers, and also as you keep in mind we're cycling through several price increases, mix changes.

The baseline of comparisons change and as such the price volume equation by definition will change, that's just a reflection of baseline and what we're doing about this one.

I think the important thing, and that's what's probably implicit in your question, is based on the past industry trends we have not changed our view on promotional policy.

We feel based on what happens in the first quarter that our view has been confirmed as evidenced by these operating margins.

I'd also say that we remain committed to our strong margins and margin expansion.

And that has also been evident in Q4 and Q1, we're playing now with more and more levers.

In the past year we played strongly in the price margins.

Now it's price margin and cost.

And we increasingly also will have volume opportunities and that ultimately will support our margin expansion.

Sam, let me give you a little bit of color on Latin America.

If we just remember, and I had this in the prepared remarks, the first quarter was the toughest comp quarter for Latin America.

And so, in general, the industry is down because it was up so high last year because of the IPI tax, the first quarter of the IPI tax in production and then the change in IPI tax.

But our expectations is that the demand environment in Brazil in fact is going to grow.

And we're already seeing that in April as we begin to comp over slightly lower numbers from last year and we see positive trends in the economic environment.

One of the comments, Sam, this is Larry, if you look at the guidance we provided throughout the year which everybody's reiterating today, if you look at just the industry guidance by itself would indicate 2.5% approximately improvement in unit volume which would translate into at least that amount of sales for the year.

To answer your question.

Okay.

If I could sneak more one more in here real quick, Marc, you mentioned that US POS was less than that of the sell-in.

Do you anticipate a bit of a correction or a softer Q2 as a result of that versus what we saw in Q1?

For the industry?

Let me first, Sam, Marc again, first re-explain what I mentioned about Q1.

As we entered the first quarter, the industry of the trade inventory levels were low.

I would say unusually low and there was largely driven by the uncertainty which was around the fiscal cliff and everything else in December.

As the quarter progressed, I would say both consumer and trade confidence, in particular trade confidence, increased and their inventory levels went up.

Coupled, or I would say particularly also driven, as you know there have been some retail landscape changes and there have bee some new plants and floors which always drive some initial load inventory but just the nature whenever you have new flooring.

That was an unusual Q1 expect.

The underlying sell through data, which as you know, there is no solid source available but we have a pretty good sense about this one, is I would say almost spot on what we had in mind for our full year guidance.

I also see that pretty stable to maybe slightly increasing as the year progresses into Q2, it feels stable right now.

Compared to Q1 trends, not stable in absolute terms.

Thank you.

We'll take our next question from the line of Eric Bosshard.

Good morning.

Curious for you to speak a little bit more, you clearly are committed to making great progress on margins.

I'm interested in how you're thinking about market share relative to that?

I know you've talked in the past of some decisions you've made on market share relative to margin, but interested in how you're thinking your commitment to that?

And then also within the market share performance, if you're seeing changes at any different piece of the market at the high end relative to the low-end within your performance?

And if you have different strategies or thoughts about defending or pursuing market share across the portfolio?

Specifically talking about North America?

Eric, again, it's Marc Bitzer.

First of all, just to provide the facts as I indicated already, our Q1 market share was year-over-year down and sequentially slightly up, which pretty much confirms our current trends and the decisions which we've taken in Q4.

Obviously, I can't give a quarterly guidance on market share.

But let me try to maybe put it more in generic terms.

The way how we look at market share is there's a certain portion, the biggest portion of our market share which I call is everyday earned in the trade flow for great products.

As you can imagine, we're exceptionally committed to great innovative products to earn that every day and we will work incredibly hard to never let that go.

There's another portion of the market which is call it promotion market share, which sometimes is a little bit like quicksand and you need to make a decision, A, how big is that?

In the past couple years we said we don't need that promotional market is too big and, two, what a return on investment like is, i.e., how much does it cost me to buy that market share in simple terms?

I'm simplifying.

And that is where we have not changed our view on this one.

But don't confuse that with us not being committed to drive our market shares with great products and novelty innovative products.

We'll remain exceptionally committed and we will remain so.

And Eric, I will just add to that.

We are investing in what we think is sustainable market share which is new product innovation.

And where we brought out really great new product innovation, we are actually gaining market share.

To Marc's point, we do not believe, if you look at the elements that construct demand in the marketplace, it's primarily replacement.

We're now seeing a really nice growth vector in new construction, we're starting to see the pickup from existing home sales, but the pure, pure discretionary is still very, very weak.

And given that environment, we don't think what I call uneconomical promotions drives any more demand.

So, that's the same position we've had for some time now.

And it's in this position we have today.

