WHIRLPOOL CORPORATION The following Management Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition of the Company and generally discusses the results of operations for the current quarter compared to the same prior year period. MD&A is provided as a supplement to, and should be read in connection with, the Consolidated Condensed Financial Statements and Notes to the Consolidated Condensed Financial Statements included in this Form 10-Q.
Certain references to particular information in the Notes to the Consolidated Condensed Financial Statements are made to assist readers.
ABOUT
Whirlpool Corporation ("Whirlpool"), committed to being the best global kitchen and laundry company, in constant pursuit of improving life at home, was incorporated in 1955 under the laws ofDelaware and was founded in 1911.Whirlpool manufactures products in 10 countries and markets products in nearly every country around the world. We have received worldwide recognition for accomplishments in a variety of business and social efforts, including leadership, diversity, innovative product design, business ethics, social responsibility and community involvement. We conduct our business through four operating segments, which we define based on geography.Whirlpool 's operating segments consist ofNorth America ,Europe ,Middle East andAfrica ("EMEA"),Latin America andAsia .Whirlpool had approximately$22 billion in annual net sales and 69,000 employees in 2021. 35
--------------------------------------------------------------------------------
OVERVIEW
Whirlpool had a second quarter GAAP net loss available toWhirlpool of$(371) million (net earnings (loss) margin) of (7.3)%), or$(6.62) per share, compared to GAAP net earnings available toWhirlpool of$581 million (net earnings margin of 10.9%), or$9.15 per share in the same prior-year period. Non-recurring items negatively impacted second-quarter net loss available toWhirlpool by$747 million , or$(13.35) per share, including asset impairment charges related to the EMEA region, a loss related to the pending divestiture ofWhirlpool Russia and other charges, including those related to the strategic review of EMEA.Whirlpool delivered second-quarter ongoing (non-GAAP) earnings per share of$5.97 and ongoing EBIT margin of 9.0%, compared to$6.64 and 11.4% in the same prior-year period. On a GAAP and ongoing basis, quarterly earnings and margin declines were driven by supply constraints and demand slowdowns negatively impacting volumes and elevated cost inflation, partially offset by positive price/mix led by the successful execution of cost-based price increases across the globe. We are very pleased with our ability to navigate another difficult operating environment and enter into a share purchase agreement to divest ourWhirlpool Russia business, which we've concluded to be the best course of action for our employees, shareholders and overall business. We continue to take actions to deliver solid margins and navigate through a challenging environment while making progress in our portfolio transformation and strategic review of EMEA.
For additional information regarding non-GAAP financial measures, see the Non-GAAP Financial Measures section of this Management's Discussion and Analysis.
36
--------------------------------------------------------------------------------RESULTS OF OPERATIONS
The following table summarizes the consolidated results of operations for the
periods presented:
Three Months Ended June 30, Six Months Ended June 30,
Consolidated - Millions of dollars, except per share
data 2022 2021 Better/(Worse) % 2022 2021 Better/(Worse) %
Net sales $ 5,097 $ 5,324 (4.3)% $ 10,017 $ 10,682 (6.2)%
Gross margin 897 1,090 (17.7) 1,748 2,238 (21.9)
Selling, general and administrative 461 509 9.4 837 1,002 16.5
Restructuring costs 5 8 37.5 10 28 64.3
Impairment of goodwill and other intangibles 384 - nm 384 - nm
(Gain) loss on sale and disposal of businesses 346 (120) nm 346 (120) nm
Interest and sundry (income) expense (19) (36) (47.2) (26) (62) (58.1)
Interest expense 45 45 - 86 90 4.4
Income tax expense (benefit) 37 94 60.6 143 253 43.5
Net earnings (loss) available to Whirlpool (371) 581 nm $ (58) $ 1,014 nm
Diluted net earnings (loss) available to
$ (6.62) $ 9.15 nm$ (1.00) $ 15.96 nm Consolidated net sales decreased 4.3% and 6.2% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021. The decrease for the three and six months endedJune 30, 2022 was primarily driven by lower volume and the impact of foreign currency, partially offset by favorable product price/mix. Excluding the impact of foreign currency, net sales decreased 2.3% and 4.6% for the three and six months endedJune 30, 2022 , compared to the same periods in 2021. The consolidated gross margin percentage for the three and six months endedJune 30, 2022 decreased to 17.6% and 17.5%, respectively, compared to 20.5% and 21.0% in the same prior-year periods. The decrease was primarily driven by raw material and other cost inflation and lower