Good morning, and welcome to Whirlpool Corporation's Second 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, Max Tunnicliff.

Thank you, and welcome to our second quarter 2019 conference call. Joining me today are Marc Bitzer, our Chairman and Chief Executive Officer; and Jim Peters, our Chief Financial Officer. Our remarks today track with a presentation available on the Investor Section of our website at whirlpool.com. Before we begin, I'll 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 results could differ materially from these statements due to many factors discussed in our latest 10-K 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 or are unrelated to 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 open for analyst questions. As a reminder, we ask that participants ask no more than two questions. With that, I'll turn the call over to Marc.

Thanks, and good morning everyone. On Slide 3, we show our second quarter highlights. As you saw in our press release, we delivered another very strong quarter leading us to significantly raise full-year earnings guidance. We achieved record second quarter ongoing earnings per share and margin expansion of 7%, a strong global price mix, and continued cost discipline more than offset cost inflation. North America delivered solid top-line growth with solid share gains in a stable industry environment. Additionally, our North America region delivered EBIT margin expansion of approximately 50 basis points to 12.4%, a strong price mix, and cost discipline more than offset continued cost inflation. Lastly, we completed the sale of our Embraco business unit and will use the proceeds to pay off our $1 billion term loan. The strong first half performance gives us confidence in our ability to deliver full-year guidance significantly above to what previously guided despite continued global macro uncertainties. Turning to Slide 4. I'll discuss our second quarter results in more detail. In line with our long-term goal, we delivered global revenue growth excluding currency of 3.5%, a strong price mix more than offset unit volume declines. Ongoing EBIT margin was 7% for the quarter a year-over-year increase of approximately 30 basis points. And our second quarter free cash flow reflects normal seasonality of cash usage and was impacted by our planned settlement payment to the French Competition Authority. Overall, we're obviously very pleased with our second quarter results and believe we're well-positioned to deliver on our upwardly revised full-year commitments. Turning to Slide 5, we show the details of our second quarter margin performance. Margin expansion in the second quarter was delivered through approximately 250 basis points price mix as we realize the carryover benefits of previously announced pricing actions primarily in the United States. We continue to expect margin benefit from price mix throughout the year which will moderate slightly on a year-over-year basis as we start to compare to strong price mix from the second half of last year. These margin benefits were partially offset by cost inflation and increased marketing and technology investments. And now I'm going to turn it over to Jim to review our regional results.

Thanks, Marc, and good morning, everyone. Turning to Slide 7, I'll review the second quarter results for our North America region. We delivered excellent results in the quarter with solid revenue growth and strong margin expansion to 12.4%. Revenue growth was favorably impacted by price mix and share gains within a stable U.S. industry environment partially offset by continued industry demand weakness in Canada. Overall, we expanded EBIT margin by approximately 50 basis points, a strong price mix, and continued cost discipline were partially offset by cost inflation and higher marketing investments. This marks the seventh consecutive quarter of margin expansion in North America highlighting the strength and agility of the underlying business and our ability to overcome significant external pressure. Turning to Slide 8, we review the second quarter results for Europe, Middle East, and Africa region. In line with our previously announced actions, we substantially completed the exit of our Turkey domestic sales operations and Hotpoint small appliances in the quarter and we announced the final agreement to sell our South Africa operations. Excluding the impact of currency, net sales were approximately flat, while unit volumes increased approximately 3% in our remaining business, driven by our improvement actions to stabilize volume. And EBIT margins improved 70 basis points led by our fixed cost reduction actions. In total, our business has stabilized and is expected to continue to show modest year-over-year improvement throughout 2019. Now we turn to Slide 9 to review the second quarter results for our Latin America region. Excluding currency, net sales increased approximately 10% driven by both industry growth and share gains in Brazil. Margin expansion was driven through strong price mix and focused cost discipline, partially offset by the impact of unfavorable currency. We now turn to the second quarter results for our Asia region which are shown on Slide 10. Excluding the impact of currency, net sales increased nearly 5%. Our India business had another very strong quarter delivering revenue and EBIT growth alongside continued share gains. This strong performance was offset by significant volume weakness in China driven by negative industry trends. In addition, we continue to increase brand investments as we transition from Sanyo branded products to the Whirlpool brand. Now I'd like to turn it back over to Marc to review our guidance.

