Whirlpool Corporation
Earnings from continuing operations for the second quarter reflect strong operating profit improvement within each of the company's international business segments, the benefit from efficiencies associated with last year's acquisition of Maytag, productivity improvements, strong cost controls, favorable currency and a lower effective tax rate. Results were adversely affected by significantly higher material costs, lower industry shipments within the United States, increased brand investment and a pension curtailment charge. Each regional business increased year-over-year operating profit margins during the quarter.
"Our international businesses continue to execute extremely well and we are pleased with their financial performance through the first half of 2007," said Jeff M. Fettig, chairman and chief executive officer of Whirlpool Corporation. "While weak industry demand and significantly higher material prices in the United States have unfavorably impacted our results for the past year, we are positive about the trends exiting the second quarter and believe demand will begin returning to moderate growth levels in the second half of this year."
During the quarter, the company repurchased $101 million of common stock. Approximately $365 million remains under the company's $500 million share repurchase program.
NEW INNOVATION
- Maytag brand completed the launch of:
* The Centennial series washer and dryer to celebrate the 100-year
anniversary of its first washing machine. The Centennial system
offers retro styling with a center-knob control and metallic accents.
The washer features a heavy-gauge steel lid, a Dependable Clean wash
system and commercial-grade strength.
* The Bravos high-efficiency, large-capacity top-load washer and dryer
system. The Bravos system features an impeller wash system with
Sensi-Care technology, Gentle Breeze drying system with IntelliDry
sensors and a commercial-grade stainless-steel wash basket.
- The Maytag brand also launched:
* The new Epic washing machine with a built-in dispenser option to
automatically dispense OxiClean® stain-fighting additive into the
pre-wash cycle to help remove tough stains.
- Jenn-Air brand in North America launched:
* A complete collection of appliances in Oiled Bronze, a richly hued
finish. The Oiled Bronze collection is a Jenn-Air exclusive. The
collection includes gas and electric cooktops, wall ovens, warming
drawers, select refrigerators and dishwashers.
- KitchenAid brand in North America launched:
* The Architect Series II, the latest generation of top-of-the-line
KitchenAid appliances. Additions to the new series include a first-
of-its-kind, full-size wall oven with dual fan convection and steam-
assist technology; induction cooktops; slow cook warming drawers;
built-in refrigerators, including French Door configurations; and
dishwasher models.
- Whirlpool Europe launched:
* The Whirlpool Evolution Emotion Hood with dual functionality. In
addition to extracting fumes, vapors and odors from the kitchen, the
hood provides a primary or additional light source. The hood can be
located anywhere in the kitchen, providing flexibility in kitchen
design.
* The Bauknecht SuperEco energy-conserving washing machine. The
machine consumes approximately 40 percent less energy than
traditional washing machines.
- Whirlpool Latin America launched:
* The Brastemp One Fitness microwave featuring a new rounded-design
concept. The microwave can fit in corners, thereby maximizing space,
and offers an exclusive Fitness Function that prepares fish and
vegetables by steam cooking.
* Two new Consul brand washing machines in the Brazilian region. The
Consul Mare and Consul Mare Super machines come with an exclusive
Easy Level feature that aids consumers in determining the correct
amount of clothes, soap, rinse and water.
- Whirlpool Asia launched:
* The Mastermind frost-free refrigerator. The refrigerator
automatically adjusts its internal temperature based on the exterior
environment and the amount of food inside the unit.
AWARDS AND ACCOMPLISHMENTS
- Whirlpool Corporation received the 2007 ENERGY STAR® Partner of the
Year Award for Sustained Excellence from the U.S. Department of Energy
and the U.S. Environmental Protection Agency. This award is given to a
select group of organizations that have exhibited outstanding
environmental leadership year after year, while sustaining product and
marketing excellence. This unique honor represents Whirlpool
Corporation's eighth consecutive ENERGY STAR Award.