volume, partially offset by favorable product price/mix. Our operating segments are based upon geographical region and are defined asNorth America , EMEA,Latin America andAsia . These regions also represent our reportable segments. The chief operating decision maker evaluates performance based on each segment's earnings (loss) before interest and taxes (EBIT), which we define as operating profit less interest and sundry (income) expense and excluding restructuring costs, asset impairment charges and certain other items that management believes are not indicative of the region's ongoing performance, if any. For additional information, see Note 14 to the Consolidated Condensed Financial Statements. The following is a discussion of results for each of our operating segments. Each of our operating segments have been impacted by the COVID-19 pandemic in the area of manufacturing operations. Excess capacity costs were not material for the six months endedJune 30, 2022 . Additionally, operating segments have been impacted by disruptions in supply chains and distribution channels, among other macroeconomic and COVID-19 related impacts. 37 -------------------------------------------------------------------------------- The EMEA operating segment continued to experience sales, distribution, supply chain, and manufacturing disruptions as a result of the Russian invasion ofUkraine and related conflict and sanctions. During the second quarter of 2022, we entered into a share purchase agreement to sell the Company's Russian business to Arcelik. We recorded a charge of$346 million in the Consolidated Condensed Statements of Comprehensive Income (Loss) during the second quarter of 2022 in connection with this transaction. The transaction is expected to be completed during the third quarter of 2022. Additionally, we recorded an impairment loss of$384 million of EMEA goodwill and Indesit and Hotpoint* trademarks. For additional information see Notes 10, 15 and 16 to the Consolidated Condensed Financial Statements. Business disruption and financial impacts may increase in future periods in the event of escalated conflict, potential imposition of new sanctions and counter measures, and related macroeconomic impacts. Please see Item 1A. Risk Factors of this quarterly report on Form 10-Q for additional information regarding the risks that we have or may in the future experience as a result of the conflict inUkraine and related sanctions. 38
--------------------------------------------------------------------------------
[[Image Removed: whr-20220630_g2.jpg]][[Image Removed: whr-20220630_g3.jpg]]
Net sales decreased 2.6% and 5.5% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021. The decrease is primarily driven by lower volume and the impact of foreign currency, largely offset by favorable product price/mix. Excluding the impact from foreign currency, net sales decreased 2.3% and 5.3% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021.
EBIT
EBIT decreased for the three and six months endedJune 30, 2022 compared to the same periods in 2021 primarily due to cost inflation as well as lower volume, partially offset by favorable product price/mix. EBIT margin was 14.1% and 15.1% for the three and six months endedJune 30, 2022 , respectively, compared to 18.3% and 19.1% for the same periods in 2021.
EMEA
[[Image Removed: whr-20220630_g4.jpg]][[Image Removed: whr-20220630_g5.jpg]]
Net sales decreased 19.4% and 13.6% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021. The decrease is primarily driven by lower volume and the impact of foreign currency, partially offset by favorable product price/mix. Excluding the impact from foreign currency, net sales decreased 10.3% and 5.6% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021.
EBIT
EBIT decreased for the three and six months endedJune 30, 2022 compared to the same periods in 2021 primarily due to cost inflation and lower volume, partially offset by favorable product price/mix. EBIT margin was 0.2% and (1.2)% for the three and six months endedJune 30, 2022 , respectively, compared to 2.5% and 2.1% for the same periods in 2021. 39 --------------------------------------------------------------------------------
[[Image Removed: whr-20220630_g6.jpg]][[Image Removed: whr-20220630_g7.jpg]]
Net sales increased 3.1% and 3.5% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021. The increase is primarily driven by favorable product price/mix and foreign currency, partially offset by lower volume. Excluding the impact from foreign currency, net sales decreased 0.5% and increased 0.1% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021.
EBIT
EBIT decreased for the three and six months endedJune 30, 2022 compared to the same periods in 2021. The decrease is primarily driven by cost inflation and lower volume, partially offset by favorable product price/mix. EBIT margin was 7.2% for both the three and six months endedJune 30, 2022 , compared to 9.7% and 9.1% for the same periods in 2021.
