Earnings Call: Q3 2019

Oct 23, 2019

Good morning, and welcome to Whirlpool Corporation's Third Quarter 2019 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, Roxanne Warner. Thank you, and welcome to our Q3 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 towards 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 a listen only mode. Following our prepared remarks, the call will be open 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 Q3 2019 a a 100 basis point increase compared to the prior year. We were pleased with our first half performance and continued that positive momentum this quarter. These results represent our 3rd consecutive quarter of global margin expansion as we progress towards our full year and long term goals. In North America, we delivered impressive margin expansion through strong pricemix, execution and focused cost discipline. In Europe, we drove near breakeven ongoing EBIT results as momentum from our strategic actions to stabilize volumes and right size our business drove strong year over year and sequential improvement. Given our strong year to date performance, which we expect to continue, we are confident that we're trending towards the high end of our full year ongoing earnings per share range of $14.75 to $15.50 dollars Lastly, in August, we paid down our $1,000,000,000 term loan, which resulted in significant progress towards our long term leverage target of approximately 2.0. In total, we are very pleased with our momentum year to date. Turning to Slide 4, I will discuss our Q3 results in more detail. We delivered organic net sales growth, which excludes the impact of underground currency of approximately 2%. Ongoing EBIT margin was 7.2% for the quarter, a year over year increase of 100 basis points as positive price mix and focused cost discipline more than offset the impact of slightly lower unit volumes. Our 9 month free cash flow reflects normal seasonality of cash usage and was impacted by our planned settlement payment to the French Competition Authority and cash taxes paid for the sale of IMBRACO. Turning to Slide 5, we show the details of our Q3 margin performance. 3 of our 4 regions delivered positive pricemix, resulting in margin expansion of approximately 150 basis points as we continue to realize the carryover benefits of previously announced pricing actions. We continue to expect margin benefit from pricemix through year end, however, at a more moderated level as we compare against last year's 4th quarter cost based pricing actions in the U. S. Kitchen segment and Brazil. Additionally, we continue to see the benefit from our cost takeout initiatives deliver favorable impact across all regions, resulting in a margin expansion of 25 basis points. Lastly, improving strength in raw materials outside of North America partially offset the continued tariff headwind resulting in an unfavorable margin impact of 25 basis points. The net impact of currency and hedging was neutral for the quarter. These margin benefits were partially offset by continuation of increased marketing and technology investments. Overall, we're very pleased with our ability to leverage our global scale, drive product innovation, proactively manage costs and deliver strong global results despite ongoing macroeconomic volatility. And 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 Q3 results for our North America region. We delivered a very strong financial performance with revenue growth despite weak industry demand in Canada. Additionally, we delivered record EBIT as strong price mix execution and disciplined cost takeout offset lower unit volumes and continued freight inflation. This marks the 8th consecutive quarter of margin expansion in North America, highlighting the fundamental strength of our business. Lastly, we're excited to announce that we were awarded a 5 year exclusive supplier relationship with ER Horton, the largest homebuilder in the United States. This relationship further reinforces the strength of our brand, product portfolio and logistics network as we bring winning products to more customers beginning January 2020. Turning to Slide 8, we review the 3rd quarter results for our Europe, Middle East and Africa region. Unit volumes increased 5% across our core European business, led by growth in Russia, UK, Italy and Poland among others. This growth was offset by improving although weak Middle East and Africa demand. Despite the continued weakness in the Middle East and Africa and the impact of previous business exits, net sales excluding the impact of currency were essentially flat for the quarter. We delivered significant year over year and sequential improvements with ongoing EBIT near breakeven as momentum from our strategic actions continues to drive results. At our 2019 Investor Day, we highlighted the following key actions to restore profitability to EMEA. Exit of Turkey Hotpoint SBA, South Africa, its cost reduction and regaining volumes. We are pleased to say that we are fully on track. We have fully exited our Turkish domestic sales operations as well as our Hotpoint branded small appliances business. We also completed the sale of our South Africa operations and are continuing to deliver structural operating improvements in the region. Now we turn to Slide 9 to review the Q3 results for our Latin America region. Unit volumes were negatively impacted by temporary trade inventory adjustments at a key Brazilian retailer. We have already begun to see unit volumes return to normalized levels and expect to recover volume in the Q4 and in early next year. Organic net sales, which excludes the impact of Umbraco and currency, increased approximately 4%. EBIT margins contracted in the quarter as positive price mix and favorable raw material inflation was more than offset by lower unit volumes related to temporary trade customer inventory timing, currency devaluation in Argentina and weak Mexico demand. Finally, as a reminder, we completed the sale of our Embraco business unit on July 1, meaning this is the Q1 without the Embraco compressor business consolidated in our regional results. 