Whirlpool Corporation Reports Resilient Second-Quarter 2020 Results, Despite Impact of COVID-19 Crisis

Rhea-AI Summary

Whirlpool Corporation (NYSE: WHR) reported challenging financial results for Q2 2020, with net sales dropping to $4.042 billion, a 22.1% decline from $5.186 billion in 2019. The company experienced a significant reduction in GAAP net earnings, falling to $35 million, a 48.2% decrease. Ongoing EBIT also decreased by 42.1% to $210 million. However, the company reported a strong cash position of $2.5 billion and implemented significant cost-cutting measures amid the COVID-19 pandemic. Future outlook anticipates a net sales decline of 10-15% for the year.

Positive

• Strong liquidity with $2.5 billion cash balance.
• Successful cost-cutting measures expected to save over $500 million in 2020.

Negative

• Net sales decreased by 22.1%, from $5.186 billion to $4.042 billion.
• GAAP net earnings fell by 48.2%, from $67 million to $35 million.
• Ongoing EBIT decreased by 42.1%, from $363 million to $210 million.
• Significant decline in regional sales, particularly in Latin America (-51.1%) and Asia (-37.1%).

BENTON HARBOR, Mich., July 22, 2020 /PRNewswire/ -- Whirlpool Corporation (NYSE: WHR) today reported financial results for the second-quarter of 2020.

"Delivering a solid Q2 performance despite the far reaching impact of COVID-19 on our business is the result of the decisive actions we took throughout the quarter and ultimately demonstrates the resilience of our business model," said Marc Bitzer, chairman and chief executive officer of Whirlpool Corporation. "While we recognize the uncertainty and volatility which lies ahead of us, we are proud of the way in which we managed through the most difficult quarter of this global crisis."

- Marc Bitzer, Chairman and Chief Executive Officer

KEY RESULTS

Second-Quarter Results	2020	2019	Change
Net sales ($M)	$4,042	$5,186	$(1,144)	(22.1)%
Organic net sales(5) ($M)	$4,191	$4,863	$(672)	(13.8)%
GAAP net earnings available to Whirlpool ($M)	$35	$67	$(32)	(48.2)%
Ongoing EBIT(2) ($M)	$210	$363	$(153)	(42.1)%
GAAP earnings per diluted share	$0.55	$1.04	$(0.49)	(46.9)%
Ongoing earnings per diluted share(1)	$2.15	$4.01	$(1.86)	(46.4)%

CASH FLOW

Year-to-Date Cash Flow	2020 YTD	2019 YTD	Change
Cash provided by (used in) operating activities ($M)	$(745)	$(821)	9.3%
Free Cash Flow(4) ($M)	$(873)	$(997)	12.4%

QUARTERLY HIGHLIGHTS

• Q2 GAAP net earnings margin was 0.9 percent, compared to 1.3 percent in the same prior-year period. Prior-year results were unfavorably impacted by a $79 million loss primarily related to the sale of our South Africa business, partially offset by a $53 million gain related to a Brazil indirect tax credit and certain favorable tax items.
• Ongoing EBIT margin⁽²⁾ was 5.2 percent, compared to 7.0 percent in the same prior-year period as COVID-19 related disruptions of nearly 300 basis points were mitigated by significant and decisive cost actions.
• Strong liquidity position with a cash balance of $2.5 billion as of June 30, 2020 and approximately $2.5 billion available under committed credit facilities.

 

"Our strong second-quarter results are a testament to our operational strength and the perseverance of our global team," said Jim Peters, chief financial officer of Whirlpool Corporation. "In the quarter, we delivered solid cost takeout globally and strong cash flow improvement through disciplined working capital management. The actions we took earlier this year to sustain our margins and protect our liquidity strengthened our ability to succeed through the ongoing COVID-19 pandemic and have prepared us to withstand current economic uncertainty."

- Jim Peters, Chief Financial Officer

REGIONAL REVIEW

North America	Q2 2020	Q2 2019	Change	Change excluding currency impact
Net sales ($M)	$2,501	$2,858	(12.5)%	(12.3)%
EBIT(3) ($M)	$316	$353	(10.6)%	-

 

• COVID-19 related sales impact less than other regions, with early signs of demand recovery in June.
• Second-quarter EBIT margin⁽³⁾ was 12.6 percent, compared to 12.4 percent in the same prior-year period, as strong cost discipline and reduced marketing investments offset negative demand.

 

Europe, Middle East and Africa	Q2 2020	Q2 2019	Change	Change excluding currency impact
Net sales ($M)	$836	$1,032	(19.0)%	(17.0)%
EBIT(3) ($M)	$(66)	$(16)	(313.1)%	-

 

• Demand recovery in June resulted in net sales growth and positive EBIT for the month.
• Second-quarter EBIT margin⁽³⁾ was (7.9) percent, compared to (1.6) percent in the same prior-year period, driven by the unfavorable impact of lower volumes.

