惠而浦 (WHR) 2016 Q1 法說會逐字稿

Good morning, and welcome to Whirlpool Corporation's first-quarter 2016 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 Chris Conley.

Please go ahead.

Thank you, and good morning.

Welcome to the Whirlpool Corporation first-quarter 2016 conference call.

Joining me today are Jeff Fettig, our Chairman and Chief Executive Officer; Marc Bitzer, our President and Chief Operating Officer; and Larry Venturelli, our Chief Financial Officer.

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

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

Our actual results could differ materially from these statements due to many factors discussed in our latest 10-K and our other periodic reports, as well as on slide 1 of this presentation.

Turning to slide 2, we want to remind you that today's presentation includes non-GAAP measures.

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

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

Listeners are directed to the supplemental information package posted on our investor relations website 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 thanks for joining us today.

As you saw in our press release this morning, we reported record operating results for the first quarter of the year.

Our ongoing earnings per share were up 23%, and our ongoing EBIT margins were up a full point.

We also stated in the statement that we are reaffirming our full-year guidance after what we view as a good start to the year.

Our integration activities in Europe and Asia have progressed well, and we are firmly on track to deliver a significant level of cost synergies for the year.

And as you will see from our results, consistent with our full-year goals, our strong execution more than offset currency and emerging market demand challenges in parts of the world.

Now I will turn to slide 5, where you see our first-quarter results.

Our revenues were up 1% versus last year, excluding currency.

Our ongoing business earnings were a record $2.63 a share, again up 23%, in line with our guidance for the year.

Free cash flow declined slightly versus last year in the quarter, however, we are on track to meet our full-year goal.

On slide 6, you will see our guidance, which once again we reaffirmed.

We expect for the year to deliver ongoing earnings of $14 to $14.75 per share, which represents over a 15% growth versus last year.

We also continued to expect to deliver free cash flow in the range of $700 million to $800 million, which is a strong improvement over last year.

So overall, our expectation is to continue to build on what we see as positive momentum that developed throughout the quarter.

And as we managed to challenge -- to manage through a challenging environment with strong execution, and also expect to deliver another year of record results.

On slide 7, we do highlight a few items in our 2016 capital allocation plans and overall, the priorities here remain unchanged, which are to fund the business to support strong returns to shareholders and to continue to evaluate value-creating M&A opportunities.

As you saw during the quarter, we did complete our existing share buyback program with $225 million in share repurchases.

And last week, our Board authorized a new $1 billion share buyback program and 11% increase in our quarterly dividend.

With our strong business performance, we believe that we have the appropriate flexibility to continue to execute our capital allocation priorities in order to drive long-term value creation.

Finally on slide 8, you can see our 2016 business priorities.

Overall, our focus is to continue to grow revenues and expand operating margins through a number of levers.

First, by delivering our restructuring and acquisition cost synergies of $175 million for the year.

Secondly, we are seeing, and do expect to continue to see, mix improvements and revenue growth as we benefit from our new product introductions and the strength of our industry-leading brands.

We continue to see and target growth opportunities in our adjacent businesses, and we are leveraging our cost productivity actions to continue to deliver benefits to expand our operating margins.

So with these actions, we will generate improved free cash flow for the year, which will enable us to continue to create shareholder value through our capital allocation plans.

So at this point, I would like to turn it over to Marc Bitzer.

Marc?

Good morning, everyone.

Turning to slide 10, we will review North America's performance in the first quarter.

We performed in line with our expectations by growing revenues 5% excluding currency, and expanding operating margins 70 basis points to 10.5%.

We delivered another quarter of sequential T6 market share improvement, and our unit sell-out in the first quarter out-paced the industry, behind the strength of our recently launched products and the investments we made to drive profitable growth.

Our strong operating margins were driven by our ongoing cost productivity programs and operating leverage from revenue growth, which more than offset the $30 million in unfavorable currency impact in Canada and Mexico.

Turning to slide 11, we outline our 2016 operation priorities for the North American region.

Our expectation is that the industry will show 5% to 6% annual growth, behind strong housing trends and consumer sentiment.

We expect to grow at or above the industry rates for the year, as we accelerate the growth of our new products and continue to make targeted investments to drive profitable growth.

Our strong cost productivity programs will continue to drive margin improvement, and we will remain focused on growing our adjacent businesses.

Turning to slide 12, we highlight our exciting new top load laundry platform.

It represents a new era in laundry, with an industry-leading capacity and intuitive front touch controls.

We saw significant first-quarter growth in the top load laundry, with very positive consumer and major trade customer support, and expect this trend to continue.

I will now share the first-quarter results for our Europe, Middle East and Africa region, as shown on slide 13.

Sales were $1.2 billion compared to $1.3 billion in the prior year.

Excluding currency, sales declined 3%.

The top line was a little soft across Europe due to a slightly weaker industry of down 1%.

The market was down slightly, [but with our] strong and what we believe temporary demand declines in the UK and Russia, where we have a much larger business.

