Earnings Call: Q4 2019

Jan 28, 2020

Good morning, and welcome to Whirlpool Corporation's 4th Quarter 2019 Earnings Release Call. Today's call will be recorded. I would like to turn the call over to Senior Director of Investor Relations, Roxanne Varner. Please go ahead. Thank you, and welcome to our Q4 2019 conference call. Joining me today are Mark Bitzer, our Chairman and Chief Executive Officer and Jim Peters, 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, I 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 ks and other periodic reports. 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 results from our ongoing business operations. We also think the adjusted measures will provide you a better baseline for analyzing trends in our ongoing business operations. Listeners are directed to the supplemental information package posted on the Investor Relations section of our website for the reconciliation of non GAAP items to the most directly comparable GAAP measures. At this time, all participants are in listen only mode. Following our prepared remarks, the call will be opened for analyst questions. As a reminder, we ask that participants ask no more than 2 questions. With that, I'll turn the call over to Mark. Thanks, and good morning, everyone. On Slide 3, we show our Q4 2019 highlights. We delivered very strong results, organic net sales growth of 1.2% and ongoing EBIT margin expansion to 7.2%, a 100 basis point increase. We demonstrated a strong performance across the globe as all regions delivered positive EBIT. North America led with record EBIT margins of 13.3 percent despite industry demand softness in the U. S. And Canada. In our Europe, Middle East and Africa region, we continue to realize the full benefits of our strategic actions. This represents the 2nd consecutive quarter of sequential EBIT improvement in the European region, providing us strong confidence in our ability to drive the region to profitability in 2020. Additionally, we delivered strong free cash flow of over $900,000,000 deposit contributions from all regions. This result was driven by working capital improvements and capital spend efficiencies. Lastly, we continue to strengthen our balance sheet and made strong progress towards our long term gross debt to EBITDA target of approximately 2. Turning to Slide 4, I will discuss our full year highlights. We delivered record ongoing earnings per share of $16 above our $14.75 to $15.50 guidance. We have a very strong ongoing EBIT margin expansion of 60 basis points and free cash flow of over $900,000,000 compared to guidance of approximately $800,000,000 We took decisive action in a challenging environment by announcing and successfully executing on our global cost based pricing initiatives and driving positive mix through product innovation. Additionally, we remain disciplined in our approach to cost takeout and continue to optimize our overall value chain, while overcoming significant headwinds from tariffs and material cost inflation. Despite significant trade and macroeconomic challenges, we fully funded our business investment needs and returned strong levels of cash to shareholders through continued share repurchases and increased our dividend for the 7th consecutive year. Real results demonstrate the fundamental strength of our business and provide us confidence when we have the right strategy in place to deliver our long term goals. Turning to Slide 5, we show the drivers of 4th quarter and full year margin expansion. In the 4th quarter, pricemix delivered 100 basis point of margin expansion as we realized the benefits of pricing actions and mix benefits from our product launches. Additionally, we delivered positive net cost takeout in the quarter. Further, improving trends in raw materials more than offset continued tariff headwinds in North America, resulting in a favorable impact of 25 basis points. These margin benefits were partially offset by continued marketing and technology investments and the unfavorable impact of currency. Over full year, very strong margin expansion from pricemix was partially offset by the impact of tariffs, increased brand investments and currency. Overall, we're very pleased to deliver and even over deliver on our margin commitment and are confident this positive momentum will continue to drive strong results in 2020. Now I'll turn it over to Jim to review our regional results. Thanks, Mark, and good morning, everyone. Turning to Slide 7, I'll review the 4th quarter results for our North America region. We delivered stable revenue despite industry softness in the U. S. And Canada, highlighting the agility and underlying strength of our business. Additionally, we delivered record EBIT with margin expansion to 13.3% as strong price mix execution and disciplined cost takeout offset headwinds from fixed cost leverage and continued cost inflation. The region drove margin improvement of 150 basis points in the quarter making it the 9th consecutive quarter of consistent margin expansion. Turning to Slide 8, we review the 4th quarter results for our Europe, Middle East and Africa region. Excluding business exits, unit volumes were approximately flat with growth in Italy, France and Eastern Europe, which was offset by soft Middle East and Africa demand. We are pleased to see strong top line exit rates in December across the region, including year over year growth in Middle East and Africa. Momentum from our cost reduction and strategic initiatives delivered positive EBIT with margin expansion of 210 basis points. These initiatives remain fully on track and we delivered in line with