Thanks Jim. On Slide 12, I will review our upwardly revised guidance assumptions for 2019. By continued volatility in the macro environment, we have built strong momentum in our business and are pleased with our first half performance and feel confident in the strategy and actions we have in place for the second half of the year. As a result of this confidence, we are raising our full-year earnings guidance. Revenue guidance increased to $20.6 billion as we recognized two additional months of Embraco operations than previously forecasted. We raised our ongoing EBIT margin guidance to approximately 6.8%, the high-end of our previous range and adjusted our free cash guidance to the low-end of the previous range to reflect additional restructuring opportunities in Europe which more than offset the high cash earnings from increasing margin expectations. And lastly, we are increasing our ongoing earnings per share guidance to a range of $14.75 to $15.50. This guidance revision reflects the strong progress being made towards our long-term goals and the confidence that we have in our ability to deliver strong levels of that equation for our shareholders this year. Turning to Slide 13. We show the updated drivers of our EBIT margin guidance. We now expect 175 basis points of improvements related to price mix benefits in 2019. Net cost benefits have been slightly reduced to 25 basis points or just still expected to be margin accretive. And although macroeconomic pressures remain elevated, raw material inflation has slowed down leading us to revise our cost inflation guidance favorably by 50 basis points for the full-year. Finally, we try to increase our expectations for marketing and technology investment levels. With these revisions, we now expect a solid 50 basis points of margin improvement year-over-year. And now Jim will cover our regional guidance and cash priorities.

Thanks Marc. On Slide 14, we show our regional guidance for the year. Our regional industry guidance ranges remain unchanged. For North America specifically, we saw improvement in the U.S. demand environment providing confidence in our guidance range for the full-year. In Latin America and Asia, we continue to trend towards the low-end of the range as Mexico and China both experienced negative industry demand in the first half. Regarding our EBIT guidance, North America remains unchanged at 12% plus. With a strong first half performance, we remain very confident in our ability to deliver meaningful margin expansion in the region. In EMEA, we are confident that we are executing the right actions to restore volume and rightsize our operational footprint. We have stabilized the business and delivered moderate improvement in the quarter but are adjusting full-year expectations to the low-end of our previous range and plan to take additional restructuring actions to further rightsize our business. In addition, we continue to expect approximately 5% volume growth in the region on a full-year basis. In Asia, we lowered our margin guidance to approximately 3%, as strong India results were more than offset by very weak industry levels in China. Lastly, our guidance for Latin America remains unchanged. Turning to Slide 15, I will discuss the drivers of our 2019 free cash flow. With the increase in our margin guidance, we expect cash earnings to positively impact free cash flow by an additional $25 million. We continue to expect $200 million of working capital improvements in 2019 as we remain focused on substantially lower working capital. And as previously mentioned, we made the final payment to the French Competition Authority this quarter which netted to approximately $50 million with the reimbursement from in-visit seller. We also adjusted our restructuring guidance to reflect additional opportunities in our European region inclusive of our intention to sell our Naples, Italy manufacturing plant. In total, we now expect to deliver free cash flow of approximately $800 million excluding the net proceeds from the sale of Embraco. Turning to Slide 16. We show our capital allocation priorities. Our capital allocation priorities for the year remain unchanged. The sale of our Embraco business unit is complete and proceeds from the sale will be used to pay-off our $1 billion term loan in August. This will drive significant progress towards our long-term gross debt to EBITDA target of 2.0. Lastly, we expect to continue repurchasing shares at moderate levels in the second half of this year. Now we will end our formal remarks and open it up for questions.

Thank you. [Operator Instructions]. Your first question comes from the line of Sam Darkatsh from Raymond James. Please go ahead.

Good morning, Marc, good morning, Jim. How are you?

Good. Good morning, Sam.

Good morning, Sam.

