View
786
Download
1
Category
Preview:
Citation preview
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
1
Whirlpool Corporation
Financial Analysis ACC 503--Term Project
By: Ali-Reza Khaleeli
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
2
Table of Contents
Introduction…...................................................................................................Page 3
I. Whirlpool Appliances
II. Brand Identification
III. Strategic Plan
IV. Business Environment
Industry Economic and Value Chain Analysis.................................................Page 9
I. Assessment of Competitors
II. Value Chain
III. Market Share
IV. Industry-Wide Technological Developments
V. Economic Analysis
Whirlpool Financial Analysis……………………………………...….….....Page 22
I. Short-Term Liquidity
II. Capital Structure and Long-Term Solvency
III. Asset Utilization Efficiency
IV. Operating Performance
V. Altman Z-Score
Executive Summary-Conclusion…………………………………………....Page 35
I. Valuation of Whirlpool
II. Valuation Reasoning
Appendix………………………………………………………....…….…....Page 38
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
3
Introduction
I. Whirlpool Appliances
In November of 1911, Emory and Louis Upton founded the Upton Machine Company. Thanks
to the financial aid of Lowell Bassford, the Upton brothers began to produce electric, motor-
driven wringer washers. In 1950, after a few mergers and name changes, what was once known
as the Upton Machine Company officially became Whirlpool and in that same year sold its first
top-loading automatic washer under the Whirlpool brand. In 1962 they won NASA's contract for
the development of the feeding and waste systems for Project Gemini and by 1968 Whirlpool
surpassed $1 billion in revenue. A decade later they surpassed $2 billion in revenue. More
recently Whirlpool’s revenue surpassed the $10 billion mark in 2002 and by 2007 that number
was up around $19 billion.
Whirlpool has been at the forefront of innovation, within their industry, since their first year in
existence with the introduction of the first ever electric motor-driven wringer washing machines.
Since then Whirlpool has gone on to revolutionize the industry with the introduction of the first
countertop microwave oven, bottom freezer refrigerator, side-by-side refrigerator, self-ventilated
cooktop, and 24 hour customer service hotline. With the recent introduction of their interactive
kitchen of the future 2.0, it appears that innovation at Whirlpool shows no signs of slowing
down.
In 1986 Whirlpool acquired Kitchen Aid and since then have gone on to acquire, fully or
partially, eight other appliance companies. The largest of which was in 2006 with the acquisition
of Maytag. It was this acquisition that propelled Whirlpool to the top of the household appliance
industry, a position they have yet to relinquish. In 2014 Whirlpool was the number one major
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
4
appliance manufacturer in the world, with approximately $20 billion in annual sales, 100,000
employees and 70 manufacturing and technology research centers throughout the world.
II. Brand Identification
Whirlpool’s appliances are sold in more than 170 countries worldwide under such brand names
as Whirlpool, KitchenAid, Bauknecht, Maytag, HotPoint, Ignis, Roper, Laden, Polar, Estate,
Brastemp, Jenn-Air, Consul, and Eslabon de Lujo. Each brand is distinct from one another by
providing a performance, quality and design, to complement a wide range of consumer wants.
The principal objective within the Whirlpool line of brands is to gain as much market share as
possible by offering a diverse product line and competitive pricing on the myriad of products
they produce. By offering such a diverse line of products, Whirlpool is able to immediately react
to any technological advancements or emerging trends within the industry much faster than most
of their competitors.
Whirlpool’s products include major appliances and related services for products such as electric
and gas ranges, refrigerators, freezers, clothes washers and dryers, cooktops, room air
conditioners, residential water systems for filtration, dishwashers, microwave ovens, and hybrid
water heaters, among others. These products are distributed through two separate channels, retail
and contract. The retail channel sells to both retail outlets and direct to consumers, mainly for
the parts replacement market. While the contract channel sells directly to building contractors
and distributors for new installations. Whirlpool has operations in five regions across the globe,
North America, Latin America, Europe, Africa and Asia. These five regions plus the Middle
East and Oceania, constitute the markets where Whirlpool appliances are sold.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
5
III. Strategic Plan
Whirlpool’s strategic plan revolves around the direction they have taken their business and the
decisions made when allocating their resources, in pursuit of this plan. The direction they have
taken their business ties directly into their mission statement, while the allocation of their
resources relates to their business strategy.
Whirlpool’s mission is to “create demand and earn trust everyday”. Over the past few years the
appliance division has strategically been implementing policies, procedures, and technology with
the goal of offering the best product possible while empowering the consumer. They have spent
a great amount of time and resources to offer an innovative, high quality, competitive line of
products. This year alone, Whirlpool introduced the first double-oven range that allows cooking
at two temperatures and an induction cooktop to ensure meals get done more efficiently, an
entire WiFi connected kitchen that gives you the freedom to control your meal without actually
being in the kitchen, and HybridCare™ clothes dryer that drastically reduces energy
consumption while not sacrificing performance. They have focused on strong execution around
the manufacturing of their products, as well as emphasizing the merchandizing of these products.
At the same time Whirlpool has made it a point to change the way they view and treat their
consumer, in hopes of earning trust. They have rolled out new trainings for their sales staff, as
well as third party retailers, which focuses on customer service and interactions. With the goal
of treating the consumer as not just a sale but an owner.
Within the past few years Whirlpool’s allocation of resources has shifted drastically to be in line
with their business strategy of “Product Leadership, Brand Leadership, Operating Excellence,
and People Excellence”. The first part of this strategy deals with product and brand leadership.
As shown above, and throughout this paper, Whirlpool is a leader in innovation. They have not
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
6
only been able to marry emerging technologies with their appliances to revolutionize the industry
many times over, they have also revolutionized the research and development stage with their
Discovery Lenses process. This process enables the R&D team to break the mental frameworks
related to their business and ultimately find new breakthrough opportunities. These factors plus
great product offerings and awareness have propelled Whirlpool to become the most widely sold
and recognized brand in their industry. Whirlpool was recently named one of the top 25 most
reputable U.S. companies by Forbes magazine and one of the world’s most admired companies
by Fortune magazine.
The second part of Whirlpool’s strategy deals with operating and people excellence. In recent
years Whirlpool has focused heavily on sustainability. Whirlpool has introduced new
procedures, polices, systems, and tools around sustainability in the hopes of improving key
performance metrics. Recently in North America, Whirlpool has been able to reduce the amount
of water consumed to manufacture just one appliance from 272 gallons in 1975 to just 39 gallons
in 2014. As well as an 18% reduction, since 2009, in the energy consumed during the
manufacturing process per major appliance produced. This drastic reduction in water and energy
consumption will help Whirlpool cut production costs, reduce resources needed, increase
margins, and in turn increase net profit. As for people excellence, Whirlpool believes “that all
people matter, regardless of their nationality or language. Great ideas and innovation come from
combining the best of everyone’s differences. Celebrating diversity and including thousands of
perspectives empower us to create products that blend in to every concept of home”. This
viewpoint has allowed Whirlpool to recruit some of the best talent in the industry, helping to
strengthen their dominance within the industry.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
7
IV. Business Environment
Whirlpool operates within the household appliance industry. The U.S. home appliance
industry is an enormous market with over 55 million units of major kitchen and laundry
appliances shipped in the U.S. during 2014. In 2014, U.S. household appliance store sales came
to about $16.08 billion. Sales through these stores grew 26% from 2000 to 2013. However this
single statistics does not tell the full story. In 2007 sales peaked and until 2014 they had
declined by 15% overall. This significant drop in sales correlates with the drop in unit sales from
66 million in 2007 to 52 million in 2013, a 21% drop.