our guidance of approximately $100,000,000 EBIT benefit on an annual basis with approximately $75,000,000 to be realized in 2019. This sustained improvement provides us confidence in our ability to return the region to profitability in 2020. Now we turn to Slide 9 to review the Q4 results for our Latin America region. Unit volume significantly increased alongside a rebound in Brazil industry demand, offsetting continued weakness in Mexico. Organic net sales, which excludes 2018 in Braco sales increased approximately 17%, driven by Brazil share gains and very strong direct to consumer sales. EBIT margins contracted in the quarter as cost productivity benefits and favorable raw material inflation were more than offset by currency devaluation in Brazil and Argentina. Finally, as a reminder, our 4th quarter quarter results for our Asia region, which are shown on Slide 10. Excluding the impact of currency, net sales were approximately flat as strong top line growth in India was offset by negative industry demand in China. India delivered double digit EBIT and continued share gains, which was offset by brand transition investments in China. These investments remain on track with Whirlpool brand share increasing sequentially and year over year. Now I'd like to turn it back over to Mark to review our guidance and operational priorities. Thanks, Jim. Turning to Slide 12, we review our guidance assumption for 2020. In line with our long term goals, we expect to drive organic net sales growth of approximately 3%. We expect to deliver approximately 7.5 percent ongoing EBIT margin, an increase of about 60 basis points. Lastly, our free cash flow guidance is $800,000,000 to $900,000,000 which includes a net unfavorable impact of $140,000,000 from one time items. Turning to Slide 13, we show the drivers of our approximately 7.5 percent ongoing EBIT margin guidance in 2020. We expect approximately 25 basis points of improvement related to price mix as we deliver new and innovative products and services to our customers. We expect net cost to drive approximately 50 basis points of improvement as we realize the benefits of our global standardization and complexity reduction initiatives. Additionally, based on what has been announced to date, we do not expect tariffs to have a year over year impact on 2020 results. While favorable trends in raw materials are expected to drive approximately 50 basis points of margin expansion. Further, we Further, we expect a negative margin impact of approximately 50 basis points as we continue to invest in our digital transformation journey and an unfavorable impact from currency of approximately 25 basis points. Moving to Slides 1415, we want to highlight just a few of our innovative products which allow us to drive positive price mix during 2020. The first slide shows how we will achieve product leadership in the North America Premium Top Load Laundry segment. These products will launch throughout the Q1 of this year, replacing our entire premium top load laundry segment. These connected capable products have purposeful innovation to meet customer needs, such as loading gold dispenser, a new pretreat station and an extra power function. 2nd example on Slide 15 highlights our new dishwasher built in our first ever true global architecture, which is set to launch in North America and Asia in the Q1 and at a later stage in Europe. By leveraging our architecture globally, we are able to drive significant improvement in parts and complexity reduction, therefore driving cost efficiencies. Even more importantly, this innovative product features a new full size 3rd rack with a full functioning spray arm, the largest 3rd rack available in the market. We fully expect to see major growth in our mass and premium segments as a result of these innovative consumer relevant features. Again, these are just a few examples of exciting innovations that we expect to launch this year that will continue to drive positive pricemix. Now, I'll turn it back to Jim to highlight a few remaining guidance items. Thanks, Mark. Turning to Slide 16. We expect to deliver ongoing earnings per share of $16 to $17 in 20.20. Our ongoing tax rate is expected to be 20% to 25 percent compared to 15.3% in 2019, resulting in a year over year headwind of approximately $1.55 A European tax law change in late 2019 favorably impacted our effective tax rate. Excluding this benefit, our tax rate would have been near the midpoint of our previous guidance. Additionally, several of our tax reform benefits and strategies from prior years are no longer effective in 2020, further increasing our rate to our current 20% to 25% range. Secondly, as we mentioned earlier, we expect to drive EBIT margin expansion in all regions, totaling approximately 60 basis points resulting in strong earnings accretion. Our earnings per share guidance includes a headwind of $0.60 as 2019 EBIT includes approximately $50,000,000 related to Umbraca. Additionally, we expect moderately lower interest expense after the repayment of our $1,000,000,000 term loan in 2019. Lastly, we highlight the guidance for 2020 and do not reflect that as a driver. On Slide 17, we show our regional guidance for the year. Starting with industry demand, we maintain our cautious demand outlook for North America, while U. S. Housing starts show positive signs of strengthening that has not yet translated into higher appliance demand. In EMEA, we expect a continuation of modest growth, while in Latin America, we expect growth of 3% to 4% as improvements in Brazil are offset by continued weakness in Mexico. Asia industry is expected