Whirlpool (WHR) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's comprehensive financial statements, including detailed notes, and management's discussion and analysis of financial condition and operating results ITEM 1. FINANCIAL STATEMENTS This chapter provides the company's unaudited consolidated condensed financial statements and detailed notes for the three and six months ended June 30, 2021 Consolidated Condensed Statements of Comprehensive Income Key Data from Consolidated Condensed Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 (Millions of USD, except per share data): | Metric | 3 Months 2021 | 3 Months 2020 | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $5,324 | $4,042 | $10,682 | $8,367 | | Cost of Sales | $4,234 | $3,417 | $8,444 | $7,039 | | Gross Profit | $1,090 | $625 | $2,238 | $1,328 | | Operating Profit | $683 | $71 | $1,301 | $334 | | Net Earnings | $580 | $20 | $1,020 | $169 | | Net Earnings Attributable to Whirlpool | $581 | $30 | $1,014 | $184 | | Diluted Net Earnings Per Share | $9.15 | $0.47 | $15.96 | $2.93 | | Dividends Declared | $1.40 | $1.20 | $2.65 | $2.40 | Consolidated Condensed Balance Sheets Key Data from Consolidated Condensed Balance Sheets as of June 30, 2021, and December 31, 2020 (Millions of USD, except share data): | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $2,968 | $2,924 | | Accounts Receivable, Net | $3,052 | $3,109 | | Inventories | $2,652 | $2,301 | | Total Current Assets | $9,403 | $9,129 | | Property, Plant and Equipment, Net | $2,734 | $3,199 | | Goodwill | $2,400 | $2,496 | | Total Assets | $20,081 | $20,436 | | Total Current Liabilities | $7,832 | $8,330 | | Long-Term Debt | $5,001 | $5,059 | | Stockholders' Equity Attributable to Whirlpool | $4,951 | $3,885 | | Total Liabilities and Stockholders' Equity | $20,081 | $20,436 | Consolidated Condensed Statements of Cash Flows Key Data from Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2021, and June 30, 2020 (Millions of USD): | Activity Type | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | | Cash Flow from Operating Activities | $646 | $(745) | | Cash Flow from Investing Activities | $(279) | $(128) | | Cash Flow from Financing Activities | $(332) | $1,605 | | Effect of Exchange Rate Changes | $(1) | $(138) | | Net Change in Cash and Cash Equivalents | $34 | $594 | | Cash and Cash Equivalents at End of Period | $2,968 | $2,546 | NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION - The company prepared unaudited consolidated condensed financial statements in accordance with GAAP and Form 10-Q, retrospectively adjusting the U.S. inventory valuation accounting principle change from LIFO to FIFO effective January 1, 2021[22][41] - The COVID-19 pandemic continues to impact the company and may materially affect future financial results, particularly estimates for goodwill, long-lived assets, deferred income taxes, and expected credit losses[26][27] - As of June 30, 2021, goodwill for the EMEA reporting unit and indefinite-lived intangible assets for Indesit, Hotpoint*, Maytag, and JennAir trademarks remain at risk of impairment[29] - The company has multiple synthetic lease agreements with financial institutions, including residual value guarantees up to $220 million as of June 30, 2021, and December 31, 2020, which the company deems unlikely to be paid[35] - The company has supply chain finance agreements allowing suppliers to sell receivables to financial institutions, with approximately $1.2 billion issued to participating financial institutions as of June 30, 2021, and December 31, 2020[37][38] - The company holds approximately 20% equity in Whirlpool China, accounted for using the equity method, and purchases products from and licenses brands to Whirlpool China and its subsidiaries[42][43] (2) REVENUE RECOGNITION Net Sales by Major Product Category (Millions of USD): | Product Category | 3 Months 2021 | 3 Months 2020 | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Laundry | $1,380 | $1,071 | $2,949 | $2,401 | | Refrigeration | $1,627 | $1,305 | $3,254 | $2,667 | | Cooking | $1,502 | $909 | $2,749 | $1,852 | | Dishwashing | $409 | $439 | $924 | $810 | | Parts and Warranty | $292 | $206 | $558 | $434 | | Other | $114 | $111 | $248 | $201 | | Total Net Sales | $5,324 | $4,042 | $10,682 | $8,367 | Allowance for Expected Credit Losses for the Six Months Ended June 30, 2021 (Millions of USD): | Category | December 31, 2020 | Charged to Earnings | Write-offs | Exchange Rate | Other | June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Allowance for Accounts Receivable | $132 | $5 | $(19) | $(4) | $(11) | $103 | | Allowance for Financing Receivables | $48 | $0 | $0 | $1 | $(21) | $28 | | Consolidated Total | $180 | $5 | $(19) | $(3) | $(32) | $131 | (3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Millions of USD): | Metric | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Cash and Cash Equivalents per Balance Sheet | $2,968 | $2,546 | | Restricted Cash in Prepaid and Other Current Assets | $0 | $0 | | Cash, Cash Equivalents, and Restricted Cash per Cash Flow Statement | $2,968 | $2,546 | | Metric | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and Cash Equivalents per Balance Sheet | $2,924 | $1,952 | | Restricted Cash in Prepaid and Other Current Assets | $10 | $0 | | Cash, Cash Equivalents, and Restricted Cash per Cash Flow Statement | $2,934 | $1,952 | (4) INVENTORIES Inventory Composition (Millions of USD): | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Finished Goods | $1,915 | $1,635 | | Raw Materials and Work-in-Process | $737 | $666 | | Total Inventories | $2,652 | $2,301 | - Effective January 1, 2021, the company changed its U.S. inventory valuation accounting principle from LIFO to FIFO[57] (5) PROPERTY, PLANT AND EQUIPMENT Property, Plant, and Equipment Composition (Millions of USD): | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Land | $84 | $92 | | Buildings | $1,297 | $1,517 | | Machinery and Equipment | $7,968 | $8,370 | | Accumulated Depreciation | $(6,615) | $(6,780) | | Property, Plant and Equipment, Net | $2,734 | $3,199 | - Net property, plant, and equipment decreased by $379 million, primarily due to the divestiture of Whirlpool China and Turkey subsidiaries[58] (6) FINANCING ARRANGEMENTS - On April 29, 2021, the company issued $300 million of 2.400% Senior Notes due 2031, using proceeds to redeem $300 million of 4.850% Senior Notes due June 2021[60] - On June 15, 2021, the $300 million 4.850% Senior Notes matured and were repaid[63] - The company has a $3.5 billion revolving credit facility and, as of June 30, 2021, was in compliance with debt capitalization and interest coverage ratio requirements[64][65] Notes Payable (Millions of USD): | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Short-Term Bank Borrowings | $10 | $12 | | Total Notes Payable | $10 | $12 | - The company transfers certain accounts receivable without recourse to financial institutions to manage customer risk, receiving $475 million in cash during the first half of 2020, with no such proceeds in the first half of 2021[70][71] (7) COMMITMENTS AND CONTINGENCIES - The company's former Embraco compressor business faces global antitrust investigations, with some claims settled but others pending, potentially having a material adverse effect on financial statements[72][73] - Brazilian operations face approximately $398 million in BEFIEX tax assessments, $52 million in IPI tax credit assessments, and $61 million in PIS/COFINS tax assessments, which the company believes are without merit and is actively defending[75][76][78] - In May 2021, the Brazilian Supreme Court ruled favorably on an ICMS tax credit case, confirming the company's right to previously recognized indirect tax credits of approximately $142 million and $54 million[83] - The company is conducting product recalls for certain Indesit-designed washing machines in the UK and Ireland, incurring approximately $3 million in recall-related settlement costs as of June 30, 2021, with total settlement costs of approximately $59 million since the activity began[93] Changes in Product Warranty Liability Reserve (Millions of USD): | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Balance, January 1 | $273 | $383 | | Issued/Accrued During Period | $185 | $108 | | Settled/Other During Period | $(149) | $(203) | | Balance, June 30 | $309 | $288 | | Current Portion | $210 | $187 | | Non-Current Portion | $99 | $101 | | Total | $309 | $288 | - The company provides customer credit line guarantees for its Brazilian subsidiaries, with