This is an obvious fallout from the great recession of 2008 that impacted the majority of U.S.
households. The recession greatly reduced consumer spending per household and devastated
consumer confidence, both of which had a detrimental impact on the appliance industry.
However, 2014 was a turning point for the industry with appliances experiencing a 4% volume
growth in unit sales and a 3% growth in store sales, a trend the industry wishes to continue. This
was the strongest growth the industry has experienced in over a decade. The industry owes this
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
8
growth to restored consumer confidence, a strong economic recovery, and technological
innovations to many of their product offerings. Analysts within the industry predict this trend to
continue as new house construction and remodeling rates continue to rise following the great
recession. Another positive sign is the growing “smart appliance” sub-market that lies within the
industry. Analysts forecast that in 2015 the value of this smart appliance market will be as high
as $5.4 billion, up from $3.2 billion in 2013.
For the full year, GAAP net sales for 2014 were $19.9 billion compared to $18.8 billion in 2013,
a sales increase of over 5%. GAAP operating profit for the year totaled approximately $1.2
billion, which was the same in 2013. Full-year ongoing business operating profit totaled $1.5
billion, or 7.4 percent of sales, compared to $1.4 billion, or 7.3 percent of sales, in 2013.
Whirlpool reported cash provided by operating activities of $1.5 billion and free cash flow of
$854 million in 2014 compared to $1.3 billion and $690 million, respectively, in the prior year.
For full-year 2015, Whirlpool expects to generate free cash flow of $700 million to $800 million.
Included in this guidance are restructuring cash outlays of up to $250 million, capital spending
of $800 million to $850 million and U.S. pension contributions of around $85 million. The
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
9
North American market produced revenues of $10.6 billion, Latin American market at $4.7
billion, European market at $3.9 billion, and Asia at $816 million in 2014.
Industry Economics and Value Chain Analysis
I. Assessment of Competitors
Whirlpool’s main competitors are Electrolux, LG Appliances, and General Electric (GE)
Appliance and Lighting. With the exception of GE, where the North American market
constitutes 87% of their sales, Whirlpool’s other major competitors’ sales are more evenly
distributed around the globe. It is because of this that you must look at Whirlpool, and its
competitors, on a global scale to truly gage how it compares.
Electrolux, which is based in Sweden, saw total net sales of $12.9 billion and a net income of
$346 million in 2014. Electrolux’s sales were distributed throughout various markets. The
European market made up 40% of all sales, North America 30%, Latin America 20%, and
Asia/Africa at
10%. LG
Appliances,
which is a part of
LG Electronics- a
subsidiary of LG
Corporation-, saw
total net sales of
$10.9 billion and
a net income of
$462 million in
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
10
2014.
While their global sales distribution is not available on their website, or in their financials, it is
reported that Asian markets constitutes 37% of their net sales, Americas at 40%, Europe at 12%,
while the other 11% is spread out amongst other smaller markets, such as the Middle East, Africa
and Oceania. GE Appliance and Lighting, which is a part of GE Home & Business Solutions- a
division of General Electric-, saw total net sales of $8.4 billion and a net income of $400 million
in 2014. As stated above, the North American market makes up 87% of their sales, with Latin
America at 6% and the rest spread out amongst the other global markets.
While Whirlpool leads in the industry in net sales, it is not the leader in operating profit margin.
That distinction goes to GE. In 2014 Whirlpool’s operating profit margin was at 3.5%. Whereas
GE
experience
d an
operating
profit
margin of
5.1%,
Electrolux
at 3.7% and
LG at a flat
3%.
Compared to the benchmark of 4.7%, set by the S&P 500 Sectors and Industries Profit Margins
guideline for the household appliances industry, only GE comes in above that mark. These
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
11
subpar margins is something Whirlpool acknowledged in their recent earnings release and will
be focusing on increasing these margins over the years to come.
Even though Whirlpool has various competitors, all with distinguished brand names, Whirlpool
has been able to maintain its dominance in the appliance industry since 2006. A large part of
Whirlpool’s success is thanks to their numerous brands that offer a diverse product line of
varying quality and function that meet the needs of almost any consumer. A constant desire to
innovate, acquire, and set up shop in more countries has also greatly contributed to their
extended stay at the top of the industry.
II. Value Chain
Back in 2000 Whirlpool’s value chain was anything but dependable. Their value chain had an
overall availability rate, which measures how often a product is in the right place at the right
time, of only 83%. Compared to industry standards, this was regarded as a complete failure.
The company’s rapid geographic expansion and recent acquisitions led to this crisis. With a
multitude of different systems and procedures in place, the value chain team found it
extraordinarily difficult to track and control all of Whirlpool’s production and distribution
processes. To fix this Whirlpool’s value chain management team and IT department replaced the
numerous production processes and distribution systems with a streamlined, standardized
solution. Within two years of implementation, Whirlpool’s overall availability rate rose from
83% to 93%, and within five years it reached as high as 97%.
Since Whirlpool has a global reach they rely on individual regions to personalize products to
meet their consumers’ needs. While the below value chain is applicable to all regions Whirlpool
operates in, it is imperative to note that each region goes through the same seven step process.
This parity is the central reason their value chain has become so successful compared to past.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
12
Step 1-R&D
The first stage of Whirlpool’s value chain starts from the ground and moves it way up. It is
crucial to the continued success of Whirlpool that the research and development (R&D) stage be
taken seriously. A lot of what happens at this stage is speculative but none-the-less critical to the
overall chain. The R&D team uses the innovative Discovery Lenses process and looks at any
new trends and technologies emerging within the appliance industry. Whether it be
interconnected appliances or a revolutionary heat-pump, that cuts energy costs in half, the R&D
team needs to account for any technological advances that impact the industry. Furthermore,
Whirlpool must stay on top of recent trends, like bottom freezers and stainless steel, in order to
stay in demand with their customer base. Whirlpool has a total of 13 technology research
centers spread amongst their global regions.
Step 2-Design
In this stage ideas move from speculative to reality. While the R&D stage allows one to assume
there are no constraints and lets the imagination flow, the design stage looks at the reality of
things. At this stage Whirlpool’s world class engineers become involved in the process. They
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
13
look to see if what the R&D team dreamed up is in fact achievable. The engineers spend
countless hours poring over blueprints and design specs to bring these visionary products to life.
If the product can be built then it is on to the next stage. If not, then back to the drawing board.
Step 3-Marketing
This stage is the make or break point for the appliance. Here Whirlpool’s marketing team looks
to see if the product is worth the cost. The marketing team looks at a multitude of factors to
determine if the product should move onto the next stage. They first look at the production costs
and benchmark that against current production costs for similar items. They then gauge if this
product is in fact affordable for the customer. If the projected production cost would force either
the price point too high or the margin too low, the product will not move onto the next stage.
Additionally, the marketing team looks to see if the product has a market. They try and analyze
if the product in fact would sell. If there is a demand within the market for such a product at its
projected price point. Even if the production costs are on par, with an average price point and
profitable margins, if the product is not marketable and there is little demand, the process stops
here. If the marketing team believes there is a market and demand for the new product then it
moves onto the next stage.
Step 4-Manufacturing
Once the appliance clears the first three major hurdles, it becomes a real product and begins
being produced on a mass scale. During this stage, the engineers involved in the second step
work with the manufacturing plants to ensure the production line builds the product their
specifications. Depending on the region, the majority of parts are sourced out. The only region
that does not source out close to 80% of the parts needed is Asia. This is because most of the
parts needed are made in Asia, at a reduced costs. Whirlpool uses a forecasting method to
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
14
predict the nature of forecasting errors to intelligently set the inventory levels. In total,
Whirlpool has 47 manufacturing plants that employ close to 45,000 people and uses
approximately 7,000 different suppliers in every region of the world.
