Whirlpool Corporation FY2021 Form 10-K Summary
Business context and reporting period
Whirlpool Corporation manufactures and markets major and small home appliances through four geographic segments: North America, Europe, Middle East and Africa (EMEA), Latin America, and Asia. Products include laundry, refrigeration, cooking, dishwashing, spare parts, warranties, and related services. The filing covers the fiscal year ended December 31, 2021, rather than a standalone fourth quarter. Whirlpool had approximately $22.0 billion of annual sales and 69,000 employees in 2021.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net sales | $21.985 billion | $19.456 billion | 13.0% increase |
| Gross margin | 20.1% | 19.7% | 40 basis-point increase |
| Operating profit | $2.348 billion | $1.615 billion | Increase |
| Net earnings available to Whirlpool | $1.783 billion | $1.075 billion | 65.9% increase |
| Net earnings margin | 8.1% | 5.6% | Increase |
| Diluted EPS | $28.36 | $16.98 | 67.0% increase |
| Ongoing EPS | $26.59 | $18.46 | Increase |
| Ongoing EBIT margin | 10.8% | 9.0% | 180 basis-point increase |
| Cash from operating activities | $2.176 billion | $1.500 billion | Increase |
| Adjusted free cash flow | $1.963 billion | $1.246 billion | Increase |
Growth was primarily driven by favorable product price and mix, with foreign-currency-adjusted sales increasing 12.3%. Management stated that price and mix and cost reductions more than offset approximately $1.0 billion of raw-material inflation and additional logistics costs.
Ending cash and cash equivalents were $3.044 billion. Gross debt was approximately $5.237 billion, and gross debt leverage was 1.8 times ongoing EBITDA. Whirlpool had $298 million of long-term debt maturing within the next twelve months, $10 million of notes payable, and approximately $3.7 billion of committed credit facilities with no borrowings outstanding under those facilities.
Material changes versus the prior comparable period
- North America sales increased 11.4%; EBIT margin increased to 17.8% from 15.7%.
- EMEA sales increased 15.9%; EBIT margin improved to 2.0% from breakeven.
- Latin America sales increased 22.2%; EBIT margin remained 8.4%.
- Asia sales decreased 2.1%, principally because of the Whirlpool China divestiture; EBIT margin improved to 5.4% from negative 0.5%.
- Whirlpool completed the partial tender offer for Whirlpool China, received approximately $193 million of cash, recognized a $284 million gain, and retained an approximately 20% equity interest.
- Whirlpool sold its Turkish subsidiary for approximately $93 million and recorded a total loss of approximately $177 million, including subsequent purchase-price adjustments.
- Restructuring costs declined to $38 million from $288 million. Management expects less than $50 million of restructuring charges in 2022.
- The company repurchased approximately 4.8 million shares for approximately $1.0 billion and paid $338 million of dividends. The quarterly dividend was increased 12% to $1.40 per share.
- Whirlpool issued $300 million of 2.4% sustainability-linked senior notes due 2031 and used the proceeds to redeem $300 million of higher-coupon notes.
Guidance, outlook, commentary, risks, and unusual items
For 2022, management provided diluted EPS guidance of $27.00 to $29.00, operating cash flow guidance of approximately $2.2 billion, and free cash flow guidance of approximately $1.5 billion, based on capital expenditures of approximately $700 million. The projected tax rate is 24.0% to 26.0%. Industry-demand assumptions are 2% to 3% growth in North America, flat to 2% growth in EMEA, a 4% to 2% decline in Latin America, and 5% to 6% growth in Asia.
Management expects supply constraints, elevated inflationary costs, and logistics pressures to continue in 2022, partially offset by cost-based price increases and favorable price/mix. The company also expects seasonal revenue and margin patterns to return closer to historical norms after pandemic-related disruptions.
- COVID-19, component shortages, labor constraints, transportation disruptions, and inflation may reduce production capacity and increase costs.
- Raw-material inflation was approximately $1.0 billion in 2021; further commodity, logistics, and wage inflation is expected.
- Sales to Lowe’s represented approximately 13% of consolidated sales and 21% of accounts receivable at December 31, 2021, creating customer-concentration and credit exposure.
- Whirlpool had approximately $0.5 billion of aggregate unfunded pension and postretirement obligations, including $0.3 billion for pension plans and $0.2 billion for postretirement health care benefits.
- The company recorded a $98 million tax reserve in the fourth quarter related to an unfavorable U.S. tax litigation ruling and has petitioned for rehearing.
- Potentially material contingencies include Brazilian tax assessments of approximately $362 million related to BEFIEX credits, additional Brazilian tax matters, the ongoing French Competition Authority investigation, product-liability and class-action litigation, and retained Embraco antitrust liabilities. The filing does not provide a clear aggregate probable-loss estimate for these matters.
- The Maytag trademark was identified as at risk in impairment sensitivity analysis. No goodwill or intangible-asset impairment charge was recorded in 2021.
- The company continues a U.K. and Ireland recall involving certain legacy Indesit-designed washers; the remaining reserve was $286 million for total product warranties at year-end, although the filing does not identify the portion attributable to this recall.
Important facts for investors to verify
- Reconcile GAAP earnings and cash flow with ongoing EBIT, ongoing EPS, adjusted free cash flow, and gross debt leverage, because these non-GAAP measures exclude selected items and may not be comparable with other companies.
- Assess whether price increases and cost reductions can continue to offset inflation, supply-chain disruption, and potential volume declines.
- Review the terms, maturity profile, and covenants of the approximately $5.2 billion gross debt, including the $298 million maturity in 2022.
- Monitor customer concentration, particularly Lowe’s receivables exposure, and the $1.4 billion of supplier-finance balances recorded in accounts payable.
- Evaluate the potential cash and earnings impact of tax disputes, Brazilian assessments, product recalls, competition investigations, and other litigation.
- Test the sensitivity of the 2022 outlook to demand, currency movements, commodity prices, working capital, and capital expenditures.
- Confirm the treatment and ongoing economics of the retained Whirlpool China investment and the acquisition of additional Elica PB India interest.