惠而浦 (WHR) 2014 Q1 法說會逐字稿

Good morning and welcome to Whirlpool Corporation's first quarter 2014 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 2014 conference call.

Joining me today are Jeff Fettig, our Chairman and CEO; Presidents Mike Todman and Marc Bitzer; as well as Larry Venturelli, our Chief Financial Officer.

Our remarks today track with the presentation available on the Investors Section of our website at www.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 10-K and other periodic reports as well as in the appendix of the 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 35 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 here today.

As you saw in our earnings release from early this morning, we are pleased with the progress that we made in the first quarter.

Despite some challenging global markets and foreign currency impacts, we were able to deliver our fourth consecutive quarter of revenue growth and our ninth consecutive quarter of expanded margins which in total resulted in a record first quarter operating profit.

And we have been able to do while at the same time we are increasing our investments in our business to continue this profitable growth trend going forward.

Overall we are firmly on track and remain confident in delivering our operating profit margin guidance, our earnings per share and our free cash flow guidance for 2014.

If you turn to slide 6 I will summarize our financial results starting with excluding the impact of foreign currency, our revenues were up 6% versus last year.

Our on going business earnings per diluted share were up approximately 12% to $2.20 compared to $1.97 last year.

Next I'll turn to slide 7, where our regional industry demand assumptions or forecasts that we gave you earlier have not change.

For North America, specifically in the US, despite a challenging first part of the quarter, we remain confident in our industry demand assumption of 5% to 7% demand growth for the year as we expect growth in US housing for the full year, increased demand related to the replacement cycle of appliances and significant improvement in discretionary demand that we are currently seeing improving.

In Europe we continue to expect flat to up 2% industry for the full year as the region has stabilized and now is beginning to recover.

And for Latin America, for the full year we expect a flat industry which is unchanged.

And finally, our Asia forecast remains flat to up 3% but varies significantly across the region.

So in total, we do continue to expect positive global demand for the full year.

Overall we remain confident in the underlying drivers of our business and our focus on multiple paths to drive profitable growth.

Our confidence in these areas has allowed us to significantly increase business -- our investments in parts of our business, continue our profitable growth trend as well as enhancing our returns to shareholders as demonstrated by our recently announced 20% dividend increase and a new $500 million-dollar share repurchase authorization.

So, at this point in time I will turn it over to Marc Bitzer.

Marc?

Thanks, Jeff.

Good morning, everyone.

Let me begin with slide 9 by reviewing North America's performance in the first quarter starting with the top line.

Despite a flat industry driven mainly by the extreme weather in January and February, our unit volumes were up approximately 4% as we gained market share in the quarter.

Net sales of $2.3 billion for North America were also up 4% compared to the prior year period and up 5% excluding currency.

We saw gross margins expand by 60 basis points in the quarter due to higher sales and on going productivity more than offsetting higher material costs and unfavorable currency.

We also increased our investments for our brand marketing in support of new product launches to drive continued growth.

Our going business operating margins were up approximately 10% for the quarter with a record first quarter on going business operating profit of $228 million compared to $218 million in the first quarter of 2013.

Consistent and disciplined execution of our actions resulted in the 4th quarter of year-over-year revenue growth and the 10th consecutive quarter of year-over-year on going business operating margin improvement.

Now, let me take a moment to talk about our expectations for 2014 as shown in slide 10.

While extreme weather created a temporary softness in US appliance demand in January and February of this year, we have already seen a significant increase in March with [CF] in the industry up almost 9%.

And we continue to see positive trends in April.

Additionally, we remain optimistic about both new construction and existing home sales.

And we see increased demand for from normal replacement purchases as well as discretionary purchases driven by improving consumer confidence.

So we remain confident in our 2014 industry guidance of up 5% to 7% for the year, and in addition we expect positive net cost productivity for our business.

We continue our focus on launching innovative new products, especially in the second and third quarters of this year.

During this quarter we also have a few examples of how we are driving growth beyond our core business.

With our EveryDrop water filter and expansion of our Greenville, Ohio plant to increase our capacity for small domestic appliances, just to name a few.

Turning to slide 11, you can see an example of our increased investment in marketing technology and products as we highlight a new phase of dependability for our Maytag brand with a massive TV and print ad campaign.

On this page you see our durable, reliable and powerful Maytag knobs and handles as well as a couple of point of sale marketing pieces for our Maytag laundry and dishwasher products.