total guarantees of $151 million and $57 million as of June 30, 2021, and December 31, 2020, respectively[95] (8) PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS Net Periodic Benefit Cost for the Three and Six Months Ended June 30, 2021 (Millions of USD): | Category | 3 Months 2021 | 3 Months 2020 | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | U.S. Pension Benefits | $0 | $(1) | $(2) | $(1) | | Foreign Pension Benefits | $2 | $2 | $3 | $3 | | Other Postretirement Benefits | $(10) | $(2) | $(20) | $1 | | Net Periodic Benefit Cost (Credit) | $(8) | $(1) | $(19) | $3 | - Effective January 1, 2021, the company resumed cash matching contributions for its 401(k) defined contribution plan, previously announced as company stock contributions in March 2020[98] (9) HEDGES AND DERIVATIVE FINANCIAL INSTRUMENTS - The company uses commodity derivatives, foreign currency contracts, and interest rate swaps to manage commodity price, foreign currency exchange rate, and interest rate risks, avoiding trading or speculative derivative financial instruments[101][102][103][107] Outstanding Derivative Contracts and Their Impact on Consolidated Condensed Balance Sheets as of June 30, 2021, and December 31, 2020 (Millions of USD): | Category | 2021 Notional Amount | 2020 Notional Amount | 2021 Fair Value of Hedging Assets | 2020 Fair Value of Hedging Assets | 2021 Fair Value of Hedging Liabilities | 2020 Fair Value of Hedging Liabilities | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Commodity Swaps/Options | $260 | $215 | $57 | $39 | $1 | $4 | | Foreign Currency Forwards/Options | $3,025 | $3,028 | $75 | $58 | $108 | $110 | | Cross-Currency Swaps | $1,275 | $1,275 | $24 | $23 | $49 | $86 | | Interest Rate Derivatives | $300 | $300 | $0 | $0 | $7 | $28 | | Total Hedging Derivatives | | | $156 | $120 | $165 | $228 | | Non-Hedged Foreign Currency Forwards/Options | $3,375 | $4,161 | $24 | $25 | $59 | $96 | | Total Derivatives | | | $180 | $145 | $224 | $324 | Impact of Derivative Instruments on Consolidated Condensed Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 (Millions of USD): | Category | 3 Months 2021 OCI Gain (Loss) | 3 Months 2020 OCI Gain (Loss) | 6 Months 2021 OCI Gain (Loss) | 6 Months 2020 OCI Gain (Loss) | | :--- | :--- | :--- | :--- | :--- | | Commodity Swaps/Options | $28 | $24 | $54 | $(31) | | Foreign Currency Forwards/Options | $(41) | $(10) | $7 | $95 | | Cross-Currency Swaps | $12 | $(25) | $44 | $95 | | Interest Rate Derivatives | $(26) | $5 | $20 | $(66) | | Net Investment Hedges - Foreign Currency | $(10) | $(14) | $(3) | $53 | | Total | $(37) | $(20) | $122 | $146 | (10) FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis as of June 30, 2021, and December 31, 2020 (Millions of USD): | Category | 2021 Total Cost Basis | 2020 Total Cost Basis | 2021 Level 1 | 2020 Level 1 | 2021 Level 2 | 2020 Level 2 | 2021 Total | 2020 Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Short-Term Investments | $1,963 | $2,164 | $1,755 | $1,603 | $208 | $561 | $1,963 | $2,164 | | Net Derivative Contracts | $0 | $0 | $0 | $0 | $(44) | $(179) | $(44) | $(179) | - In Q2 2021, the partial tender offer for Whirlpool China was completed and deconsolidated, with the company retaining approximately 20% equity at a fair value of $214 million[114] - In Q2 2021, the company sold its Turkey subsidiary, recording a $40 million asset impairment loss, reducing its asset carrying value to a fair value of $111 million[116] - As of June 30, 2021, and December 31, 2020, the fair value of long-term debt (including current portion) was $5.92 billion and $6.13 billion, respectively, estimated using discounted cash flow analysis with incremental borrowing rates for similar arrangements[118] (11) STOCKHOLDERS' EQUITY Changes in Stockholders' Equity for the Six Months Ended June 30, 2021, and June 30, 2020 (Millions of USD): | Metric | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Total Whirlpool Stockholders' Equity | $4,951 | $4,014 | | Noncontrolling Interests | $134 | $907 | | Total Stockholders' Equity | $5,085 | $4,921 | Net Earnings Attributable to Whirlpool for the Six Months Ended June 30, 2021, and June 30, 2020 (Millions of USD): | Metric | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Net Earnings Attributable