Ongoing operating margin was 4.9%, a 220 basis point increase compared to prior year, and in line with our expectation for full-year margin improvement.

Strong execution of our integration plans and ongoing cost productivity more than offset $20 million in unfavorable currency impact.

On slide 14, our 2016 priorities remain unchanged, with a strong focus on integration activities, ongoing cost productivity, and growth from new products.

We expect the industry to be flat to up 2%.

For the year, we continue to expect to grow in line with the market, and to deliver margin expansion consistent with our full-year guidance of 7% to 8%.

On slide 15, we are proud to feature Europe's first fully connected appliance [suite].

These products work together seamlessly to give consumers the performance they expect while offering flexibility and peace of mind.

Now I will discuss our Latin America results on slide 16.

Sales for the quarter were $705 million.

Excluding the impact of currency, sales decreased 4%.

Industry in Brazil was down 13%, which was in line with our forecast of down 10% for the full year, however, through the strength of our brands and products, we gained market share and continue to outperform the industry.

Our operating profit for the quarter totaled $42 million, nearly 6% of sales compared to 6.6% in prior year.

It is important to note that the first quarter of 2015 was the beginning of last year's significant real devaluation and industry declines.

We have readjusted our business for today's operating environment through previously announced cost base price increases, new product introductions, and substantial cost and capacity reduction, and are on track to deliver our full-year operating margin guidance.

On slide 17, we summarize our priorities in Latin America.

We expect to manage through continued volatility, through strong cost productivity programs, and by maintaining our right sized fixed cost structure.

We will continue to invest in new products, and remain well-positioned when consumer demand does return.

Based on our expectation of demand down 10%, and with the benefits of our offsetting actions, we expect to successfully navigate short-term challenges and deliver on our full-year guidance.

Slide 18 is our console freestanding range, which is a value priced product for Brazil but includes several premium cooking features that deliver great value for consumers.

The initial sales results for this product have been very strong.

And now we turn to our first-quarter results in the Asia region, which are shown on slide 19.

Net sales were $371 million in comparison to $378 million in the prior-year period.

Excluding the impact of currency, our sales increased 3%.

Our ongoing operating profit was $27 million, compared to $26 million in the prior period.

Ongoing operating margins were 7.3%, an increase of nearly 0.5 point, driven by revenue growth and ongoing cost productivity.

Turning to slide 20, we share our 2016 priorities for our Asia operations.

We will continue to focus on growth through distribution expansion and ongoing cost productivity programs.

Our expectation continues to be flat industry in the region, with stronger demand in India and slight weakness in China.

Overall, we expect strong margin performance of 7% to 8%, driven by our larger growth platform and the benefits of our strong innovation pipeline.

On slide 21, we showcase our new top load laundry product for the China market.

Similar to our North American product, it features front touch controls and a novelty of wash technology for improved fabric care.

This is a great example of leveraging our product development capabilities across regions.

And finally, on slide 22, we summarize our regional margin guidance for the full year.

Our first-quarter performance was consistent with these goals, which remain unchanged as we continue to see opportunities for strong margin expansion in all regions.

And now, I'd like to turn it over to Larry.

Good morning, everyone.

As Jeff mentioned, we had solid performance in the first quarter that was in line with our expectations.

Our earnings momentum entering the second quarter and expected run rates for the second half are strong.

Turning to our first-quarter results on slide 24, revenues were $4.6 billion.

Currency had a top line impact of nearly $300 million, and excluding currency, sales were up 1%.

We achieved record ongoing earnings of $2.63 per share, which was up 23% year over year, primarily driven by acquisition synergies and ongoing cost productivity programs.

We achieved these results while absorbing a currency impact of over $0.50 per share, or approximately 1 point of margin.

Our ongoing EBIT margin improved by a full point during our lowest volume quarter, and we are on track for the full-year guidance of 8% to 8.5%.

In summary, we are very pleased with our results for the quarter.

Turning to slide 25, we expect another record year of performance and are reaffirming our full-year guidance.

As Marc discussed in the regional reviews, we are confident in our operational plans, and as a result expect to deliver 15% plus growth in ongoing earnings per share in 2016, and approximately $700 million to $800 in free cash flow.

On slide 26, we outline our expectations for EBIT margin expansion.

As previously communicated, we expect to expand our margin by over 1 point, primarily driven by ongoing cost productivity, favorable price mix, and acquisition cost synergies.

We expect to continue funding our global brand and product innovation, and to absorb between 1 point and 1.5 points of margin impact from currencies.

Currencies very recently have strengthened versus the dollar.

While we are not adjusting our currency assumptions at this time, should trends continue, we would see lower headwinds.

On slide 27, we highlight the cadence of the first-half versus second-half earnings drivers.

First, given the seasonality of our business, we expect volume to be stronger in the second half of the year.

Second, we should also have lower currency headwinds in the second half of the year.