Two questions if I might. First on EMEA, everybody's favorite topic I suppose. The -- I recognize and see that your confidence in getting it not only stabilized but rightsized remains we're looking though at a little bit of a lower margin guide for the year. Second quarter organic sales growth slipped a little bit from the first quarter despite an easier comparison and now there's new restructuring outlays. So what gives you the confidence sequentially what you're seeing in the marketplace, Marc, going forward if you could?

So Sam, it’s Marc. First of all I would not make it reliant on the marketplace. The marketplace in Europe is reasonably solid but we're not counting on a massive market increase. The reason why we're confident is ultimately coming back to be actions which we took. As you know, we took significant fixed cost out. We exited South Africa or sold South Africa, exited Turkey, small domestic Hotpoint business and we put a strong focus on driving core volume growth. As a result of that now in Q2, we saw some improvement year-over-year in sequential but frankly not yet to the level where we want to be. So it's largely dependent now on solidifying the core volume growth. As you may recall in the investor meeting, we said you should expect 5% to 6% core volume growth on the remaining business and we keep 3% which there is a small detail is largely driven by our Middle East business was a bit soft in Q2, which should recover end of Q3. So it ultimately comes back to, Sam, our organic core volume growth needs to be 5% on top of all of the actions which I described. And then we will see both sequential and year-over-year improvement in our European business.

And then my second question and thank you for that. My second question the inventories. I know you were looking to take out at least $100 million of inventories in the second quarter, you're mentioning that there's still temporarily a little high. Can you help quantify that and specifically where those inventories are and the timing of when you see that in the back half getting taken out is it 3Q, 4Q thing and just a little bit more meat on the bone, if you could.

Yes, Sam and this is Jim and I think if you look across the globe, the one area where we did and for the full-year we still expect to get to the $200 million of working capital improvement that we highlighted and that we've had in our guidance and as we look around the globe actually within EMEA and now stabilizing the sales volumes, our inventories are in a good shape there but in our other three parts of world, I'd say it's kind of evenly spread right now and so it's due to demand fluctuations and other things and we do anticipate that within the third quarter, we will get down to the levels we expected to be. I mean as you know, the first or the second quarter in the U.S. started off slightly slower than we expected but then picked up momentum. So we do expect to have that corrected within the third quarter.

And the quantification of the inventory, that's still out there that you wanted to work down?

Well, as I say we don't really get into but it fits within that total $200 million of working capital reduction. So you should expect to see inventory levels similar to or slightly lower than last year by the end of this year.

Your next question comes from the line of Megan McGrath from Buckingham Research. Please go ahead.

Good morning, thanks for taking my question. I guess I wanted to ask a little bit about you mentioned some issues in North America outside the U.S., if you could give a little bit of further thoughts on your share position in the U.S. and what's going on in those other regions. That would be great.

Megan, its, Marc. First of all, good morning. First of all, from the scope, as you know, this change reporting last year in North America, it's U.S. and Canada two years ago it still included Mexico, it’s really U.S. and Canada. First of all for me overall I mean obviously with Q2, a 12.4% margin we feel very good about North America business, very strong traction, and the impacts from our pricing actions. We feel good about our share position. If you just do the math and as you always know, it's a little bit tricky between the T6 AM or T7 and our overall business but we feel very good of our share position both year-over-year. So we feel good. The weakness right now is more industry related in Canada. Canada year-to-date is a fairly soft market environment. And we are overall market leader in Canada. So of course you feel it to some extent. So if you want to point to any remote weakness in our North America business probably more industry-related Canada but the U.S. business is in very solid shape.

Great, thanks for that. And then a follow-up in terms of cost and price in North America. My guess is maybe there's some concern that as cost inflation eases, there might be some pressure on your ability to keep prices up. And obviously you can't comment on what your pricing actions are going to be in the future but typically in an environment where commodity pressures are easing, would you expect to see pricing come down. Do you think that that will spur volume? How are you thinking about let's say the next six to nine months in light of these lower commodity costs?