to Whirlpool | $1,014 | $184 | | Diluted Net Earnings Per Share | $15.96 | $2.93 | | Dilutive Securities Impact | 0.5 | 0.4 | | Diluted Weighted-Average Shares Outstanding | 63.5 | 63.0 | Other Comprehensive Income (Loss) and Related Tax Effects for the Three and Six Months Ended June 30, 2021, and June 30, 2020 (Millions of USD): | Category | 3 Months 2021 Pre-Tax | 3 Months 2021 After-Tax | 3 Months 2020 Pre-Tax | 3 Months 2020 After-Tax | 6 Months 2021 Pre-Tax | 6 Months 2021 After-Tax | 6 Months 2020 Pre-Tax | 6 Months 2020 After-Tax | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Currency Translation Adjustments | $219 | $224 | $(61) | $(54) | $327 | $326 | $(233) | $(250) | | Cash Flow Hedges | $(18) | $(12) | $7 | $4 | $8 | $2 | $118 | $92 | | Pension and Other Postretirement Benefit Plans | $23 | $17 | $46 | $34 | $33 | $25 | $62 | $47 | | Other Comprehensive Income (Loss) | $224 | $229 | $(8) | $(16) | $368 | $353 | $(53) | $(111) | - On April 19, 2021, the Board approved an additional $2 billion share repurchase program with no expiration date, with approximately $2.3 billion remaining under the program as of June 30, 2021[125] (12) RESTRUCTURING CHARGES Changes in Restructuring Liabilities for the Six Months Ended June 30, 2021 (Millions of USD): | Category | December 31, 2020 | Charged to Earnings | Cash Paid | Non-Cash and Other | June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | | Employee Termination Costs | $145 | $25 | $(61) | $0 | $109 | | Asset Impairment Costs | $8 | $1 | $0 | $(1) | $8 | | Other Exit Costs | $20 | $2 | $(11) | $(3) | $8 | | Total | $173 | $28 | $(72) | $(4) | $125 | Restructuring Charges by Operating Segment for the Six Months Ended June 30, 2021 (Millions of USD): | Operating Segment | 6 Months 2021 | | :--- | :--- | | North America | $0 | | Europe, Middle East and Africa | $25 | | Latin America | $0 | | Asia | $2 | | Corporate/Other | $1 | | Total | $28 | - The company expects to incur up to $100 million in restructuring charges for the full year 2021, primarily from previously announced actions[174] (13) INCOME TAXES Income Tax Expense for the Three and Six Months Ended June 30, 2021 (Millions of USD): | Metric | 3 Months 2021 | 3 Months 2020 | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Income Tax Expense | $94 | $17 | $253 | $89 | | Earnings Before Tax | $674 | $37 | $1,273 | $258 | | Income Tax Expense at U.S. Statutory Rate (21%) | $142 | $8 | $267 | $54 | | Divestiture Tax Impact | $(21) | $0 | $(21) | $0 | | Legal Entity Reorganization Tax Impact | $(46) | $0 | $(46) | $0 | | Income Tax Expense at Global Effective Tax Rate | $94 | $17 | $253 | $89 | - In Q2 2021, divested businesses generated $120 million in total gain but taxable losses for tax purposes with no recognized tax benefit, increasing tax expense by $21 million; legal entity reorganization related to Whirlpool China divestiture generated $46 million in tax benefits[135] - The company is in tax litigation with the IRS regarding revenue recognition for its Luxembourg subsidiary's Mexican branch, appealing to the U.S. Sixth Circuit Court of Appeals, and believes it will prevail[136] (14) SEGMENT INFORMATION Operating Segment Performance for the Three and Six Months Ended June 30, 2021 (Millions of USD): | Metric | North America (3 Months) | EMEA (3 Months) | Latin America (3 Months) | Asia (3 Months) | North America (6 Months) | EMEA (6 Months) | Latin America (6 Months) | Asia (6 Months) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales (2021) | $3,042 | $1,250 | $763 | $269 | $6,087 | $2,420 | $1,495 | $680 | | Net Sales (2020) | $2,501 | $836 | $434 | $271 | $5,041 | $1,715 | $1,052 | $559 | | EBIT (2021) | $557 | $31 | $74 | $4 | $1,164 | $52 | $136 | $26 | | EBIT (2020) | $310 | $(66) | $11 | $(18) | $616 | $(81) | $42 | $(34) | | Total Assets (June 30, 2021) | $7,857 | $11,107 | $4,471 | $1,596 | | | | | | Total Assets (December 31, 2020) | $7,597 | $11,296 | $4,244 | $2,573 | | | | | | Capital Expenditures (2021) | $34 | $30 | $28 | $9 | $65 | $47 | $43 | $12 | | Capital Expenditures (2020) | $25 | $18 | $12 | $9 | $53 | $32 | $26 | $23 | Reconciliation of EBIT to Amounts in Consolidated Condensed Statements of Comprehensive Income (Millions of USD): | Metric | 3 Months 2021 | 3 