 

Latin America	Q2 2020	Q2 2019	Change	Change excluding currency impact
Net sales ($M)	$434	$888	(51.1)%	(39.0)%
EBIT(3) ($M)	$11	$56	(80.5)%	-

 

• Organic net sales⁽⁵⁾ decreased 4.1 percent as share gains were offset by negative Mexico demand.
• Second-quarter EBIT margin⁽³⁾ was 2.5 percent, compared to 6.3 percent in the same prior-year period, as strong cost actions were offset by lower volumes and unfavorable currency. The Latin America region's second-quarter 2019 results include $23 million of EBIT⁽³⁾ related to the Embraco compressor business.

 

Asia	Q2 2020	Q2 2019	Change	Change excluding currency impact
Net sales ($M)	$271	$430	(37.1)%	(33.7)%
EBIT(3) ($M)	$(18)	$15	nm	-

 

• Net sales significantly impacted by India shutdown in April/May with recovery across the region in June.
• EBIT⁽³⁾ declined as cost takeout actions were offset by significant demand weakness across the region.

2020 PERSPECTIVE

While the full impact of COVID-19 on future business results remains uncertain, the Company is updating its perspective on 2020:

• Expects full-year 2020 net sales decline of approximately 10 percent to 15 percent (previously 13 percent to 18 percent) and organic net sales⁽⁵⁾ decline of 7 percent to 12 percent (previously 10 percent to 15 percent)
• Our COVID-19 response plan is on track to deliver over $500 million in cost takeout (including raw materials savings) in 2020 through the following actions:
• Capturing raw material deflation opportunities
• Significantly reducing structural and discretionary costs
• Continue to effectively and efficiently manage working capital
• Adjust supply chain and labor levels to match demand environment

 

(1)	A reconciliation of ongoing earnings per diluted share, a non-GAAP financial measure, to reported net earnings per diluted share available to Whirlpool and other important information, appears below.
(2)	A reconciliation of earnings before interest and taxes (EBIT) and ongoing EBIT, non-GAAP financial measures, to reported net earnings available to Whirlpool, and a reconciliation of EBIT margin and ongoing EBIT margin, non-GAAP financial measures, to net earnings margin and other important information, appears below.
(3)	Segment EBIT and Ongoing Segment EBIT represents our consolidated EBIT broken down by the Company's reportable segments and are metrics used by the chief operating decision maker in accordance with ASC 280. Consolidated EBIT also includes corporate "Other/Eliminations" of $(151) million and $(154) million for the second quarters of 2020 and 2019, respectively. Ongoing segment EBIT includes certain adjustments to segment EBIT, and a reconciliation and other important information, appears below. EMEA Q2 2019 EBIT and EBIT margin reflects ongoing results, which excludes $12 million in legacy product warranty expense.
(4)	A reconciliation of free cash flow, a non-GAAP financial measure, to cash provided by (used in) operating activities and other important information, appears below.
(5)	Organic net sales reflects net sales excluding the impact of foreign currency and the Embraco divestiture.

About Whirlpool Corporation
Whirlpool Corporation (NYSE: WHR) is the leading kitchen and laundry appliance company in the world, with approximately $20 billion in annual sales, 77,000 employees and 59 manufacturing and technology research centers in 2019. The company markets Whirlpool, KitchenAid, Maytag, Consul, Brastemp, Amana, Bauknecht, JennAir, Indesit and other major brand names in nearly every country throughout the world. Additional information about the company can be found at whirlpoolcorp.com.

Website Disclosure
We routinely post important information for investors on our website, whirlpoolcorp.com, in the "Investors" section. We also intend to update the Hot Topics Q&A portion of this webpage as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our webpage is not incorporated by reference into, and is not a part of, this document.