2018 and first half twenty nineteen results will continue to include the impact of our Embraco compressor business. Reference our appendix for a schedule of Umbraco's quarterly results. We now turn to the 3rd quarter results for our Asia region, which are shown on Slide 10. Excluding the impact of currency, net sales increased 7%. Strong momentum continued in our India business, delivering double digit revenue and EBIT growth alongside continued share gains. Although unit volumes increased in China, the cost of the brand transition initiative resulted in elevated margin pressure. That said, our brand transition strategy in China is on track with the value share of Whirlpool brand exceeding Sanyo brand for the first time during the quarter. Before we move on to our full year guidance, I want to make a few comments regarding our Q3 consolidated financial results compared to prior year. Our SG and A favorability of approximately $60,000,000 was primarily due to strategic actions in EMEA and currency favorability in Latin America. Favorability in interest and sundry income of approximately $50,000,000 is primarily driven by currency related hedging gains. The net earnings impact from currency and hedging throughout the income statement was immaterial in our results. Now I'd like to turn it back over to Mark to review our guidance. Thanks, Jim. On Slide 12, we are reaffirming our ongoing guidance assumption for 2019. Revenue guidance remains unchanged at 20.6 $1,000,000,000 as the moderate improvement in U. S. Is offset by continued softness in Canada, Mexico and the exit of some of our European businesses. Our EBIT margin guidance is now 6.8% or slightly above, reflecting our solid year to date performance and confidence in our ability to deliver 4th quarter results in line with our full year commitments. Our free cash flow guidance of approximately $800,000,000 which includes Embraco sales proceeds and related term loan repayment remains unchanged. In total, we're trending towards the high end of our full year ongoing earnings per share range and have decreased our full year GAAP guidance as additional product warranty and liability expenses was partially offset by adjustments in Embraco's gain on sale calculation. With strong momentum through the Q3, we are confident our strategy and actions will deliver continued progress towards our long term goals. Turning to Slide 13, we show the drivers of our ongoing EBIT margin guidance. We now expect 200 basis points of improvement related to price mix benefits in 2019. Net cost benefits have been slightly reduced by 25 basis points as ongoing cost productivity actions are offset by the impact of lower unit volumes. With these revisions, we continue to expect at least 50 basis points of margin improvement year over year. Now Jim will cover our regional guidance and cash priorities. Thanks, Mark. On Slide 14, we show our regional guidance for the year. In North America, we saw moderate improvement in the U. S. Demand environment for the 2nd consecutive quarter, providing confidence in our guidance range for the full year. In Latin America, we revised our guidance expectations to 3% to 4% as Mexico demand weakness continues to weigh on the region. Industry expectations for EMEA and Asia remain unchanged. In total, we continue to forecast approximately flat global growth for 2019. Regarding our EBIT guidance, North America was revised to 12% plus reflecting our continued confidence in the region's ability to drive meaningful margin expansion. In EMEA, we are confident that we are executing the right actions to restore profitability and continue to expect EBIT margin of approximately breakeven for the full year. In Latin America, we have adjusted our guidance to approximately 6%, taking into account the impact of temporary trade inventory moves and weaker than expected Mexico demand. Lastly, our margin guidance for Asia remains unchanged. In total, we expect margin improvement of at least 50 basis points as we continue to leverage our year to date momentum and drive strong global results. Turning to Slide 15, I will discuss the drivers of our 2019 free cash flow. We reaffirm our expectations to deliver free cash flow of approximately $800,000,000 including the net proceeds and term loan repayment related to the sale of Umbraco. With our year to date momentum and strong global results, we continue to expect strong cash earnings. We reaffirm our capital expenditures and restructuring assumptions and we are focused on driving sustainably lower working capital. As previously mentioned, we made payments to the French Competition Authority in the first half, which netted to approximately $100,000,000 And our restructuring guidance reflects ongoing asset optimization in our European region, inclusive of restructuring of our Enable's Ed Leaf manufacturing plant. Turning to Slide 16. We provide an update on our capital allocation priorities for the year. The sale of our Umbraco business unit is now complete and the proceeds from the sale were used to pay off our $1,000,000,000 term loan in August, as we previously communicated. This