Whirlpool Corporation 2023 Q1 SEC Filing Summary
Business context and reporting period
Whirlpool Corporation manufactures and markets home appliances globally through North America, EMEA, Latin America and Asia. This Form 10-Q covers the three months ended March 31, 2023, compared with the same period in 2022. The company had approximately $20 billion of 2022 annual sales and 61,000 employees.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Net sales | $4.649 billion | $4.920 billion | Down 5.5% |
| Gross margin | $763 million; 16.4% | $851 million; 17.3% | Down 90 basis points |
| Operating profit | $43 million | $461 million | Material decline |
| Net earnings available to Whirlpool | $(179) million | $313 million | Turned to loss |
| Diluted EPS | $(3.27) | $5.33 | Material decline |
| Ongoing diluted EPS | $2.66 | $5.31 | Down 50% |
| Ongoing EBIT margin | 5.4% | 9.4% | Down 400 basis points |
| Cash used in operating activities | $(477) million | $(328) million | Higher cash use |
| Free cash flow | $(573) million | $(415) million | Higher cash use |
Results were pressured by weaker industry demand, unfavorable price/mix, cost inflation, productivity impacts and higher selling, general and administrative expense. The reported loss also included a $222 million loss adjustment related to the planned EMEA transaction and $62 million of legacy EMEA legal matters. Management reported ongoing EBIT of $251 million, excluding those items.
Cash flow, liquidity and debt
- Cash and cash equivalents were $1.359 billion at March 31, 2023, down from $1.958 billion at December 31, 2022.
- Operating cash flow was negative primarily because of lower cash earnings and unfavorable working-capital movements, including higher accounts receivable and inventories.
- Capital expenditures were $96 million; cash used in investing activities was $110 million.
- Total debt was approximately $7.7 billion, consisting of $300 million of current maturities, $7.382 billion of long-term debt and $9 million of notes payable.
- The company had $2.5 billion outstanding under its term loan facility, which was used principally to fund the $3 billion InSinkErator acquisition. The term loan matures in tranches in April 2024 and October 2025.
- Whirlpool maintained a $3.5 billion revolving credit facility and reported compliance with applicable interest-coverage covenants. Approximately $300 million of long-term debt matures within the next twelve months.
- The company declared a quarterly dividend of $1.75 per share and made $97 million of dividend payments during the quarter. No share repurchases occurred.
Material changes versus the prior comparable period
- Sales decreased 5.5%, or 3.7% excluding foreign-currency effects, reflecting lower demand and unfavorable price/mix.
- North America sales declined 1.6% and EBIT margin fell to 10.0% from 16.3%, primarily because of cost inflation and product/price mix.
- EMEA sales declined 18.0%, while EBIT margin improved to 0.6% from negative 2.5%, partly because of held-for-sale accounting and favorable price/mix.
- Latin America sales were approximately flat, but EBIT margin declined to 5.2% from 7.1% because of cost inflation and foreign-currency effects.
- Asia sales declined 10.2%, and EBIT margin declined to 3.1% from 4.8%, primarily due to currency and price/mix.
- Interest expense increased to $75 million from $41 million, primarily because of higher debt associated with the InSinkErator acquisition.
- SG&A increased to $487 million from $376 million, reflecting higher employee compensation accruals, marketing investments and the absence of a prior-year sale-leaseback gain.
- Operating cash flow worsened to negative $477 million from negative $328 million. The prior-year period included $533 million of share repurchases; there were none in Q1 2023.
Guidance, outlook and unusual items
- Full-year 2023 GAAP diluted EPS guidance was $13.00 to $15.00. The outlook includes per-share adjustments for M&A transactions, legacy EMEA legal matters and tax effects.
- Management expected 2023 operating cash flow of approximately $1.4 billion, capital expenditures of approximately $600 million and free cash flow of approximately $800 million.
- Expected industry demand changes were negative 6% to negative 4% in North America and EMEA, negative 3% to negative 1% in Latin America, and positive 2% to positive 4% in Asia.
- Whirlpool expected less than $50 million of restructuring charges for full-year 2023.
- The planned combination of Whirlpool’s European major domestic appliance business with Arcelik’s European businesses was expected to close in the second half of 2023, subject to conditions. Whirlpool expects to own approximately 25% of the combined entity.
- The EMEA transaction generated a cumulative reported loss of $1.743 billion through March 31, 2023, including the $222 million first-quarter adjustment. Further reassessments may affect future periods.
- Maytag and JennAir trademarks remained at risk for potential impairment, although no impairment-triggering events were identified in the quarter.
Risks, contingencies and other considerations
- Macroeconomic volatility, weak demand, foreign exchange, raw-material and component costs, supply-chain disruptions, geopolitical events and the Russia-Ukraine conflict could materially affect results.
- Brazilian tax assessments related to BEFIEX, IPI and PIS/COFINS matters totaled approximately $544 million based on amounts disclosed in the filing; Whirlpool had not accrued amounts for these assessments and is contesting them.
- Legacy EMEA legal matters had an aggregate accrual of $62 million. The French Competition Authority investigation remains ongoing.
- Product-liability, class-action, warranty and potential quality or safety matters could result in material charges. Product warranty reserves were $192 million at March 31, 2023.
- Off-balance-sheet guarantees, letters of credit and surety bonds totaled approximately $438 million. Brazilian customer credit guarantees totaled approximately $168 million.
- Supplier-finance programs involved approximately $1.2 billion issued to participating financial institutions and recorded within accounts payable.
- The company was pursuing a business-interruption insurance claim related to the 2021 Texas freeze; any future gain was not quantified.
Most important facts for investors to verify
- Whether the Arcelik transaction closes on schedule and whether additional fair-value adjustments or transaction costs arise.
- Whether management achieves the $13.00–$15.00 full-year GAAP EPS outlook and approximately $800 million of free cash flow.
- Whirlpool’s ability to refinance or repay the $300 million of debt maturing within twelve months and manage the April 2024 term-loan maturity.
- Progress in restoring margins amid weaker appliance demand, inflation, unfavorable mix and foreign-currency pressure.
- Potential cash or earnings effects from Brazilian tax disputes, legacy EMEA legal matters, product claims and other contingencies.
- Whether Maytag or JennAir valuation declines trigger future goodwill or indefinite-lived trademark impairment.