Operator: 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.
Joe Lovechio - Senior Director, IR: 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 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 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.
Jeff M. Fettig - Chairman and CEO: Good morning, everyone, and thank you again for joining us today. As you saw in our earning release from earlier this morning, our first quarter results were in line 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 in products. We continue to reduce our fixed cost structure and we're delivering on ongoing cost productivity programs.
The first quarter results mark the fifth consecutive quarter of year-over-year ongoing business operation's 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 were summarized there. As expected, excluding the impact of foreign currency and BEFIEX, 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 of 40% to $1.97 compared to the $1.41 last year. And, first quarter, our (indiscernible) 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 U.S. 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 are forecasting industry demand growth ranging from 3% to 5% in Europe we still expect flat industry for the full year as a weak economic environment continues across the Eurozone. And finally we are forecasting moderate growth of 3% to 5% in the Asian regions.
At this point in time I'll turn it over to Marc Bitzer to review more detail on our North America operations.
Marc Bitzer - President, North America: Thanks Jeff and good morning to everyone. Let me begin on Slide 9 by reviewing North America's performance in the first quarter. Starting with the top line.
First of all if you recall in December of last year U.S. retailers concerned over consumer reaction to a fiscal cliff maintained very little inventory levels. Now amidst first quarter 2013 retailers increased their inventory levels particularly driven by additional brands in their stores. Result was that industry sell-in was quite a bit better then sell through for the quarter.
Industry sell through for the quarter was actually in line with 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 U.S., 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 have 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 expand by 3 points year-over-year. Strong market execution and the innovative consumer product continue to drive increase in pricing mix and the benefit of our cost and capacity reduction initiative was also positive driver in the first quarter. The consistent and disciplined execution of our actions resulted in a six 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 front load steam washer.
Let me just take a moment to talk about our expectations for rest of the year as shown on Slide 11. Q1 was in line with our expectation and we expect revenue growth to build throughout the year. With regard to the industry demand, as we continued the year, we remain optimistic about the continued strength in U.S. housing and the consumers will gain confidence at federal government policies become clear, and also, the normal replacement cycle of appliance continued, which is particularly important given the peak appliance industry years that accrued well before recession.
Relative to our business priorities, we remain focused on actions driving margin expansion, including investing in innovative new products continuing to deliver cost and capacity reduction initiative, realizing positive net cost productive and growing beyond our core product category.
Now, I'd like to turn it over to Mike for his review of international operations.
Michael A. Todman - President, Whirlpool International: Thanks Marc. Turning to Slide 13, overall our international operations were led 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 cost.
If you turn to Slide 14, you will see our Latin America first quarter results. Sales excluding currency and BEFIEX increased 2% on improved pricing and mix lower, 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 comps.
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 BEFIEX 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 a point to 9.6%.
Our first quarter results of Europe, Middle East and Africa on Slide 15 reflect a 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 $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 innovations were more than offset by weaker industry demand unfavorable currency and higher material costs.
Slide 17 shows the 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 brands' stain washer in India. Brazil brand 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.
Larry Venturelli - EVP and CFO: 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 the reconciliation of our reporting 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 130 basis points improvement in operating profit margins, 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 1 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 as expected to deliver a positive 0.5 point of margin for 2013.
In addition, as planned, we increased our marketing, technology and product investment 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 BEFIEX, sales were flat to the prior year. As Jeff, Mike and Marc mentioned, we expect revenue growth to progress throughout the year. Monetization of the BEFIEX tax credits were $16 million, compared to $7 million last year. As of March 31, $177 million in BEFIEX tax credits remained.
Turning to Slide 23, the income tax benefit in this quarter primarily relates to recognition of $84 million for the U.S. Energy Tax Credit program, related to 2012 in Q1 2013 production. As we noted previously, our 2013 full year GAAP earnings guidance includes $120 million of expected benefit from the U.S. energy tax credits.
Our full year 2013 ongoing tax rate assumptions 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 towards 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.
Jeff M. Fettig - Chairman and CEO: 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 are seeing in U.S. 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 in the 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 stop our formal remarks and then open it up for Q&A.
Operator: Sam Darkatsh, Raymond James & Associates, Inc.
Sam Darkatsh - Raymond James & Associates, Inc.: Couple of questions, first off, 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.
Michael A. Todman - President, Whirlpool International: Sam, this is Mike. No, I didn't make market share commentary, but in Latin America, actually our market share was stable, so we maintain, and in Europe actually we saw a slight increase in our market share.
Sam Darkatsh - Raymond James & Associates, Inc.: Then my primary question. You said that you are 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 United States particularly if industry pricing gets little bit more challenging?