I will now talk for -- to our first quarter results for our Europe, Middle East and Africa regions as shown on slide 13.

Sales were $720 million compared to $668 million in the prior year.

Excluding currency, sales increased approximately 4% for year driven by higher volumes from share gains and growth in our small domestic appliance business.

The cost and capacity reduction initiative we put in place last year combined with on going productivity has delivered another quarter of positive operating profit.

Our operating profit of $7 million improved by $15 million compared to the prior year period, and operating margins improved 220 basis points.

Now turning to slide 14, while the market environment in the Euro zone remains somewhat is soft, we are seeing some recovery, and we expect normal seasonality as we progress throughout the year.

We expect positive operating profits and margin expansion driven by continued benefits from our on going cost productivity program and our previously announced restructuring initiatives.

And we continue to focus on our innovative new product launches and growth beyond our core.

Turning to slide 15, we are highlighting a new line of gas cook tops with glass surfaces, and these cook tops have multiple designs to complement a variety of kitchen styles, high power, high efficiency burners to reduce cooking times and twin and full coverage grids that allow maximum flexibility for our consumers.

And now I would like to turn it over to Mike.

Thanks, Mark.

If you turn to slide 17, you will see our Latin America results.

In the first quarter the industry was up 10% while our unit volume grew over 15% as we continued to gain share.

Sales for the quarter were $1.2 billion.

Excluding currency and BEFIEX, net sales increased approximately 11% compared to the previous year primarily driven by the higher volume.

GAAP operating profit totaled $123 million compared to $130 million in the prior year period.

Our on going business operating profit for the quarter totaled $109 million compared to $114 million in the prior year period.

Favorable price and mix including price increases and on going cost productivity were offset by higher material costs and foreign currency.

Turning to slide 18 for our expectations of the region, as previously discussed, we expect the second quarter appliance industry to be down due to the World Cup.

And, given the government elections in Brazil and uncertain impact of inflation on consumer sentiment, we have kept our industry assumption flat for the year.

We expect to continue outperforming the industry in growing our revenue given our strong market position and current competitive environment.

We recently announced a price increase for the second half to help offset negative currency impacts and significant levels of inflation.

Our innovative new product launches are winning with consumers, and we will continue growing beyond our core business.

We remain confident in our Latin America business and in particular expect improved performance in the second half of this year as we expect to realize the recent price increase benefits, and the World Cup and tough currency comps will be behind us.

Slide 19 shows how we continue to capitalize on the opportunities for growth in Brazil.

Consumers in Brazil love their soccer and love their beer as well, particularly ice cold beer.

The Consul brand is already a leader in refrigeration in the Latin America market, so we are excited to introduce a home beer cooler with a professional cooling system.

Our first quarter results in the Asia region are shown on slide 21.

Net sales during the quarter were $166 million compared to $187 million in the prior year period.

Excluding the impact of currency, sales decreased approximately 4%.

Operating profit of $5 million improved by $2 million, and operating margins improved 120 basis points compared to the prior year period.

Favorable price and mix including cost base price increases as well as ongoing cost productivity offset lower unit volumes from a lower industry, increased raw material costs and foreign currency.

Turning to slide 22, despite challenging market environments, our margin expansion continues as our innovative products drive market share and improved mix, and our on going productivity actions reduce costs.

Additionally, we are on track to become the majority shareholder of Hefei Sanyo to accelerate our growth in the emerging Chinese market.

We were pleased to see that Hefei Sanyo recently reported full year 2013 sales of approximately $860 million in US dollars and increase of 33% compared to the prior year and operating income of approximately $60 million over 7% of sales.

The transaction remains subject to approval by the China securities regulatory commission, certain other regulatory approvals required by the relevant Chinese authorities and other formalities.

We continue to expect the transaction to close any time between the end of the second quarter and the end of 2014.

Slide 23 shows an example of our product leadership in Asia this quarter where we highlighted the Whirlpool Ice Magic refrigerator with best in class ice making and bottle cooling, a Powercool zone to help consumers keep food safe during power outages common in India and innovative storage solutions for our consumers' medicines and spices.

Now I would like to turn it over to Larry.

Thanks, Mike, and good morning, everyone.

We are pleased with our first quarter results and are on pace to deliver a record annual performance which we communicated last quarter, as shown on slide 25.