Just to follow-up, I totally understand your comment that uneconomical promotions don't drive demand but they may influence market share.

And so what I'm curious is if you seen LG and Samsung go into Depot and Lowe's, how that has impacting your market share there, and how you're seeing the landscape change?

I know you've also won market share at Home Depot with the Whirlpool brand but my follow-up is how you're seeing that market share position evolve as those new players have arrived?

Again, Eric, I can't really speak about competitors but if you look at last couple of years, when there were these heavy promotions, we would lose some share and a month or two months later we'd be in the right back to where we are, so we think it's transitory.

And I haven't seen any change in the environment today.

Okay.

Thank you.

We'll go next to the line of Denise Chai.

Great, thank you very much.

I had a question on the growth in the North American contractor channel that you saw in the first quarter just year-on-year and also quarter-on-quarter?

And then my second question's about how you see the raw material price outlook and really how that factors into your thinking on price and margins going forward?

Thank you.

Hi Denise, it's Marc Bitzer.

Let me first take the question on the North American prospect channel.

Yes, it's correct, we've seen strong, robust and sustained growth and progress in the first quarter.

I would also like to refer back to some comments that we made in Q3 and Q4.

The size of the contract channel is still off a very low base so that's not yet weighed as big as it would have done four or five years ago.

But, again, I would say growth, and without giving you specific numbers, strong double-digit growth and we've not seen that for sustained period, and we do expect that even to grow further as the year progresses.

Denise, regarding raw materials, costs, clearly the last couple weeks there's been some change in sentiment.

Certainly reported and in some prices of pure commodities, for the year we don't see a material change.

We've guided early on in February to $150 million to $200 million for the year.

I would say if current trends hold, we're probably heading towards the lower end of that range as opposed to the higher.

And we still have some big materials like resins and that are significantly higher on a year-over-year basis.

And the other thing we have some very high inflationary markets like India and Brazil where they're not reflecting the global commodity trends that you're talking about.

But overall we're comfortable.

We have a significant portion of our business hedged.

We will benefit at these current prices hold of reducing that range.

Which will just help our net productivity.

Great.

Thank you.

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

It's actually Will Wong on for Mike.

How are you guys?

Regarding your 2014 outlook in terms of the operating margin getting back to about at least 8% operating margins, you guys are looking at maybe about 7% looking at the midpoint of the range this year, what are the main drivers of getting back to that 8% plus in 2014?

Well, for the full year 2014 we're clearly not getting forecast yet, but the 8% plus is what we've been indicating really for the last three years of what the way we're going to drive our business to rebuild healthy margins, invest in the things that will drive growth.

And, so, we've been executing now to those plans and with great detail for some time.

If you just look at the margin progression in the last five quarters, in the drivers of it you kind of see all the pieces.

Fundamentally, we have four big levers that we're driving.

Three that we're driving and one that is external.

First is demand.

We do think demand is going to improve.

We don't think it's going to -- we believe it's improving gradually.

But that's a profound change from what we've seen the previous four years where the North American market's still 25% below where it was in 2007.

European market's about 20% down and so on.

So, having even a little growth is going to be highly leverageable in our business.

The second thing has been price mix.

We made great progress in price mix last year through both cost base price actions and very positive mix from our new product innovation.

That's moderating this year as we expected.

But we still expect certainly the mix portion of that to be very important this year and going forward.

The third is our restructuring plans which we're fully on track to delivering and we've indicated this year will contribute $175 million.

And there may be a tail to that with some more benefits even next year.

And then lastly is our cost productivity.

Despite weak volumes we've been in a highly inflationary materials market.

And, so, even this year we talk about commodities going down.

They're still up for the full year and so a moderation of that will help us drive higher net productivity.

In the combination of those four things that we're managing in every part of the world, everywhere, and plus the last five quarters of track record, we believe we're going to continue to grow our margins sequentially and head into next year and when it's time, we'll give you those plans, but we've guided early on to between 6.8% and 7.2%, so 7% is a midpoint could be on high-end could be on the low-end, it's too early to tell but that was the basis for our guidance this year.

Okay.

Great.

And question regarding Europe, last year you guys made about $4 million on higher revenue and this quarter you lost about $8 million.

You talked a little bit about maybe potential further restructuring going forward.

Question, like how much of that restructuring that was previously announced was actually executed thus far?

And then in terms of profitability in Europe, how should we think about just the remainder of the year?

Do you expect to be profitable in the region going for the next couple quarters?

Yes.

Let me take that question.

First of all, if you think about how Europe went over the course of last year, what we saw is a reduction in demand over the course of the year.

And so that had an impact on our total profitability.