Yes, so Megan, so first of all as we mentioned in our statements before, we feel very good about our pricing actions in North America not just about the fact that we took them but how they were executed, so we didn't lose mix, we feel really good about how the team overall executed them. With that in mind to your question of course it's pure speculation about what happens going forward and we don't comment on this one but I would like to remind that our pricing actions were cost based pricing actions. The cumulative effects just for the last two years was $600 million to $700 million raw material increase. But just because we now see a small moderation of raw materials and maybe scenario where it gets more to a zero increase, doesn't change the fact that we had $600 million or $700 million cost increase cumulative. So for us, the need for change, that doesn't change anything about, we had to do pricing and we would hold on.

Your next question comes from the line of David MacGregor from Longbow Research. Please go ahead.

Just in the European business I guess you talked about the 3% unit volume growth but if you occurred with the weak Middle Eastern business. Are you able to isolate out what you did in Europe as separate from the Middle East and Africa and how that would compare with that size of 5% to 6% growth target?

Yes, so David I mean again our core business in particular on the core European markets UK, France, Italy, Poland, Russia and Germany we're actually in pretty much all markets maybe little bit except Italy, a very strong performance in Q2. We were actually in most of these markets even trending towards more than 5% growth. So we feel actually very good about these markets. Hate to leave our thoughts a little bit softer. And then to my earlier point this Middle East was disappointing Q2 which is largely met by fairly easy to isolate where the regulatory changes are in Saudi Arabia which is a very important market for us and we should be out of this one by end of September.

The second question just back to North America, and I guess following up on the last question, can you just talk about how North American Competitive forces are revolving in Premium segments versus Value segments?

Yes, I mean David. Again, I mean, I would overall say Q2 from what we've seen in the competitive landscape is not materially different from Q1 or Q4 last year. So this is -- North America is highly competitive market environment. I wouldn't right now see a disproportionate growth of the Value segment versus Premium segment. So we, as you know, the overall North American market was pretty much flat in Q2. And I would say that's pretty much the same both on Premium and mass value. Reason why we feel good about our Premium part is, as you know, we launched a new front load line which helps us a lot in the Premium segment. We have the Whirlpool GBL launch which kind of fully finds traction. So with the new product launches, we feel actually very good about our position in the Premium segment of the market.

Your next question comes from the line of Michael Rehaut from JPMorgan. Please go ahead.

Hi, this is Elad on for Mike. Thanks for taking my question. First I was just wondering if you could help us think about margin expansion potential for 3Q and if there is some potential impact from any further need to reduce production volume in the remainder of the year and how much of that you're able to work through in 2Q? And then, also if there is any more impact from higher marketing and tech investments in 3Q as well? Thanks.

Yes. So this is Jim and I'd say if you look at 3Q, we expect our EBIT margin expansion and our cost takeout to be similar to what we've seen year-to-date and then kind of what we've guided to for the full-year. So it's not going to be dissimilar from any of the previous quarters here. I think the one piece you asked on the inventory reduction, what I will say is that that it'll have a slight impact on the third quarter but we also had some of that in the third quarter last year. And additionally as you look at when we talked about our net cost and you look at what we forecasted last quarter for the full-year versus this quarter for the full-year that does reflect the impact of some of the -- it reflects the impact of needing to reduce production volumes in the third quarter. In addition, it just increased levels of logistics costs and other costs we're seeing outside of materials.

Let me maybe just make the additional comment. So, as you know, we don't give quarterly margin guidance. We guide the year now 6.8% which again was at the very high-end of a previous range. We just finished Q2 with 7.0%. So I would say in the 6.8% always moving parts being inventory and marketing investments that fully factored in and given the run rate where we are, we feel very confident about the 6.8% on a full-year basis.

Okay. I was more talking about North America in particular because I know in 2Q you had mentioned that it's going to have a kind of a decline on a sequential basis. So I was wondering if we should expect a little bit more moderated margin expansion in 3Q as well.