Step 5&6-Ship & Distribute
In these steps, Whirlpool’s appliances are shipped and stored throughout the region from the
regional manufacturing plants. Whirlpool's distribution network consists of plant warehouses or
factory distribution centers (DCs). These DCs include regional distribution centers and local
distribution centers. Over the past few years, Whirlpool has moved to centralize its freight-
planning efforts, through reliance on a load-control center that covers all of their regions. This
operation allows Whirlpool to plan both inventory stock and customer shipments in the same
department. In total, Whirlpool has over 25 DCs that employ approximately 26,000 people.
Step 7-Sell
The last step in the value chain is split between two “channels”. These channels are retail and
contract. The retail channel involves the sale of products to national retailers (Lowes) or
independent dealers like Ray’s Appliances. The contract channel involves the sale of products to
either single family or multi-family home builders. Around 65% of the company’s sales come
through retailers, with the construction market accounting for the rest of their business. Last
year Whirlpool delivered to about 30,000 retailers worldwide. In the U.S. Whirlpool is not
allowed to dictate pricing for retailers, instead the market does. Whirlpool sells to the retailers at
a certain price but has no say in what the retailers price it for. Whirlpool’s sales associates are
allowed to help set up store displays and in-store marketing but cannot set the pricing.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
15
III. Market Share
The below graph represents the global market share of appliance manufactures for 2013. No
reliable information could be found for 2014 yet.
To no
surprise,
Whirlpool
leads the
industry with
a total market
share of
13%. Not far
behind is
their biggest
competitor
Electrolux at
10%. While
LG and GE,
their other
main
competitors,
come in at
7% and 6%
respectively.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
16
Both Bosch-Siemens and Haier control more of the global market than LG and GE but a major
acquisition and interesting trend looks to boost both LG and GE’s market share.
Over the past decade both South Korean based LG and Samsung have invested heavily in their
appliance divisions. This has taken place because both companies believe they can price out any
of their competitors. Both companies benefit from a massive revenue stream that is not based
just on the sale of appliances. Combine that with cheaper labor and production materials costs
and they can price their products far lower than their counterparts. Over the past few years both
LG and Samsung have experienced a huge surge in appliance sales. Nowhere else is this surge
more apparent than in the U.S. While Whirlpool’s U.S. market share still doubles it closest
competitor, GE, both Samsung and LG are rising steadily. In the above graph one can see that,
between 2008 and 2013, LG has increase its market share by almost 6%, while Samsung has
increased it by over 8%. This is a trend that must be alarming to Whirlpool and their investors.
In September 2014 GE sold their appliance division to Electrolux for $3.3 billion. While the
acquisition is still waiting approval from the U.S. Department of Justice, which is said to happen
later this summer, this will greatly erode Whirlpool’s market share both domestically and
internationally. Based on the 2013 numbers, Electrolux will surpass Whirlpool’s global market
share and only be a few percentage points behind them in the U.S.
IV. Industry-Wide Technological Developments
As stated above, Whirlpool has always been at the forefront of innovation. They have
introduced many products that have revolutionized the industry. As technology seemingly
advances exponentially and impacts everyday devices, it was only a matter of time till that
impact was felt in the appliance industry. Never has there been a time in the industry that so
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
17
much innovation and change taken place. All of this driven by the consumer’s desire to be
interconnected and environmentally friendly.
Earlier this year GE launched, under its Profile brand, a suite of connected appliances. GE’s aim
is to allow users to be more in touch with the appliances in their homes thru their mobile devices.
According to Liz VerSchure, general manager of GE’s connected appliances, "the range of
products will give users newfound control to complete tasks like remotely checking if ice is
available or preheating the oven from the grocery store”. At the recent International Consumer
Electronics Show (CES), in Las Vegas, Whirlpool rolled out its interactive kitchen of the future
2.0. This kitchen of the future includes an interactive backsplash which comes with a
personalized touch screen that allow you to live chat with family and friends or stream a cooking
show. This kitchen also includes an oven that you can turn on with your mobile device, as well
as a refrigerator that sends an alert notification when groceries are needed. Other companies
such as Philips, Belkin, and Electrolux are all expected to launch similar interconnected
appliances later this year.
Recent advances in cooling technologies will allow appliance manufacture the ability to offer
consumers and businesses a reasonably priced, reliable, energy-efficient alternative to what is
currently on the market. Thanks to advances in hydrocarbon systems, ones that utilize propane
as a refrigerant specifically, manufacturers can significantly reduce energy consumption
compared to current synthetic fluids systems. Advances have also been made in heating
technologies, highlighted by Whirlpool’s recent HybridCare™ clothes dryer. The dryer comes
with a heat pump technology that is designed to regenerate energy during the drying cycle
compared to current dryers that use great amounts of energy in the form of venting hot air. This
vent-less heat pump dryer reduces energy consumption but does not sacrifice dryer speed or
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
18
performance. With an ever increasing demand and market for environmentally responsible
alternatives, these new technologies will surely be incorporated into the next generation of
refrigerator, freezers and dryers.
Recent advances in technology are not only limited to the products they manufacture but to the
manufacturing process itself. As more devices become interconnected, “The Internet of Things”
is primed to change the landscape of manufacturing. Machine-to-machine communication, the
embodiment of “The Internet of Things”, will forever change the manufacturing process and
impact the organization’s bottom line. These interconnected machines will allow for more
efficient maintenance schedules, optimize inventories by ordering parts and supplies
automatically, lower-cost repairs to industrial equipment, and allow for lower production costs
by realizing higher utilization rates. GE has already opened an interconnected manufacturing
plant that it refers to as a "flexible factory" in Pune, India. This one plant will produce products
and parts for four different GE businesses, realizing many of the benefits already stated. The
versatility of this plant will also have a dramatic impact on the surrounding environment. This
one plants will only use a fraction of the energy needed and produce only a fraction of the
emissions, compared to the four plants previously needed for each business unit.
V. Economic Analysis
According to Whirlpool’s Chairman of the Board and Chief Executive Officer Jeff Fettig “The
global environment in which we operate continues to be volatile with emerging market
challenges in China and Brazil, volatile demand in Russia and Eastern Europe, currency
devaluation in key markets and changing raw materials costs. However, the key to our success in
this type of environment is a proactive management approach to delivering on our commitments
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
19
while managing this volatility”. The above statement was a part of 2014’s annual chairman’s
message and is in relation to the company’s outlook for 2015.
The global household
appliance market’s
outlook for 2015 and
beyond is very
positive. As you can
see both shipments
and revenue are
expected to continue
to increase through
2017. While the
message encompasses the global environment Whirlpool operates in, which is expected to reach
an estimated value of $324.2 billion by 2019, it is essential to examine the U.S. market in order
to better analyze the value of firm and make an informed recommendation on the company’s
stock.
During 2014 the industry was driven by the high volume of small appliance sales and growth.
After a few down years, the industry is growing mainly due to strong economic recovery,
technological innovation and high consumer confidence. The industry’s overall sales volume
grew 4%, with major appliances growing 2%, in 2014 and are projected to continue this growth
as housing starts and remodeling rates continue to rise following a massive downturn during the
great recession in the late 2000s. Overall sales volume is expected to increase by 5% for 2015.
A great benchmark to help visualize this growth is the S&P 500 index, a stock market index
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
20
based on the market capitalizations of 500 large companies having common stock listed on the
New York Stock Exchange.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
21
As of April 20th
, 2015 the S&P 500 index saw an increase in one year change of 11%. During
the same period the S&P 500 Household Appliance index saw an increase in one year change of
25.82%. It wasn’t
until late October
2014 that the
appliance index
surpassed the S&P
index for the year.