brings our gross debt to EBITDA to 2.5, which puts us well on track towards our long term target of approximately 2.0. Additionally, we completed the sale of our South Africa operations, which is another step forward in our plan to restore the EMEA region to profitability. Lastly, we repurchased $50,000,000 of shares and expect to continue repurchasing shares at moderate levels going forward. Turning to Slide 17, I'd like to highlight our initial planning assumptions for 2020. We are anticipating industry growth of approximately flat in North America and globally as modest growth in the U. S. And Brazil is offset by continued softness in Canada, Mexico and China. The unfavorable impact of previously announced tariffs is expected to be offset by easing material costs. We anticipate approximately flat depreciation and amortization expense for the full year. Lastly, we expect restructuring expense to be approximately $75,000,000 to $100,000,000 on a go forward basis and an effective tax rate of 20% to 25%. Further detail on our 2020 guidance will be provided on our January earnings call. Now we will end our formal remarks and open it up for questions. Your first question comes from the line of David MacGregor from Longbow Research. Please go ahead. Yes. Good morning, everyone. Good morning, David. First question, just on EMEA. Can you just remind us on the EMEA profit benefit from exiting Turkey and the Hotpoint SDA and then South Africa? Yes. David, it's Mark. As you may recall when we laid out these actions pretty much a year ago, we said the combination of Hawk Point SBA, exiting 30, fixed cost action, everything else is about a $50,000,000 annualized run rate profit. So I would say in the quarter, we kept pretty much that share and moved thoughtfully in there. And on top of that, you have the additional benefit of now having solid growth in the core key markets, which kind of gave us back the volume level. So I would say very much half of improvement comes back to the strategic actions, the fundamental strategic actions, the other part came back from we see some growth in our core markets and that's healthy. And just on the North American volume declines, are you able to bucket that out across kind of value, mass and premium? Thanks. David, it's Marc. First of all, Frank, I wouldn't read too much into the North America volume decline, which is slightly minus 6.9% or 7%. It's almost entirely coming from Canadian market weakness, so we didn't lose share. There's no volume, it's the weakness And the FDA or KitchenAid FDA volume, as you know, the KitchenAid FDA is a heavily Q4 focused business with a promotional period. And whenever you have trade inventory, I mean, from kind of last week, September 1st October, that can have an impact. At the end of the day, our North America revenue were still up 0 point 5%. And the core majors business, we didn't have a very I mean, based on volumes are essentially flat to slightly down. So we didn't see that kind of impact. Great. Thanks, Mark. Your next question comes from the line of Megan McGrath from Buckingham Research. Please go ahead. Good morning. Good morning. I wanted to follow-up a little bit on your 2020 comments. I know you don't want to give that much more color. But could you tell us just give us a little color on your RMI assumptions for next year? Are you assuming commodity prices as of this week? Or are you taking into account, I assume you're sort of in negotiation process for contracts? How are you thinking about that heading into next year? Yes. Megan, this is Jim. And again, what we really start with is we look at where the prices are today going into the period where we begin to negotiate contracts and take that into consideration. Additionally, we look at the tariffs that have come into play this year and that could still come into play and estimate those out. So at this point in time, as we've said, we do expect unfavorable tariffs to be partially offset by favorable materials. But then once we get to the January earnings call, we'll really detail that more and we'll have a much better feeling at that point on where we think material costs will be for the full year next year. Meghan, it's Mark. Maybe it's just to echo what Jim is saying, giving some additional color. First of all, what we lay out today, that's a point in time assumption. That could well change until end of January. But right now, we certainly do see on the raw material side, we see a moderation of raw material levels. Keeping in mind, we still have accumulated inflation of 2 years in pretty much in our baseline. But we see a moderation. And when from that perspective, we have certainly a slightly positive outlook for RMI. On the other hand, as to Jim's point, you have on the tariffs, there's an element carryover because not all tariffs are in effect for full year. And right now, we have to take into account what has currently been announced but not yet implemented, which will be a further slightly headwind. So the 2 of them pretty much net themselves out, but I would expect between now and January, there will be some moving parts here. Thanks. That's really helpful. And I wanted to follow-up on the warranty costs in the quarter. That was sort of an unexpected expense there. So any more color you could give on the $100,000,000 And any anticipated cash impact from that? Yes, Megan, and this is Jim. To begin with, this is something that we're in the middle of the process of and we've identified a component related issue with the product we sell in EMEA. And right now, we put our best estimate out there of what it will cost