[[Image Removed: whr-20220630_g8.jpg]][[Image Removed: whr-20220630_g9.jpg]]
Net sales increased 25.7% and decreased 8.4% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021. The increase for the three months endedJune 30, 2022 is driven by higher volumes primarily driven by COVID-related shutdowns inIndia in the prior period and the impact of favorable product price/mix, partially offset by the impact of foreign currency. The decrease for the six months endedJune 30, 2022 is primarily driven by the sale of Whirlpool China and lower volumes, partially offset by favorable product price/mix. Excluding the impact from foreign currency, net sales increased 30.5% and decreased 5.3% for the three and six months endedJune 30, 2022 , respectively, compared to the same periods in 2021.
EBIT
EBIT increased for the three and six months endedJune 30, 2022 compared to the same periods in 2021. The increase was primarily due to higher volumes in the second quarter and favorable product price/mix, partially offset by cost inflation. EBIT margin was 6.8% and 5.8% for the three and six months endedJune 30, 2022 compared to 1.7% and 3.8% for the same periods in 2021. 40 --------------------------------------------------------------------------------
Selling, General and Administrative
The following table summarizes selling, general and administrative expenses as a percentage of net sales by region for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
As a % of As a % of Net As a % of Net As a % of Net
Millions of dollars 2022 Net Sales 2021 Sales 2022 Sales 2021 Sales
North America $ 209 7.1 % $ 212 7.0 % $ 369 6.4 % $ 387 6.4 %
EMEA 98 9.6 129 10.3 193 9.2 262 10.8
Latin America 68 8.6 62 8.1 132 8.5 122 8.2
Asia 33 9.7 38 14.2 65 10.4 93 13.7
Corporate/other 53 - 68 - 78 - 138 -
Consolidated $ 461 9.0 % $ 509 9.6 % $ 837 8.4 % $ 1,002 9.4 %
Consolidated selling, general and administrative expenses decreased for the
three and six months ended June 30, 2022 compared to the same periods in 2021.
The decrease for the three months ended June 30, 2022 is primarily driven by
decreased marketing investments and benefits of prior restructuring actions. The
decrease for the six months ended June 30, 2022 is primarily driven by a gain
from a sale-leaseback transaction, divestiture of businesses and benefits of
prior restructuring actions.
For additional information, see Note 1 to the Consolidated Condensed Financial Statements.
Restructuring We incurred restructuring charges of$5 million and$10 million for the three and six months endedJune 30, 2022 , respectively compared to$8 million and$28 million for the same periods in 2021. For the full year 2022, we expect to incur less than$50 million of restructuring charges.
For additional information, see Note 12 to the Consolidated Condensed Financial Statements.
Impairment of
We recorded an impairment loss of
The primary indicators of impairment were the adverse impacts from the
continuation of the
For additional information, see Note 10 and 16 of the Consolidated Condensed Financial Statements and the Other Information section below.
(Gain) Loss on Disposal of Businesses
We incurred a loss of
On
On
For additional information, see Note 15 to the Consolidated Condensed Financial Statements.
*
41
--------------------------------------------------------------------------------Interest and Sundry (Income) Expense
Interest and sundry income decreased for the three and six months endedJune 30, 2022 compared to the same periods in 2021 primarily due to the impact of foreign currency and the recognition of tax credits in theLatin America region in the prior period. Interest Expense
Interest expense decreased for the three and six months ended
Income Taxes
Income tax expense was$37 million and$143 million for the three and six months endedJune 30, 2022 compared to income tax expense of$94 million and$253 million in the same periods of 2021. For the three and six months endedJune 30, 2022 , the changes in the effective tax rate from the prior period include overall lower level of earnings, impact of non deductible goodwill impairments, audits and settlements, prior year divestiture, and legal entity restructuring tax impacts.
For additional information, see Note 13 to the Consolidated Condensed Financial Statements.