Since then the
appliance index has
continue to outgrow
the stock market
index. As stated
above the major
drivers of the appliances industry are the economic recovery, technological innovation and
higher consumer confidence. Other drivers include an increase in per capita income, housing
activities, and increasing urbanization. As of the third quarter in 2014, required payments on
consumer debt and mortgage had fallen to 9.9% of disposable income, which is close to the
lowest level on record. According to the Wall Street Journal, in 2014 U.S. homeowners spent a
total of $130 billion on remodeling projects, an increase of 3.1% from the previous year and the
largest amount spent since the housing downturn began in 2007. New home sales in the U.S.
increased from 500,000 in January to 539,000 in February of 2015, a 7.8% increase. Home
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
22
sales are expected to increase by 9% in 2015, with new housing starts expected to grow 14% and
home price growth expected to moderate.
There is a renewed interest in home building that is helping to drive consumer demand for new
appliances, instead of just the simple desire to upgrade homes. Include the advances in
technological changes to household appliances, continued reduction in unemployment, and
falling gas prices will help drive growth in this industry. All this is likely to translate to a surge
in appliance demand for 2015 and beyond.
Whirlpool Financial Analysis
I. Short-Term Liquidity
Ratio Dec-14 Dec-13 Dec-12
Current Ratio .96 1.03 1.0
Quick Ratio .64 .68 .69
Working Capital -305 million 228 million 317 million
Inventory Turnover 6.01 6.42 6.48
Current Ratio
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
23
To measure current ratio you divide the current assets by the current liabilities. This ratio is used
to determine if the company can pay its’ short-term obligations with the cash it has access to. In
the last three years, Whirlpool’s current ratio decreased and the most recent current ratio is below
1. This shows that Whirlpool would not be able to take their current assets and turn them
quickly into cash to pay off their liabilities.
Whirlpool has high current liabilities compared to the previous years. This is due in part to an
increase in accounts payable, large increase in notes payable, and increased advertising expense
and from 2013 they had a decrease in net earnings. This increase in liabilities, with no similar
increase in assets can drive the current ratio down, and have a negative impact on Whirlpool’s
short-term liquidity. The average current ratio in the appliance industry is .88, which is lower
than Whirlpool’s. This shows that Whirlpool is doing better than other appliance companies,
although still with a decrease from their previous years.
Quick Ratio
Measuring a company’s quick ratio involves taking the current assets less inventories and diving
that by the current liabilities. This ratio is to determine if the company will be able to meet their
short-term obligations by using the assets they have that are most liquid. Over the years,
Whirlpool’s quick ratio has slightly decreased, but for the most part stayed around the same.
Since it is .64 it shows that the company does not have much short-term liquidity if they want to
meet their current obligations and needs. Notes payable having such a large increase indicated
that Whirlpool had made recent investments.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
24
Although this seems like a bad ratio for Whirlpool, the appliance industry average is still lower
at .54. Therefore, Whirlpool is doing better than some companies in the same industry and may
be able to survive in the industry longer than others.
Working Capital
Working capital shows how much liquidity is available for the operating activities of the
company. It is found by subtracting current liabilities from current assets. From 2013 to 2015,
the working capital decreased significantly, which can cause a big problem for the company.
However, the main reason for this was the significant increase in notes payable, so Whirlpool
borrowed money for acquisitions. From the financial statements, you can see that they acquired
two new companies, Indesit and Hefei Rongshida Sanyo Electric.
This shows that Whirlpool is trying to expand their operations. Therefore, the negative working
capital may not cause too much of a problem for Whirlpool, if they can make more profits in the
new business ventures that they now acquired.
Inventory Turnover
This ratio shows how many times a company sells and replaces its inventory over a time period.
To calculate it, you take the cost of goods sold and divide it by the average inventory.
Whirlpool’s average inventory turnover is not bad at 6.01. It had slightly decreased from
previous years, and you can see that the most current year had higher inventory levels. This can
be a sign of several things. The turnover ratio may have slightly dropped because of Whirlpool
ordering too much inventory and not being able to sell it because they ordered more than what
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
25
they forecasted to sell. Lastly, Whirlpool could have ordered the same amount of inventory each
of the time periods, but in 2014 people bought less than in the previous years.
Low turnover for a company can be bad because many times inventories that are sitting will start
to deteriorate and then can end up being a loss for the company. In order to keep a high
inventory turnover, Whirlpool needs to better gauge the demand for products, keep fewer
products on hand and make sure they are selling inventory before they order or manufacture
more. A good way to do this would be to implement a just-in-time strategy throughout their
value chain.
Another sign that Whirlpool needs to implement some kind of plan to increase their inventory
turnover is that it is lower than the industry average at 9.96. That shows that their turnover is
about 40% less than the rest of the industry. A new plan needs to be put into place for Whirlpool
to increase their turnover, as to not have a deterioration of sitting inventory.
Short-Term Liquidity Conclusion
Whirlpool’s short-term liquidity is not great, but also not as bad as it could be in their industry.
Their current ratio and quick ratio are lower than any company would want. It is much more
beneficial for the company to have these ratios to be at least a 1, in order to ensure that they are
making enough profits to cover their expenditures. Even though both of these ratios are less than
1 for Whirlpool, they are still above the industry averages.
If looking at the company’s working capital, it would seem as the company is doing very poorly.
However, this is mainly because of their acquisition of two other companies. The acquisition of
these can prove to be beneficial for Whirlpool to expand and possible increase profits and in turn
increase their short-term liquidity. Lastly, their inventory turnover is not terrible, but Whirlpool
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
26
needs to find a way to improve this number in order to better compete with those of their
industry.
II. Capital Structure and Long-Term Solvency
Ratio 14-Dec 13-Dec 12-Dec
Total Long-Term Debt to Assets 0.20 0.12 0.13
Total Debt Ratio 0.71 0.68 0.72
Financial Leverage Index (FLI) 3.45 3.65 4.67
Financial Leverage Ratio (FLR) 4.09 3.16 3.61
Total Long- Term Debt to Assets
This ratio gives an understanding of the financial position of the company as well as what
percent of their assets are financed through debt. For Whirlpool, their Long-term debt to assets
ratio is low and, for the past three years has been kept under or at 20%. The increase in the ratio
from 2013 to 2014 comes from the need to borrow money to finance part of their acquisition of a
Indesit. Although the ratio increased in 2014 from the year before, it is still a low ratio and can
be said that the company is in good financial position based on this ratio.
Total Debt Ratio
Whirlpool’s Debt ratio has been kept relatively constant for the past three years. Because it is
below 1, the company has more assets than liabilities. This means that the company, although
acquired more debt in 2014, also increased its assets and was able to maintain that ratio at around
.70. The debt ratio allows us to know how risky the company is. Because the company has more
assets than liabilities, the company is not experiencing high levels of risk.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
27
Financial Leverage Index (FLI)
Whirlpool’s Financial Leverage Index shows how the company is using their debt in a positive
way. A financial leverage index that is above 1 suggests that the company is using their debt in a
positive way. Whirlpool’s FLI, being 3.45, 3.65 and 4.67 for 2014, 2013 and 2012, respectfully
explains how the company is doing well with how and for what they use their debt. This can be
linked back to Whirlpool’s overall capital structure of using their operating cash to finance their
operations and growth and not needing to acquire large amounts of debt to run and grow the
company.