to rectify that. And again, at this time, that's an estimate and there's a lot of work going on to identify what the final remedies will be. If we look at it from a cash flow perspective, we would expect that more to be a early next year type of issue in terms of when we'll see the impact. As I said, as these actions are kind of unfolding as we speak. Thank you. Thanks, Megan. Your next question comes from the line of Curtis Nagle from Bank of America Merrill Lynch. Please go ahead. Good morning, guys. Thanks for taking the question. So just a quick one in terms of, I guess, confidence in the EMEA turnaround, another negative margin, although I guess some progress made in this quarter. Looking at what's implied for 4Q, I think it's something around a 3% margin, which is a pretty significant uplift from where we are now. So I guess just what gives you confidence and what do you have in place like right now, I think you could help you achieve that? Curtis, it's Mark. First of all, I would see the way I would look at this Q3 is a very encouraging sign that our actions that we put in place are fully on track. And to have pretty much a €35,000,000 year over year improvement is no matter where you come from, it's a big move. But we're still losing money, but we're pretty close to breakeven. Having said that, and that I would call that the normal seasonality non European business, which is a little bit more skewed towards Q4 than other regions. There's enormous seasonality where we will be above breakeven and positive in Q4. I'm not quite sure I fully agree with the math of 3% and we can pull up separately on this one, but it will be in the positive territory, but probably not to the magnitude of 3%. Okay. Thanks very much. Your next question comes from the line of Michael Rehaut from JPMorgan. Please go ahead. Thanks. Good morning, everyone. Good morning, Michael. I wanted to focus for a minute on the North American margins in the Q3, very strong result, a little bit more than we were looking for. And I was curious if you could kind of drill down a little bit in terms of the drivers of that improvement, if it was all effectively price mix, but there were some other drivers there. And particularly, as part of that answer, if you could also address any changes in the competitive backdrop as LG and Samsung have been ramping production this year at their own facilities? Yes, Michael, this is Jim. And let me kind of start off here and then Mark will add some more commentary to this too. But as we look at North America, again, it was a very strong quarter. We are seeing continuing benefits of many of the price increases that we've taken as well as mix coming from recent product launches and all that. So that's one of the bigger drivers that we see. Obviously, cost has been a headwind within North America, whether it was material costs that have started to moderate some, but tariffs continue to be a year over year cost increase as well as we've talked about freight costs. So we've been able to offset that obviously with the price increases we took, but also as we said, the mix of our business is very healthy. In terms of the competitive environment, what I would say is through Labor Day, we did see some increased levels of competition, again, that outside of our level of normal and that outside of what we expected. As we look towards the Black Friday holiday period, that will obviously be an indicator of where things are and all that. But as we've said in the past, we do participate in promotions when we see that they create value. And right now, I think we've had a very good track record within the North America business of continuing to balance margins versus the promotional periods. Yes. Michael, it's Mark. Maybe additional color I want to give North America. At the end of the day, not just Q3 the entire year. This is an environment where, frankly, we do not get a lot of help from the outside. I mean, the industry demand has been pretty much moving sideways the entire year. We have cost inflation, tariffs and logistics costs. DuePoint, LG and Samsung, we're fully in production. And yet, we delivered 12.8 percent EBIT margin, which basically tells me no matter how you look at the North America business, this business is in a really, really shape, and we have very strong momentum, and we have a lot of confidence for that business. That's great. I appreciate that. And I guess secondly, just to revisit an earlier question on EMEA and the profitability there. And obviously, you still expect a lot of big things out of that region or a lot of improvement over the next year or 2. Right now, as you kind of look at the business plus or minus breakeven, I was hoping you've given you're another quarter or 2 into the turnaround and you laid out some of the plans at your Analyst Day. If you could kind of just remind us of how we should think about the next year or 2 in terms of the next 2 or 3 steps that are right in front of you in terms of driving improved profitability for the region? Is it all essentially is it much more driven by recapturing some of the share gains, some of the new product introductions and retailing wins that you hope to achieve. Maybe if you could give us an update on how those initiatives are progressing and how we should think about the next 12 to 18 months, particularly in a backdrop where Europe is still overall somewhat challenging? Yes, Michael, this is Jim. I'll start off with that. And I think the way you need to look at it is we talked about the actions earlier and Mark talked about these and we talked about them on Investor