I mean. And again I mean the same what I said before holds true. I mean we don't give quarterly margin guidance particularly on a region-by-region, we in our full-year guidance North America is factored into 12 plus, we're running at 12.4% which is very, very strong and that should give you all the indication that we're very confident about Q3 and Q4 being about 12%, and we're fully on track. And so, yes, there will be always some ins and outs but the overall sum will be 12 plus.

Great, okay. And just quickly on Europe, the additional restructuring actions that you pointed out with the $200 million outlays instead of the $100 million from last quarter. Any more detail on the additional actions that you're seeing over there that was the expansion we saw in April? Thanks.

Yes. We did as you said we announced our intention to sell or re-industrialise the Naples facility. But on top of that there's numerous other small actions that we're looking at that are not of the size that that we'd mentioned them individually but it's a basket of actions that we continue to take to right size our business and our cost structure within that environment.

Okay. So just the -- are you just looking at $75 million in EBIT improvement for 2019 and $100 million in annualized EBIT improvement, is that still how we should think about it?

In EMEA or overall?

Well I guess the question was referring to Europe. I mean again we updated our margin guidance for Europe to a new level which is around zero. So, yes, it means a year-over-year improvement pretty much in that ballpark. So I think we now need to move on to the next caller.

Your next question comes from the line of Curtis Nagle from Bank of America. Please go ahead.

Great. Thanks very much. Maybe I'll just follow-up on the restructuring question. I think what might have been asked is in terms of how you think about forward assumptions for restructuring costs next year and the year after which I think were somewhere around about $75 million to $100 million ballpark. We're now at $200 million from this year which was $100 million, so are we at a new run rate or we still expecting something around $75 million to $100 million in the out years.

No, I mean Curtis I think you should still expect $75 million to $100 million in the out years and I think what you're seeing is we're on the tail end of the big restructuring program within EMEA. We did add the Naples facility to this which brought it from the $100 million to the $200 million. And as we get past that now it'll just be looking at specific opportunities as they come up. But there's nothing that we've identified. But we do expect to identify some opportunities on a go-forward basis but they will be in that $75 million to $100 million range and then below the $200 million that we're seeing this year and we've seen in the prior years.

Got it. And I'm not sure if this was covered and I don't think I heard it but how did you keep relative to the past couple of quarters?

Curtis, this is Marc. I mean overall I would say the UK performance is very much in line with what we had in mind i.e. we saw a solid growth in Q2 but of course we all know this all the moving pieces with political and certainly it's a fragile market environment. But right now our Q2 was actually reasonably solid.

Your next question comes from the line of Alvaro Lacayo from Gabelli Research. Please go ahead.

Good morning. Two questions just the first one on North America. You talked about demand improving in the second quarter but I guess guidance calls for even more improvement beyond what we saw in Q2. Maybe if you could talk about what you're seeing in the market that gives you confidence that you'll see a rebound in shipments going into the second half. And then, if you can comment on the year-on-year margin expansion for the second half if you can maybe make some comments around price mix and cost productivity given that you're going to be anniversarying, I think your pricing in laundry, although you'll still be benefiting from other price increases. Some commentary on that would be great?

Alvaro let me maybe first take the first one in North America industry. Again we revised the industry guidance at the last earnings call from minus 2 to zero. And right now what we've seen in Q2 is kind of April started very soft from selling perspective and May started recovery and June was we finally saw some growth. Our expectation is that scenario pretty much will continue to Q3 and Q4 i.e. we will see a small, not very significant but we will see small growth in both sell-in and sell-through. And while we all saw our sell through data which, as you know, is non-public data and we get it from some of our retailers points to reasonably solid end of Q2 and that gives us the overall confidence that the industry will stabilize the back half and we're right now in fact towards that full-year guidance.

And then talking about your question on the EBIT margin improvement, and you are correct, because if you look at we saw within the second quarter 2.5% margin improvement from pricing and mix and obviously now that all the price increases that we've taken in the prior year have been run in. If you look at the full-year and what we're forecasting and while it's better than we would have said last quarter for the full-year we're still at 1.75% margin improvement for the full-year. So it does imply that in the back half of the year, it's not as big of a benefit. But however for the full-year it is a very strong benefit from a pricing perspective pricing and mix perspective. And as Marc said before, we just we don't break down the individual quarters.