Months 2020 | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Operating Profit | $683 | $71 | $1,301 | $334 | | Interest and Sundry (Income) Expense | $(36) | $(15) | $(62) | $(16) | | Total EBIT | $719 | $86 | $1,363 | $350 | | Interest Expense | $45 | $49 | $90 | $92 | | Income Tax Expense | $94 | $17 | $253 | $89 | | Net Earnings (Loss) | $580 | $20 | $1,020 | $169 | | Less: Net Earnings Attributable to Noncontrolling Interests | $(1) | $(10) | $6 | $(15) | | Net Earnings (Loss) Attributable to Whirlpool | $581 | $30 | $1,014 | $184 | (15) DIVESTITURES - On May 6, 2021, the partial tender offer for Whirlpool China was completed, with the company recording a $284 million gain on sale and retaining approximately 20% equity accounted for using the equity method[144][145] Carrying Value of Major Assets and Liabilities of Whirlpool China (Millions of USD): | Category | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $0 | $324 | | Accounts Receivable, Net | $0 | $85 | | Inventories | $0 | $98 | | Property, Plant and Equipment, Net | $0 | $309 | | Total Assets | $0 | $1,192 | | Accounts Payable | $0 | $216 | | Other Current Liabilities | $0 | $254 | | Total Liabilities | $0 | $530 | - On June 30, 2021, the company completed the sale of its Turkey subsidiary, recording a $164 million loss on disposal, including a $40 million asset write-down and $124 million in cumulative foreign currency translation adjustments[149] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This chapter discusses Whirlpool's financial condition and operating results for the three and six months ended June 30, 2021, highlighting strong GAAP net earnings and operating cash flow ABOUT WHIRLPOOL - Whirlpool Corporation, founded in 1911 and incorporated in Delaware in 1955, aims to be the world's best kitchen and laundry company, manufacturing in 11 countries and selling globally[151] - The company operates through four geographic segments: North America, EMEA, Latin America, and Asia, with approximately $19 billion in net sales and 78,000 employees in 2020[151] OVERVIEW - Whirlpool's Q2 GAAP net earnings attributable to Whirlpool were $581 million (10.9% net earnings margin), or $9.15 per share, compared to $30 million (0.7% net earnings margin), or $0.47 per share, in the prior-year period[152] - Operating cash flow was $646 million, and free cash flow (non-GAAP) was $769 million, primarily driven by increased net earnings and the completion of the Whirlpool China partial tender offer and Turkey subsidiary divestiture[152] - The company's Q2 ongoing (non-GAAP) earnings per share were $6.64, with an ongoing EBIT margin of 11.4%, compared to $2.07 and 5.0% respectively in the prior-year period[153] - Revenue and EBIT grew strongly across all regions on both GAAP and ongoing bases, driven by sustained consumer demand, favorable product price/mix, and offsetting raw material inflation[153] RESULTS OF OPERATIONS Consolidated Results Consolidated Operating Results for the Three and Six Months Ended June 30, 2021 (Millions of USD, except per share data): | Metric | 3 Months 2021 | 3 Months 2020 | % Change | 6 Months 2021 | 6 Months 2020 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | $5,324 | $4,042 | 31.7% | $10,682 | $8,367 | 27.7% | | Gross Profit | $1,090 | $625 | 74.4% | $2,238 | $1,328 | 68.5% | | Selling, General and Administrative Expenses | $509 | $421 | (20.9)% | $1,002 | $841 | (19.1)% | | Restructuring Charges | $8 | $118 | 93.2% | $28 | $123 | 77.2% | | (Gain) Loss on Disposal of Businesses | $(120) | $0 | Not Applicable | $(120) | $0 | Not Applicable | | Net Earnings Attributable to Whirlpool | $581 | $30 | Not Applicable | $1,014 | $184 | Not Applicable | | Diluted Net Earnings Per Share | $9.15 | $0.47 | Not Applicable | $15.96 | $2.93 | Not Applicable | - Consolidated net sales increased by 31.7% and 27.7% in Q2 and the first half of 2021, respectively, driven by increased volume, favorable product price/mix, and positive foreign currency exchange rates[155] - Consolidated gross profit margin increased to 20.5% and 21.0% in Q2 and the first half of 2021, respectively, primarily due to favorable product price/mix and increased volume, partially offset by raw material inflation and increased marketing spend[156] NORTH AMERICA - North