Jeff M. Fettig - Chairman and CEO: Sam, this is Jeff. Let me take that at a global level. First of all, we had – our Q1 revenues were basically flat when you take our foreign currency and we've been – the big currency devaluations happened in March and early April of last year. So, we kind of 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, you know largely speaking, the Q1 was probably marginally slightly better or slightly worse than it has been in the last six to nine months, meaning there has been no real material change in the global market. The individual markets, there has 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 innovations. So, our comments are that with revenues as 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're sitting here today feeling good about our revenue growth opportunities. Specifically in North America, I'll let Marc speak to that.
Marc Bitzer - President, North America: Sam, it's Marc Bitzer. I made earlier comment about the revenue growth which we're expecting, and it's first of all, as you know we are not giving revenue or price mix guidance by regions. So, let me try to be vague (within) these guard rails. First of all on revenue growth, I wouldn't say I expected, if we don't see trend supporting that, and if we don't have a strong degree of confidence, that revenue growth will materialize, and we are very confident. Obviously, and particularly as you compare year-to-year, revenue numbers and also as you keep in mind we are (cycling) through several price increases, mix changes, but based on comparison change and as such the price volume equation by definition will change, it just reflects from base line and what we are doing about this one. I think important thing and that’s what's probably (indiscernible) 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 this first quarter that our view has been confirmed as evidenced by the operating margins. I'd also say that we remain committed to our strong margins and margin expansions and that has also been evident in Q4 and Q1. We are playing now with more and more levers. In the past we would play strongly in the price margins, now its price margin and costs. And we are increasing also will have volume opportunities. And that ultimately will support our margin expansion.
Michael A. Todman - President, Whirlpool International: 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 introduction 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 are 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.
Larry Venturelli - EVP and CFO: If you look at the guidance we provided throughout the year which everybody is 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.
Sam Darkatsh - Raymond James & Associates, Inc.: If I could sneak one more in here real quick. Marc, you mentioned that U.S. 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?
Marc Bitzer - President, North America: Sam, it's Marc again. First we explain what I mentioned about Q1. As we entered the first quarter of the industry the trade inventory levels were low. I would say, unusually low and that 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 consumers and trade confidence, in particular trade confidence, increased and inventory levels went up coupled – or I would say particularly also driven there as you know there have been some retail landscape changes and there were some new brands and plots, which always drives some initial loads of inventory. That's just the nature whenever you have new flowing. That was an unusual Q1 expect the underlying sell-through data, which as you know there's 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 to our full year guidance. I also see that pretty stable to maybe slightly increasing as the year progresses and for Q2 it feels stable right now compared by Q1 trends, not stable in absolute terms.
Operator: Eric Bosshard, Cleveland Research Company.
Eric Bosshard - Cleveland Research Company: Curious for you to speak a little bit more, you clearly are committed in making great progress on margins. I'm interested in how you are 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 are thinking your commitment to that and also within the market share performance, if you are 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?
Marc Bitzer - President, North America: Eric, again it's Marc Bitzer. First of all, just to provide fact, as I indicated already, our Q1 markets share was year-over-year down and sequentially slightly up which pretty much confirms our current trend and the decision which we've taken in Q4. Obviously I can't give quality guidance on market share, but let me try to maybe put it more in generic terms. The way how we look at market share, there is a certain portion, I think it's portion of our market share which I call is everyday earned in the (trade slope) for great product. As you can imagine, we are exceptionally committed for great and innovative products that are met every day, and we will work incredible hard to never let that go. There is another portion of the market, which is call it promotion market share, which sometimes is maybe like quicksand, and you need to make a decision, A, how big is that. In the past couple of years, we've said, we don't believe that promotional markets were big, and two what return on investment do I get, 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 as us not being committed to drive our markets shares with great product in innovative products. We remain exceptionally committed and will remain so.
Jeff M. Fettig - Chairman and CEO: Eric, I would just add to that. I mean we are investing in what we think the saleable market share which is new product innovation, and where we've brought out really great new product innovation, we are actually gaining market share. To Marc's point, you know we do not believe if you look at the elements that construct demand in the marketplace, it's primarily replacement. We are now seeing a really nice growth factor in new construction. We are starting to see the pickup from existing home sales. But the pure, pure discretionary is still very weak. And given in that environment we don’t think what I call uneconomical promotions drives anymore demand. So that’s the same position we've had for some time now and it's in this position we have today.
Eric Bosshard - Cleveland Research Company: I guess just a follow-up. I totally understand your comment that uneconomical promotions don’t drive demand. But they may influence market share and so what I am curious is as you have seen LG and Samsung going to Depot and Lowe's. How that is impacting your market share there and how you are seeing the landscape change. I know you have also won market share at Home Depot with the Whirlpool brand. But my follow-up is how you are seeing that market share position evolve as those new players have arrived?