to be approximately flat as growth in India is offset by continued demand pressure in China. In total, we expect the global appliance industry to be approximately flat for 2020. Regarding our EBIT guidance, we expect continued margin expansion in North America driven by focused cost discipline and favorable price mix related to new product introductions. In EMEA, we fully expect to continue to realize the benefits of our strategic actions to restore EMEA to profitability, resulting in EBIT margin expansion of over 170 basis points. As a reminder, we executed several strategic actions including our business exits in the first half of twenty nineteen driving benefits primarily in the second half. In Latin America, we expect to deliver EBIT margins of approximately 6% as demand improvements and accelerating direct to consumer sales in Brazil are offset by demand weakness in Mexico and currency devaluation in Argentina and Brazil. Lastly, we expect to achieve EBIT margins of 3% to 4% in Asia as strong India operations are partially offset by weak demand expectations in China. In total, we expect to deliver approximately 60 basis points of margin improvement and are confident that our operational priorities and initiatives will deliver continued progress towards our long term goals. Turning to Slide 18, I will discuss the drivers of our 2020 free cash flow. We expect to deliver approximately $1,700,000,000 in cash earnings, primarily driven by margin expansion offset by the sale of Embraco. We expect $550,000,000 in capital expenditures as we continue to invest in our business. Additionally, we expect to deliver approximately $50,000,000 of working capital improvement, primarily through inventory outlays, which includes the reindustrialization of our Naples, Italy manufacturing facility. Lastly, free cash flow is negatively impacted by approximately $140,000,000 related to several one time items. Further details of these items can be found in the appendix of this presentation. In total, we expect to deliver $800,000,000 to $900,000,000 of free cash flow. Turning to Slide 19, we provide an update on our capital allocation priorities for the year. We remain fully committed to funding the business for growth while continuing to strengthen our balance sheet and return cash to shareholders. Consistent with our balanced approach to capital allocation, we repurchased approximately $50,000,000 of shares in the 4th quarter and expect to continue shares at moderate levels in 2020. In line with guidance at Investor Day, our gross debt to EBITDA is on track towards our long term target of approximately 2. Lastly, I'd like to announce that starting in April, we will no longer report units sold in our earnings materials, including our 10 ks and 10 Q. As we continue to redefine what product is, this will lead to an increase in revenue from products not reported as units such as the KitchenAid Smart Oven plus Baking Stone and the upcoming launch of Yumly's wireless smart thermometer. Further, we continue to invest in our digital transformation journey and unlock long term value creation through incremental revenue from digital products and services, such as our Yumly Pro subscription service. As a result, units are becoming less of an indicator of our overall sales performance. Consequently, we will eliminate units reporting in our earnings materials, including our 10 Q and 10 ks. Now we will end our formal remarks and open it up for questions. Your first question comes from the line of Mike Dahl with RBC Capital Markets. Please go ahead. Good morning. Thanks for taking my questions. Good morning. I wanted to start out just a couple of questions around North American volumes and maybe a follow-up about your last comment on, Jim, around units. But just in the quarter, with volumes a bit weak, it seems like on the major appliance side a little below what Aham said. And then I think we all were expecting some rebound in small appliance shipments just given the timing shifts you had indicated last quarter. Can you talk us through just the inventory dynamics potentially at your trade partners, both in major appliances and small appliances? And how we should be thinking about what happened in the quarter and maybe how that's progressing into 2020? So Mike, it's Mark Witscher. Let me comment on the NAR volume Q4, which as you know, in total, we reported a 3.8% unit decline for North America. Now keep in mind, 1st of all, on the pure majors business, and if you want to take one indication, the AAM numbers were minus 1.8 for the quarter, which to remind everybody does not encompass the entire spectrum of what we sell. That's of course one part of that. If you look at the pure majors business, we approximately held market share in Q4. So we feel pretty good about where we are for market share, in particular during promotional period. On the other parts of the business, keep in mind, Canada is in there. Canada continues to have a market decline and the Canadian market is soft and it has an impact. On the SDA volume, frankly coming into the quarter, we did expect that the trade brings inventories back to normal levels around the end of the year. So the trade inventories on the SDA side are lower than the year before, but we feel very good about the sell for KitchenAid SDA, which is pretty solid and pretty stable. So these are pretty much the major components. And maybe, Jim, you want to comment again on the units reporting? Yes, Mike. And then on the units reporting, as I mentioned, as we look at our business globally, there are a lot of parts of the world where services