We expect to deliver annual GAAP EPS in the range of $11.05 to $11.55 per share and annual on going business EPS of $12 to $12.50.

Our expectations for free cash flow remain at approximately $700 million.

Overall the underlying fundamentals of our business remain strong as evidenced by our continued sales growth and margin expansion as well as a strong balance sheet.

As I speak to the financial results on slides 26 through 28, you will see how we continue to expand our on going business operating margin in the first quarter and expect to deliver another balanced approach towards margin expansion resulting in an 8% plus margin for the full year 2014.

Price mix was up a half a point and we continue to expect to realize a half to full point of margin driven by our cost base price increases, innovative new product launches and growth beyond our core business.

Our cost and capacity reduction initiatives contributed another half point consistent with our full year guidance.

For the quarter, our cost productivity more than offset material cost inflation of $52 million to deliver a positive quarter point of margin expansion.

Our on going cost productivity for the year is on track to fully offset approximately $150 million to $200 million of material cost inflation and is expected to deliver a positive half a point of margin.

As planned and previously communicated, our increased marketing technology and product investments, primarily reduced margins by three-quarter points during the quarter.

And we expect to have a negative half to one full point of margin impact for the year.

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

In summary, for the first quarter, on going business operating profit increased driven by higher sales, positive price mix, on going cost productivity and the benefit from the cost and capacity reductions more than offsetting higher material costs, currency and investments in marketing technology and products.

As we said back in January, we expect a stronger second half as productivity ramps up, Latin America price increases take effect and World Cup and tough first half currency comparisons are behind us.

Our continued margin improvements combined with positive revenue growth enable us to deliver double digit improvement in on going business earnings per share.

The graph on slide 29 illustrates expenses associated with our cost and capacity reduction initiative.

The actions we have been taking the past couple of years and into 2014 represent a generational change to our [cork burning] cost structure.

As mentioned last quarter, we took additional cost and capacity reduction actions to address the soft but recovering European market and to continue to expand our margins.

For the year we continue to expect approximately $100 million of charges and $80 million of on going benefits.

As we continue to improve margins and grow revenues, our plans to deploy the cash generated from our business are solid as shown on slide 30.

We will fund the business for growth including capital expenditures between $625 million and $675 million Last week our board approved a 20% increase in the quarterly dividend to $3 per share on an annual basis.

Our board also approved a new $500 million share repurchase authorization.

Finally, as Mike mentioned, we are on track with our acquisition of the majority stake in China's Hefei Sanyo.

The proceeds from our recent bond offering will be used to pay off $600 million of maturing debt during Q2 and Q3 as well as for the acquisition of Hefei Sanyo.

In summary, given our profitable growth trends, increased investment capacity and strong balance sheet, we will balance funding for 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.

Thanks, Larry.

Let me turn to slide 32 where I will summarize.

Again, we continue to grow our revenue and expand our margins.

With our innovative solutions for consumers, we are winning in the marketplace, and we are well positioned to capitalize on positive global demand trends.

As Larry and Mike mentioned, the Hefei Sanyo acquisition is progressing and provides an opportunity transformational growth for us in China.

We also continue to make investments and see very good growth in our beyond the core businesses our expand and extend, and in total, as a result, we remain very confident in our ability to deliver a record year of performance in 2014.

But equally important is our ability to continue to build upon this revenue growth, margin and earnings momentum for -- to deliver medium and long term shareholder value.

Finally, I turn to slide 33, which is our road map for growth and value creation.

And I would just say we are very confident that we are executing in line with our long-term growth strategy.

We are appropriately investing in our business and enhancing returns to our shareholders.

As I said previously, as we achieve our 8% plus operating margin target and close the Hefei Sanyo transaction, we will provide updates to our shareholder value creation targets at the appropriate time later in the year.

In the meantime, we will continue to execute this strategy to ensure the best long term value creation for our shareholders.

So with that, I will conclude our formal remarks, and we will open this up to Q&A.

(Operator Instructions)

We go first to David MacGregor with Longbow Research.

Good morning, David.

I wonder if we could talk about Latin America for a moment.

I'm just trying to understand some of the moving parts here.

You say volumes were up about 15% against the 10% industry number which is -- it looks like you are your holding share gains down there which is great to see.

Revenue excluding FX up about 11%.