Got it. And then, with regards to EMEA, I think the comment you made last quarter was you would exit the quarter at a break-even rate. Is that a good way to think about it now as we enter -- as we see it going forward does break-even and then momentum will lead to improvements over time or how should we think about that?

Yes, Alvaro, so your statement is correct and we exited Q2 above break-even. However to be fair also based on seasonality, positive seasonality in the June volume but even if you factor that out we feel a lot better about June and the run rate. And of course we fully focus in now getting to break-even or above break-even. And that's pretty much what we guide for the back half.

Your next question comes from the line of Mike Dahl from RBC Capital Markets. Please go ahead.

Good morning. Thanks for taking my questions. I wanted to start out with a question, Jim, I think you made a comment about the cost takeout and I know you don't want to talk quarter-by-quarter but just with respect to the second half implications for cost takeout, this is something where you're still expecting a 25 basis point benefit for the full-year. It's been a headwind year-to-date. Can you talk about just the cadence in the second half? And what is driving, what looks to be a fairly strong inflection in your expectation for net cost takeout?

Yes, Mike there's a couple of things in there. One EMEA will be a big part of it. And as we talked about we expect the EMEA margins to begin to improve significantly throughout the back half of the year. And a big part of that is the cost reduction efforts that we've done within EMEA and so we'll start to see the benefits of those. Additionally, when we look year-over-year, we really saw the logistics costs within the U.S. become elevated especially in the back half of last year. And so it's -- while it's a headwind in aggregate on a year-over-year basis in the back half of the year, it's not as big of a headwind as it was before. And then additionally, there are other cost reduction efforts that we've put in place across the globe just in light of some of the recent inflation that we've seen and that will take effect. So it's a basket of different things but those are the big drivers.

Okay. Got it. And then my second question just relates to the raw material and inflation but also thinking about the marketing investments, I'm wondering just the linkage between the two. Is there anything we should read into as raw materials deflate, I understand not wanting to get forward-looking commentary around pricing and great pricing performance so far, but is there going to be some reinvestment of cost tailwinds into the marketing side. And alongside that if you could give any commentary around the promotional environment just in the quarter and post quarter with some of the big holiday events?

Michael, it's Marc. So first of all I would not create a linkage between raw material and marketing investments. We have over the last couple of years steadily increased our marketing investment to support the new product launches. We have regional specific initiatives like for example, in China, where we invest in brands and brand building but that is -- these are long-term investments against the multiyear strategic plan. So they are not driven by what happens every driven quarter by raw material. On the raw materials itself and I can read through it what I commented before, yes, we see a moderation. But keep in mind even the first half was up. So we see a little moderation going forward but that's against a backdrop that we had $600 million to $7000 million increase over the last two years. So the fundamentals about being significantly elevated compared to 2015 has not changed and therefore we don't take any dramatic action in our direction because the fact is still the same. Now and again as I mentioned before forward-looking statements about pricing, we don't do it and it's pure speculation. The promotional environment in Q2 in retrospect I wouldn't describe as fundamentally different than Q1. So this is a highly competitive environment. Our promotional strategy has not changed. We participate when we think we can create value and if not we don't. So that has not dramatically changed and we don't see it right now.

Your next question comes from the line of Ken Zener from KeyBanc. Please go ahead.

Good morning gentlemen. So look your guys margins continue to be strong obviously on price in part from last year but mix as well. I think to the extent you guys continue to deliver very strong North American margins in general right outside the U.S. causes some deflation of that performance whether it's Europe or Asia in this quarter. So my question to you is this, I mean if usually the $600 million to $700 million mark that you keep referring to cost inflation. If you're getting that and you're neutral to that or your higher margins would suggest actually you're doing better; is that -- when you talk about price recovery, price relative to the cost inflation. I mean it sounds as though you're getting your cost inflation and it's actually product mix efficiency that is leading to the year-over-year gains. I mean is that an accurate way to think about it as opposed to you're asking for price above cost inflation?