Jeff M. Fettig - Chairman and CEO: You know again Eric I'm not going to speak about competitors. But if you look at the 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 right back to where we are, so we think it's transitory and I haven’t seen any change in environment today.
Operator: Denise Chai, Bank of America Merrill Lynch.
Denise Chai - Bank of America Merrill Lynch: 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 is 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.
Marc Bitzer - President, North America: So let me first take the question on the North American contract channel. Yes it is correct we are seeing strong robust and sustained growth in contracts than in the first quarter. I would also like to refer back some comments that we made in Q3 and Q4. The size of the contract channel is still off a very low base. So, it does not get weighed as big as it would have done four, five years ago. But again, I would say, growth and without giving you specific number, its 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.
Jeff M. Fettig - Chairman and CEO: Denise, regarding the raw materials cost, clearly the last couple of 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 the $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 higher and we still have some big materials like resins that are significantly high on a year-over-year basis. The other thing, we have some very high inflationary markets like India and Brazil where they are not reflecting the global commodity trends that you are talking about. But overall we're comfortable. We have a significant portion of our business hedged. We will benefit if these current prices hold or reducing that range which will just help our net productivity.
Operator: Michael Rehaut, JPMorgan Securities.
William Wong - JPMorgan: It's actually Will Wong on for Mike. 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?
Jeff M. Fettig - Chairman and CEO: Well, you know for the full year 2014, we're clearly not giving 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 driver growth. And so, we've been executing now to those plans with great detail for some time. If you just look at the margin progression, the last five quarters in the drivers, you kind of see all of the pieces. Fundamentally, we have four big levers that we are 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 in the previous four years where the North America market still 25% below where it was in 2007, European markets about 20% down and so on. So, having even a little growth is going to highly leveragable in our business. The second thing has been price and mix. We made great progress in price and mix last year through both cost based 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 were fully on track to delivering and we've indicated this year, they will contribute $175 million and there may be a tail to that with some more benefits even next year. Then lastly, as 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 are still up for the full year. And so a moderation in that will help us drive higher net productivity. In the combination of those four things that we are managing in every part of the world, everywhere and plus the last five quarters of track record we believe we are in it to continue to grow our margin sequentially and head into next year and when it's time we'll give you those plans. But we've guided early on between 6.8% and 7.2, so 7 is the midpoint can be on the high-end and can be on the low-end it's too early to tell, but that was the basis for our guidance this year.
William Wong - JPMorgan: And a question regarding Europe. Last year you guys made about $4 million on higher revenue in this year 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 next couple of quarters?
Jeff M. Fettig - Chairman and CEO: Let me take that question. First of all if you think about how Europe went over the course of last year what we saw as 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 year-over-year if we look at just sequentially the first quarter is always our lowest quarter of volume seasonally in Europe. So it's about 20% lower than it is in the fourth quarter. So, those are that’s kind of the 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 year.
William Wong - JPMorgan: 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 and capacity reductions, could you just give us a little bit more color on that that will be great?
Marc Bitzer - President, North America: It's Marc Bitzer again. First of all, typically what you've seen Q4 to Q1 sequentially in North America, it may be less amplified as you would see for example compared to Europe as Mike just referred to. (While 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 effects because typically the Q4 is a little bit more promotion end period. As a net result of all of this and you typically would Q4 to Q1 a small drop, i.e. but Q1 has a slightly lower operating margin than Q4 and this year was different and that is a good achievement and that gives us all the confidence of this year.
Larry Venturelli - EVP and CFO: Well, I just wanted to add to what Marc said. Realize that there's almost – there's almost 20% lower volume between Q4 and Q1 and that's really typical across the Company as well as in North America and margins improved.
Operator: David MacGregor, Longbow Research, LLC.
David MacGregor - Longbow Research, LLC: On the North American business, you mentioned that Canada and Mexico were all off. I wondered if you could just say what U.S. grew, if you exclude Canada and Mexico?
Marc Bitzer - President, North America: David, it's Marc Bitzer. I mean first of all, you probably have seen the industry shipment data which are 5.5% up for Q1. Again, keep in mind, there 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, and but there is obviously a few point below that, but again supporting our full year assumptions. Mexico in particular in Q1 had a very soft industry, double digit down.
David MacGregor - Longbow Research, LLC: We've kind of curbed this thing up. I would 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 – now the authorization is and what you inclination would be to be active here in the very near term in terms share repurchase activity?
Larry Venturelli - EVP and CFO: Dave, this is Larry. I said in my prepared remarks, the uses of cash funding the business, debt maturities, pension contribution, M&A, return to shareholders. You know we did increase the dividend pretty much in line 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'll continue to evaluate both M&A as well as share repurchase as we move forward.