and other consumables, products that aren't normally included in our unit count are an increasing part of our sales. So we've typically looked at a unit as something that has a power cord attached to it. And a lot more of the stuff that we sell now today, whether it be stand mix or attachments, it be licensed products, it be, as I mentioned, consumables or services just don't fall into there. And so we felt it was a much less relevant indicator, while revenues is a better indicator of how we're doing on a global basis. Okay, thanks. And then that was actually going to be my second question. Just is there any way you can size up those components just before you kind of transition to their new reporting? Give us a sense of what those represent today, either in aggregate or by major region? Yes. I'd say right now that we don't disclose those specifically by region and all that. As we said, it's becoming more a part of our ongoing sales. And I think we switch to this new model, we'll look at what relevant measures we think we should be communicating. Okay. Thank you. Your next question comes from the line of Michael Rehaut with JPMorgan. Please go ahead. Thanks. Good morning, everyone. Good morning, Mike. First question I had was just on the competitive backdrop in North America. There's been a lot of chatter and concern as there always is perpetually. But given the past year with the ramp of the LG and Samsung lines, we've gotten a lot of questions around how that may or may not have affected the competitive dynamics. I was hoping you could comment on your view of the promotional environment in the Q4. Seasonally, there's always, I think, a lift in the As As you mentioned already, this question around the competitive background in North America, they're almost a perennial question. So, I. E, they have been around for 10 years. In the last 10 years, we expanded our margin on consistent base in North America. So we of course, it's an intense competitive environment, but I think we've also impressively demonstrated that we can expand margins despite a highly competitive environment. In particular, when it comes to the on shoring of the 2 washing machine factories, as we always said, we welcome that because it's a level playing field and we feel very confident that we can compete in that environment. So as such, no, we did not see a negative impact on the broader competitive environment from the onshoring of our production. I would say it's pretty much the same intense environment. Particular relates to your question around the promotional environment. Yes, in Q4, we saw a slight uptick on the promotion intensity, particularly from 2 competitors, but not the entire marketplace. And that doesn't entirely surprise us, but you've also seen that despite a broader market contraction, we delivered 13.3 percent EBIT margin in North America, which demonstrates that even in a promotional environment, even with a declining market, we are able to deliver very, very strong margins. So I appreciate that, Mark. And maybe just to dive in a little bit more as my second question on the North American margins, which obviously is very, very impressive. If you could give us any sense of perhaps just being a little more granular around the drivers of that 150 basis point year over year improvement. In particular, obviously, you have the price mix component. And I'm also curious about cost productivity. What's driving that bucket and what was the contributor there, particularly as obviously you don't have any additional volume levers to take advantage of. So really what was driving that other bucket? Yes, Michael. And this is Jim. Let me maybe start a little bit with that. I'd say for North America, the margin expansion was driven by similar levers to what we said globally. And so there's not a significant difference there. We did obviously have positive price and mix within North America within the quarter. From a net cost perspective, we also began to see some cost progression there. And what we're seeing is 1, and as we talked about going into 2020, a reduction in headwinds in terms of what we're seeing on materials. Tariffs were very stable within the quarter. So that was positive for us. And then we did make some investments similar to what you see on our walk for the whole quarter. So there's nothing unusual within North America outside of what we demonstrated globally that it was really pricing and mix and then a cost headwinds we had to deal with. Your next question comes from the line of Susan Maklari with Goldman Sachs. Your line is open. Thank you. Good morning. Good morning. To start off with, can you talk a little bit about inflation and how you're seeing steel prices and other kind of key inputs as we think about 2020? Yes, Susan, so when it comes to inflation, let me first repeat what we said several times. Coming into 2019, we basically had accumulated inflation of around $700,000,000 in our business. That is a result of raw materials, tariffs, cost inflation throughout the entire value chain, in particular logistics. That was still in total headwind pretty much throughout mid year 2019. And as of Q3 and in particular Q4, we saw that slowly coming around in terms of a total net cost takeout. If you break it down more in terms of the external factors on this one, yes, we saw globally a turn on the raw materials pretty much around Q3 and then more impact in Q4. And as you've seen in our guidance for 2020, we also expect another improvement on the raw material side. What has changed since our last earnings call is our outlook on the tariffs, because in the last