Other Information
Our Critical Accounting Policies and Estimates for goodwill and other
indefinite-lived intangibles are disclosed in Note 1 to the Consolidated
Financial Statements and in Management's Discussion and Analysis of our annual
report on Form 10-K for the fiscal year ended
Our Maytag trademark continues to be at risk atJune 30, 2022 . Indesit and Hotpoint* intangibles in the EMEA reporting unit are recorded at fair value and consequently future impairments could result if we experience further deterioration in business performance results or if there is a significant change in other qualitative or quantitative factors, including an increase in discount rates, a decrease in forecasted revenues or decrease in royalty rates.
For additional information, see Note 1 to the Consolidated Condensed Financial Statements.
EMEA goodwill was fully impaired during the second quarter of 2022,
In performing the quantitative assessment of indefinite-lived intangible assets, Indesit and Hotpoint* trademarks, significant assumptions used in our relief-from-royalty model included revenue growth rates, assumed royalty rates and the discount rate, which are discussed further below.
We performed a sensitivity analysis on our remaining estimated fair values
noting a 10% reduction of forecasted revenues in the Indesit and Hotpoint*
trademarks would have resulted in an impairment charge of approximately
We used a royalty rate of 3% and 3.5% for our Indesit and Hotpoint* trademarks, respectively. We performed a sensitivity analysis on our estimated fair values for Indesit and Hotpoint* noting a 100 basis point reduction of the royalty rates from each trademark would have resulted in an impairment charge of approximately$107 million and$73 million , respectively. We used a discount rate of 19.0% for both Indesit and Hotpoint*, respectively. We performed a sensitivity analysis on our estimated fair values for Indesit and Hotpoint* noting a 100 basis point increase in the discount rate would have resulted in an impairment charge of approximately$72 million and$39 million , respectively. If actual results are not consistent with management's estimate and assumptions, a material impairment charge of our trademarks could occur, which would have a material adverse effect on our financial statements.
*
42
--------------------------------------------------------------------------------For additional information about goodwill and intangible valuations, see Note 10 and 16 of the Consolidated Condensed Financial Statements.
FINANCIAL CONDITION AND LIQUIDITY
Background
Our objective is to finance our business through operating cash flow and the appropriate mix of long-term and short-term debt. By diversifying the maturity structure, we avoid concentrations of debt, reducing liquidity risk. We have varying needs for short-term working capital financing as a result of the nature of our business. We regularly review our capital structure and liquidity priorities, which include funding innovation and growth through capital expenditures and research and development expenditures as well as opportunistic mergers and acquisitions; and providing returns to shareholders through dividends, share repurchases and maintaining our strong investment grade rating. The Company believes that free cash flow provides stockholders with a relevant measure of liquidity and a useful basis for assessingWhirlpool 's ability to fund its activities and obligations.Whirlpool has historically been able to leverage its strong free cash flow generation to fund our operations, pay for any debt servicing costs and allocate capital for reinvestment in our business, funding share repurchases and dividend payments. Our short-term potential uses of liquidity include funding our business operations, ongoing capital spending and returns to shareholders. We currently have$248 million of long-term debt maturing in the next twelve months, and are currently evaluating our options in connection with this maturing debt, which may include repayment through refinancing, free cash flow generation or cash on hand. In the second quarter of 2022, we completed an offering of$300 million in aggregate principal amount of 4.700% Senior Notes due 2032, the net proceeds of which were used to pay off$300 million in maturing debt onJune 1, 2022 .
We monitor the credit ratings and market indicators of credit risk of our lending, depository, derivative counterparty banks, and customers regularly, and take certain actions to manage credit risk. We diversify our deposits and investments in short-term cash equivalents to limit the concentration of exposure by counterparty.
Cash and cash equivalents
The Company had cash and cash equivalents of approximately$1.6 billion atJune 30, 2022 , the majority of which was held inthe United States . For cash in each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated tothe United States . The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and expected future foreign investments. Our intent is to permanently reinvest these funds outside ofthe United States and our current plans do not demonstrate a need to repatriate the cash to fund ourU.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicableUnited States taxes (if any) and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with the repatriation of cash due to the complexity of its hypothetical calculation. AtJune 30, 2022 , we had cash or cash equivalents greater than 1% of our consolidated assets inthe United States (3.2%),Mexico (1.7%),India (1.3%) andBrazil (1.1%). In addition, we had third-party accounts receivable outside ofthe United States greater than 1% of our consolidated assets inItaly andBrazil , which represented 1.4% and 1.3%, respectively. We continue to monitor general financial instability and uncertainty globally.
