WHIRLPOOL CORP annual report, FY2023

Whirlpool Corporation — Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report, not a standalone fourth-quarter filing; fourth-quarter information is included within the full-year results. Whirlpool manufactures and markets major and small domestic appliances globally, with approximately $19.5 billion of 2023 sales and 59,000 employees. Its 2023 reportable segments were North America, EMEA, Latin America and Asia. Effective January 1, 2024, the Company reorganized into five segments, including a separate Small Domestic Appliances Global segment.

Financial Performance and Position

Metric20232022Change / commentary
Net sales$19.455 billion$19.724 billionDown 1.4%
Gross margin$3.170 billion; 16.3%$3.073 billion; 15.6%Margin improved 70 basis points
Operating profit$1.015 billion$(1.056) billionImproved primarily because 2022 included major impairment and divestiture charges
Net earnings available to Whirlpool$481 million; $8.72 diluted EPS$(1.519) billion; $(27.18) diluted EPSReturned to profitability
Ongoing EBIT$1.191 billion; 6.1% margin$1.360 billion; 6.9% marginDown $169 million; margin declined 80 basis points
Operating cash flow$915 million$1.390 billionDown $475 million
Free cash flow$366 million$820 millionDown $454 million
Dividends paid$384 million$390 millionQuarterly dividend approved at $1.75 per share
  • Sales were pressured by unfavorable price/mix and increased promotional activity as industry conditions normalized, partly offset by higher volume, North America share gains and the InSinkErator acquisition.
  • Gross margin benefited from lower raw-material costs and productivity initiatives, partly offset by unfavorable price/mix.
  • Interest expense increased to $351 million from $190 million, primarily because of higher debt associated with InSinkErator and higher interest rates.
  • Income tax expense was $77 million, including a $172 million net benefit from legal-entity restructuring, partially offset by higher valuation allowances.
  • Cash and cash equivalents were $1.570 billion at year-end, compared with $1.958 billion in 2022. Approximately 72% of cash was held by foreign subsidiaries.
  • Total debt, including current maturities, was $7.214 billion, consisting of $800 million due in 2024 and $1.850 billion due in 2025. The Company repaid approximately $450 million of net debt in 2023 and $500 million in the fourth quarter.
  • Whirlpool had approximately $5.7 billion of committed credit facilities and $17 million of notes payable at year-end. It was in compliance with applicable interest-coverage covenants.
  • Working-capital items included $2.247 billion of inventory, $1.529 billion of receivables and $3.598 billion of accounts payable.

Segment Results and Changes Versus Prior Period

Segment2023 sales change2023 EBIT marginPrior-year EBIT margin
North AmericaDown 0.4%9.7%11.5%
EMEADown 10.5%1.6%(1.4)%
Latin AmericaUp 9.0%6.0%6.4%
AsiaDown 7.5%2.7%4.9%
  • North America benefited from volume, share gains and InSinkErator, but price/mix pressure reduced EBIT margin.
  • EMEA profitability improved as raw-material inflation moderated and held-for-sale accounting benefits were recognized, but volume declined.
  • Latin America delivered higher volume and currency-related sales growth, while margin declined because of cost inflation.
  • Asia sales and margin declined because of unfavorable price/mix and currency effects, partly offset by higher volume and productivity.
  • Major product-category sales were $5.794 billion for refrigeration, $5.333 billion for laundry, $4.721 billion for cooking and $1.729 billion for dishwashing.