- Whirlpool and Habitat for Humanity together built 9 homes in 5 days for
the second annual Building Blocks project, created by Whirlpool to
raise awareness of the affordable housing crisis and to help eliminate
substandard housing in the United States. The homes were built in
Guadalupe, Arizona.
- Whirlpool Corporation received the 2006 Cause Marketing Golden Halo
Award for Business. The Cause Marketing Golden Halo Award is America's
highest honor for companies and organizations that give back to the
community through creative and effective cause marketing campaigns.
The award recognizes Whirlpool Corporation and its Whirlpool and
KitchenAid brands for their long-term, successful partnerships with
Habitat for Humanity International and Susan G. Komen for the Cure.
- Whirlpool Corporation was again recognized by DiversityInc. magazine
for its diversity and inclusion initiatives.
- In Europe, the Bauknecht ProTouch stainless steel surface received the
"BMK Innovation Prize 2007" from the German federal kitchenware trade
association. The ProTouch surface is a specially treated stainless
steel that resists scratches and reduces the visibility of
fingerprints.
- In India, Whirlpool won the Reader's Digest "Most Trusted Brand" award.
SECOND-QUARTER REGIONAL REVIEW*
Whirlpool North America reported second-quarter revenue of $3.0 billion, down approximately 6 percent versus the year-ago period primarily due to lower OEM shipments and industry demand. As expected, industry unit shipments of major appliances (T7)** declined approximately 1 percent for the quarter and 5 percent for the first half of 2007. Industry shipment trends began to improve during the quarter, following six months of high single-digit, year-over-year declines.
Operating profit of $179 million for the quarter improved over the prior year despite significant material cost increases, primarily for base metals, component parts and steel, lower industry demand, increased brand investment in support of the Maytag launch of new innovative products and a pension curtailment charge. Acquisition efficiencies, cost-based price increases and lower administrative expense mitigated the higher costs.
Based on current economic conditions, the company continues to expect full-year 2007 U.S. industry unit shipments to decline approximately 2 to 3 percent.
Whirlpool Europe reported record second-quarter revenue and operating profit. Revenue increased 10 percent to $900 million driven by strong Whirlpool brand sales performance and the impact from innovative new product offerings. Excluding currency translation, sales increased by 3 percent. Industry demand during the quarter was estimated to have increased 2 to 3 percent.
Operating profit of $51 million increased 20 percent for the quarter and margins expanded as a favorable mix, productivity improvements and reduced benefit expenses offset higher material costs during the quarter.
Based on current economic conditions in Europe, the company continues to expect full-year industry unit shipments to increase approximately 2 to 3 percent.
Whirlpool Latin America reported record second-quarter revenue and operating profit. Revenue of $822 million grew 29 percent from last year driven by strong industry growth in appliances, favorable economic conditions in Brazil, cost-based price adjustments, and strong demand for the region's top-selling innovative brands. Excluding currency translations, sales for appliances and compressors increased approximately 18 percent. Regional unit shipments of appliances grew by 22 percent while industry unit shipments were estimated to have increased 18 percent during the quarter.
Record operating profit of $95 million increased significantly from the prior year. Higher industry demand within the region, strong productivity and price increases implemented to mitigate higher material costs drove the year- over-year improvement and increased operating profit margins to 11.6 percent.
Based on the current economic environment in Brazil, the company continues to expect full-year 2007 appliance industry shipments to increase 15 to 20 percent.
Whirlpool Asia reported sales of $163 million, an increase of 23 percent from the prior-year period. Excluding the impact of currency, sales increased approximately 13 percent. Increased operating profit during the quarter was led by very strong growth in India. The region benefited from successful new product introductions, an improved product mix and cost-based price increases implemented to mitigate higher material costs.
Based on current economic conditions in Asia, the company continues to expect 2007 industry unit shipments to increase 5 to 10 percent.