Revolving credit facility and other committed credit facilities
The Company maintains a
We were in compliance with our interest coverage ratio under the revolving
credit facility as of
43
--------------------------------------------------------------------------------
At June 30, 2022 , we had aggregate borrowing capacity of approximately $3.7
billion on our committed credit facilities, consisting of $3.5 billion under the
revolving credit facility and approximately $204 million under our committed
credit facilities in Brazil and India .
Notes payable
Notes payable consists of short-term borrowings payable to banks and commercial paper, which are generally used to fund working capital requirements. AtJune 30, 2022 , we have no notes payable under the revolving credit facility. For additional information, see Note 6 to the Consolidated Condensed Financial Statements.
Trade customers
We continue to review customer conditions globally. We had no material effect from customer insolvencies during the three months endedJune 30, 2022 , nor do we have immediate visibility into customer insolvency situations materializing in the future. We continue to monitor these situations, considering each geographic region, the unique credit risk specific to the country, marketplace and economic environment, and take appropriate risk mitigation steps.
For additional information on guarantees, see Note 7 to the Consolidated Condensed Financial Statements.
Other matters
As announced on
Share Repurchase Program
For additional information about our share repurchase program, see Note 11 to the Consolidated Condensed Financial Statements.
Sources and Uses of Cash
The following table summarizes the net increase (decrease) in cash, cash equivalents and restricted cash for the periods presented:
Six Months Ended June 30,
Millions of dollars 2022 2021
Cash provided by (used in):
Operating activities $ (180) $ 646
Investing activities (142) (279)
Financing activities (1,022) (332)
Effect of exchange rate changes 12 (1)
Less: decrease in cash classified as held for sale (70) -
Net change in cash, cash equivalents and restricted cash $
(1,402)
Cash Flows from Operating Activities
More cash was used in operating activities during the six months endedJune 30, 2022 compared to the same period in 2021. The decrease in cash provided by operating activities was primarily driven by lower cash earnings and unfavorable changes in working capital. The working capital change was primarily driven by increased inventory due to higher input costs and higher levels of cash payments due to elevated accounts payable driven by cost inflation, partially offset by a decrease in accounts receivable as a result of lower sales volumes. 44 -------------------------------------------------------------------------------- The timing of cash flows from operations varies significantly throughout the year primarily due to changes in production levels, sales patterns, promotional programs, funding requirements, credit management, as well as receivable and payment terms. Depending on the timing of cash flows, the location of cash balances, as well as the liquidity requirements of each country, external sources of funding are used to support working capital requirements.
Cash Flows from Investing Activities
Cash used in investing activities during the six months ended
For additional information, see Note 1 to the Consolidated Condensed Financial Statements.
Cash Flows from Financing Activities
Cash used in financing activities during the six months endedJune 30, 2022 increased by$690 million compared to the same period in 2021, which primarily reflects increased share repurchases and an increase in the dividend compared to the same prior-year period. Financing Arrangements The Company had total committed credit facilities of approximately$3.7 billion atJune 30, 2022 . These facilities are geographically reflective of the Company's global operations. The Company is confident that the committed credit facilities are sufficient to support its global operations. We had no borrowings outstanding under the committed credit facilities atJune 30, 2022 orDecember 31, 2021 , respectively.
For additional information about our financing arrangements, see Note 6 to the Consolidated Condensed Financial Statements.
Dividends
In
Off-Balance Sheet Arrangements
In the ordinary course of business, we enter into agreements with financial institutions to issue bank guarantees, letters of credit, and surety bonds. These agreements are primarily associated with unresolved tax matters inBrazil , as is customary under local regulations, and other governmental obligations and debt agreements. AtJune 30, 2022 , we had approximately$335 million outstanding under these agreements.
For additional information about our off-balance sheet arrangements, see Notes 6 and 7 to the Consolidated Condensed Financial Statements.