David MacGregor - Longbow Research, LLC: If 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 are thinking about M&A opportunity and maybe from a valuation standpoint or geographic standpoint or, and how can you execute acquisitions at this point in a way that disappoint the investment community?
Jeff M. Fettig - Chairman and CEO: I guess that would be the starting point. David, I won't personalize as I have said, we are always looking at opportunities throughout the world in different parts of our business. We have strict criteria that we follow and evaluating them. There have been a number of acquisitions over the last couple of years that we've looked at and decided it didn’t meet our criteria. But top of the list of that criteria is creating value for our shareholders. So, the simple answer is if we don’t see a clear path 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'll call plug and plays into some of our regions, the cold regions. We continue to invest in certain emerging markets where we can scale up. We continue to look at opportunities in our extended and expand categories. But the fact that we haven’t done any means that we haven’t done anything that really meets our criteria.
David MacGregor - Longbow Research, LLC: Would that criteria include being accretive in the first year?
Jeff M. Fettig - Chairman and CEO: I can't answer that, because it just depends on the opportunity.
Marc Bitzer - President, North America: But I think we are looking at the value creation. Value creation versus application.
David MacGregor - Longbow Research, LLC: I am just thinking about catalyst in the story. And then could you just maybe talk about Eastern Europe and particularly Russia, just what is the opportunity there for Whirlpool and where would that stand in terms of your list of emerging market priorities?
Jeff M. Fettig - Chairman and CEO: Russia historically and continuous 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 boom and other years would be a bust. So what we are 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.
David MacGregor - Longbow Research, LLC: 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?
Jeff M. Fettig - Chairman and CEO: Well, yeah, Dave, look we got many things we can and are doing in our current business in Europe to improve value creation and returns for 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.
Operator: Ken Zener, KeyBanc Capital Markets.
Ken Zener - KeyBanc Capital Markets: Jeff, Larry, I'm going to go back to AHAM versus yours North America shipments, because it's a 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 U.S. selling to Lowe's, part of that product shift. How clearly can you express to investors that you are not losing share which is the fundamental pressure on the stock today despite the excellent off trading leverage sequentially that you delivered?
Jeff M. Fettig - Chairman and CEO: Well, let's be clear. First of all AHAM, we are not talking North America we're talking in the U.S. AHAM was up roughly 5.8% and we think sell-though was about 2% to 3%. You talk about competitor number up 19%. Please remember, they entered a major distribution channel during the quarter which – that has nothing to do with sell-out and has everything to do with sell-in. you also probably note in that release their margins in this category was down two 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 the new innovations we're bringing to the marketplace. We've got great examples where we are gaining share with this innovation and we feel fine about where we are in market share today. To Marc's point, there is business, you got to earn every day and there is business that's transactionally in it, and we do both and the business that you earn every day, we do very well and the transaction, if it's a good transaction, we do it. But candidly, as I've said in the past week, it gained 2 to 3 points of market share in 90 days in the U.S. market, if we wanted to pursue certain types of business. Today, that type of business just isn't value creating.
Ken Zener - KeyBanc Capital Markets: Second question is, our forecast if AHAM was 30 – again North America was 36 million units in '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, you know that growth is predicated upon structural issue like your distribution channel, A, and comment on the profitability of that business relative to the segment in general? Thank you very much.
Marc Bitzer - President, North America: First of all on your 2015 industry forecast which I wouldn't confirm, but I am not disagreeing with. First of all, right where you pointed out the two fundamental drivers in the long-term industry demand are ongoing replacement cycle and structural recovery in the housing/construction. You obviously also noted that all the growth which we see in housing permit is still, and we made that point earlier, six to nine months away from housing completions and then 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 and that also means in two-thirds and you would only see a certain portion of the underlying momentum being built in the channel. But again, the momentum is 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 positively a very captive channel that you have to earn contracts. Over many years these contracts awarded, were signed and it's a very difficult channel to manage and serve in the right way. It takes years of building a capability of contracts, and today that market I would say largely is two players and the third one a little smaller of the branch you mentioned before, obviously 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 manner.
Jeff M. Fettig - Chairman and CEO: I would add to that. I mean, there is an infrastructure cost to be in that channel. Supply chain cost, service cost, coverage cost and we're still early in the game and I think in the housing recovery. That infrastructure cost is highly leveragable. Its fixed, and so as that channel grows it's not only very leveragable from a fixed cost base. But it’s a great mix channel for us. Because the power of our brand portfolio. We give 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 its getting healthy. It was an investment on our part when it was down to the levels that were with the fixed costs that we had, but it was an investment we decided to make and we are 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.
Joe Lovechio - Senior Director, IR: I think that was our last question we had on the line. We appreciate everyone joining us today we look forward to talking to you next time. Thank you.
Operator: This concludes today's program. Have a great day. You may disconnect at this time.