Third, we expect strong results from cost productivity programs and our acquisition synergies will continue throughout the year.

As a result, and consistent with prior disclosures, we would expect full-year earnings to approximate 40% in half one and 60% in half two.

On slide 28, we share some details on our first-quarter free cash flow results and capital allocation actions.

Our free cash flow declined slightly versus prior year, primarily due to higher restructuring cash, legacy product warranty actions, and temporary working capital funding related to the integration product transitions in Europe.

We executed a balanced approach to capital allocation by funding the capital needs of our business and returning cash to shareholders in the form of dividends and the completion of our share repurchase program.

Our plans to generate $700 million to $800 in annual free cash flow are on track.

With our recently announced $1 billion share buyback program, we have appropriate flexibility to continue with a balanced approach to capital allocation throughout the year.

On slide 29, you can see an update on the progress of our restructuring and integration activities.

We incurred $47 million in restructuring expense and delivered $58 million in benefits in the first quarter.

For the year, we expect $250 million in expense and $175 million in benefits, consistent with previous communications.

In summary, our strong first-quarter results support the run rates needed to deliver our full-year guidance.

Given our results and strong balance sheet, we also believe we have the right plans in place to deploy cash in ways that will maximize shareholder value.

Now I would like to turn it back over to Jeff.

I will turn to slide 31, which summarizes again our 2016 priorities, which are built around revenue growth, margin expansion, and delivering strong free cash flow for the year.

4 months into the year, we feel like we have very strong and robust plans to deliver on all of these priorities, and we remain confident in our full-year guidance.

And as outlined on slide 32, we continue to execute our value creation strategy, which is unchanged, and this gives us an outstanding opportunity to continue delivering significant shareholder returns.

So with that, I would like to conclude our formal remarks and open it up to Q&A right now.

Thank you.

(Operator Instructions)

Rob Wetenhall, RBC Capital Markets.

Good morning everyone.

Larry, I just want to talk about currency for a minute.

First, FX exposure in North America.

You called out at $30 million headwinds.

And I was trying to understand when you think that headwind will abate?

And it looks like it is a little bit more than just translational.

And you sound very, very confident in your guidance.

And I wanted to understand, do you think there is potential upside to your guidance because of what's going on in FX?

And how should we try to quantify that?

Yes, as I said in the prepared remarks, we saw currencies begin to strengthen towards the -- towards the end of the quarter.

And we've seen, over the last couple weeks or so, that continued strengthening.

So if I was bracketed, I would say if these trends continue to be positive, and we see the continued strengthening, we expect probably the lower end of our currency headwind guidance.

We said 1% to 1.5%.

It would be closer to that 1%.

So that would be approximately $0.50 a share.

Again, I think currencies are moving in the right direction.

The earnings that we posted in the first quarter is fully in line with our expectations, and support our full-year guidance.

Operationally, and Marc mentioned, things are going well, and so that gives us the confidence in our full-year guidance.

Got it.

And I was hoping, Marc, could you talk for a second about what you're thinking revenue trends in Europe?

It sounds like demand was a little bit softer than you might have otherwise expected.

Do you think this is something that's going to persist?

Or do you think this is transitory?

And how should we think about revenue growth accelerating in tandem with your ability to get synergies from Indesit?

Rob, it's Marc.

So let me actually put the European performance a little bit in context.

First of all, on a full-year basis, as you know, we guided towards 7% to 8% margin.

We guided the market demand to be flat to plus 0% -- plus 2%.

And we said we would grow in line with market, which also tells you we have a lot of focus on further margin expansion in Europe.

With that in mind, and as I indicated in my prepared remarks, we are actually very pleased with our performance in Europe in Q1.

We delivered a substantial margin improvement of 220 basis points, and we continued to delivered integration cost synergies, and I would argue we are firmly on track towards the full-year margin targets.

On the revenue side, and I said that in my remarks, we perceive it as a slight softness versus what we had in mind.

But to underline that, we characterize that as a temporary softness.

It was particularly driven by the UK and Russia where, as you know, post-Indesit acquisition we have a significant exposure where we saw some weakness.

From what we see today, we do not see this as structural or permanent; we considered it a very temporary issue.

Okay.

That is helpful.

And final question.

Switching over to Latin America, it sounds like -- I'm just trying to understand a little bit -- it sounds like you had a tough comp with 1Q 2015.

And then I'm trying to put that in context.

Was Brazil in line with your internal expectations for the quarter?

Or is it something else going on with the other segments in the Latin American business?

I am just trying to understand how you're thinking about demand and profitability with the three businesses in the segment.

Rob, it's Marc again.

The simple answer is, we are 100% aligned with our internal plans in Q1.

To give a little bit more color, keep in mind the decline of particularly of the Russian -- of the Brazilian macroeconomic environment started pretty much Q1 last year, but really accelerated as we went through the year.

And you saw the same on the currency.

So Q1 was, I would say, the toughest comparison, if you want to say, so because it was just the beginning of a recession.