NON-GAAP FINANCIAL MEASURES
We supplement the reporting of our financial information determined underU.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial measures, some of which we refer to as "ongoing" measures, including:
•Earnings before interest and taxes (EBIT)
•EBIT margin
•Ongoing EBIT
•Ongoing earnings per diluted share
•Ongoing EBIT margin
•Sales excluding foreign currency
45
--------------------------------------------------------------------------------•Free cash flow
•Gross debt leverage
Ongoing measures, including ongoing earnings per diluted share and ongoing EBIT, exclude items that may not be indicative of, or are unrelated to, results from our ongoing operations and provide a better baseline for analyzing trends in our underlying businesses. EBIT margin is calculated by dividing EBIT by net sales. Sales excluding foreign currency is calculated by translating the current period net sales, in functional currency, toU.S. dollars using the prior-year period's exchange rate compared to the prior-year period net sales. Management believes that sales excluding foreign currency provides stockholders with a clearer basis to assess our results over time, excluding the impact of exchange rate fluctuations. Management believes that Gross Debt Leverage (Gross Debt/Ongoing EBITDA) provides stockholders with a clearer basis to assess the Company's ability to pay off its incurred debt. We also disclose segment EBIT, which we define as operating profit less interest and sundry (income) expense and excluding restructuring costs, asset impairment charges and certain other items, if any, that management believes are not indicative of the region's ongoing performance, as the financial metric used by the Company's Chief Operating Decision Maker to evaluate performance and allocate resources in accordance with ASC 280, Segment Reporting. Management believes that free cash flow and adjusted free cash flow provides stockholders with a relevant measure of liquidity and a useful basis for assessingWhirlpool 's ability to fund its activities and obligations. The Company provides free cash flow and adjusted free cash flow related metrics, such as free cash flow and adjusted free cash flow as a percentage of net sales, as long-term management goals, not an element of its annual financial guidance, and as such does not provide a reconciliation of free cash flow and adjusted free cash flow to cash provided by (used in) operating activities, the most directly comparable GAAP measure, for these long-term goal metrics. Any such reconciliation would rely on market factors and certain other conditions and assumptions that are outside of the Company's control.Whirlpool does not provide a non-GAAP reconciliation for its other forward-looking long-term value creation and other goals, such as organic net sales, EBIT, and gross debt/Ongoing EBITDA, as such reconciliation would rely on market factors and certain other conditions and assumptions that are outside of the company's control. We believe that these non-GAAP measures provide meaningful information to assist investors and stockholders in understanding our financial results and assessing our prospects for future performance, and reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP financial measures, provide a more complete understanding of our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These non-GAAP financial measures should not be considered in isolation or as a substitute for reported net earnings (loss) available toWhirlpool , net sales, net earnings (loss) as a percentage of net sales (net earnings margin), net earnings (loss) per diluted share and cash provided by (used in) operating activities, the most directly comparable GAAP financial measures. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. 46 --------------------------------------------------------------------------------
Please refer to a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures below.
Three Months Ended Six Months Ended June 30 ,
Ongoing Earnings Before Interest & Taxes (EBIT) June 30,
Reconciliation: 2022 2021 2022 2021 in millions Net earnings (loss) available to Whirlpool (1)$ (371) $ 581 $ (58) $ 1,014 Net earnings (loss) available to noncontrolling interests 3 (1) 6 6 Income tax expense (benefit) 37 94 143 253 Interest expense 45 45 86 90 Earnings before interest & taxes$ (286) $ 719 $ 177 $ 1,363 Restructuring expense (a) - 8 - 28 Impairment of goodwill and other intangibles (b) 384 - 384 - Impact of M&A transactions (c) 363 (120) 363 (120) Ongoing EBIT(2)$ 461 $ 607 $ 924 $ 1,271 (1)Net earnings (loss) margin is approximately (7.3)% and (0.6)% for the three and six months endedJune 30, 2022 , respectively, compared to 10.9% and 9.5% in the same prior year period. Net earnings margin is calculated by dividing net earnings (loss) available toWhirlpool by consolidated net sales for the three and six months endedJune 30, 2022 andJune 30, 2021 , respectively. (2)Ongoing EBIT margin is approximately 9.0% and 9.2% for the three and six months endedJune 30, 2022 , respectively, compared to 11.4% and 11.9% in the same prior year period. Ongoing EBIT margin is calculated by dividing Ongoing EBIT by consolidated net sales for the three and six months endedJune 30, 2022 andJune 30, 2021 , respectively. Earnings Per Diluted Share Three Months Ended June 30, 2022 2021 Earnings per diluted share$ (6.62) $ 9.15 Restructuring expense (a) - 0.13 Impairment of goodwill and other intangibles (b) 6.86 - Impact of M&A transactions (c)