Portfolio Transformation, Outlook and Unusual Items

  • Whirlpool expects to contribute its European major domestic appliance business to a newly formed entity with Arcelik, retaining approximately 25% ownership while Arcelik owns approximately 75%. Whirlpool separately agreed to sell its Middle East and North Africa business to Arcelik.
  • The transactions were expected to close by April 2024, subject to remaining closing conditions. The U.K. Competition and Markets Authority provisionally cleared the transaction on February 8, 2024; final clearance was expected by March 26, 2024. The transaction will deconsolidate MDA Europe and is not reported as discontinued operations.
  • Whirlpool recorded a $106 million 2023 loss related to the planned European transaction, including a $180 million fourth-quarter gain. The cumulative loss related to the transaction was approximately $1.6 billion, following the substantial 2022 loss.
  • 2023 ongoing results excluded $181 million of M&A-related items and $94 million related to legacy EMEA legal matters. Investors should distinguish these non-GAAP adjustments from GAAP earnings.
  • Management's 2024 outlook calls for GAAP diluted EPS of $8.50 to $10.50, operating cash flow of approximately $1.150 billion to $1.250 billion and free cash flow of approximately $550 million to $650 million.
  • The outlook assumes subdued demand with gradual improvement, $300 million to $400 million of net cost-takeout benefits, approximately $600 million of capital expenditures, approximately $50 million of restructuring cash outlays and an estimated tax rate of approximately 24%.
  • Management expects 2024 industry demand of 0% to 2% in MDA North America, 0% to 3% in MDA Latin America, 4% to 6% in MDA Asia, 2% to 4% in SDA Global and negative 8% to negative 6% for MDA Europe in the first quarter.

Risks, Contingencies and Unusual Exposures

  • Demand remains sensitive to consumer confidence, housing activity, interest rates, inflation, promotional intensity and the broader global economy.
  • Whirlpool faces intense competition, retailer concentration and customer purchasing leverage. Lowe's represented approximately 13% of 2023 sales and 38% of year-end accounts receivable.
  • Supply-chain, commodity, logistics, labor, tariff, geopolitical and foreign-exchange risks remain material, despite moderation in certain cost pressures during 2023.
  • Maytag and InSinkErator indefinite-lived trademarks were identified as at risk for impairment. Their fair values exceeded carrying values by approximately 9% and 3%, respectively. Further demand deterioration or unfavorable valuation assumptions could produce impairment charges.
  • Brazilian tax assessments remain significant: approximately $470 million related to BEFIEX credits, $59 million related to IPI matters and $69 million related to PIS/COFINS input credits. The Company has not accrued amounts for these assessments and is contesting them.
  • The French Competition Authority investigation remains unresolved; Whirlpool accrued approximately $69 million in 2023 and expected the settlement to be finalized and paid in 2024.
  • The Company is investigating potential product quality and safety issues globally. Product warranty reserves were $206 million at December 31, 2023, and additional recall, repair or litigation costs could be material.
  • Aggregate pension and postretirement obligations exceeded plan assets by approximately $0.3 billion at year-end, including $0.2 billion for pensions and $0.1 billion for postretirement healthcare.
  • Cybersecurity, data privacy, product liability, environmental regulation, climate-related transition costs, labor relations and international conflicts could adversely affect operations and financial results. The Company reported no material cybersecurity impact to date.

Investor Verification Priorities

  • Verify completion, final terms, regulatory approvals and accounting consequences of the Arcelik European and MENA transactions.
  • Reconcile GAAP EPS of $8.72 with ongoing EPS of $16.16 and assess whether excluded M&A, legal, tax and restructuring items are recurring.
  • Monitor debt maturities, refinancing plans, interest expense and the effect of any Whirlpool India stake sale on leverage.
  • Test the achievability of the 2024 cost-takeout, margin, operating-cash-flow and free-cash-flow outlook against demand and promotional trends.
  • Review impairment sensitivity for the Maytag and InSinkErator trademarks and the performance of the acquired InSinkErator business.
  • Assess the potential cash and earnings impact of Brazilian tax disputes, the French competition matter and product-quality investigations.
  • Evaluate liquidity after dividends, approximately $600 million of planned capital expenditures, restructuring payments and the $800 million of debt maturing in 2024.
  • Review the forthcoming 2024 segment disclosures because the 2023 financial statements use the former geographic segment structure.