Financial Leverage Ratio (FLR)
Similar to the financial leverage index, the financial leverage ratio shows how a company is
using their equity to finance its assets. Whirlpool’s fluctuating FLR suggests that their use of
equity to finance its assets varies from year to year, but on average is 3.65. The higher 4.09 in
2014 is due to the increase in long-term debt that the company experienced during this year.
Whirlpool’s relatively high FLR is due to their use of operating cash to finance their operations
and growth.
Capital Structure and Long-Term Solvency Conclusion
Whirlpool’s capital structure suggest that they manage their operating and growth risk by
financing it with their operating cash flow and a good mix of short-term and long-term debt.
This allows for the company to both manage their risk and reduce their liquidity. By financing
the company using this method, they are able to increase returns for shareholders and fund
potential acquisitions.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
28
Whirlpool’s capital structure in the years 2014, 2013 and 2012 has allowed them to make several
acquisitions including Hefei Sanyo in China and Indesit in 2014. In addition, they use the cash
from their operating activities to support and promote inventions and productivity, restructure the
company, fund pension plans and pay off or get rid of some of their debt.
The company’s total long-term debt to assets, total debt, financial leverage index, financial
leverage ratio and Altman Z score provides a look into how Whirlpool’s capital structure has
supported and will continue to support, at least for the foreseeable future, the company’s
operations and overall growth.
Whirlpool’s capital structure has allowed them to acquire different companies and finance their
everyday operations while still providing a good return for their shareholders and maintaining
their position as leaders in the industry.
III. Asset Utilization Efficiency
Ratio Dec-14 Dec-13 Dec-12
Accounts Receivable Turnover 7.18 9.36 8.90
Total Asset Turnover 1.17 1.10 1.07
Fixed Asset Turnover 2.07 2.90 2.80
Inventory to Revenue 13.8% 12.8% 13.0%
Accounts Receivable Turnover
This ratio is used to estimate how many times a company is collecting their average accounts
receivable in a time period. It will show how efficient of a system the company has in place in
order to collect their sales on credit. To find this ratio you divide net sales by the average
accounts receivable. Between 2012 and 2013 this ratio increase for Whirlpool, but then
decreased about 24% in 2014. The company needs to evaluate their credit sales collection
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
29
system. This could be partially because more people purchased on credit in 2014. However, a
decrease in accounts receivable turnover is never good.
Whirlpool should analyze their collection system and determine if there is a way to improve it to
get back to higher numbers. The decrease shows that the system became inefficient over that
year. Whether people just did not want to pay or were not able to cannot be determined. When
issuing on credit, they should ensure that the buyer would be able to pay them back, or at least
have an efficient set pay schedule in place.
Total Asset Turnover
To determine the total asset turnover ratio, divide the sales by the company average total assets.
This ratio will show how efficient a company is in using their assets. It evaluates if they are
using assets to generate revenues and the amount of time it takes for goods to be sold. Usually, a
higher ratio is better because it means that the company is earning more revenue for each dollar
of asset it has. Over the last three years, the ratio has slightly increased, which shows that they
had an increase in net sales. However, total assets also had an increase, which would have
decreased the ratio. It is seen that the ratio increased, but not by a very large amount because the
average total assets remained lower.
The total asset turnover ratio would have been higher if Whirlpool had not acquired the two new
companies in 2014. These acquisitions increased their total assets by increasing property and
goodwill. It is good that this ratio is not below one, and it shows that they are still earning one
dollar of revenue for every dollar of assets that they possess.
Fixed Asset Turnover
This ratio is calculated by dividing sales by average fixed assets. It shows if a company is able
to generate sales from their fixed asset investments, usually plant, property and equipment. If
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
30
this ratio is higher, the company is seen to have used their investments in fixed assets more
effectively to get revenues. However, this is not the case for Whirlpool. They are only
generating two times the sales as compared to its’ fixed assets.
Fixed assets of Whirlpool increased in the areas of goodwill and property, without their sales
increases as much. They bought more property when acquiring the new companies. Buying
these new companies will hopefully increase the future sales, which will increase this ratio over
the next year. Using their new fixed assets of the newly acquired companies, greater earnings
can be seen.
Inventory to Revenue
This ratio measures what percentage of inventory they have on hand to support the amount of
sales that they currently have. To calculate, take the inventories and divide by net sales. From
2012 to 2013, Whirlpool’s ratio decreased slightly and then increased again in 2014.
It was likely that it was lower in 2013 because that is the year sales spiked greatly. Sales slowed
in 2014, which made the ratio increase again. It was highest in 2014, which shows that
Whirlpool either had kept too much inventory on had at one time, therefore manufacturing too
much, or they just had lower sales than forecasted. Having this ratio higher is not good for a
company because it can cause inventories to sit around and deteriorate over time if not sold.
Whirlpool’s ratio is not too high, as too have a large negative effect, but they still want to keep
this number as low as possible and not have it increase again over the next year.
Ratio Dec-14 Dec-13 Dec-12
ROA 4.06% 4.93% 2.14%
ROCE 14% 18% 10%
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
31
ROA
Return on assets measures if a company is profitable, relative to its total assets. It will show if
management of the company is efficient as generating sales and earnings by using its assets. To
calculate the ROA add net income to the interest expense. Then multiply that by the tax rate and
then divide by the average total assets.
In 2012, the ROA was the lowest, partially because there was a much higher tax rate than other
years. The tax expenses were about the same each year, but the percentages fluctuated because
of the great difference in sales. It more than double from 2012 to 2013 because of a great
increase in net income of the company. Then again in 2014, there was a slight decrease in ROA.
Since the ROA of Whirlpool is not high, it shows that the company is more asset-intensive than
they are revenue-intensive. This means that the company needs more money invested in assets
in order to continue to produce decent revenues.
Whirlpool has a large amount of newly acquired assets compared to their new revenue. They
should try to plan a way to try to use these assets to generate higher incomes. This would
prevent the company from needing as much cash as they do from investors.
ROCE
The return on common equity is calculated by dividing net income, less the preferred dividends,
by the average common equity. This ratio will show how well investors’ money is used to make
profits. It is an indicator for common stockholders how the company is reinvesting their money.
If a company has a higher ROCE, it shows that they are good at generating cash internally as
opposed to from investors.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
32
In 2013, Whirlpool had the highest ROCE it has had in the past few years. This was due to the
spike in net income in that year. For 2014, the ROCE decreased, but still remained higher than
in the past. Stockholders are going to want a higher ROCE to continue to invest in the company
and get better dividends back for their investments. Whirlpool needs to devise a plan in order to
better use the investment dollars to increase their profits. However, this may be part of their plan
with their acquisition of the two new companies in the past year, with the hope of increased
income resulting in increased dividends.
Asset Utilization Efficiency Conclusion
It is important for a company to wisely use their assets to gain revenues and generate funds
internally, as opposed to from investors. Whirlpool has a large amount of assets, but does not
really use them efficiently. They can keep less inventory on hand, as to not lose any to
deterioration when not sold. They should also adopt ways in which they can use their assets to
generate revenue. This may be part of their goal when acquiring two new companies, and the
fixed assets that came along with that. A more efficient system for collecting money for
merchandise that was paid on credit should be developed, as to increase the accounts receivable
ratio.
Return on assets and return on common equity ratios are definitely looked at by shareholders, to
see if they should invest more money in the company or invest in the company to begin with.
Shareholders want to be sure that their money is being used wisely and in beneficial ways that
would give them larger returns.
Both of these ratios for Whirlpool are not very high. Therefore, new investors may be more
hesitant to invest in the company. This is also seen by the decrease in ROCE. It is showing that
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
33
the company is not efficiently using the investors’ money to generate profits, and in turn need
more money to keep making money and staying profitable.