outlook we had to work with what was announced at that time. And based on what we know today now, the tariffs will not have a negative year over year impact. And as a result of that, we basically see this 0.5% margin expansion just coming from better raw materials. The other inflation elements like logistics or other cost elements, so far we don't see yet turning around. So that is still working against us and that's what we're trying to address. But again summarizing, I would describe 2020, we will see less of an inflationary environment, but it's not completely gone and it's certainly not reversed. And it's obviously our key operational priority to kind of double down and really improve our cost take up throughout the entire system. Okay. That's helpful. Thank you. And then just turning to your EMEA business, can you talk to how much of the improvement in the margin this quarter came from kind of the core business and maybe your improving position within that relative to some of the benefits of the restructuring actions that you've taken there? Susan, I think it's pretty balanced. I mean, at the end of the day, it's the combination of all these measures. Keep in mind, the biggest actions which we drove pretty much for the last several quarters is a fixed cost takeout, the kind of exit of certain non core businesses like Turkey, like South Africa, and we'll have points small domestic appliances and the refocus of investments in driving growth in our core markets. And frankly, I would say we delivered on all three of these levers. So I think it's a combination of these ones which drove the year over year improvement. But in particular, when it comes to the core markets, and this maybe is embedded in our overall unit number, which we have for Europe, We had in our core markets growth in Q4, and that's a good thing. So we stabilized or regained market share in most of core markets. And again, that's a very encouraging sign as we look into 2020. Okay, great. Thank you. Thanks, Your next question comes from the line of Sam Darkatsh with Raymond James. Your line is open. Good morning, Mark. Good morning, Jim. How are you? Sam. Good, Sam. Good morning. Couple of questions if I could. First, you're mentioning sales growth expectations. I'm trying to figure out the rank order, the reasons for the outperformance in sales dollars for you expected in fiscal 2020 versus the flat industry shipments. I'm guessing some of that's the D. R. Horton win. I'm guessing some of that's price mix. But if you could help rank what are the drivers of that gap, Jim? Yes. Sam, here's what I'd probably start with is, if you look at it, what we would say is demand being flat globally, obviously, we do believe we'll have some share win in certain markets around the world. And you pointed to some of the specific examples in North America. But I think also as Mark just talked about, within EMEA, we also expect to gain back some of the share we lost there. So that will help drive us from a revenue perspective despite an industry being flat globally. The second thing is, as we mentioned, there's an incremental amount of price mix in there, which also does help us on a revenue base. We assume that to be slightly positive for the year. So both of those, that would probably be the 2nd biggest driver that I would say. And then my second question, the net cost benefit of 50 basis points in 2020, that's obviously constructive, but I think it's still below where you'd like to be ideally, at least from a productivity standpoint. Are you still anticipating having production below shipments in fiscal 2020? I know you mentioned inventories maybe being down a little bit, but that sounded more like efficiencies than it did production cuts. So if you could talk about production expectations versus shipments, please? I can take that, Sam. First of all, on a full year base, as you point out, we're certainly not planning on the net cost takeout to have benefit from volume leverage. Or put it differently, we're not going to increase production beyond the sales forecast. We're actually contrary with planning to take out further inventory. We have some opportunity. However, I would say that is not a huge item in there. It's a small negative in the cost takeout efforts. But the other element is, still have logistic costs which are elevated throughout the world. That is still a factor. The good news is we're making good progress on the fixed cost takeout in Europe and some other parts. We see some benefits from our global product architecture, so it's all coming to materialize. And yes, internally, our job over time is to do with that is the initial data points, which we got in December from housing were in fact very encouraging. But it's the first positive data point and we want to see that stabilizing. I would also add when you look at the news from homebuilders, these were in fact very strong, very encouraging signs. But I also want to remind everybody is between an order of a new house and the actual appliance shipments, you typically have 9 to 12 months. So the good signs which we see now on the order side, it takes a while until it shows up in our revenue line. So but I would say, if housing stabilizes and sees more positive trends like we've seen in December, I would say that spells good news for our industry and for us. Okay. Understood. And then just as my follow-up. I mean, I guess, how should we think about restructuring costs and I guess kind of the past going forward? The commentary from you guys is for years now is we should expect that to kind of tick down this year, it's going to be