America net sales increased by 21.6% and 20.7% in Q2 and the first half of 2021, respectively, driven by favorable product price/mix and increased volume[162] - North America EBIT increased in both Q2 and the first half of 2021, with EBIT margins of 18.3% and 19.1%, respectively, primarily due to favorable product price/mix and increased volume, partially offset by raw material inflation and increased marketing spend[163] EUROPE, MIDDLE EAST AND AFRICA (EMEA) - EMEA net sales increased by 49.5% and 41.1% in Q2 and the first half of 2021, respectively, driven by increased volume and positive foreign currency exchange rates[165] - EMEA EBIT increased in both Q2 and the first half of 2021, with EBIT margins of 2.5% and 2.1%, respectively, primarily due to increased volume, cost efficiencies, and favorable product price/mix, partially offset by raw material inflation and increased marketing spend[166] LATIN AMERICA - Latin America net sales increased by 75.8% and 42.1% in Q2 and the first half of 2021, respectively, driven by increased volume and favorable product price/mix[168] - Latin America EBIT increased in both Q2 and the first half of 2021, with EBIT margins of 9.7% and 9.1%, respectively, primarily due to favorable product price/mix and increased volume, partially offset by raw material inflation[169] ASIA - Asia net sales decreased by 0.7% in Q2 2021, primarily due to the deconsolidation of Whirlpool China and COVID-19 related shutdowns in India, partially offset by favorable product price/mix; first half sales increased by 21.6%, driven by increased volume and favorable product price/mix[171] - Asia EBIT increased in both Q2 and the first half of 2021, with EBIT margins of 1.7% and 3.8%, respectively, primarily due to favorable product price/mix and cost efficiencies, partially offset by raw material inflation and unfavorable foreign currency exchange rates[172] Selling, General and Administrative Selling, General and Administrative Expenses as a Percentage of Net Sales (Millions of USD): | Region | 3 Months 2021 | 3 Months 2021 % of Net Sales | 3 Months 2020 | 3 Months 2020 % of Net Sales | 6 Months 2021 | 6 Months 2021 % of Net Sales | 6 Months 2020 | 6 Months 2020 % of Net Sales | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $212 | 7.0% | $170 | 6.8% | $387 | 6.4% | $336 | 6.7% | | EMEA | $129 | 10.3% | $105 | 12.6% | $262 | 10.8% | $201 | 11.7% | | Latin America | $62 | 8.1% | $46 | 10.5% | $122 | 8.2% | $107 | 10.2% | | Asia | $38 | 14.2% | $52 | 19.2% | $93 | 13.7% | $110 | 19.7% | | Corporate/Other | $68 | — | $48 | — | $138 | — | $87 | — | | Consolidated Total | $509 | 9.6% | $421 | 10.4% | $1,002 | 9.4% | $841 | 10.1% | - Consolidated selling, general and administrative expenses increased in both Q2 and the first half of 2021, primarily driven by increased employee compensation accruals and marketing investments[173] Restructuring - Restructuring charges were $8 million and $28 million in Q2 and the first half of 2021, respectively, significantly lower than $118 million and $123 million in the prior-year periods[174] (Gain) Loss on Disposal of Businesses - On May 6, 2021, the partial tender offer for Whirlpool China was completed, with the company recording a $284 million gain; on June 30, 2021, the sale of the Turkey subsidiary was completed, with the company recording a $164 million loss[175] Interest and Sundry (Income) Expense - Interest and sundry income increased in both Q2 and the first half of 2021, primarily due to the recognition of tax credits in Latin America and changes in other postretirement benefit plans[176] Interest Expense - Interest expense decreased in both Q2 and the first half of 2021, primarily due to reduced short-term debt[177] Income Taxes - Income tax expense was $94 million and $253 million in Q2 and the first half of 2021, respectively, higher than $17 million and $89 million in the prior-year periods, primarily due to increased earnings and related taxes, partially offset by tax impacts from divestitures and legal entity reorganizations[178] Other Information - The company continues to monitor global economic uncertainties from COVID-19, assessing product demand and its impact on business and financial performance; goodwill for the EMEA reporting unit and indefinite-lived