*During the first quarter of 2007, the company adopted changes to its segment reporting consistent with the methodology the chief executive officer now uses to evaluate each segment's operating and financial results. The company previously included the financial results for its Caribbean operations and exports of certain portable appliances to Europe within its North America business segment. The results for these businesses are now being reported within the Latin America and Europe segments, respectively. In addition, the company has reallocated certain costs previously included within corporate administrative expense to each of the respective regions. Regional results for 2006 have been reclassified to reflect these changes.
Outlook
For the balance of the year, Whirlpool continues to expect strong performance within its international businesses. Increasing U.S. industry demand, acquisition efficiencies, productivity improvements and innovative Maytag product launches are expected to improve performance within North America during the second half of the year.
"We are addressing current U.S. industry demand trends and heightened global material costs with continued new product innovation, increased productivity throughout our global operations, as well as improving our overall mix of business and realizing implemented cost-based price adjustments," said Fettig. "We now expect to realize efficiencies in excess of $400 million from the Maytag acquisition during 2007 and continue to execute plans to revitalize Maytag's product offering and growth. Due to rising oil prices, the company now expects the combination of material and oil-related costs to increase approximately $570 million for the year."
Whirlpool continues to expect full-year 2007 earnings per diluted share from continuing operations to be in the $8.00 to $8.50 range and anticipates generating between $600 million to $650 million in free cash flow.
Cash Flow Reconciliation
The table below reconciles projected 2007 cash provided by continuing operations determined in accordance with generally accepted accounting principles (GAAP) in the United States to free cash flow, a non-GAAP measure. Management believes that free cash flow provides shareholders with a relevant measure of liquidity and a useful basis for assessing the company'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 the company's calculations. As defined by the company, free cash flow is cash provided by continuing operations after capital expenditures and proceeds from the sale of assets/businesses. Free cash flow does not include proceeds from the sale of Maytag businesses. The projections shown here are based upon many estimates and are inherently subject to change based on future decisions made by management and the board of directors of the company, and significant economic, competitive and other uncertainties and contingencies.
(millions of dollars) Cash provided by continuing operations $1,175-$1,225 Capital expenditures (625) Proceeds from sale of assets/non-Maytag businesses 50 Free Cash Flow $600-$650 About Whirlpool Corporation
Whirlpool Corporation is the world's leading manufacturer and marketer of major home appliances, with annual sales of approximately $18 billion, 73,000 employees, and 70 manufacturing and technology research centers around the world. The company markets Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Brastemp, Bauknecht and other major brand names to consumers in nearly every country around the world. Additional information about the company can be found at http://www.whirlpoolcorp.com/.
**T7 refers to the following household appliance categories: washers, dryers, refrigerators, freezers, dishwashers, ranges and compactors.
Whirlpool Additional Information:
This document contains forward-looking statements that speak only as of this date. Whirlpool disclaims any obligation to update these statements. Forward-looking statements in this document include, but are not limited to, statements regarding expected earnings per share, cash flow, productivity and material and oil-related prices, as well as expectations as to the integration with Maytag Corporation. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool Corporation's forward-looking statements. Among these factors are: (1) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European, manufacturers and the strength of trade customers; (2) Whirlpool's ability to continue its strong relationship with Sears Holding Corporation in North America (accounting for approximately 14% of Whirlpool's 2006 consolidated net sales of $18.1 billion) and other significant trade customers, and the ability of these trade customers to maintain or increase market share; (3) Whirlpool's ability to complete the integration of Maytag Corporation on a timely basis and fully realize the anticipated benefits of the merger while remaining within the current cost estimates; (4) demand for Whirlpool's products, including the strength of the U.S. building industry and the level of interest rates; (5) the ability of Whirlpool to achieve its business plans, including productivity improvements, cost control, leveraging of its global operating platform, acceleration of the rate of innovation and realization of cost-based price increases; (6) fluctuations in the cost of key materials (including steel, oil, plastic, resins, copper and zinc) and components, and the ability of Whirlpool to offset cost increases; (7) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (8) our ability to attract, develop and retain executives and other qualified employees; (9) changes in market conditions, health care cost trends and regulatory changes that could increase future funding obligations for pension and postretirement benefit plans; (10) the cost of compliance with environmental and health and safety regulations, including regulations in Europe regarding appliance disposal; (11) potential exposure to product liability claims, including claims that may arise through Whirlpool's regular investigations of potential quality issues as part of its ongoing effort to provide quality products to consumers; (12) the impact of labor relations; (13) Whirlpool's ability to obtain and protect intellectual property rights; (14) volatility in Whirlpool's effective tax rate; (15) the ability of Whirlpool to manage foreign currency fluctuations; (16) global, political and/or economic uncertainty and disruptions, especially in Whirlpool's significant geographic regions, including uncertainty and disruptions arising from natural disasters or terrorist attacks; and (17) risks associated with operations outside the United States. Additional information concerning these and other factors can be found in Whirlpool Corporation's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K.
WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIOD ENDED JUNE 30
(millions of dollars except per share data)
Three Months Ended Six Months Ended
------------------ -----------------
2007 2006 2007 2006
-------- -------- ------- --------
Net sales $4,854 $4,734 $9,243 $8,270
EXPENSES:
Cost of products sold 4,121 4,034 7,882 7,013
Selling, general and administrative 463 465 838 809
Intangible amortization 7 9 17 9
Restructuring costs 16 21 33 33
-------- -------- ------- --------
4,607 4,529 8,770 7,864
-------- -------- ------- --------
OPERATING PROFIT 247 205 473 406
OTHER INCOME (EXPENSE):
Interest and sundry income (expense) 2 (12) (3) (19)
Interest expense (49) (56) (99) (85)
-------- -------- ------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND OTHER ITEMS 200 137 371 302
Income taxes 29 35 70 82
-------- -------- ------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE EQUITY EARNINGS AND MINORITY
INTERESTS 171 102 301 220
Equity in (losses) earnings of
affiliated companies (2) 1 (4) 2
Minority interests (8) (3) (12) (4)
-------- -------- ------- --------
EARNINGS FROM CONTINUING OPERATIONS 161 100 285 218
Loss from discontinued operations, net
of tax - (9) (7) (9)
-------- -------- ------- --------
NET EARNINGS $161 $91 $278 $209
======== ======== ======= ========
Per share of common stock:
Basic earnings from continuing
operations $2.04 $1.28 $3.62 $3.01
Discontinued operations, net of tax - (0.12) (0.09) (0.13)
-------- -------- ------- --------
Basic net earnings $2.04 $1.16 $3.53 $2.88
======== ======== ======= ========
Diluted earnings from continuing
operations $2.00 $1.26 $3.55 $2.96
Discontinued operations, net of tax - (0.12) (0.09) (0.13)
-------- -------- ------- --------
Diluted net earnings $2.00 $1.14 $3.46 $2.83
======== ======== ======= ========
Dividends declared $.43 $.43 $.86 $.86
Weighted-average shares outstanding
(millions):
Basic 78.8 78.0 78.8 72.4
Diluted 80.5 79.4 80.2 73.7
WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(millions of dollars)
(Unaudited)
June 30, December 31,
2007 2006
----------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $343 $262
Trade receivables, less allowances
(2007: $85; 2006: $84) 2,683 2,676
Inventories 2,810 2,348
Deferred income taxes 374 372
Other current assets 656 578
Assets of discontinued operations - 240
----------- -----------
Total Current Assets 6,866 6,476
----------- -----------
OTHER ASSETS
Investment in affiliated companies 18 23
Goodwill, net 1,760 1,663
Other intangibles, net 1,855 1,871
Deferred income taxes 534 513
Other assets 176 175
----------- -----------
4,343 4,245
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 90 94
Buildings 1,170 1,174
Machinery and equipment 7,433 7,186
Accumulated depreciation (5,613) (5,297)
----------- -----------
3,080 3,157
----------- -----------
Total Assets $14,289 $13,878
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $788 $521
Accounts payable 3,191 2,945
Employee compensation 416 420
Accrued advertising and promotions 404 550
Deferred income taxes 63 74
Accrued expenses 667 698
Pension benefits 16 16
Postretirement benefits 97 97
Restructuring costs 119 177
Income taxes 37 79
Other current liabilities 287 287
Current maturities of long-term debt 137 17
Liabilities of discontinued
operations - 121
----------- -----------