So we saw a significant impact, obviously, on the top line, once converted back to US dollars, and then also on the demand side.

We knew that coming into the year, and that's why we put the plans where the plans are.

And I would say we're extremely pleased with how the team performed on price margin realization, i.e.

on delivering cost-based and inflation-based price increases, and they are sticking.

We are very pleased with how the team has been managing capacity and fixed cost.

And a result is a margin which are, particularly if we'd keep the top line in mind, very promising.

And we are very confident that we will deliver on our full-year guided margins.

Are the other businesses performing well inside Latin America?

Yes, Rob, there is always gives and takes.

I would say compressor business is performing solid or strong.

And consistent with what we have seen the last couple of quarters.

Our appliance business out of Brazil has some issues, largely driven by the introduction of import tariffs in Ecuador and Colombia.

But again, these are typically one-time effects that are just pipeline issues.

Michael Rehaut, JPMorgan.

Wanted to first dive into North American region a little bit more, if possible.

You mentioned that the 1Q sales, I believe, outpaced the industry.

And just wanted to get a sense, where did that strength come from?

Was it any particular product categories?

And offsetting it, because you did have a 5% volume growth, and I know that includes some other of the categories, and in Canada/Mexico.

Maybe to give us a sense of how those regions did, as well?

Michael, it's Marc.

So let me try to answer your question.

First of all -- and I repeat that from prior calls, and as we said in a number of calls -- our reported unit shipments versus the T6 market share units are not comparable.

We are not doing an apples to apples comparison.

Because obviously in our unit shipments, there is a lot more than what is typically the AM T6.

So don't fully compare [that].

Anyhow, having said that and taking that into context, our unit shipments in Q1 in North America were up 5%.

But technically, I would say it is slightly trading versus what the AM numbers would show, even though, I mentioned before, they not fully comparable.

What is, however, very important to keep in mind -- and I indicate that before -- our shipment volumes, i.e.

sell-in volumes, after a weak start in January, we had a very strong February and March.

And that momentum continued and carried into Q2.

And even more important, [we ever] measure which we internally look at are the so-called sell-out volumes, i.e.

what is sold through on the trade partner level.

And on that level, we even outpaced the overall market.

So we are actually very pleased with the US volume of US shipment trends, and the momentum we are carrying.

To your question, was it one category, no, it is not one category.

But of course, we feel in particular that we have regained strength in our laundry category, which as you know is our flagship.

And we had, last year, some issues, and we saw strong growth in laundry, but it carried through other categories, as well.

That is a great rundown, and yes, certainly appreciate the apples to apples is not comparable there, so thanks for that additional detail.

I guess secondly, on the margin itself, if you adjust for the $30 million FX hit, and as well as the top line, I'm actually calculating like an 11.5% adjusted North American margin.

So I was wondering if that is correct, Larry?

And maybe just to drive through what were some of the puts and takes of that?

And because certainly it would seem that overall, as -- particularly as currency headwinds lessen, you'd still be very much on track to hit the full-year margin guidance.

So just trying to get a sense of the different benefits that you are seeing on the margin side?

Again excluding the currency headwind, it looks like it was about 100 basis points above the reported number.

Thanks.

Michael, let me take this again.

As you know, we guided full-year North American margins 11.5% to 12.5%.

If you would take the midpoint of that, that would be 0.7% higher [when launch is] actual, if you would take the midpoint of that range.

Q1 was exactly 0.7% higher than last year.

So quarter -- Q1 year over year, we are exactly in line with the midpoint of what we guided on a full-year base, which obviously gives us confidence we are very well on track towards our full-year guidance.

And that typically, as you also know in particular, as you follow our share for a long time, there is a lot of seasonality in our Q1 business.

So there is a couple of factors like small domestic appliances, which are much stronger in Q4 and Q3, and that is a normal issue.

If you would go back the last couple of years, you will always see a margin lift as the year progresses.

So again, that is very typical and that is why we are very confident.

Particularly with regard to your question on FX, yes, you are probably correct, particularly in Q1, our FX burden was high.

Within North America, with two currencies, very simply, it's Canadian dollar and Mexican peso.

First of all, both finally regained some strength towards the end of the quarter.

However, on a quarter average, and particularly compared to last year, this was a tough comparison.

That comparison gets a lot less challenging as the year progresses.

Denise Chai, BofA Merrill Lynch.

I wanted to ask, in North America, what you are seeing in the competitive environment?

And specifically, can we get an update on the anti-dumping suit?

Denise, let me first talk about the competitive environment.

Again, it is -- as we always say, this is a market where you will always see promotions, and we assess the promotions in terms of value creation or if they do not create value.

Right now, we saw -- and I mentioned that in the last earnings call -- we saw a slightly elevated level of promotions in Q4.

We adjusted to that, and that's pretty much the same level in Q1.

So it's -- I would not describe the situation as overly concerning or surprising to us.

We operate very well in that environment.

We delivered strong sales growth.