IV. Operating Performance
Ratio 14-Dec 13-Dec 12-Dec
Gross Profit Margin (Before Taxes) 17% 18% 16%
Operating Profit Margin (Before Taxes) 6% 7% 5%
Net Profit Margin 3% 5% 2%
Gross Profit Margin (Before Taxes)
Whirlpool’s gross profit margins are relatively low at 17%, 18% and 16% for 2014, 2013 and
2012, respectively. This margin explains how after the cost of goods sold, Whirlpool makes
around $0.17 of every dollar it sells. Although companies with higher gross profit margins are
considered to be more profitable, Whirlpool’s stable margin and position in the industry suggest
that they are profitable and have a good strategy set in place.
Operating Profit Margin (Before Taxes)
The operating profit margin, compared to the gross profit margin shows how profit a company is
before taxes and interest. Whirlpool’s operating profit margins of 6% (2014), 7% (2013) and 5%
(2012) might seem low for many, but when comparing them to Electrolux’s profit margins of 3%
(2014), 1% (2013) and 4% (2012), Whirlpool’s operating margins seems to be higher than their
main competitors. This suggests that the operating margins for the industry are most likely low
and, therefore, Whirlpool is doing well with higher operating margins than its competitor
Electrolux.
Net Profit Margin
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
34
Whirlpool’s competitor, Electrolux’s net profit margins which are 2%, 1% and 2% for 2014,
2013 and 2012, respectfully. Whirlpool net profit margins which are 3%, 5% and 2% for 2014,
2013 and 2012, respectfully. Whirlpool’s net profit margins, although considered low for many
industries, are good since they are better and comparable to those of Electrolux. In the past year,
the company’s net profit margins decreased 2%, mainly due to a decrease in overall net earnings
combined with just a small increase in net sales.
Whirlpool’s operating performance can be considered weak for many industries, but when
comparing it to Electrolux they show stronger profit margins. This suggest that the company has
been able to have strong margins for their industry, increase revenues and continuously grow,
especially compared to their competitors.
Operating Performance Conclusion
Whirlpool’s operating performance for 2014 was characterized by having strong margins, record
revenues and an increase in their investments and brand innovations. This led to two
acquisitions, one in China and one in Europe, which increased their international presence and
growth.
Whirlpool’s net sales increased 5.9% from 2013 to 2014 and 3.4% from 2012 to 2013. This
shows how Whirlpool is focused on growth and continued increase in sales and profits. The
company’s decrease in net earnings at the end of 2014 was mainly due to the increase in selling,
general and administrative expenses and a large restructuring costs. The large restructurings
expenses come from the restructuring plan (2011 Plan). In 2014, the restructuring plan cost the
company a total of $136 million. The increase in selling, general and administrative expenses
comes from the acquisitions and investments that the company made during 2014.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
35
The company’s restructuring plan, which includes expanding operating margins and to improve
earnings will continue to bring high expenses for 2015. The company is expected to incur $300
million in 2015 for the company’s restructuring.
V. Altman Z-Score
Ratio 14-Dec 13-Dec 12-Dec
Altman Z-Score 2.26
A company’s Altman Z score shows the likelihood of a company going bankrupt. Whirlpool’s
Altman Z score, 2.26, suggests that the company is in a grey area. A Z score below 1.8 shows
that a company is likely to go bankrupt, while a Z score of more than 3.0 shows that the
company is not likely to go bankrupt. Whirlpool’s 2.26 Z score shows that they are closer to the
1.8, but are still in the “grey” are a which is between likely and not likely.
Whirlpool’s overall capital structure is guided by using their cash flow from operations as well
as a good mix of long-term and short-term debt to continue to finance both the company’s
operations and growth. Whirlpool’s long-term debt to assets ratio, total debt ratio, financial
leverage ratio, and financial leverage index show how the company is in good shape and has a
capital structure strategy that is kept constant and is allowing them to grow. In addition, the
company’s Altman Z score shows that the company is in a grey area, but is not likely to go into
bankruptcy since the score is not below 1.8.
Executive Summary-Conclusion
I. Valuation of Whirlpool
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
36
Our recommendation is that an investor should BUY shares of Whirlpool. We base this decision
on the financial analysis, as well as the industry economic analysis for Whirlpool that were
presented above.
II. Valuation Reasoning
The following are the main points supporting our BUY recommendation:
Business Environment
There are many positive signs that the household appliance industry is in full recovery following
the great recession. With a growth of 4% in 2014 and a project 5% growth for 2015, the
recovery shows no signs of slowing down and Whirlpool, being the industry leader, should
greatly benefit from this recovery. Additionally the market for smart appliance, where
Whirlpool has already introduced many products, is projected to increase by about $2 billion
over the next year. This is yet another revenue stream for Whirlpool and will only help to
increase their sales.
Economic Analysis
All of the major drivers of the appliances industry have strengthened over the past year and are
projected to continue to strengthen. The economic recovery is in full swing, technological
innovation continues at an exponential rate and consumer confidence is the highest since the
great recession. An increase in employment and a decrease in gas prices should only help to
strengthen consumer confidence over the next year. Home sales and new housing starts are
expected to increase by 9% and 14%, respectively, in 2015, resulting in a higher demand for
appliances than previous years. High material costs and volatility in exchange rates are offset by
the benefits of the acquisitions, higher sales, ongoing cost productivity and cost and capacity-
reduction initiatives. The acquisition of GE by Electrolux should not pose a huge threat to
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
37
Whirlpool’s revenue stream, since Whirlpool is already dominant in the overall market. In
reality it is just a blow to their pride, no longer holding the largest global market share. The only
disconcerting issue for Whirlpool is the emergence of LG and Samsung. Both of these
companies have the resources to undercut the price points of their major competitors. While this
is troubling for Whirlpool, their brand awareness and customer base is so strong it should not
drastically impact their revenue. Whirlpool has been a leader in their industry for over 100 years
and through a multitude of brand and product offerings, they should be able to maintain a
majority of their customers and continue their sales growth thanks to the beneficially economic
conditions.
Short-Term Liquidity and Asset Utilization Efficiency
Over the past year, stock prices for Whirlpool has increased from $154 to about $197.83 per
share. This is a clear indicator that the company is doing well and is growing. Although they
have a negative working capital, they are still expected to generate higher profits over the next
year. The negative working capital is due to the acquisition of two new companies, so it can be
seen that Whirlpool is expecting to expand and grow their business.
Whirlpool needs to keep a reasonably low inventory, as to try to prevent loss of revenues from
deteriorated and damaged goods. Keeping a low inventory will help them save money, and in
turn have higher profits. These higher profits will result in higher dividends for shareholders, so
long as the two new companies prove to be a good investment for Whirlpool. Now that the new
companies have been purchased, Whirlpool can now more efficiently use these assets and
investors’ money to make profits and increase their return on assets and return on common
equity. If these two ratios increase, it will prove valuable for investors, and therefore they should
be buying stock in Whirlpool now before the stock prices spike.
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
38
Capital Structure and Long-Term Solvency
Whirlpool’s capital structure of using their operating cash flow as well as a good mix of long-
term and short-term debt is allowing the company to grow and continue to finance their
operations. The capital structure ratios suggest that the company has been able to maintain good
risk levels and use the debt they incur in a positive way by using this capital structure strategy. In
addition to its capital structure and long-term solvency strategy, the company is also focused on
its long-term goals. This means that as Whirlpool continues to grow they will continue to use this
strategy, which is why they will continue to be successful in the future. They will be able to
finance their operations as well as support and increase innovations and productivity.