Total Current Liabilities 6,222 6,002
----------- -----------
OTHER LIABILITIES
Deferred income taxes 313 352
Pension benefits 801 838
Postretirement benefits 1,221 1,207
Other liabilities 431 350
Long-term debt 1,677 1,798
----------- -----------
4,443 4,545
----------- -----------
MINORITY INTERESTS 57 48
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value:
Shares authorized - 250 million 103 102
Shares issued - 103 million
(2007); 102 million (2006)
Shares outstanding - 78 million
(2007); 78 million (2006)
Paid-in capital 1,951 1,869
Retained earnings 3,407 3,205
Accumulated other comprehensive loss (543) (643)
Treasury stock - 25 million shares (2007);
24 million shares (2006) (1,351) (1,250)
----------- -----------
Total Stockholders' Equity 3,567 3,283
----------- -----------
Total Liabilities and Stockholders'
Equity $14,289 $13,878
=========== ===========
WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30
(millions of dollars)
2007 2006
----------- -----------
OPERATING ACTIVITIES OF CONTINUING
OPERATIONS
Net earnings $278 $209
Loss from discontinued operations 7 9
----------- -----------
Earnings from continuing
operations 285 218
Adjustments to reconcile earnings
from continuing operations to net
cash flows (used in) provided by
continuing operating activities:
Equity in losses (earnings) of
affiliated companies, less dividends
received 4 (2)
(Gain) loss on disposition of assets (12) 8
Depreciation and amortization 292 237
Changes in assets and liabilities,
net of business acquisitions:
Trade receivables (9) 82
Inventories (429) (351)
Accounts payable 162 (9)
Restructuring charges, net of
cash paid (61) (9)
Taxes deferred and payable, net 38 (11)
Accrued pension (9) 47
Accrued payroll and other
compensation (45) (66)
Other - net (222) (63)
----------- -----------
Cash (Used In) Provided By Continuing
Operating Activities (6) 81
----------- -----------
INVESTING ACTIVITIES OF CONTINUING
OPERATIONS
Capital expenditures (202) (233)
Proceeds from sale of assets 20 6
Proceeds from sale of Maytag adjacent
businesses 100 -
Purchase of minority interest shares - (53)
Acquisition of businesses, net of
cash acquired - (795)
----------- -----------
Cash Used In Investing Activities of
Continuing Operations (82) (1,075)
----------- -----------
FINANCING ACTIVITIES OF CONTINUING
OPERATIONS
Net proceeds of short-term borrowings 261 198
Proceeds from borrowings of long-term
debt 3 748
Repayments of long-term debt (8) (190)
Dividends paid (68) (62)
Purchase of treasury stock (101) -
Common stock issued under stock plans 51 40
Other 10 11
----------- -----------
Cash Provided By Financing Activities
of Continuing Operations 148 745
----------- -----------
Cash Provided By Discontinued
Operations
Operating Activities 6 12
Investing Activities - (2)
----------- -----------
Cash Provided By Discontinued
Operations 6 10
----------- -----------
Effect of Exchange Rate Changes on
Cash and Equivalents 15 16
----------- -----------
Increase (Decrease) in Cash and
Equivalents 81 (223)
Cash and Equivalents at Beginning of
Period 262 524
----------- -----------
Cash and Equivalents at End of Period $343 $301
=========== ===========
First Call Analyst:
FCMN Contact: angela_m_hersil@whirlpool.com
SOURCE: Whirlpool Corporation
CONTACT: Media, Monica Teague, +1-269-923-8037,
Web site: http://www.whirlpoolcorp.com/