But you say that as well on your slide deck that price increases are offsetting inflation and currency.

Is it possible that price increases were achieved but came -- the 4% difference between the numbers shy of FX?

Yes, David, let me answer that.

We took a price increase earlier on in the year, at the beginning of the year.

Now we are just executing a second price increase.

So, what we are expecting is the combination of all these price increases will offset all of the currency impact.

But we are looking to offset inflation, and inflation in the environment has been high.

So, the price increase will offset both of those.

Your competitor earlier this morning talked about a 15% revenue growth in Latin America and said it was attributable almost entirely to price mix, not volume.

Can you help us understand the discrepancy?

Yes.

Hey, David, this is Larry.

I think, again, what you are seeing is a little bit similar to what we saw in the quarter last year.

You got to remember, on the unit side that we just have appliance units in there, we have a compressor and an appliance business.

What you are essentially seeing is the fact -- if we were to combine both units from compressors and appliances and then calculate the ASVs on there, you would see the combined business as being very positive.

It's just the abnormality we have is we are just reporting appliance units and not compressor units.

David, this is Jeff.

I just want to add one last point There's three pieces of our Latin America business, Brazil appliance, the appliance market outside -- 32 markets outside of Brazil and our global compressor business.

Of that, it was -- there are different conditions.

And our Brazil appliance business has been going very strong, very well.

Larger national with countries like Argentina and Venezuela, et cetera, has been very unpredictable.

And the global compressor business, particularly because of China has been, I would say, weak in the first quarter but we're starting to see recovery as we go forward.

It's a number of these things.

But the biggest part, Brazil, we had a good quarter.

Thank you for that detail.

Could I ask you to elaborate a little further on your observation that April has been good in the United States are?

David, it's Marc Bitzer, let me expand my April comment more into first quarter.

Not forward but backwards.

As you well know, January and February was impacted very strongly by weather and by a lot of trade inventory moves.

We have seen in March and -- a very strong demand with both sell in and sell out.

We pretty much see almost the same level of strong momentum in the marketplace throughout April, both sell in and sell out which gives us a lot of confidence.

And can you speak to the builder business as part of that, or is it retail?

Can you distinguish between the two elements?

No, David.

First of all, it's both but to be also clear, if you go back further in time, Q3 and Q4 we saw exceptionally strong momentum in builder business.

That by definition came down a little bit in January and February because of momentum.

You just could not complete certain houses.

You know our appliances come in pretty much last.

You saw a little bit dip in this one.

But our builder business also in Q1 and builder market from what we have seen is up in solid single digits and to high single digits.

Great, thank you very much.

Thank you.

Our next question is from Michael Rehaut from JPMorgan.

Thanks.

Good morning, Michael.

First question I had was on North American margins, a little bit up year over year but down sequentially.

I think in the past couple of years from a seasonality standpoint, sometimes it's up sequentially Q4 to Q1; sometimes it's down.

I'm wondering if you can highlight if there were any drivers on a sequential basis that took you down from the 11% that you did in the back half of 2013 and also in Q4 itself down to a little under 10%, if those are kind of temporary, if you would expect to kind of get back to that 11% run rate that you did in the second half of last year?

Michael, it's Marc Bitzer.

First of all to make a long story short, we see the same strength of our margin in Q1 as we saw in Q4.

True to what you expect between Q4 and Q1 is a slight dip in margins that comes largely through seasonality of certain product types.

It's less than you would, for example, see in Europe or other markets, but there is a small dip from what you historically see.

The other thing which I want to highlight or point to also, I made reference in the script, our margins in Q1 year-over-year -- but gross margins up 60 basis points.

You see that also and that is offset by the brand investments.

Most brand investments are up sequentially even versus Q4, because we simply ramped up this massive Maytag campaign.

Long story short, I mean, our margin momentum I would say continues to have strength.

Again, we are not going to dwell, the only surprise we saw at all in the first quarter was at what we talked about, January, February.

We went from an industry which was running high single digit to low double digit the last six months of last year to January, February combined was negative 5%.

As soon as we got out of the challenging weather conditions in half the country, we went right back to the run rate industry demand before.

So, that was really the only difference.

Our decision to invest more in new products and brand investment is very consistent with our strategy.

We didn't stop any of those because of January-February shortfalls in volume, because these are more long lasting, and these will fuel further revenue growth for us.