Whirlpool Additional Information:
This document contains forward-looking statements about Whirlpool Corporation and its consolidated subsidiaries ("Whirlpool") that speak only as of this date. Whirlpool disclaims any obligation to update these statements. Forward-looking statements in this document may include, but are not limited to, statements regarding expected net sales and organic net sales, earnings, regional profitability, restructuring charges, cash flow, order pipeline, and raw material prices, and the impact of the COVID-19 pandemic on our operations and financial condition, our ability to weather COVID-19 related economic uncertainty, sustain margins and protect liquidity, achieve net cost and raw material savings, manage working capital, capture raw material deflation opportunities, mitigate volume deleveraging, maintain credit ratings, the adequacy of our liquidity resources and financial covenant buffers during the crisis, and our recovery timing expectations, belief that Q2 2020 represents the trough of the crisis, rebound actions and growth opportunities and ability to win in the economic recovery following the crisis. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool's forward-looking statements. Among these factors are: (1) COVID-19 pandemic-related business disruption and economic uncertainty; (2) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers, and the impact of the changing retail environment, including direct-to-consumer sales; (3) Whirlpool's ability to maintain or increase sales to significant trade customers and the ability of these trade customers to maintain or increase market share; (4) Whirlpool's ability to maintain its reputation and brand image; (5) the ability of Whirlpool to achieve its business plans, productivity improvements, and cost control objectives, and to leverage its global operating platform, and accelerate the rate of innovation; (6) Whirlpool's ability to obtain and protect intellectual property rights; (7) acquisition and investment-related risks, including risks associated with our past acquisitions, and risks associated with our increased presence in emerging markets; (8) risks related to our international operations, including changes in foreign regulations, regulatory compliance and disruptions arising from political, legal and economic instability; (9) information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks; (10) product liability and product recall costs; (11) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (12) our ability to attract, develop and retain executives and other qualified employees; (13) the impact of labor relations; (14) fluctuations in the cost of key materials (including steel, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (15) Whirlpool's ability to manage foreign currency fluctuations; (16) impacts from goodwill impairment and related charges; (17) triggering events or circumstances impacting the carrying value of our long-lived assets; (18) inventory and other asset risk; (19) the uncertain global economy and changes in economic conditions which affect demand for our products; (20) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and postretirement benefit plans; (21) changes in LIBOR, or replacement of LIBOR with an alternative reference rate; (22) litigation, tax, and legal compliance risk and costs, especially if materially different from the amount we expect to incur or have accrued for, and any disruptions caused by the same; (23) the effects and costs of governmental investigations or related actions by third parties; and (24) changes in the legal and regulatory environment including environmental, health and safety regulations, and taxes and tariffs. Additional information concerning these and other factors can be found in Whirlpool'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.

Additional information concerning these and other factors can be found in Whirlpool'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. The number one major appliance manufacturer in the world claim is based on most recently available publicly reported annual revenues among leading appliance manufacturers.

 

WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE PERIODS ENDED JUNE 30
(Millions of dollars, except per share data)
	Three Months Ended		Six Months Ended
	2020		2019		2020		2019
Net sales	$	4,042			$	5,186			$	8,367			$	9,946
Expenses
Cost of products sold	3,411			4,254			7,036			8,202
Gross margin	631			932			1,331			1,744
Selling, general and administrative	421			584			841			1,089
Intangible amortization	15			18			30			36
Restructuring costs	118			60			123			86
(Gain) loss on sale and disposal of businesses	—			79			—			79
Operating profit	77			191			337			454
Other (income) expense
Interest and sundry (income) expense	(15)			(63)			(16)			(193)
Interest expense	49			52			92			103
Earnings before income taxes	43			202			261			544
Income tax expense (benefit)	18			130			89			(2)
Net earnings	25			72			172			546
Less: Net earnings (loss) available to noncontrolling interests	(10)			5			(15)			8
Net earnings available to Whirlpool	$	35			$	67			$	187			$	538
Per share of common stock
Basic net earnings available to Whirlpool	$	0.55			$	1.04			$	2.98			$	8.42
Diluted net earnings available to Whirlpool	$	0.55			$	1.04			$	2.97			$	8.35
Dividends declared	$	1.20			$	1.20			$	2.40			$	2.35
Weighted-average shares outstanding (in millions)
Basic	62.4			63.8			62.6			63.9
Diluted	62.7			64.3			63.0			64.4
Comprehensive income	$	9			$	16			$	61			$	583

 

WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Millions of dollars, except share data)
	(Unaudited)
	June 30, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	2,546			$	1,952
Accounts receivable, net of allowance of $135 and $132, respectively	1,998			2,198
Inventories	2,129			2,438
Prepaid and other current assets	906			810
Total current assets	7,579			7,398
Property, net of accumulated depreciation of $6,497 and $6,444, respectively	3,132			3,301
Right of use assets

FAQ

What were Whirlpool's net sales for Q2 2020?

Whirlpool's net sales for Q2 2020 were $4.042 billion, a decline of 22.1% compared to the same period in 2019.

How much did Whirlpool's GAAP net earnings drop in Q2 2020?

Whirlpool's GAAP net earnings dropped to $35 million in Q2 2020, down 48.2% from $67 million in Q2 2019.

What is Whirlpool's outlook for full-year 2020 net sales?

Whirlpool expects a full-year 2020 net sales decline of approximately 10% to 15%.

What significant measures did Whirlpool take in response to COVID-19?

Whirlpool implemented cost-cutting measures expected to deliver over $500 million in savings in 2020 due to raw material deflation and reduced operating costs.