So Ken, this is Marc. Let me try to answer your question. First of all what I want to re-emphasize of course our overall results are very dependent on the North America performance. But one aspect which I also want to highlight for Q2 is we had margin expansion in three out of four regions. So of course in absolute terms North America was the star. But we had margin expansion in three out of four regions which gives us a good sense. On your point about pricing again right now we have pricing which is above the total cost increases which we have and we feel very good about the execution to your point, it's not just the like-for-like increase which we did based on the raw material cost increases. The new product launches not only in North America but throughout the world really helped us manage mix very well. And what you see right now is very much to your point, it's a combination of the carryover benefit of like-for-like increases and very good mix management across all regions. And that's also opportunity going forward. We have good products, new innovative product launches which justify the price in the marketplace.

Right. No, and I do agree with you, I think North America is the star. But I mean it's clear there's a lot of other elements that work and you're executing well. This is not a setup question, Marc, but I think what continues to be a drag obviously I mean the movie Jerry Maguire Show Me The Money, to the extent Europe is having this $100 million headwind and your free cash flow. I think what really is missing is the synchronization of your continuing EBIT with your free cash flow and to the extent you can talk about bigger picture your thoughts of those two metrics coming together. So normalizing better, I'd appreciate it. Thank you very much.

Yes, Ken, and this is Jim and I'll kind of start-off and take that and then let Marc add any commentary. I think as we look at -- I think the additional $100 million you're talking about is the additional restructuring that we've added and obviously those are projects within EMEA. Now what we do expect is at once we complete all that and we've begun to improve the margins within EMEA, now we'll begin to see significant cash generation coming from increased earnings within EMEA. Additionally, as I mentioned earlier from an inventory perspective within EMEA, we are beginning to see benefits as we begin to get our inventories in line with our sales levels and normalize our production levels there. So from -- well, we don't give regional cash performance perspective. What I will say is that once we get past this restructuring, EMEA is moving to become part of a positive cash generator. Now for the full-year again as you said we've got a big turn in the back half of the year here. If we look at last year or we look at this year within the first half of this year, we've had some significant one-off type items such as the French anti-Competition Authority payment that we had to make and some large tax payments we had to make on some of the gains that we carved out of our ongoing earnings. And we don't have those in the back half of the year and so we'll see a significant generation of cash within the back half of the year. And if you think about last year in the back half of the year, we made a $350 million pension contribution. So when you're looking at it year-over-year, there's a big -- our back half of this year was significantly better than last year's second half.

Yes, Ken, maybe just close that and add to Jim's comments that, as you know we don't give recent cash numbers or guidance. But to echo what Jim was referring to. If you look at the European cash flow the ins-on numbers, you would see more confidence and improvement than you right now see in earning. So take that as an early and a positive leading indicator. But we see it in the cash flow and we'll continue to focus on this one.

So let me maybe just wrap up here. And I'm now referring to Page 18 and I'm not going to go through all of the bullet points on Page 18 but just to re-emphasize what we said in our prepared remarks and also in Q&A. Obviously we feel very good about our ongoing momentum in the business. What we have achieved in the first half, our perspective in full-year and that allowed us to raise the guidance fairly significantly by $0.75 on the bottom and $0.50 on the high-end. So we feel very good about the business not only in North America but in many parts of the world. North America stands out in a what I would describe still a fairly soft environment in North America. We achieved a very, very strong performance on the margin but even on the top-line level. We feel confident about Europe slowly coming around. We always have certain amount of impatience about how quickly can come around. But I think we start seeing the traction of the actions which we put in place and that should set us up much better for the back half and for next year. And finally, we completed the sale of Embraco which as you know was long works but it had significant helps us now addressing our debt level and we feel confident towards reaching that famous gross debt to EBITDA target of 2.0 by the year-end. So overall, we feel very good about our business. We remain focused on delivering Q3 and Q4 in line with what you all have in mind and as a continuation of a very strong first half. Thank you very much.

Thank you. This concludes today's conference call. You may now disconnect.