Michael, it's Larry.

Keep in mind when you look at volumes in North America, Q4 to Q1 volumes are 20% to 25% lower in Q1.

So you are just not getting the same leverage.

Okay.

I appreciate that.

Thanks for that help.

And, also, on Latin America, trying to get arms around the timing of the price increase, if that's something that you expect to go into effect in Q2, or is that more of a second half event and as the flowing through of inflation and currency continues to impact that business, it's certainly on a year-over-year it was a solid -- still a solid result.

But in terms of Q2 itself, given the timing of the price increase, et cetera, some of the costs, will you expect margins to dip a little bit that quarter and then rebound in the back half of the year?

Just trying to get a sense of the timing.

Yes, Michael, it's Mike.

The price increase has already been announced.

It will go into effect throughout the second quarter.

So, we will likely see the real benefits of that price increase in the second half of the year, okay.

In terms of -- we stated our experience has been this World Cup means that we are going to have lower demand in the second quarter.

And, so, as you pointed out, yes, we do expect margins to be slightly lower, but we expect a very strong second half as we both recover on the volume side as well as the full impact of the price increases.

Great, appreciate it.

Thanks.

Our next question is from Denise Chai with Bank of America.

Go ahead.

Thank you for taking my question.

Just wanted to follow-up on your North America SG&A.

You mentioned the Maytag campaign.

Will we see that kind of spin continuing in the coming quarters, or was that really a drag on SG&A in the first quarter, because it's a small quarter and also it was weather impacted?

Denise, it's Marc Bitzer.

First of all also let me [lever it in] SG&A and that is consistent with what we said earlier.

If you look -- if you would break down our SG&A into two components, one call it infrastructure, which is basically the real fixed costs and revenue generation, brand investments, and we held in North America our infrastructure expenses flat the last two or three years.

And we will not change that going forward.

We will have a strong focus -- we have a strong focus on maintaining fixed costs flat.

The thing which [we made today] is we dialed up our brand investments and -- which is basically the Maytag launch.

We also have significant amount of product launches in Q2 and Q3 of a magnitude which we probably haven't seen in a long time.

That will be supported by rev gen.

Having said that and that gets back to Larry's point, we have these brand investments; of course, on a low volume base you lose some of the leverage by definition.

If the revenues grow in Q2 and Q3, that will probably somewhat change.

What we expect is this isn't one quarter.

This is the rate we are spending.

We had a very low demand quarter; as a percent of sales it will likely decrease with the same dollar spent.

Okay, got it.

Were there any -- for the direct one-off costs from weather disruptions, given factory closures and the fact that you couldn't even ship out of Atlanta for over a week, were those material?

Denise, it's Marc.

First of all, and it may be specific to our situation, we were not only impacted by consumers but keep in mind we have a majority of factors up north.

We have a lot of production in Ohio.

Yes, indeed, it was hard to get trucks out of Ohio which had a temporary impact on our logistic cost.

Whenever you have spikes in the supply chain, it always costs you something.

It's not a huge magnitude but evolves as a one-time impact probably around $10 million to $20 million.

Okay.

Thank you.

One last one, you gave us the North America gross margin.

Can you give us some sense of the other regions, please?

I'm sorry.

What was your question?

Gross margin in other regions besides North America?

Yes, I mean, I think what you saw across the regions, as Marc just mentioned, international margins also up.

What you are seeing is the benefit from the price mix improvement in the international businesses that are -- have been able to offset a lot of the material cost inflation and FX that we have.

I would say globally, very consistent to what Marc talked about in the North America picture.

Great, thank you.

Our next question is from Ken Zener with KeyBanc.

Your line is open.

Gentlemen.

Ken.

So, no good deed goes unpunished.

You beat AHAM, but it's about margins.

I just wanted to walk through what I think you've already said.

Marc, you said $10 million to $20 million hit from weather.

Is that correct?

Yes, that's what we said.

Would that be considered -- well, obviously, hopefully one time.

But that would be a sequential benefit, right, to whatever the run rate is?

That would be correct.

Now, the $10 million to $20 million hit that you just described, does that represent more of a margin drag, if you will, or cause for lack of margin expansion?

Is that greater than the SG&A investments that you just described given your 60 basis point improvement in gross margin?

Just trying to get a sense of magnitude here.

Obviously, you can do the math.