Operating Performance
Whirlpool’s operating performance ratios might seem low compared to many industries but are
strong compared to their competitor Electrolux. When compared to Electrolux, Whirlpool
surpasses them in all of the key ratios, which shows why they are the leaders within the industry.
Whirlpool’s operating performance shows that they are committed to growing and restructuring
their company in order to maintain a good positions in the industry and to expand their earnings.
Buying stock in this company is a good investment as their commitment to growth and long-term
goals will prove to be, as seen by the operating performance ratios, successful.
Appendix Whirlpool’s 10K Financial Statements
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
39
(In mill ions, except per share data) 31-Dec-14 % 31-Dec-13 % 31-Dec-12 %
Net Sales 19,872$ 100.00% 18,769$ 100.00% 18,143$ 100.00%
Expenses
Cost of product sold 16,477 82.92% 15,471 82.43% 15,250 84.05%
Gross margin 3,395 17.08% 3,298 17.57% 2,893 15.95%
Selling, general and administrative 2,038 10.26% 1,828 9.74% 1,757 9.68%
Intangible amortization 33 0.17% 25 0.13% 30 0.17%
Restructuring costs 136 0.68% 196 1.04% 237 1.31%
Operating profit 1,188 5.98% 1,249 6.65% 869 4.79%
Other income (expense)
Interest and sundry income (expense) (142) -0.71% (155) -0.83% (112) -0.62%
Interest expense (165) -0.83% (177) -0.94% (199) -1.10%
Earnings before income taxes 881 4.43% 917 4.89% 558 3.08%
Income tax expense 189 0.95% 68 0.36% 133 0.73%
Net earnings 692 3.48% 849 4.52% 425 2.34%
Less: Net earnings available to noncontrolling interests 42 0.21% 22 0.12% 24 0.13%
Net earnings available to Whirlpool 650$ 3.27% 827$ 4.41% 401$ 2.21%
Per share of common stock
Basic net earnings available to Whirlpool 8.30$ 10.42$ 5.14$
Diluted net earnings available to Whirlpool 8.17$ 10.24$ 5.06$
Weighted-average shares outstanding (in millions)
Basic 78.3 79.3 78.1
Diluted 79.6 80.8 79.3
Common - Size Statements of Income
Whirlpool Corporation
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
40
(In mill ions, except share data) 31-Dec-14 % 31-Dec-13 % 31-Dec-12 %
Assets
Current assets
Cash and equivalents 1,026$ 5.13% 1,380$ 8.88% 1,168$ 7.59%
Accounts receivable, net of allowance of $154, $73 and $60, respectively 2,768 13.84% 2,005 12.90% 2,038 13.24%
Inventories 2,740 13.70% 2,408 15.49% 2,354 15.29%
Deffered income taxes 417 2.08% 549 3.53% 558 3.62%
Prepaid and other current assets 1,147 5.73% 680 4.37% 709 4.61%
Total current assets 8,098 40.49% 7,022 45.17% 6,827 44.34%
Property, net of accumulated depreciation of $5,959, $6,278 and $6,070, respectively 3,981 19.90% 3,041 19.56% 3,034 19.71%
Goodwill 2,807 14.03% 1,724 11.09% 1,727 11.22%
Other intangibles, net of accumulated amortization of $267,$237 and $211, respectively. 2,803 14.01% 1,702 10.95% 1,722 11.18%
Deffered income taxes 1,900 9.50% 1,764 11.35% 1,832 11.90%
Other noncurrent assets 413 2.06% 291 1.87% 254 1.65%
Total assets 20,002$ 100.00% 15,544$ 100.00% 15,396$ 100.00%
Liabilities and stockholders' equity
Current l iabilities
Accounts payable 4,730$ 23.65% 3,865$ 24.86% 3,698$ 24.02%
Accrued expenses 852 4.26% 710 4.57% 692 4.49%
Accrued advertising and promotions 673 3.36% 441 2.84% 419 2.72%
Employee compensation 499 2.49% 456 2.93% 520 3.38%
Notes payable 569 2.84% 10 0.06% 7 0.05%
Current maturities of long-term debt 234 1.17% 607 3.91% 510 3.31%
Other current l iabilities 846 4.23% 705 4.54% 664 4.31%
Total current l iabilities 8,403$ 42.01% 6,794$ 43.71% 6,510$ 42.28%
Noncurrent l iabilities
Long-term debt 3,544 17.72% 1,846 11.88% 1,944 12.63%
Pension benefits 1,123 5.61% 930 5.98% 1,636 10.63%
Postretirement benefits 446 2.23% 458 2.95% 422 2.74%
Other noncurrent l iabilities 690 3.45% 482 3.10% 517 3.36%
Total noncurrent l iabilities 5,803 29.01% 3,716 23.91% 4,519 29.35%
Stockholders' equity
Common stock, $1 par value, 250 mill ion shares authorized , 110 mill ion,
109 mill ion and 108 mill ion shares issued, and 78 mill ion, 77 mill ion and 79 mill ion
shares outstanding, respectively 110 0.55% 109 0.70% 108 0.70%
Additional paid-in capital 2,555 12.77% 2,453 15.78% 2,313 15.02%
Retained earnings 6,209 31.04% 5,784 37.21% 5,147 33.43%
Accumulated other comprehensive loss (1,840) -9.20% (1,298) -8.35% (1,531) -9.94%
Treasury stock, 32 mill ion shares (2014 ane 2013) and 29 mill ion shares (2012) (2,149) -10.74% (2,124) -13.66% (1,777) -11.54%
Total Whirlpool stockholders' equity 4,885 24.42% 4,924 31.68% 4,260 27.67%
Noncontrolling interests 911 4.55% 110 0.71% 107 0.69%
Total stockholders' equity 5,796 28.98% 5,034 32.39% 4,367 28.36%
Total l iabil ities and stockholders' equity 20,002 100.00% 15,544 100.00% 15,396 100.00%
Whirlpool Corporation
Common - Size Balance Sheets
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
41
(In mill ions) 31-Dec-14 % 31-Dec-13 % 31-Dec-12 %
Operating activities
Net earnings 692$ 100.00% 849$ 100.00% 425$ 100.00%
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization 560 80.92% 540 63.60% 551 129.65%
Curtailment gain - 0.00% - 0.00% (52) -12.24%
Increase (decrease) in LIFO inventory reserve 9 1.30% (26) -3.06% (13) -3.06%
Brazil ian collection dispute - 0.00% - 0.00% (275) -64.71%
Changes in assets and liabilities (net of effects of acquisitions)
Accounts receivable (90) -13.01% (65) -7.66% 47 11.06%
Inventories 40 5.78% (86) -10.13% (7) -1.65%
Accounts payable 359 51.88% 275 32.39% 240 56.47%
Accruedd advertising and promotions 121 17.49% 28 3.30% (13) -3.06%
Accrued expenses and current l iabilities (232) -33.53% 82 9.66% - 0.00%
Taxes deffered and payable, net 49 7.08% (105) -12.37% (68) -16.00%
Accrued pension and postretirement benefits (181) -26.16% (184) -21.67% (227) -53.41%
Employee compensation (17) -2.46% (23) -2.71% 249 58.59%
Other 169 24.42% (23) -2.71% (161) -37.88%
Cash provided by operating activities 1,479 213.73% 1,262 148.65% 696 163.76%
Investing activities
Capital expenditures (720) -104.05% (578) -68.08% (476) -112.00%
Proceeds from sale of assets and businesses 21 3.03% 6 0.71% 10 2.35%
Change in restricted cash 74 10.69% - 0.00% - 0.00%
Acquisition of Indesit Company S.p.A (1,356) -195.95% - 0.00% - 0.00%
Acquisition of Hefei Rongshida Sanyo Electric Co., Ltd. (453) -65.46% - 0.00% - 0.00%
Investment in related businesses (16) -2.31% (6) -0.71% (28) -6.59%
Other (6) -0.87% (4) -0.47% - 0.00%