And again, as I mentioned before, we're very pleased with our sell-out momentum, which ultimately, as you know, translates into sell-in.

So we are actually very confident about the overall volume growth and our ability to find and regain some market share which we lost last year.

Denise, regarding -- this is Jeff -- regarding the dumping, let me give you just a brief update on that.

I believe we told you last time, at the end of January, the ITC Commissioners unanimously voted to proceed with the investigation in the washer dumping trial are in a process that we filed.

It is tracking in line with our knowledge of the process and our expectations.

At a high level, we would expect by midyear, or just beginning in the third quarter, that the Department of Commerce will complete their investigation and establish dumping levels and cash deposits for violating companies.

Typically, then, it would be six months where the Department of Commerce releases its final NI dumping determination, and then it goes back to the ITC, which we would expect within the next month, and have a final conclusion to that.

So from our perspective, it is progressing as it should.

Again, we feel very strong that this has been going on for some period of time, quite a long time, really a continuation of the previous washer dumping, which we brought.

And so we expect the process to continue on this path.

Great, and just one more.

So in terms of raw materials, are you still expecting to see like a north of $100 million benefit this year, and mostly in the first half?

And just related to that, how should we think about the North America pricing of down 2% on an average unit basis?

Are we seeing you reinvest some of the raw material savings?

Yes, Denise, I think we're -- our guidance for total cost productivity, which includes the $100 million plus in raw materials, is still very valid, and we are very confident in that.

And our Q1 results fully support the -- what we expect for the full year on the productivity perspective.

Denise, let me just -- it is Marc again.

Let me just comment on what you referred to, the minus 2%.

Again, very important to highlight the revenue growth, excluding currencies.

As we said, the published revenue growth in North America is plus 3%.

Excluding FX, it is plus 5%, which exactly matches our unit growth.

So on an average sales value per unit, we are exactly flat year over year.

Dave MacGregor, Longbow Research.

You touched already, Marc, on the fact that you are happy with the recovery in the North American business.

I guess I wanted to just go back to that a little bit.

And a couple of earnings calls ago, you had indicated that may have cost you over 100 basis points in market share.

And I guess the question is, can you update us on the progress on the product availability issues from last year?

And do you feel this recovery positions you to regain the 100 basis points plus of market share that you had previously indicated the situation cost you last year?

So David, to that point, yes, you are correct.

Last year, our availability issues, which were very largely related to the huge amount of product introductions, they cost us a market share.

And when we guided on a full-year base to grow in line with market, or above market, that basically implied that we were regaining that market share.

I would characterize -- and particularly on a sequential basis -- that Q1 is fully on track towards recovering that lost market share.

And I would also expect that now with Q2, that turns into also a year-over-year improvement.

And yes, that is led largely by the laundry category, where we had some product introduction issues.

So it is now fully on track and actually in a very strong performance.

Okay, congratulations on the progress there.

A question for Larry, you talk about the $175 million of benefit this year.

I guess the question is, how much that goes to margins versus how much of it ends up getting reinvested elsewhere in other initiatives?

I think you are referring to the synergies -- synergy benefits, and David, that all will flow into margins.

Yes, David, the way I guess I would look at it is, if you go to the margin walk page, basically, and particularly in the case of Europe and China, where we talked about acquisition synergies, it was squarely our position that these would be brought to the bottom line and expand our margins.

And to date, that has been the case.

You have got other moving parts.

Raw material costs, productivity, mix, price et cetera, et cetera -- and currencies, and so there's give and takes.

But as a general principle, the restructuring in M&A synergies we're using in those particular parts of the world, clearly, they expand margin.

Yes, and if you are looking at Europe, David, certainly some very nice, solid margin improvement, probably around 3.5 points of synergies.

But that is being partially offset -- to Jeff's point -- from the unfavorable currency that we're absorbing.

Megan McGrath, MKM.

Wanted to follow up a little bit on the North American competitive environment.

We've seen a lot of signage and stuff from the big-box stores around a spring Black Friday event.

Just wanted to get your thoughts on that, in terms of appliances.

Is it about the same as last year?

Is this a new initiative for them, in terms of a more aggressive promotional in the spring?

Megan, it is Marc.

First of all, from an overall competitive environment, trade environment, promotions are just the nature of the North American business.

You will have spring Black Friday or Earth Day.

You will have Memorial Day, Labor Day, and Red White and Blue.

So there is a lot of promotional holidays.

That is just the nature of the US market, but it does not drive the entire market.

So as we have said in the past, [also], the name of the game is how we effectively play between promotional environments and a regular ongoing business environment.

On promotions, we, on a case-by-case basis, make the decision, does it create value for us and our customers, or not?

And then we make a situation assessment.

As I mentioned before, we saw a slight increase of promotion environment in Q4, and that carried into Q1.

As evidence for our margin expansion, I think we can create value, grow the business, and add -- expand margins, despite that environment.

So we're not overly concerned about it.

Okay.

