Whirlpool (WHR) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's Q1 2023 results show a net loss and decreased sales, driven by a business disposal loss Consolidated Condensed Statements of Comprehensive Income (Loss) Q1 2023 net sales fell 5.5% to $4.65 billion, resulting in a net loss of $179 million due to a business disposal Q1 2023 vs Q1 2022 Income Statement Highlights | Metric | Q1 2023 (Millions) | Q1 2022 (Millions) | Change | | :--- | :--- | :--- | :--- | | Net sales | $4,649 | $4,920 | -5.5% | | Gross margin | $763 | $851 | -10.3% | | Operating profit (loss) | $43 | $461 | -90.7% | | (Gain) loss on sale and disposal of businesses | $222 | $0 | N/A | | Net earnings (loss) available to Whirlpool | $(179) | $313 | N/A | | Diluted net earnings (loss) per share | $(3.27) | $5.33 | N/A | Consolidated Condensed Balance Sheets Total assets and stockholders' equity decreased slightly to $16.86 billion and $2.23 billion respectively by March 31, 2023 Balance Sheet Summary | Metric (Millions of dollars) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $6,095 | $6,394 | | Total assets | $16,864 | $17,124 | | Total current liabilities | $5,982 | $5,931 | | Total liabilities | $14,630 | $14,618 | | Total stockholders' equity | $2,234 | $2,506 | Consolidated Condensed Statements of Cash Flows Cash used in operations increased to $477 million, contributing to an overall $599 million decrease in cash for Q1 2023 Cash Flow Summary (Three Months Ended March 31) | Activity (Millions of dollars) | 2023 | 2022 | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $(477) | $(328) | | Cash provided by (used in) investing activities | $(110) | $(12) | | Cash provided by (used in) financing activities | $(38) | $(631) | | Increase (decrease) in cash | $(599) | $(930) | Notes to the Consolidated Condensed Financial Statements Notes detail the EMEA business disposal, InSinkErator acquisition goodwill, new debt, and key risks and contingencies - The company's JennAir and Maytag trademarks continue to be at risk for future impairment due to potential negative impacts from market conditions[30][31] - In February 2023, the company issued $300 million of 5.5% Senior Notes due 2033 to repay existing notes and for general corporate purposes[55] - The company faces significant outstanding tax assessments in Brazil, including approximately $428 million related to BEFIEX credits[74][75] - An additional loss of $222 million was recorded in Q1 2023 for the EMEA business divestiture, bringing the total estimated loss to $1.743 billion[137][176] - The InSinkErator acquisition resulted in a preliminary goodwill allocation of $1.15 billion from a total purchase price of $3.021 billion[143] Disaggregated Revenue by Major Product Category (Three Months Ended March 31) | Product Category (Millions) | 2023 | 2022 | | :--- | :--- | :--- | | Laundry | $1,295 | $1,333 | | Refrigeration | $1,372 | $1,528 | | Cooking | $1,092 | $1,281 | | Dishwashing | $432 | $450 | | Total major product category | $4,191 | $4,592 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the sales decline, the impact of the EMEA disposal, and reaffirms full-year 2023 guidance Results of Operations Q1 2023 saw a 5.5% sales decline and contracting margins across most regions, impacted by the EMEA disposal loss - North America's net sales decreased 1.6%, with EBIT declining due to cost inflation and unfavorable product/price mix[162][163] - EMEA's net sales decreased 18.0%, but EBIT improved due to favorable price/mix and held-for-sale accounting benefits[165][166] - Consolidated SG&A expenses increased to 10.5% of net sales from 7.6%, driven by higher compensation and marketing costs[173] Segment EBIT Margin (Three Months Ended March 31) | Region | 2023 EBIT Margin | 2022 EBIT Margin | | :--- | :--- | :--- | | North America | 10.0% | 16.3% | | EMEA | 0.6% | (2.5)% | | Latin America | 5.2% | 7.1% | | Asia | 3.1% | 4.8% | Financial Condition and Liquidity Liquidity is supported by $1.4 billion in cash and credit facilities, despite a $477 million operating cash outflow - Cash used in operating activities increased to $(477) million in Q1 2023 from $(328) million in Q1 2022 due to lower cash earnings[196] - The company maintains total committed credit facilities of approximately $6.2 billion, with $2.5 billion drawn to fund the InSinkErator acquisition[200] - Cash and cash equivalents stood at approximately $1.4 billion at March 31, 2023, with the majority held in the United States[187] Non-GAAP Financial Measures Non-GAAP measures adjust for items like the EMEA disposal, showing ongoing EBIT of $251 million and EPS of $2.66 GAAP to Non-GAAP Reconciliation (Q1 2023) | Metric (Millions, except per share) | GAAP | Adjustments | Ongoing (Non-GAAP) | | :--- | :--- | :--- | :--- | | EBIT | $(33) | $284 | $251 | | Impact of M&A transactions | | $222 | | | Legacy EMEA legal matters | | $62 | | | Diluted EPS | $(3.27) | $5.93 | $2.66 | Forward-Looking Perspective The company reaffirms its 2023 outlook, projecting GAAP EPS of $13.00-$15.00 and free cash flow of ~$800 million Full-Year 2023 Outlook | Metric | Current Outlook | | :--- | :--- | | Estimated GAAP EPS | $13.00 - $15.00 | | Cash from operating activities | ~$1,400 million | | Free cash flow | ~$800 million | 2023 Industry Demand Forecast | Region | Demand Change | | :--- | :--- | | North America | (6)% - (4)% | | EMEA | (6)% - (4)% | | Latin America | (3)% - (1)% | | Asia | 2% - 4% | Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposures were reported since year-end 2022 - There have been no material changes to the company's market risk exposures since December 31, 2022[220] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[221] - No material changes in internal control over financial reporting occurred during the quarter[221] PART II. OTHER INFORMATION Legal Proceedings Details on legal proceedings are cross-referenced to specific notes in the financial statements - Details on legal proceedings are cross-referenced to Note 6 and Note 11 of the Consolidated Condensed Financial Statements[223] Risk Factors No material changes in risk factors were reported compared to the latest annual report - No material changes in risk factors were reported compared to the latest Form 10-K[224] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase shares in Q1 2023, with $2.6 billion remaining under its repurchase authorization - No shares were repurchased during the first quarter of 2023[225][226] - Approximately $2.6 billion remains available for share repurchases under the authorized program as of March 31, 2023[225]