Day. Remember, those were implemented this year. So you have carryover going into next year of benefits of that of us being out of Turkey of us having disposed of the South Africa business and of the cost takeout. You'll see a continued level of cost takeout within the EMEA business. Again, just because we've done a lot of the big actions doesn't mean that we don't have a lot of other things we're focusing on there to continue to adjust our costs. But also then we talk about the 5% core growth within that business. And we do expect that to continue into next year as we gain back share in some of the countries where we lost it. So again, it's going to be a balance next year of cost takeout with its incremental volume coming in due to a stability of that business. Your next question comes from the line of Sam Darkatsh from Raymond James. Please go ahead. Good morning, Mark. Good morning, Jim. How are you? Good. Good. Good morning. A couple of questions. First, regarding North America specifically, and in light of the volumes being down 7%, how are you feeling about inventories? Was your production in line with shipments this quarter? What are you expecting for production? And then also looking into 2020, are you where you want to be from a production versus shipment standpoint? I'll start there. Sam, it's Mark. In short, we are where we want to be. I'll give you a little bit more color. Our actual our inventories are in a pretty good shape. As you know, we spent a lot of time this year bringing down our inventories early in the year, and we're pretty much well on track. Obviously, that hurt us a little bit on the production average, but we've dealt with that. The more important part, and that's behind the units, which I was referring to earlier, we feel pretty good about the freight inventories out there, in particular in small domestic where you have a lot of volume in Q4. I would even describe inventory inventories as right now being fairly low. The more important thing for us is what we see on the sell through, I. E, the sell out in the stores on both majors and small domestic, we're in pretty good shape. And we feel very good, and that gives us a lot of confidence for Q4. And then my follow-up question is actually a follow-up on a prior inquiry about RMI. There's a fair amount of confusion though as to why that tailwind is only moderate based on what we can see obviously with the steel markets and copper and aluminum and what have you. I'm wondering why it's only moderate. Were you letting more of your steel purchases float this year? Do you have longer dated hedges for some of your purchases of base metals and plastics and what have you. Just trying to get a sense of why that might be based on what we can see externally. Yes. It's Mark. Let me maybe try to take this. First of all, as a reminder, on both steel and particularly on the base metals, as you know, we try to either buy very long or hedge as much as we can within our policies and guidelines. So by definition, mid side, we never buy a spot. The spot barely impacts us. And in particular, sometimes elevated raw material prices, you should assume that we have quite a bit of a discount in our books versus the spot rate. So as such, yes, what you're probably referring to, our spots are coming down, and we see that. But again, it's we bought below the spot, and our full year costs are below spot prices. Having said that, we're certainly encouraged by the trends, certainly encouraged by the momentum of raw material. You may also know that the big steel contracts typically get negotiated towards the end of the year, early next year. And I think the current momentum puts us in a good shape or a good position towards these contract negotiations. But we will not know until end of January. The other big and that typically moves a little bit faster element in the raw materials is the plastics. With plastics, you can't go out long or typically buy quarterly or even shorter term because you simply cannot go long. So any volatility you may have on oil prices ultimately, in most cases, reflects back on volatility on the plastics. And that is still a little bit of an uncertainty even though that was certainly a good time for us in 2019. Thank you both. Thanks Dan. Your next question comes from the line of Alvaro Massaro from Gabelli Research. Please go ahead. Good morning. I wanted to start with price mix in North America. It looks like sequentially there was an acceleration, which I assume is driven by mix. If you talk and if you try to parse that out for me between price and mix and then maybe give some high color on how you expect mix to evolve from here and maybe call out some of the things you're doing to drive that mix going forward? Tamara, it's Marc. Let me maybe first take that. First of all, what most people should avoid is to don't try to just take the unit decline and then take the revenue and assume that price mix because it's not that high. On our major domestic appliance business, again, where we had basically flat to slightly down volume, we had a revenue growth, which is indicative of we had very favorable price mix in North America. We communicated that for the entire company, we had 1.5% pricemix in Q3, and North America was above that. So North America led that, and that's a very good performance. In particular, if we take into account that we're kind of running against already last year's price increase to some extent, not all, but to some extent, which basically tells you the price mix we should get in Q3 is a combination of both, the announced price increase and how we execute it. But we also feel pretty good about the mix management, which came from new products and what we're rolling out the market. So we feel pretty good about the mix. Okay. With regards to the Doctor Horton win, can you give us a little bit more color? 