And then wanted to follow up on the share buybacks.

Obviously, you put a new large share buyback into place.

You seem to be pretty opportunistic in the first quarter on buying back shares.

So how are you looking at that $1 billion authorization?

Are you thinking about just continuing to be opportunistic?

Are you going to put some things more regular in place?

Do you have a goal, in terms of keeping your shares outstanding at a certain level?

If you could give us some more color, that would be great.

Yes, Megan, this is Jeff.

The way -- I guess the way I would -- the best way for us to frame it is, this is part of our capital allocation process.

And on an ongoing basis, we have dialogue with our Board in terms of opportunities to create value for shareholders.

And over time, they vary or different opportunities occur.

Certainly completing our last share repurchase, we felt, was a very good use of capital for our shareholders.

We are funding our business at appropriate levels now, to deliver new product innovations to the marketplace around the world.

We are funding the business for restructuring opportunities with our M&A acquisitions, which are delivering great cost benefits.

In the past, we've demonstrated when we saw great M&A opportunities, we can move very quickly on them and we have.

And then you also have -- certainly have returned to shareholders both dividend and share repurchase.

And again, we have given our long-range view of what our financial performance we expect to be.

And obviously, that makes our shares based on that, in our view, have great opportunity to increase in value.

And as we balance all of those, we make different decisions during different periods.

But the point of all that is, we have the ability to look at all of these opportunities in any period of time and act on them, and that's what we have been doing.

We will not, nor have we in the past, given specific time frames for when we expect to complete this.

You should expect we, as we have been, that today's levels, it is highly likely we will be a buyer, can even be a buyer this year of our shares.

But we don't have a defined period of time by which we are going to complete it.

Ken Zener, KeyBanc Capital.

Should we interpret for North America, the 5% rough -- squiggly line 5% plus to be -- now you are saying 5% to 6%.

Are you taking that up 1% for the industry guidance?

Or is that just a rounding error?

And the reason I am asking that is, it seems like North America is obviously, they have started off, could it be weather or not.

But I think with some people, it's going to be surprising, with the higher demand we saw in [AHEM], that you would not have impacted your guys' guidance at all to the upside.

Ken, it's Marc.

So technically speaking, we are taking it up 0.5 point, because that's the average of 5% to 6%.

But all joking aside, we do see strength from the North American market in Q1, and we expect some of that strength to carry through as the year progresses.

Behind that is, we are, and we remain, confident about the US housing market.

I know there have been somewhat sluggish numbers about housing starts, and we do see that being corrected over time.

So we still counting on 1.15 to 1.2 housing starts, and we are still counting on existing home sales of 5.3, 5.4, in that ballpark.

And we continue to see that as we are observing the market every day.

So that's why we said it is 5% to 6%.

Could it even be more?

Could be.

We do not see weakness today on the North American market demand.

And then related to last year's product launches and the variety of issues you were juggling last year, why wouldn't -- or why aren't we seeing a greater lift, as you talked about 100 basis points market share you are covering?

But why don't we see more of a lift, if that was something you called out last year?

If you're comping against, in theory, easy comps and you have a more vigorous product line in North America?

In Canada -- it is Marc again.

Obviously, we have got to see how the year progresses.

I can only say, and in particular related to what I mentioned before, our sell-out in Q1 has been very strong.

And we're talking about high-single-digits, low-double-digits sell out, which is an indication of a newly floor product, the new product introduction are working on the floor.

If you know of a product [that are] working on the floor and are selling on the floor, you know the shipments will come.

So that is why we are bullish on what we said before.

We will grow in line or above markets, and obviously are focusing on above markets.

And Ken, the trend data really is there.

I think we had the full impact in this in late summer, Q3.

We improved Q4 versus Q3.

We improved Q1 versus Q4.

To Marc's point, the real important thing is what our consumer is buying, not necessarily what you are shipping.

That will fall, and that has been very positive.

So I think we've -- we like the trend we have been on, particularly over the last eight 8 to 10 weeks, and our performance throughout the market should be good.

Sam Darkatsh, Raymond James.

Three real quick questions, if I could.

Larry, first off, I wanted to make sure I understood your commentary around FX.

Specifically, did I understand it to mean that if you were to mark to market current FX rates, then the benefit incrementally to guidance, or at least to EPS, would be $0.50?

Is that accurate?

Yes, Sam.

I would say if we continue -- and again, it is still early on -- if we continue to see the same trends that we have been seeing in the last couple of weeks or so, that would translate, to my comments, would be approximately $0.50.

And Sam, this is Jeff.

Let me just add on that because obviously, there is a lot of talk, for over a year about currency.

Our big parameters, when we gave guidance for the year in February, were really about the things that had been the most volatile, which are currency levels and demand levels, particularly emerging market demand levels.

In the first quarter, we were able to operate within those parameters.

Late in the quarter, the currency portion, and so far in April, has been better than our assumptions.

The demand has not.