intangible assets for Indesit, Hotpoint*, Maytag, and JennAir trademarks remain at risk of future impairment[180] FINANCIAL CONDITION AND LIQUIDITY - The company aims to finance its operations through operating cash flow and an appropriate mix of long-term and short-term debt, mitigating liquidity risk through diversified maturity structures[182] - As of June 30, 2021, the company had approximately $3 billion in cash and cash equivalents and $3.7 billion in committed credit facilities, maintaining solid investment-grade credit ratings and ample financial covenant cushions to navigate economic uncertainties[185][186] - The company maintains a $3.5 billion revolving credit facility, with no borrowings outstanding as of June 30, 2021, and is in compliance with debt capitalization and interest coverage ratio requirements[188][189] - Notes payable (short-term borrowings) totaled $10 million as of June 30, 2021[191] - The company continuously reviews global customer conditions and implements risk mitigation measures to address increased risks of trade customer financial restructuring or bankruptcy amid the COVID-19 pandemic[192] - In April 2021, the Board approved a 12.0% increase in the quarterly common stock dividend to $1.40 per share, marking the ninth consecutive year of dividend increases[203] - As of June 30, 2021, the company had approximately $375 million in outstanding commitments for bank guarantees, letters of credit, and performance bonds, primarily related to pending Brazilian tax matters and other governmental obligations[204] Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash for the Six Months Ended June 30, 2021, and June 30, 2020 (Millions of USD): | Metric | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | | Cash Flow from Operating Activities | $646 | $(745) | | Cash Flow from Investing Activities | $(279) | $(128) | | Cash Flow from Financing Activities | $(332) | $1,605 | | Effect of Exchange Rate Changes | $(1) | $(138) | | Net Change in Cash, Cash Equivalents, and Restricted Cash | $34 | $594 | - Operating cash flow increased in the first half of 2021, primarily due to higher cash earnings, reduced promotional spending, and improved working capital[196] - Investing cash outflows in the first half of 2021 included $193 million from the sale of a majority interest in Whirlpool China and $93 million from the sale of the Turkey subsidiary, partially offset by a $393 million reduction in cash and cash equivalents held by divested businesses[198] - Financing cash outflows increased by $1.9 billion in the first half of 2021, primarily reflecting reduced long-term debt borrowings and decreased short-term borrowings[200] NON-GAAP FINANCIAL MEASURES - The company provides supplemental non-GAAP financial measures, including EBIT, EBIT margin, ongoing EBIT, ongoing diluted earnings per share, ongoing EBIT margin, sales excluding the impact of foreign currency, and free cash flow, to offer clearer business trend analysis[206] Reconciliation of Ongoing EBIT (Millions of USD): | Metric | 3 Months 2021 | 3 Months 2020 | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings Attributable to Whirlpool | $581 | $30 | $1,014 | $184 | | Earnings Before Interest and Taxes (EBIT) | $719 | $86 | $1,363 | $350 | | Restructuring Charges | $8 | $118 | $28 | $123 | | (Gain) Loss on Disposal of Businesses | $(120) | $0 | $(120) | $0 | | Ongoing EBIT | $607 | $204 | $1,271 | $473 | | Ongoing EBIT Margin | 11.4% | 5.0% | 11.9% | 5.7% | Reconciliation of Diluted Earnings Per Share: | Metric | 3 Months 2021 | 3 Months 2020 | | :--- | :--- | :--- | | Diluted Earnings Per Share | $9.15 | $0.47 | | Restructuring Charges | $0.13 | $1.89 | | (Gain) Loss on Disposal of Businesses | $(1.89) | $0 | | Income Tax Impact | $0.44 | $(0.42) | | Normalized Tax Rate Adjustment | $(1.19) | $0.13 | | Ongoing Diluted Earnings Per Share | $6.64 | $2.07 | Reconciliation of Free Cash Flow (FCF) (Millions of USD): | Metric | 6 Months 2021 | 6 Months 2020 | | :--- | :--- | :--- | | Cash Flow from Operating Activities | $646 | $(745) | | Capital Expenditures | $(184) | $(155) | | Proceeds from Sale of Assets and Businesses | $298 | $27 | | Changes in Restricted Cash | $9 | $0 | | Free Cash Flow | $769 | $(873) | FORWARD-LOOKING PERSPECTIVE Full-Year 2021 