We've executed the bulk of the restructuring actions, but as you know in Europe it takes a little bit longer to begin to get those benefits but we are getting the restructuring benefits that we committed to and we expect to get that throughout the course of this year.

The other thing to remember is even though you've quoted the year-over-year, if we look at just sequentially, the first quarter is always our lowest quarter of volume seasonal in Europe.

So, it's about 20% lower than it is in the fourth quarter, so those are the kind of macro.

We do expect that as we go throughout the course of this year that, yes, we will drive this business to profitability.

And we will continue to assess the demand environment.

And if necessary, we will take action on our fixed costs.

But that's something that we'll observe over the course of the y ear.

Great.

And then just last question if I could, regarding the sequential improvement in margins in North America from 9.3% in 4Q to 9.7%, could you help us maybe in terms of what were the main drivers?

Was it price mix, cost in past reduction?

Maybe just give us a little bit more color on that, that would be great?

Thanks.

It's Marc Bitzer again.

First of all, typical of what you've seen in Q4 to Q1 sequential North America it's maybe less amplified as you would see for example compared to Europe which Mike just referred to.

What we took the gap in North America between Q4 and Q1 is two effects.

You have a little bit of less profitability coming from small domestic business, which is a healthy business for us, and you have the opposite effect because typically with Q4 it's a little bit more promotion.

As a net result of all this when you typically would expect Q4 to Q1 a small drop, i.e., that Q1 as flat to low operating margins, then Q4, and this year was different.

And that is a good achievement and that gives us all the confidence of this year.

Will, just one other thing to add what Marc said, realize that there's almost 20% lower volume between Q4 and Q1 and that's really typical across the Company.

As well as North America.

And margins improved.

Great.

Got it.

Thank you.

We'll go next to the line of David MacGregor.

On the North American business you mentioned that Canada and Mexico were off.

I wonder if you could just say what US grew if you exclude Canada and Mexico?

David, it's Marc Bitzer.

First of all, you probably have seen the industry shipment data which are 5.5% up from Q1.

Again, keep in mind these are sell-in data which are slightly elevated due to the inventory moves.

Again, it's difficult to quantify publicly what we think the sell-through is but it's obviously a few points below that.

But, again, supporting our full-year assumption.

Mexico in particular in Q1 had a very soft industry, double-digit down.

Okay.

You've kind of carved this thing up, I'd like to maybe talk about the use of cash.

My recollection is that you still have a share repurchase authorization remaining from many years ago.

Could you just remind us if that's correct?

And what the amount of the authorization is?

And what your inclination would be to be active here in the very near term in terms of share repurchase activity?

Yes, David, this is Larry.

I said in my prepared remarks the uses of cash, funding the business, debt maturities, pension contribution, M&A, and return to shareholders, we did increase the dividend.

Pretty much inline with our historical payout ratio.

We are evaluating both M&A and share repurchase.

We have $350 million remaining on our authorization.

And, again, as I mentioned we are continuing to evaluate both M&A as well as share repurchases moving forward.

Okay.

Maybe we could talk about the M&A opportunity a bit as well and I guess, Jeff, if you could talk a little bit about your priorities or how you're thinking about M&A opportunity and maybe from a valuation standpoint or geographic standpoint?

And how can you execute acquisitions at this point in a way that doesn't disappoint the investment community?

Well, I guess that would be the starting point, David, is first of all, as I've said we're always looking at opportunities throughout the world in different parts of our business.

We have strict criteria that we follow when evaluating them.

There have been a number of acquisitions over the last couple of years that we've looked at and have decided we didn't meet our criteria.

But top of the list, that criteria is creating value for our shareholders, so the simple answer is if we don't see a clear path to doing that we won't do it.

And again, the things that have worked well for us, very well in the past, are what I call plug-and-plays into some of our regions, the core regions.

We continue to invest in certain emerging markets where we can scale up.

We continue to look at opportunities in our extended and expanded categories.

But the fact that we haven't done any means that we haven't done anything that really meets our criteria.

Would that criteria included being accretive in the first year?

David, it depends -- I can't answer that because it just depends on the opportunity.

I think were looking at the value of creation.

Value creation versus application.

I'm just thinking about catalysts in the story.

And then could you maybe talk about Eastern Europe and particularly Russia, what is the opportunity there for Whirlpool and where would that stand in terms your list of emerging market priorities?

Yes, David.

Russia historically and continues to be a pretty volatile market.

So, it's a market that's driven on basically one area which is oil.

And so our investments in Russia have been limited.

We don't see it as a huge growth opportunity because some years would be a boom and other years it would be a bust.