elevated. And I understand for I guess what I'll call a one time item, but past 2020, do you guys still think we will see a tick down or how should we think about it? Yes. Curtis, this is Jim. And what I'd say is, we expect to be from a P and L perspective at 100,000,000 restructuring costs this year and most of that is related to the already announced action we're taking around our Naples factory within EMEA. So that's also the $100,000,000 is about the run rate you should expect that or less on a go forward basis. What we do have within this year is we still have assumed $200,000,000 of cash outlays for restructuring. And that's just some of the ongoing projects that we have, including Naples. That's the finalization of those, but we've already taken the P and L charge for those. But somewhere $100,000,000 or less than that is what you really should think about on an ongoing basis that we'll see. Curtis, it's Mark. And let me also echo what Jim is saying is. And again, stepping back in time, post the acquisitions, which we did, and also post recession, we had several years where we had restructuring $150,000,000 to $200,000,000 or north of $200,000,000 And rightfully, many of you asked, when is that coming down? So I would say 2020 is now the first significant year where we basically take it down to 100,000,000 dollars And again, to Jim's point, the cash is following it over time, but the charge as such will be 100,000,000 And I would say 2020 is the 1st significant year where you see a significant reduction in restructuring and that I think should be a trend going forward. Okay, understood. Thanks very much. Your next question comes from the line of David MacGregor with Longbow Research. Your line is open. Yes, good morning. Congratulations on the quarter. I thought it was a good quarter overall. I guess just on Europe, just go back to an earlier caller's question on Europe and just looking at your 2020 EBIT guide of 100 to 150 basis points, how much of the expected improvement is related to a full year of the savings that you've delivered so far versus how much is related to top line drivers like listing growth and favorable mix? Yes. Well, I'd say, David, if you start off with, we said that the actions we took deliver about $100,000,000 on a run rate basis. And we really realized about $75,000,000 of that so far. So there's about an incremental $25,000,000 that will come within next year from those actions we've already planned. And then additionally, we've got other continuing cost takeout initiatives that we've entered into there and we continue to drive. We have, as I mentioned, the action around the Naples factory that at some point in time, while we don't expect it to be a significant benefit within 2020, it will be from an ongoing perspective. And then as I mentioned earlier, really volume lift or regaining some of the market share in some of our key markets is what we see as the opportunity that will then close the gap in terms of that margin progression there. I don't want to get cut off because I've got a second question, but if I could just add to ask you to elaborate on the answer you just provided and just how much of a drag on the segment EBIT was the EBIT was the EMEA business? David, the EMEA business was a drag throughout pretty much Q3. As you know, we had issues around recertification against the new industry standard. But EMEA in Q4 was pretty much in line with where we historically had it and where we be. But it was a drag pretty much until September. So it was a little bit drag on a full year base. So yes, I would say that is a further leverage of a lever for further operational organic improvements in 2020 because you're just now comping against the ore free quarters. Right. Okay. And then my follow-up question, I guess, with respect to the North American business, I guess there's a lot of questions in the market today regarding you've got negative North American units. The working capital certainly was below the guide that you had discussed on the October call. Yet revenues were generally flat and you put up some pretty impressive margins. I guess within the revenue growth math, can you talk about how strong is the mix and just how confident are you that the mix will remain strong through 2020? And I guess you've got a lot of innovation in the market right now. Is this a matter of just we had a good year in mix and then we end up against some pretty tough mix comps? Or are we in the beginning of maybe a 2, 3, 4 year stretch driven by innovation and very strong mix contribution to the P and L? So David, overall, I would say in Q4, first of all, it was driven by pricing, was driven by, yes, our continued discipline in line with our established policy around promotional and participation will create a value. Second of all, to your point, it's product mix, where we started, I emphasize started leveraging some of the product innovation. And that's also the reason why we showed early in the script our kind of 2 major new product ones because they're both impacting North America. And that's why we're confident we will have good mix, solid mix across brands, across products also in a go forward base and that is our big opportunity. Thanks very much. Thanks, David. Your next question comes from the line of Sheldon Clark with Deutsche Bank. Your line is open. Hey, thanks for the question. Just given all the moving pieces in free cash flow, what do you think the right way to think about long term EBITDA to free cash conversion is? Well, as we've always said, we see our long term free cash flow goal around the 5% to 6% of sales. So