Outlook: | Metric | Current Outlook | | :--- | :--- | | Expected Diluted Earnings Per Share | ~$26.95 | | Operating Cash Flow | ~$1,950 million | | Free Cash Flow | ~$1,700 million | | Capital Expenditures | ~$600 million | | Restructuring Cash Spending | ~$225 million | | Industry Demand Growth: | | | North America | 10%+ | | EMEA | 2%—4% | | Latin America | 2%—4% | | Asia | 6%—8% | OTHER MATTERS - The company's prior anti-dumping and safeguard petitions resulted in tariffs on certain large residential washing machines, with safeguard measures extended to February 2023, imposing 15% to 35% tariffs on imported washers and parts[215][216] - The company expects continued impact from global semiconductor shortages, tight raw material supply, and cost inflation in the second half of 2021, which could materially adversely affect financial statements[217] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company's market risk exposures have not significantly changed since December 31, 2020 - The company's market risk exposures have not significantly changed since December 31, 2020[218] ITEM 4. CONTROLS AND PROCEDURES Management assessed the effectiveness of disclosure controls and procedures as of June 30, 2021, concluding they are effective with no significant internal control changes - As of June 30, 2021, the company's Chief Executive Officer and Chief Financial Officer evaluated and determined that disclosure controls and procedures are effective at a reasonable assurance level[219] - No significant changes in internal control were reported this quarter[219] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and other miscellaneous disclosures ITEM 1. LEGAL PROCEEDINGS This chapter references detailed information on the company's legal proceedings and contingencies, including tax disputes and antitrust investigations, which may materially impact financial statements - Legal proceedings information is detailed in Note 7, "Commitments and Contingencies," and Note 13, "Other Income Tax Matters," to the Consolidated Condensed Financial Statements[222] ITEM 1A. RISK FACTORS This chapter updates the company's risk factors, emphasizing operational risks from supplier capabilities, supply chain disruptions, and raw material inflation - No material changes to risk factors have occurred since the annual report as of December 31, 2020, but operational risks, particularly supplier delivery capabilities and manufacturing disruptions, may affect global business performance[223][224] - The company anticipates continued impact from global semiconductor shortages, tight raw material supply, and cost inflation in future quarters, which could materially adversely affect financial statements[224] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This chapter discloses the company's stock repurchase activities during Q2 2021 and updates the remaining amount under the board-authorized repurchase program - On April 19, 2021, the Board authorized an additional $2 billion stock repurchase program with no expiration date, with approximately $2.3 billion remaining under the program as of June 30, 2021[225] Summary of Common Stock Repurchases for the Three Months Ended June 30, 2021 (Millions of USD, except shares and average price per share): | Period | Total Number of Shares Repurchased | Average Price Paid Per Share | Total Number of Shares Repurchased Under Publicly Announced Plans | Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Plans | | :--- | :--- | :--- | :--- | :--- | | April 1 to April 30, 2021 | — | — | — | $2,381 | | May 1 to May 31, 2021 | 61,500 | $236.78 | 61,500 | $2,366 | | June 1 to June 30, 2021 | 152,676 | $232.08 | 152,676 | $2,331 | | Total | 214,176 | $233.43 | 214,176 | | ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities during this quarter - No defaults upon senior securities[228] ITEM 4. MINE SAFETY DISCLOSURES This disclosure is not applicable - Not applicable[228] ITEM 5. OTHER INFORMATION No other information is disclosed this quarter - No other information[228] ITEM 6. EXHIBITS This chapter lists various exhibits filed with the report, including CEO and CFO certifications and XBRL files - Exhibits include certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL instance and taxonomy extension files[229]