And, so, what we're looking at is really investing in those businesses where we think we can get sustainable growth.

And we don't see Russia, we think there's opportunity but not for huge investments.

Okay.

And as ugly as Europe is right now is it fair to say that at least it would be a consideration for you if there was an opportunity to play a consolidating role in Europe?

Right.

Yes, David, look, we've got many things we can and are doing in our current business in Europe to improve value creation and returns to our shareholders.

Europe remains a very fragmented market.

And consolidation is something that can and likely will happen someday, but the question is some day.

And I don't know when that will be.

And we'll take our final question from the line of Ken Zener.

Jeff, Larry, I'm going to go back to the AHAM versus your North American shipments because it's the fundamental question today given that your margins sequentially are higher in North America which is I think outstanding.

However, we had LG report last night they were up 19% International led by US sell into Lowes, part of that product shift.

How clearly can you express to investors that you're not losing share?

Which is the fundamental pressure on the stock today, despite the excellent operating leverage sequentially that you delivered.

Again, let's be clear, first of all AHAM, we're not talking North America were talking the US.

AHAM was up roughly 5.8% and we think sell-through was about 2% to 3%.

Okay?

You talk about the competitor number up 19%.

Please remember they entered a major distribution channel during the quarter, which involves -- that has nothing to do with sellout and has everything to do with sell-in.

You also probably note in that release their margins in this category was down 2 points.

So, I guess I wouldn't make a plus 19% trade off for minus 2 points of margin.

It wouldn't be value creating for our shareholders, so our view is that we're going to earn good business every day.

We are investing significantly in a new innovation to bring into market place.

We've got great examples where we are gaining share with this innovation.

And we feel fine about where we are in the market share today.

To Marc's point, there's business you've got to earn every day and there's business that's transaction oriented.

And we do both.

And the business that you earn every day we do very well in and the transaction if it's a good transaction we do it.

But candidly as I said in the past, we could gain 2 to 3 points of market share in 90 days in the US market if we wanted to pursue certain types of business.

Today, that type of business just isn't value creating.

Jeff, that was very good and clear.

I do appreciate it.

Second question, is our forecast, if AHAM was, again, North America was 36 million units, '12 we forecast roughly 42 million in 2015 of which half of the growth comes from housing normalizing the 1.5 million starts.

Can you give investors a little more comfort that your market share, which I believe is roughly 40% nationally as well as 40% new construction, that that growth is predicated upon structural issues like your distribution channel, A, and comment on the profitability of that business relative to the segment in general?

Thank you very much.

It's Marc Bitzer.

First of all on your 2015 industry forecast which I wouldn't confirm but I'm not disagreeing with, first of all, rightfully you point out the two fundamental driver in the long-term industry demand are ongoing replacement cycle and the structural recovering in the housing slash construction.

You, obviously, also noted that all the growth which we've seen in housing permits is still, and we made that point earlier, six to nine months away from housing completions when you typically get the appliance shipments.

You get the appliance shipments pretty much on two days before the keys are handed over.

So, we're always at the tail end, that also means in 2013 you will still only see a certain portion of the underlying momentum being built in that channel.

But, again, the momentum its building strongly.

Now as you look at the market share, and that is I would say the nice thing about this channel in particular, and you asked earlier about certain other brands, that channel is a very, how shall I phrase it?

A very captive channel where you are have to earn contracts over many years, these contracts awarded, they're signed, and it's a very difficult channel to manage and serve in the right away.

It takes years of building a capability of contracts and, today, that market is I would say largely two players and a third one is a little bit smaller of a branch we mentioned before of basically not having access to that channel so we are very confident that we're in a very strong position to participate in that growth of the market and I would say almost disproportionate matter.

And, Ken, I would add to that there is an infrastructure cost to be in that channel also, supply chain cost, service cost, coverage cost.

And we're still early in the game I think in the housing recovery.

And that infrastructure cost is highly leverageable.

It's fixed.

And, so, as that channel grows it's not only a very leverageable from a fixed costs base, but it's a great mix channel for us because the power of our brand portfolio, we give builders package options which they offer to consumers and we see great mix upgrade opportunities throughout our portfolio of brands, so it's a great channel as it's getting healthy.

It was an investment on our part when it was down to the levels that were with the fixed cost that we had, but it was an investment we decided to make and we're going to benefit from the upside of that.

And we'll see some very strong industry growth in the future as that part of the business comes back

Thank you.

Well listen, I think that was our last question had on the line.

We appreciate everyone joining us today.

We look forward to talking to you next time.

Thank you.

This concludes today's program.

Have a great day.

You may disconnect at this time.