Cash used in investing activities (2,456) -354.91% (582) -68.55% (494) -116.24%
Financing activities
Proceeds from borrowings of long-term debt 1,483 214.31% 518 61.01% 322 75.76%
Repayments of longg-term debt (606) -87.57% (513) -60.42% (361) -84.94%
Net proceeds from short-term borrowings 63 9.10% 5 0.59% 6 1.41%
Dividends paid (224) -32.37% (187) -22.03% (155) -36.47%
Repurchase of common stock (25) -3.61% (350) -41.22% - 0.00%
Purchase of noncontrolling interest shares (5) -0.72% - 0.00% - 0.00%
Common stock issued 38 5.49% 95 11.19% 43 10.12%
Other (19) -2.75% (2) -0.24% (3) -0.71%
Cash provided by (used in) financing activities 705 101.88% (434) -51.12% (148) -34.82%
Effects of exchange rate changes on cash and equivalents (82) -11.85% (34) -4.00% 5 1.18%
Increase (decrease) in cash and equivalents (354) -51.16% 212 24.97% 59 13.88%
Cash and equivalents at beginning of year 1,380 199.42% 1,168 137.57% 1,109 260.94%
Cash and equivalents at end of year 1,026$ 148.27% 1,380$ 162.54% 1,168$ 274.82%
Supplemental disclosure of cash flow information
Cash paid for interest 172$ 24.86% 179$ 21.08% 197$ 46.35%
Cash paid for income taxes 140$ 20.23% 158$ 18.61% 177$ 41.65%
Whirlpool Corporation
Common-Size Cash Flows
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
42
(In mill ions, except per share data) 31-Dec-14 31-Dec-13 31-Dec-12
Net Sales 19,872$ 18,769$ 18,143$
Expenses
Cost of product sold 16,477 15,471 15,250
Gross margin 3,395 3,298 2,893
Selling, general and administrative 2,038 1,828 1,757
Intangible amortization 33 25 30
Restructuring costs 136 196 237
Operating profit 1,188 1,249 869
Other income (expense)
Interest and sundry income (expense) (142) (155) (112)
Interest expense (165) (177) (199)
Earnings before income taxes 881 917 558
Income tax expense 189 68 133
Net earnings 692 849 425
Less: Net earnings available to noncontrolling interests 42 22 24
Net earnings available to Whirlpool 650$ 827$ 401$
Per share of common stock
Basic net earnings available to Whirlpool 8.30$ 10.42$ 5.14$
Diluted net earnings available to Whirlpool 8.17$ 10.24$ 5.06$
Weighted-average shares outstanding (in millions)
Basic 78.3 79.3 78.1
Diluted 79.6 80.8 79.3
Whirlpool Corporation
Consolidated Statements of Income
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
43
(In mill ions, except share data) 31-Dec-14 31-Dec-13 31-Dec-12
Assets
Current assets
Cash and equivalents 1,026$ 1,380$ 1,168$
Accounts receivable, net of allowance of $154, $73 and $60, respectively 2,768 2,005 2,038
Inventories 2,740 2,408 2,354
Deffered income taxes 417 549 558
Prepaid and other current assets 1,147 680 709
Total current assets 8,098 7,022 6,827
Property, net of accumulated depreciation of $5,959, $6,278 and $6,070, respectively 3,981 3,041 3,034
Goodwill 2,807 1,724 1,727
Other intangibles, net of accumulated amortization of $267,$237 and $211, respectively. 2,803 1,702 1,722
Deffered income taxes 1,900 1,764 1,832
Other noncurrent assets 413 291 254
Total assets 20,002$ 15,544$ 15,396$
Liabilities and stockholders' equity
Current l iabilities
Accounts payable 4,730$ 3,865$ 3,698$
Accrued expenses 852 710 692
Accrued advertising and promotions 673 441 419
Employee compensation 499 456 520
Notes payable 569 10 7
Current maturities of long-term debt 234 607 510
Other current l iabilities 846 705 664
Total current l iabilities 8,403$ 6,794$ 6,510$
Noncurrent l iabilities
Long-term debt 3,544 1,846 1,944
Pension benefits 1,123 930 1,636
Postretirement benefits 446 458 422
Other noncurrent l iabilities 690 482 517
Total noncurrent l iabilities 5,803 3,716 4,519
Stockholders' equity
Common stock, $1 par value, 250 mill ion shares authorized , 110 mill ion,
109 mill ion and 108 mill ion shares issued, and 78 mill ion, 77 mill ion and 79 mill ion
shares outstanding, respectively 110 109 108
Additional paid-in capital 2,555 2,453 2,313
Retained earnings 6,209 5,784 5,147
Accumulated other comprehensive loss (1,840) (1,298) (1,531)
Treasury stock, 32 mill ion shares (2014 ane 2013) and 29 mill ion shares (2012) (2,149) (2,124) (1,777)
Total Whirlpool stockholders' equity 4,885 4,924 4,260
Noncontrolling interests 911 110 107
Total stockholders' equity 5,796 5,034 4,367
Total l iabil ities and stockholders' equity 20,002 15,544 15,396
Whirlpool Corporation
Consolidated Balance Sheets
Whirlpool Corp. Financial Analysis Report NYSE: WHR May 4, 2015
44
(In mill ions) 31-Dec-14 31-Dec-13 31-Dec-12
Operating activities
Net earnings 692$ 849$ 425$
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization 560 540 551
Curtailment gain - - (52)
Increase (decrease) in LIFO inventory reserve 9 (26) (13)
Brazil ian collection dispute - - (275)
Changes in assets and liabilities (net of effects of acquisitions)
Accounts receivable (90) (65) 47
Inventories 40 (86) (7)
Accounts payable 359 275 240
Accruedd advertising and promotions 121 28 (13)
Accrued expenses and current l iabilities (232) 82 -
Taxes deffered and payable, net 49 (105) (68)
Accrued pension and postretirement benefits (181) (184) (227)
Employee compensation (17) (23) 249
Other 169 (23) (161)
Cash provided by operating activities 1,479 1,262 696
Investing activities
Capital expenditures (720) (578) (476)
Proceeds from sale of assets and businesses 21 6 10
Change in restricted cash 74 - -
Acquisition of Indesit Company S.p.A (1,356) - -
Acquisition of Hefei Rongshida Sanyo Electric Co., Ltd. (453) - -
Investment in related businesses (16) (6) (28)
Other (6) (4) -
Cash used in investing activities (2,456) (582) (494)
Financing activities
Proceeds from borrowings of long-term debt 1,483 518 322
Repayments of longg-term debt (606) (513) (361)
Net proceeds from short-term borrowings 63 5 6
Dividends paid (224) (187) (155)
Repurchase of common stock (25) (350) -
Purchase of noncontrolling interest shares (5) - -
Common stock issued 38 95 43
Other (19) (2) (3)
Cash provided by (used in) financing activities 705 (434) (148)
Effects of exchange rate changes on cash and equivalents (82) (34) 5
Increase (decrease) in cash and equivalents (354) 212 59
Cash and equivalents at beginning of year 1,380 1,168 1,109
Cash and equivalents at end of year 1,026$ 1,380$ 1,168$
Supplemental disclosure of cash flow information
Cash paid for interest 172$ 179$ 197$
Cash paid for income taxes 140$ 158$ 177$
Whirlpool Corporation
Consolidated Cash Flows
Recommended