It's about in line, and some markets are worse, and a few markets are better.

But -- and our view was, it's, particularly with what we've seen volatility-wise and what's -- in the case of Brazil, the political chaos and so on and so forth, it is way too early for us to change our currency assumptions.

But to Larry's point, if you take our two big parameters, currency levels and demand, our view is, if they get better, we will get better.

Where I am confused is, you are saying if trends continue.

So for example, if the real went from $0.26 to $0.28 during the quarter, does that mean that it has to continue to strengthen at that rate?

No.

(multiple speakers) Hold on.

We said in February, the real is actually $4 to BRL1 in the dollars in February.

It is now $3.55, so a 10% strengthening, built around a political scenario.

So it could -- our view is if it stays at $3.55, which is where it is today, we will do better in Latin America.

Same with the euro, which was probably $1.08 or so in February.

It is $1.12, $1.13.

That's a -- the translation effect there.

Now for the most part, we have a couple of negatives around the world.

But net-net, whereas currency was bad all year last year, we have a little bit of stabilization, which we view as a good thing.

But it's way too early for us to adjust any guidance based on that.

Eric Bosshard, Cleveland Research.

This is Tom Mahoney on for Eric.

A quick question on the Europe revenue decline.

Interested how the 1Q organic trend compares to what you guys did through 2015?

I guess really looking to pinpoint the timing of when you guys cycled the Russia headwind.

Tom, it's Marc Bitzer.

So first of all, on -- as you, on a full-year basis last year, Europe revenue was pretty much flat, and that's what we're basing the market assumptions pretty much expecting also this year, directionally.

So Q1, on constant FX or in local currency, was minus 3, so we're trading 3 points pretty much behind where we want to be, from a revenue side.

Again, as I mentioned before, where it is largely driven by Russia and UK, for different reasons.

UK, there is a British Pound weakness.

We announced some cost-based price increases.

As you also know, we have a safety recall action [faced] so that is a certain -- a temporary UK issue.

Russia, the market remained soft throughout Q1.

As we said also in Investor Day, Russia is a market of extreme volatility.

We saw in previous [crises] that the market came down very quickly and also comes up very quickly.

It started already last year, pretty much around February or [minute] it dropped.

So Q1 over Q1 was a slight [for] weakness, even when we saw, towards the end of the quarter, some signs of stabilization in the Russia market.

But it is very hard to predict how the Russian market develops going forward.

Again, the latest trends have been a little bit more encouraging, but it still remains very soft.

Great.

Thank you.

(Operator Instructions)

Sam Darkatsh, Raymond James.

Yes, I better ask all my questions at once before the moderator gets trigger finger-happy there.

I have two other quick questions, if I could.

First off on slide 27, which is the timing of earnings walk, first half to second half.

If my notes hold, the cost and capacity reductions, it used to be two pluses in the back half, and now it is one plus.

If that is accurate, what's the derivation of that?

And then my final question would be in Latin America, you said the price mix you were happy with.

Could you help quantify what price mix was, year on year, in the Latin American segment?

Yes, Sam, this is Larry.

You will probably note, from the slide in the deck there, that we had very strong cost and capacity from the synergies in Q1.

So we are delivering a little bit ahead of our pace on the synergies.

And that is the only reason we adjusted the chart from the previous.

But we expect -- obviously expect continued strong productivity and continued strong synergies for the remainder of the year.

Sam, it's Marc.

Just on Latin America -- and we will not get trigger-ready on you -- just put it in context.

So in Latin America, we had a minus 22 unit growth in Q1.

Excluding currency, our revenue were minus 4. So that gives you a lot of the answer about the massive progress we made there on driving up our price mix.

As you also know, this is a blend of multiple different businesses.

You also have a large national business in there, and there are quite a bit of differences within Brazil between what we call T3, T9 and T12.

Any [outfit].

If you peel back beyond -- and in particular on our all-important T3 categories, we had substantial improvements on price mix, and we were successful in passing on several cost-based price increases into the market.

So in short, we're pleased about how the team mitigates the negative impacts of inflation currency on to price mix.

So we are very pleased with the progress.

Can you help quantify that, Marc, if you could?

Even if it is a range of where price mix was in the quarter?

On the core -- as you know, Sam, we don't give detailed numbers on price mix.

But on the core Brazil, and particularly if you look at T3, again (inaudible) -- an element of our core business, we had, year over year, almost double digit is the improvements.

Very helpful.

Thank you, gentlemen.

David MacGregor, Longbow.

You've talked in the past about the importance of having market share leadership at the country level in Europe.

And that Indesit, [seems] one of the virtues of this acquisition is that it enhances that country-by-country leadership position.

Can you just talk about how your market share and your leadership countries may have changed versus the non-leadership countries?

David, it's Marc.

And as you know, we typically don't break down market share progress quarter over quarter, country by country.

Having said that, I reaffirm that one of the key strengths of that acquisition have been the market share's strength and positioning which we have in several key countries.