6.49 (1.89)
Income tax impact (2.51) 0.44 Normalized tax rate adjustment (d) 1.78 (1.19) Share count adjustment (e) (0.03) $ - Ongoing earnings per diluted share$ 5.97 $ 6.64 47
-------------------------------------------------------------------------------- Throughout 2021 and comparable periods, the Company defined adjusted free cash flow as cash provided by (used in) operating activities less capital expenditures and including proceeds from the sale of assets/businesses, and changes in restricted cash. Starting in 2022, the Company presents free cash flow which is cash provided by (used in) operating activities less capital expenditures. Adjusted free cash flow of$769 million for the second quarter of 2021 has been restated to$462 million free cash flow measure to conform with current year presentation. Free Cash Flow (FCF) Reconciliation: Six Months Ended June Six Months Ended June in millions 30, 30, 2022 2021 As adjusted Cash provided by (used in) operating activities $ (180) $ 646 Capital expenditures (217) (184) Free cash flow $ (397) $ 462 Cash provided by (used in) investing activities $ (142) $ (279) Cash provided by (used in) financing activities $ (1,022) $ (332) Adjusted Free Cash Flow (FCF) Reconciliation: Six Months Ended June in millions 30, 2021 Cash provided by (used in) operating activities $ 646 Capital expenditures (184) Proceeds from sale of assets and business 298 Change in restricted cash 9 Adjusted free cash flow $ 769 Cash provided by (used in) investing activities $ (279) Cash provided by (used in) financing activities $ (332) Footnotes (a) Restructuring expense - In 2022, and moving forward, we will only exclude restructuring actions greater than$50 million from our ongoing results. In 2021, these costs were primarily related to actions that right-size and reduce the fixed cost structure of our EMEA business and other centralized functions. (b) Impairment of goodwill and other intangibles - The carrying value of the EMEA reporting unit and Indesit and Hotpoint* trademarks exceeded their fair values resulting in an impairment charge of$384 million during the second quarter of 2022. For additional information see Note 16 to the Consolidated Condensed Financial Statements. (c) Impact of M&A transactions - During the second quarter of 2022, we entered into an agreement to sell ourRussia business. We classified this disposal group as held for sale and recorded an impairment loss of$346 million for the write-down of the net assets to their fair value. See Note 15 to the Consolidated Condensed Financial Statements for additional information. Additionally, we incurred unique transaction related costs of$17 million related to portfolio transformation and EMEA strategic assessment expenses. These transaction costs are recorded in Selling, general and administrative expenses on our Consolidated Condensed Statement of Comprehensive Income (Loss). (d) Normalized tax rate adjustment - During the second quarter of 2022, the Company calculated ongoing earnings per share using an adjusted tax rate of 18.8% to reconcile to our anticipated full-year ongoing effective tax rate between 21.0% and 23.0%, which excludes the impacts of the non-tax deductible loss on sale of theRussia business of$346 million and impairment of goodwill of$278 million . During the second quarter of 2021, the Company calculated ongoing earnings per share using an adjusted tax rate of 25.0%, to reconcile to our anticipated full-year ongoing 2021 effective tax rate between 24% and 26%, which excludes the gain on sale and disposal of businesses. 48 -------------------------------------------------------------------------------- (e) Share count adjustment - During the second quarter of 2022, the Net earnings (loss) available toWhirlpool was a loss. Consequently any increases in the number of shares within the denominator results in a lower loss per share and is therefore antidilutive. As a result, the shares are not included in the Company's ongoing earnings per diluted share calculation.
FORWARD-LOOKING PERSPECTIVE
Earnings per diluted share presented below are net of tax. We currently estimate
at our anticipated 2022 full-year adjusted tax rate between 21.0% and 23.0%. We
currently estimate earnings per diluted share for 2022 to be within the
following ranges:
2022
Current Outlook
Estimated earnings per diluted share, for the year ending December
31, 2022 $22.00 - $24.00
Industry Demand
North America (7) - (5)%
EMEA (5) - (3)%
Latin America (4) - (2)%
Asia 5-6%
For the full-year 2022, we expect to generate cash from operating activities of
approximately $1.85 billion and free cash flow of approximately $1.25 billion ,
including restructuring cash outlays of approximately $50 million and capital
expenditures of approximately $600 million .