1, do you currently already do business at Doctor Horton or would this all be 100% incremental? If you could talk about, does this include all major appliances? And then what does that mean for your overall margin? Would this be accretive, similar or how would you categorize that going into 2020? Yes. Elvar, this is Jim. And I'll probably start with it and Mark can add some comments to it. This is a new customer for us. And again, it's a big win that we're very excited about. It will involve all of our major domestic appliances. And so again, as we look forward to this, it is a volume increase for us next year and an increase in terms of the margin of the business. It's not outside of the norms of the margin of our overall business. So again, we feel very good about it. Yes. As far as Mark, obviously, we won't get into details about the volume and the margins, but is 100% incremental. I think the more important thing is we for years have been talking about us. We want to focus more and more on the homebuilder and the housing market. It's a big part of it. Dior Horton is the leader in North America, a highly respected company, and we're very proud to have one having awarded with an exclusive contract. So it's a big deal for us. Okay. Thank you. Thanks. Your next question comes from the line of Mike Dahl from RBC Capital Markets. Please go ahead. Good morning. Thanks for taking my questions. Mark, just back on the North American volume, I wanted to just better understand that a little more because you call it Canada as being a headwind and that makes sense. But last we saw, Canada is only 8% of that business from a revenue standpoint. So I guess I'm still struggling to understand how any decline could really explain the majority of the 7% overall decline. So maybe a little more color on that. And when you talk about the KitchenAid timing, what exactly that contributed? Yes, Michael, I mean, I can only repeat what I said earlier. The entire volume decline is larger due to Canada and small domestic appliances. Canada market has been down. And on small domestic appliance, again, you've got to keep in mind that the vast majority of sell out on small domestic appliance happened in Q4. So every year, there's a lot of inventory moves typically happening around September, October in that industry. We feel good about the sell through, but right now, the trade inventories are right now fairly low. So I'm not overly nervous about it. At the end of the despite all of this, we showed 0.5 percent revenue growth in North America release kind of margins. So I'm not at all nervous about these volumes. And in particular, knowing that our major domestic appliances, we did not lose any share. So we feel very good about that. Okay. Got it. And then the second question is a follow-up on the tariffs. I think there's been a lot of commentary this year that you guys have been able to provide around monthly numbers of tariff impacts. I think on the website you've posted what list 4 and the step up if it happens in list 1, 23 could mean on a monthly basis. But given your earlier commentary around just the carryover effect into 2020. Can you just quantify how much is truly incremental to 2020 if we consider all current implemented tariffs and then the proposed increases and or list 4. Just give us kind of what impacted 2019 and what's incremental of 2020? Yes. Michael, it's Marc. So again, to your point, there's the element of already implemented tariffs where we have a certain carryover. As you may recall, at the beginning of the year, we talked roughly about $10,000,000 every month and now we talk about in the range of $12,000,000 to $14,000,000 also depending on how much volume we have, how much we import. So put a number behind the carryover, it's probably around €20,000,000 but we can provide more details, maybe a little bit more. But then you have the additional element of tariffs announced but not implemented. And right now, as it is prudent, we have to take that into account and that is an additional element of a small headwind. But we of course all recognize there's uncertainty around the actual implementation and thought by end of January we will know more. Okay. Thank you. Thanks, Mike. Your next question comes from the line of Ken Zener from KeyBanc. Please go ahead. Good morning, gentlemen. Good morning, Ken. Good morning, Ken. So a lot of questions asked. So if we could just take a step back, I was looking your 3Q presentation last year where you gave guidance for this year and you guys did pretty well. Obviously. If you look at 1Q, we can start seeing where the parts switched around. For example, we had lower volume, which hurt your net costs. You got better price mix by a little bit and RMI tariff. That moved in your favor. So clearly, that was a variety of things moving. How does that kind of play out? I mean, was that a one off situation because RMI went down so much? I mean, you're talking about modest tailwind for RMI next year. But how often does that occur given your guys' kind of experience where you have volume come down, which hurt your net cost out capabilities, basically offset by RMI. That's kind of my first question. Is that something that is normal or is that tends just to happen once when inflation drops dramatically the 1st year? Yes. I'd say, Ken, if to say that it's the norm, that would not when I say it's the