And that is, to be honest, 1 year or 1 1/2 years into the integration, has been fully re-confirmed.

Our business, in particular, Italy, France, UK, and Russia and Poland remain very strong and are very strong.

We do not see, to your question, a decline in market share -- a significant decline in some our smaller markets.

I think what is re-confirmed, the structural benefit of having a strong market position, but we don't see a dramatic shift, year over year, between weaker and stronger markets.

And David, over time, I think you will see it demonstrated through our continued ability to build our overall margin structure.

And I think the other point Marc made in Q1 is, when you look at a -- overall market, we also have a market mix.

And having strong share in Russia and UK, having those markets down more, which would weight our overall mix a little bit worse than the market, that's really, in our view, a temporary situation.

Okay.

If I could just a quick follow-up, but you mentioned twice in your slide deck the adjacencies business as a growth driver.

What kind of growth is achievable in this business?

And do you expect margins in this business to be greater in 2016 than they were in 2015?

Yes, David.

Overall, that business, there's a number of things in it, but two that you know very well.

One is our kitchen and small appliance business, and in the case of North America, we have a consumer products business.

We have a commercial laundry business, and then everywhere around the world it is slightly different.

But these businesses are -- each one of them are somewhat different.

But our view is, we'd like to be able to consistently grow this at least double digit.

And that would be [SDA], that would be consumer products, ultimately commercial laundry and so on, given our position.

We also have similar businesses like this in Brazil.

We are developing them now in Europe, with the acquisition.

We don't yet have these businesses in China.

So it varies a little bit around the world.

But on average, yes, these are nicely margin business, probably at least double our margins that we have in our -- what we'd call our core major appliance business.

And so again, when we talk about capital allocation and that sort of thing, we do focus on, where are the opportunities to grow these businesses?

Could be by adding product lines, could be by expanding in new markets around the world and so on, and we focus on that very strongly.

Ken Zener, KeyBanc Capital.

Marc, going -- following up on the question -- or your statement that you grew -- point-of-sale was high single, low double versus the industry shipments.

Could you expand on that and give us some context?

Is that due to your easy comps last year?

Has that happened in the past?

What does that mean for your inventory levels and/or your utilization rates?

Because I think Larry, you said 40% of your EPS will fall into the first half, until your midpoint is about $3.11.

So I'm just trying to understand how those comments might impact your inventory shipments?

And just context, to see if that type of variance happens often, occasionally, rarely?

Ken, it is Marc.

So obviously, our sell-through or sell-out has been slightly higher than the sell-in.

So that delta, by definition, is the reduction of trade inventory in the quarter.

That is by definition.

So no matter how you turn it, the ending inventory for retailers is lower when we're coming in.

I would say it is a combination of both.

I think some retailers were slightly high in inventory coming into the quarter.

But right now, I would argue for strong sell-through momentum of our products, we will see and we are seeing the shipments coming and catching up.

So this is not a structural inventory reduction; it is a temporary, and ultimately, as Jeff pointed out before, selling [always follows] sell-out.

Michael Rehaut, JPMorgan.

Just wanted to make sure I heard right on the Europe segment, that you were -- that revenues down 3%, ex FX, even if it is down 4%.

And I -- did I hear right, that you saw the market flattish, so you under-performed a little bit?

And just wanted to get a sense of what the drivers were there?

Sorry if I'm being -- if you've covered this already.

I just want to make sure I fully understood that.

And what -- if that's the case, how do you anticipate getting back in line with market growth for the full year?

Which I think was still -- you're looking at flat to more closer to flattish.

Michael, it's Marc.

So first of all, what I said is, our unit growth was minus 4%, and we think the market was about minus 1% on a total level.

So technically, yes, that would translate into, we lost something versus the market.

However -- and that is what Jeff highlighted before -- it is very important to note that our country profile is not exactly the average of the [over] market, i.e.

we are exposed more to Russia, UK, Italy and France.

So I would say the over market profile is not exactly identical to our sales profile.

And in this case, and typically in every situation, it swings back in the other direction.

We were a little bit more impacted by the Russia decline, but again, we consider that temporary.

Okay.

And then just Larry, a couple of technical questions on the income statement.

Could you give us a sense, with the share buyback, how we should think about fully diluted shares for the second quarter, as well as the full year, assuming nothing incremental from here?

And also just the tax rate expectations for the full year, if you can revisit that as well?

Yes.

Tax rate, Michael, we said -- at last call, our guidance was 22% to 24%.

And I see in Q1, we are at 22%, and I would expect that to hold for the rest of the year.

And I -- your first question was on share -- (inaudible) share (inaudible)?

Weighted average share?

I would just use what you see in Q1.

It appears we have no further questions.

At this time, I will return the floor to Jeff Fettig for closing remarks.

Again, everyone, thank you for joining us today, and we look forward to talking to you at our next call.

Thank you.

And this does conclude today's program.

Thanks for your participation.

You may now disconnect, and have a great day.