as we begin to exit this year, I think you start to look at it at a conversion that begins to get into the 85% plus area. And again, I think 2020, as we mentioned, we still have some key one time items that we need to do such as some legal settlements and other things. But once you get beyond that, we do expect to be in that 5% 6% of sales as a free cash flow percentage. And that's you think starting in 2021? In 2021, I'd say we're going to get we will get much closer to there and it will be a progression as you go through over the next few years. But most of these items, as we mentioned, coming out of 2020, our restructuring cash outflows will be less and we'll have some of these whether they're legal settlements or product actions that we had to take behind us. And so we do feel confident that our free cash flows will begin to reflect that stronger performance. That's helpful. And then I know you manufacture the majority of your appliances in the U. S, but do you anticipate any major impacts to production stemming from this coronavirus outbreak, whether it be related to Whirlpool specifically or just the industry more broadly? Sheldon, it's Mark. I would say at this point, the answer is no, we don't expect a major impact. So, elaborate a little bit on this one. And first of all, it's kind of our biggest concerns right now are around our people, but it's so far looks like all our 10,000 people are safe and healthy. Beyond this one is office coronavirus from what you can see today, it may have 3 potential impacts. 1 is the China domestic markets. Obviously, when people don't go into stores, the market will decline. You all know that our exposure to the China domestic market is limited. So yes, that's not going to hurt us a whole lot. 2 is then on production and 3 is on components. Production, China production is largely serving Asia and to only a lesser extent Europe and to almost very small extent North America. As you know, North America, 80% of what we sell in North America or U. S. Is produced in U. S. So the wet exposure is somewhat limited, in particular, with one factory where we export from China is it's almost a 1,000 miles away from Wuhan. So we're a little bit, I would say, protected, but it's a little bit further away. The third element is components. Keep in mind, this whole thing happens around the Chinese New Year. Every year around Chinese New Year, you plan with your supplier inventory levels, when they stop production, when they start production. I would say we're pretty well covered. We're also well covered for this 3 or 4 days of extension for Chinese New Year. Beyond this one, we got to see. The other thing that you also need to keep in mind, throughout the last couple of years, the most critical components we went aggressively for dual sourcing. So we're not we're single source only in very, very few components. We're largely dual source and which gives you a little bit of a hedging. Okay. It's helpful. Appreciate the questions. Thanks, Alden. Your next question comes from the line of Eric Boffard with Cleveland Research. Your line is open. Good morning. Good morning. Two things in the U. S. Market to be curious about. First of all, your expectation of share, it looks like you've got some key new product launches, interested in how you think about your major plans market share performance in 'twenty? And then secondly, curious how you're seeing retailers managing their business in what looks to be a sustained somewhat slower growth environment and also an environment where it appears Sears is probably giving up less share funding their growth? Yes. So Eric, it's Marc. I mean, as you've seen in our outlook, so for North America, we have a lot of new product innovations where we do believe we have some shared growth opportunities. Certainly on the 2 products, which we've just shown on top load and dishwasher, The old dishwasher platform architecture, which we have was almost 10 years old. So I mean bringing in such an architecture with such great features that should open opportunities for some share growth. And I'm not talking about promotional share growth, I'm talking about structural share growth in a healthy business. So yes, we have certain ambition for share growth in North America. Related to your question about retailers, yes, it's obvious that the kind of windfalls, which came out of a serious decline for many other retailers that has diminished. I mean, that's based on existing. But right now, I would say it's a reasonably stable retail environment with home improvements, having a strong growth in home appliances, Best Buy being very well established, but also some other good regional players. So I think it's right now we don't see dramatic moves across the retail landscape. We've seen some ins and outs when it comes to inventory management of retailers. And I think you all have seen that in the AM shipment data in October and then subsequently in December. So there has been some moves, which of course impacts us and our entire supply chain. But beyond this one, we don't see dramatic moves across the different retailers. Great. Thank you. Your next question comes from the line of Ken Zener with KeyBanc. Your line is open. Good morning, everybody. Good morning, Ken. Jim, I just have a quick question. So look, the EPS mix, given your expansion in margins that you guys are giving guidance, should we basically expect kind of a normal EPS cadence, meaning front half, little under half the earnings, Q1 kind of that 21%, 22% range. Just given the strength and the different moving parts, I just want to make sure we're