The table below reconciles projected 2022 cash provided by operating activities
determined in accordance with GAAP to free cash flow, a non-GAAP measure.
Management believes that free cash flow provides stockholders with a relevant
measure of liquidity and a useful basis for assessing Whirlpool 's ability to
fund its activities and obligations. There are limitations to using non-GAAP
financial measures, including the difficulty associated with comparing companies
that use similarly named non-GAAP measures whose calculations may differ from
our calculations. For 2022 we define free cash flow as cash provided by
operating activities less capital expenditures. For additional information
regarding non-GAAP financial measures, see the Non-GAAP Financial Measures
section of this Management's Discussion and Analysis.
2022
Millions of dollars Current Outlook
Cash provided by (used in) operating activities (1)
(600)
Free cash flow $1,250
(1)Financial guidance on a GAAP basis for cash provided by (used in) financing
activities and cash provided by (used in) investing activities has not been
provided because in order to prepare any such estimate or projection, the
Company would need to rely on market factors and certain other conditions and
assumptions that are outside of its control.
The projections above are based on many estimates and are inherently subject to
change based on future decisions made by management and the Board of Directors
of Whirlpool , and significant economic, competitive and other uncertainties and
contingencies. Additional information concerning these and other factors can be
found in the "Risk Factors" section of our Annual Report on Form 10-K, as
updated in Part II, Item 1A of our Quarterly Reports on Form 10-Q.
OTHER MATTERS
For additional information regarding certain of our loss
contingencies/litigation, see Note 7 and Note 13 to the Consolidated Condensed
Financial Statements. Unfavorable outcomes in these proceedings could have a
material adverse effect on our financial statements in any particular reporting
period.
49--------------------------------------------------------------------------------
Antidumping and Safeguard Petitions
As previously reported,Whirlpool filed petitions in 2011 and 2015 alleging that Samsung, LG and Electrolux violatedU.S. and international trade laws by dumping large residential washers into theU.S. Those petitions resulted in orders imposing antidumping duties on certain large residential washers imported fromSouth Korea ,Mexico , andChina , and countervailing duties on certain large residential washers fromSouth Korea . InMarch 2019 , the order covering certain large residential washers fromMexico was extended for an additional five years, while the order covering certain large residential washers fromSouth Korea was revoked. The order covering certain large residential washers fromChina is currently subject to administrative review to determine whether the order should be extended.Whirlpool also filed a safeguard petition inMay 2017 to address our concerns that Samsung and LG were evadingU.S. trade laws by moving production from countries covered by antidumping orders. A safeguard remedy went into effect inFebruary 2018 , implementing tariffs on finished large residential washers and certain covered parts for three years. InJanuary 2021 , the remedy was extended for two years untilFebruary 2023 . During the fifth year of the remedy, beginningFebruary 7, 2022 , the remedy imposes a 14% tariff on the first 1.2 million large residential washers imported intothe United States (under tariff) and a 30% tariff on such imports in excess of 1.2 million, and also imposes a 30% tariff on washer tub, drum, and cabinet imports in excess of 110,000. Consistent with modifications to the order approved in 2020, the 1.2 million under tariff is allocated by quarter (300,000 large residential washers per quarter). We cannot speculate on the modification's impact in future quarters, which will depend on Samsung and LG'sU.S. production capabilities and import plans.
These orders are subject to administrative reviews, possible appeals, and other potential modifications.
Raw Materials and Global Economy
The current domestic and international political environment have contributed to uncertainty surrounding the future state of the global economy. We have experienced raw material inflation in certain prior years based on the impact ofU.S. tariffs and other global macroeconomic factors. Due to many factors beyond our control, including the conflict inUkraine and related sanctions, COVID-related shutdowns and government actions inChina , we expect to continue to be impacted by the following factors: global shortage of certain components, other supply chain constraints and cost inflation, all of which we expect to continue in 2022. This could require us to modify our current business practices, and could have a material adverse effect on our financial statements in any particular reporting period.
© Edgar Online, source