If SG&A went up half a point on the revenue base, you can do the math.

By definition, it's in the ballpark but likely less.

The logistics cost is slightly less.

The logistics cost technically flows into our gross margins.

That is not showing up in fixed cost.

That is a variable cost.

Ken, it's Jeff.

If you step back, take a global look and go down the key drivers of our business, volume was a little bit weaker than we expected, largely due to the US that we talked about.

We expect -- we know -- we've seen that -- we don't see any other big changes around the world.

Price mix, we were up I think a half point.

We guided for the year a half a point to a point.

And with some of the cost-based price increases that are kicking in, we still feel very good about that.

Next one, productivity.

As always, our productivity ramps up throughout the year.

That would be especially true this year where we had a weak demand in the first quarter.

That's a negative productivity.

Return to normal demand plus our normal ramp up during the year, productivity will be a big lever.

Restructuring benefits.

Those will flow, and we got them in the first quarter.

Those will flow throughout the year.

The offset is increased brand and product investment and -- but in total, the walk, if you will, from last year to this year, we remain confident in delivering our 8% plus margin for the full year.

By definition, yes, our run rate will increase.

Thank you.

If we look at the -- let me ask you about your cash flow, because I think we are getting to the point that investors are getting more focused on that as you are.

With the impending acquisition as well as the announced share buy-back.

You did some buy-backs last year, but it was mostly for share options, if you will.

Could you comment on how much of that $500 million is dedicated to net share repurchases, A. And then, B, given that you talked about Hefei on the call here -- and you did mention China in relation to your compressor being kind of weak, could you give us a context so investors have some context when you guys do acquire the company for what is happening in China and we can start getting used to your language for that region?

Thank you.

Ken, this is Jeff.

I go back to use of cash investing in the business which we're doing at an increased rate, paying down debt, et cetera predictable on track.

Return to shareholder, as we did last year, we both increased the dividend and have an authorization for $500 million.

And we have a very important M&A in Hefei Sanyo.

So, we are very much executing to what we've been communicating is our plan.

Last year we purchased $350 million which was, by the way, our authorization.

We don't have a defined time period for the current authorization.

We typically fund out of free cash flow generation.

Your question on dilution; at today's stock price, we probably run around a million shares a year dilution.

So, clearly that is -- it would be -- if done today, it would be a net reduction but, again, that would be done over some period of time.

And we really can't give you, as we said in the very beginning, I guess last July, that as soon as we close, because this is a publicly traded company in China, we cannot disclose non-public information about Hefei Sanyo.

So, we will not be able to give you all the details of the impact it has on us.

I mean, you do have the end of the year data point which is clear.

And shortly after we close or whenever it's appropriate, we will go through in great detail, both the impact on an earnings standpoint, on an ongoing basis, expectations of growth and earnings in cash.

Right, no, I understand that.

I guess in trying to keep the commentary constrained to your current business, you did highlight compressor, when you're talking about Latin America and different businesses, you did highlight compressor had some weakness in China -- related to China.

Yes, Ken, the Chinese market, depends on which product category but first quarter was weak.

There is different data, but it was double-digit declines.

You know, we don't think that's a forever thing.

It's going through -- there has been some slowdowns in China.

We were comping over a really big previous year of growth.

It looks like it's starting to level out.

So, yes, China -- which affected both our compressor business and our appliance business.

And Hefei Sanyo has not reported the first quarter yet.

There's nothing we can say about that.

I understand.

I was just looking for your -- Then, if you would -- I will follow up with you guys off line.

Thank you.

Okay.

We will take our next question from Sam Darkatsh with Raymond James.

Go ahead.

Your line is open.

Good morning, Jeff, Larry, Marc and Mike.

How are you?

Good.

Two more broad questions if I might, first about Europe.

A few years ago, Jeff, you mentioned that I think you needed about 6% operating margin in order to earn your cost to capital.

That was prior to, I believe, all your restructuring efforts.

What margin do you now need to earn your capital cost in Europe, and can you achieve that without further material restructuring and/or industry consolidation at this point?

Yes, Sam, that's correct.

I think I said 5.5% to 6% given our asset base and so on is where we needed to be.

We absolutely believe we can get there and now are starting to show the path to get there.

It's a combination of what I call self-help, what we are doing from a fixed cost reduction and then which is supported by the restructuring that we are doing -- and, by the way, getting the benefits for -- our ongoing productivity, our investment in product innovation.