norm, when you look at it, obviously, when volumes come down, you do expect the pressure on demand to come down also and in terms of commodity costs and all that. So as we look forward to next year, again, as Mark talked about earlier, that's really why at this point in time, we're giving guidance on what we or indications on what we see on materials, but not necessarily giving the guidance yet because there are a lot of moving parts still. And once we get to January, we have a much better understanding just like we would have been in the Q3 last year versus when we got to January this year. Yes, Ken, it's Mark. Maybe I'll offer some additional color. Obviously, this year, our entire company business was riding heavily on price increases, previously announced price actions. And we had to deal with cost inflation. The good news is as we come to the end of this year, we still have a benefit of our pricing, and we're really now starting to turn the corner on the cost side. So that's good news. So in a year from now, no, I don't think we would be reliant on 1 of these 2 drivers. I think you should expect more cost takeout from us, in particular as you get a little more tailwind from the RMI. And of course, by definition, when you run into the anniversary of price increase, you will have less pricing. Having said that, keep also in mind, we have in a lot of our business a lot of product innovation coming into play into Q4, Q1 and Q2 next year, which always gives us a significant mix opportunity. So in short, I don't think we will be entirely reliant on pricing. You should expect more from cost, but we will get more details in January. Understood. Now related to I'm assuming a lot of it's product innovation, Mark. With the U. S. Volume where it was for the year, is was, yes, the price slash mix, and I think you're obviously implying there was some good mix in North America, given that you didn't lose share. Does that seem strange to you all that you're seeing flat volume that the consumers mixing up as opposed to your initial expectations of volume growth? What does that I mean, how does that sink in your mind that people are trading up, but the volume is flat? Ken, I'm not quite sure I would and I don't think we said that the industry of the total consumers mixing up. Our business has been mixing up with good product innovation. Yes, yes, exactly, your business, yes. Our business is really we have a good mix up opportunity. As you know, we introduced in our entire Whirlpool kitchen range. We will have next year a brand new dishwasher platform, which will be really superior in the marketplace. We're introducing a new vertical top loader, which is a significant part of our business, which comes out in Q1. So the product innovation give us the power to mix up and in the marketplace and in Consumer Papers. I'm not quite sure that is reflective of the entire market. The entire market, I would say, is pretty much flat. Okay. If I could, one last question. Comment on India? Thank you very much. India continues to be a very strong business for us. Again, we're seeing significant growth within the India market, very strong margins there. And so from that standpoint, it continues to be one of the bright spots that we have within the different countries that we do business in. But nothing significantly different. Again, we're performing very well there, maintaining and gaining share and continue to see good results. Ken, it's Marc. But I certainly do appreciate that you let us end on a positive note in there because it's a really good business, something we're very proud of. So now, as we come to the end of our Q and A, so let me just maybe summarize some of our key messages on Slide 19. As you've seen, we're certainly very pleased with the momentum in our global business and the level of margin expansion we deliver year to date. And having Q3 at 7.2 percent EBIT margin ongoing is a very strong performance. In North America, again, no matter how you look at it, our strong fundamentals have allowed us to be agile in a volatile macro environment. And despite changes in economic trade and competitive landscape, our North America business has delivered margin expansion now for 8 consecutive quarters. And in Europe, we're pleased to see the continued momentum from our strategic initiatives, and we delivered near breakeven results on an ongoing basis. And it's not been pretty much a year since we laid out our strategic initiatives for returning the region to profitability. And since that time, we've sold and exited nonprofitable businesses. We regained volume in key countries across Europe and have successfully executed our various cost takeout initiatives. So overall, I think we laid out the plans. We're executing according to plans and now we start seeing results. And additionally, we completed the sale of our Envaco business unit and used to proceed to pay down our outstanding term loan and making significant progress towards our gross debt to EBITDA goal of 2.0. I would also like to mention a few key highlights that reflect our commitment to environment, society and governance issues. We're named to the 2019 Dow Jones Sustainability Index for North America, and we were named a leading company on the 2019 Diversity Best Practice Improvement Index. I'm very pleased with our performance year to date. I'm confident we're executing on the right operational priorities across the globe. And just want to thank you for joining us today, and we look forward speaking with you again on our Q4 earnings call in late January. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.