kind of thinking about if your business balance is shifting this year? Yes. Ken, I think you should expect within this year a similar seasonality. And I mean, even in the Q1, we tend to be pretty close to 20% as what as we look at historically. But a similar 40 five-fifty 5 type of split that you've seen in other years is a safe assumption. Okay. And then given the kind of in North America, and I understand you're moving to away from the volume price mix discussion given AM and the long history there, I understand. I'm wondering if you might be able to anticipate, I mean, if the result if the revenue is down, I mean, how are you guys going to go about kind of explaining this? What type of communication could we expect to hear from you absent that those data points just so none of us get caught by surprise you all or us in terms of if results are better or worse just so we can properly interpret it. I mean, do you think you'll be able to talk about volume even though you're not reporting it or the price mix? How will that dialogue change? Well, Ken, I would expect first thing is there'll still be obviously industry data out there that will give an indication of which direction the industry is going and especially from a North America perspective now that it's really 2 key markets and the biggest one being the U. S, currency also doesn't play a big difference within there. So as I said, I don't think that whether we disclose units or not within the North America business will make a significant difference because the couple of big variables that already drive it are out there. Obviously, we will talk about how we believe we're doing from a share perspective. And then what the benefits price and mix are, we'll continue to talk about that on a go forward basis, which also is an indicator of revenues versus what unit performance is doing. Okay. And then I guess this is just looking at AHAM, it was kind of interesting, right? I mean, you had for the year, laundry was up 1 to 2 points, kitchen fridge was down, I think 3 to 4. How do you think about or what does that say to you about kind of the market that we're seeing some of these categories in a sustained growth challenging environment relative to mark the fixed cost because this global architecture that you mentioned in the laundry seems to be really important factor for Whirlpool given your global platform to kind of extract leverage from categories that really are challenged in terms of growth? Yes. So Ken, I mean, on a go forward base, to be honest, we don't see dramatic differences across the different product groups in terms of where we would see the industry growth or development. Now given what I said before, it's kind of various at least the early indication that the housing may strengthen. Housing strengthening that typically translates in kitchen suites. So that should help the cooking, the dishwasher, refrigeration business. But I would not get read too much into this one. So I wouldn't break down the pieces too much. I would say right now our guidance for next year industry is pretty much a flat. But very frankly, I think the uncertain factor to the upside could be the housing and how housing not evolves if that's stabilized and if we see the growth trend extending beyond the December number. But again, don't read too much into the different subcategories. Thank you. I enjoyed your interviews yesterday. Okay. Appreciate it, Ken. First of all, thank you for joining us all and let me give me just came to the last question. Let me just quickly wrap up and summarize. First of all, I want to start out with all the numbers in and out. I want to remind everybody we had an all time record year last year. We feel very good about it and we closed an all time record year with the best quarter ever in our history, which I think is more remarkable given that we did not have a lot of tailwinds throughout the year. Industry demand didn't help us. We still saw cost inflation throughout most parts of the year. So we feel very good about what we've achieved last year. But now we're in January 2020. The most important thing about last year is that it gave us a good momentum as we exited the year. So we feel very good about momentum, which will carry into 2020. And I hope you heard also that confidence throughout the earnings call. As we look into 2020 and we laid that out, we have 3 operational priorities. We are very focused on getting the cost out of the system. We are focused on executing the product launches, which we talked about. And obviously, there's a lot more launches beyond those 2 ones, which we highlighted. From a regional perspective, of course, we have a key focus not only in maintaining strong margins in North America, but particularly turning continue to turn around Europe and China. That is a key focus. But then in a broader perspective, and this comes back to our Investor Day, I want to remind everybody, our strategy has not changed. Beyond the operational priorities and delivering on our commitments, we have a very strong focus on continuing to execute along our strategic imperatives, which is not only about product leadership, but it's our entire digital transformation, be it on redefining what the product is, be it on winning digital consumer journey. So there's a strong focus in our company around the strategic transformation and we feel very good about where we are and we will kind of increase our efforts throughout the year to kind of create a long term strong and sustainable business. With that in mind, I just want to thank you for joining us today and talk to you next quarter.