And I think you are starting to see the accelerated growth we are getting.

And absolutely a stable or modestly growing market will certainly accelerate that.

We are on track for that.

I think we are going to make a very large step forward this year, quarter-by-quarter.

Our -- every asset we have has to be able to earn its return, and Europe is no different.

So, to paraphrase then, the 6% or so, 5.5% to 6% is still the necessary bogey, and you don't need anything dramatic to happen incremental to prior -- previously announced actions then?

Well, what I said is that we will take the appropriate costs and capacity and investment decisions needed to do that, and we have.

We've announced a number of them.

I can't tell you go forward what we need to do, but I will say go forward, we will get to 5.5% or 6% or hopefully better.

Second question, your US market share, or at least domestic market share was quite good this quarter.

You did have an easy comparison on a year-on-year basis.

At least directionally, I won't hold you to specificity, but directionally how should we think about your US market share over the next few quarters knowing your comps get harder and you are not going to be matching a lot of promotional activity.

But you do have new products coming, and you have a builder mix that is favorable.

How should we directionally think about your market share trends over the next few quarters in the US?

Hey, Sam, it's Marc.

First of all, please, with your compliment about Q1 market share.

I wouldn't call last year's baseline easy in any case.

As you know, we really don't give quarterly guidance of market share.

Having said that, our market share is both sequentially and year-over-year up.

That is correct.

It was not done through promotions or [bad destroying] activities.

Otherwise we would see it in gross margin which basically tells you if product launches this innovation without overly aggressiveness on promotion, we get to steady good run rate and market share, and we're comfortable with current levels.

Last questions, it's real quick, the BEFIEX, if my math holds, you will not be recognizing any more BEFIEX credits this year.

Are we done, or what's the status on that program?

Based on what we know today, we did monetize $14 million in the first quarter, and right now we would not anticipate anything at this state for the rest of the year.

What's left -- what is still unrecognized?

There is $53 million left tied into legal rewards that will be settled over the next few years.

Very good, thank you all.

Thank you.

We'll take our final question from Eric Bosshard with Cleveland Research.

Please go ahead, your line is open.

On US market share curious for further detail.

It seems like the Maytag and bigger than normal year of product launches are still in front of you.

So talk a little bit about what allowed the share progress in the first quarter, and if I'm correct, there is incremental new product coming to market that should sustain or perhaps expand the market share benefit in Q2 and beyond?

Eric, it's Marc Bitzer again.

What we saw in Q1 in particular are still carryovers of last year's product launches, particularly with top loaded line which is called Fusion where we got healthy market share gains.

Our cooking products are running extremely well.

It's an exceptionally strong category, and we see that also carrying over in Q1.

On top of that, you have the Q1 industry, just from the overall industry, and that's impacted by Q4 promotions.

And as we said last year, we are not participating that much in aggressive promotions.

You see the effect to all of this, the larger expanse to Q1.

At the same time, you're correct, there is a significant amount of product launches ahead of us in Q2 and Q3 that we're, based on initial trade-run reactions, very confident about.

A follow onto that, if could you give a little bit of color of Maytag which has been around for a while, but it seems like you're more excited about the new product efforts and the traction and the response from the trade.

Can you frame a little bit of strategically what you are doing with Maytag in terms of channel or price point or position and then also the magnitude of the uptick you're seeing from the channel on these new products?

It's Marc again.

I think to really get into detail, it's probably more subject to at some point an investor conference to really show the entire Maytag evaluation strategy.

To make it short, the Maytag brand still stands for exceptional quality and reliability.

I think it's fair to say that the last decades probably and even before, the Maytag brand didn't get all the product it deserved.

This is what we are changing.

We have a complete new product line which I think fully represents what the Maytag brand in the consumer mind stands for.

That is accompanied by a very big brand relaunch with both TV and ads.

To be also clear, we started with TV and ad campaign.

The product themselves will be launched end of May, early June.

You don't get to see them in market, but of course we already introduced it to the trade and there is a lot of additional flooring which we will get from it.

Thank you.

Okay.

If there's no more questions, I'd just like to thank everyone for joining us today, and we look forward to speaking with you next time.

Thank you.

This does conclude today's program.

You may disconnect at this time.

Thank you and have a great day.