2016 INVESTOR MEETINGS FIRST QUARTER 2016 WHIRLPOOL CORPORATION

Transcription

1 2016 INVESTOR MEETINGS FIRST QUARTER 0 FIRST-QUARTER INVESTOR MEETINGS

2 WHIRLPOOL CORPORATION ADDITIONAL INFORMATION This Presentation contains forward-looking statements about Whirlpool Corporation and its consolidated subsidiaries ( Whirlpool ) that speak only as of this date. Whirlpool disclaims any obligation to update these statements. Forward-looking statements in this Presentation may include, but are not limited to, statements regarding expected earnings per share, cash flow, productivity and raw material prices. Many risks, contingencies and uncertainties could cause actual results to differ materially from Whirlpool's forward-looking statements. Among these factors are: (1) intense competition in the home appliance industry reflecting the impact of both new and established global competitors, including Asian and European manufacturers; (2) acquisition and investment-related risk, including risk associated with our acquisitions of Hefei Sanyo and Indesit, and risk associated with our increased presence in emerging markets; (3) Whirlpool's ability to continue its relationship with significant trade customers and the ability of these trade customers to maintain or increase market share; (4) risks related to our international operations, including changes in foreign regulations, regulatory compliance and disruptions arising from natural disasters or terrorist attacks; (5) fluctuations in the cost of key materials (including steel, plastic, resins, copper and aluminum) and components and the ability of Whirlpool to offset cost increases; (6) the ability of Whirlpool to manage foreign currency fluctuations; (7) litigation, tax, and legal compliance risk and costs, especially costs which may be materially different from the amount we expect to incur or have accrued for; (8) the effects and costs of governmental investigations or related actions by third parties; (9) changes in the legal and regulatory environment including environmental and health and safety regulations; (10) Whirlpool's ability to maintain its reputation and brand image; (11) the ability of Whirlpool to achieve its business plans, productivity improvements, cost control, price increases, leveraging of its global operating platform, and acceleration of the rate of innovation; (12) information technology system failures and data security breaches; (13) product liability and product recall costs; (14) inventory and other asset risk; (15) the uncertain global economy and changes in economic conditions which affect demand for our products; (16) the ability of suppliers of critical parts, components and manufacturing equipment to deliver sufficient quantities to Whirlpool in a timely and cost-effective manner; (17) our ability to attract, develop and retain executives and other qualified employees; (18) the impact of labor relations; (19) Whirlpool's ability to obtain and protect intellectual property rights; and (20) health care cost trends, regulatory changes and variations between results and estimates that could increase future funding obligations for pension and postretirement benefit plans. Additional information concerning these and other factors can be found in Whirlpool's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. 1 FIRST-QUARTER INVESTOR MEETINGS

3 USE OF NON-GAAP FINANCIAL MEASURES This presentation includes certain non-gaap financial measures, which we refer to as ongoing business (1) measures: Ongoing business operating profit (loss), ongoing business operating margin, ongoing business earnings (loss) before income taxes, ongoing business earnings per diluted share, ongoing business earnings before interest and taxes (EBIT), ongoing business earnings before interest and taxes (EBIT) margin, earnings before interest and taxes (EBIT), earnings before interest and taxes (EBIT) margin, ongoing business segment operating profit (loss) and ongoing business segment operating margin Other non-gaap financial measures included in this presentation are free cash flow (2). Please refer to the appendix for a reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measures. (1) Ongoing business measures are non-gaap measures. See appendix slides (2) Free cash flow is a non-gaap measure. See appendix slide 32 2 FIRST-QUARTER INVESTOR MEETINGS

4 VALUE CREATION STRATEGY Growth Margin Expansion Cash Generation % Larger Global Platform Product and Brand Innovation Best Cost Structure 3 FIRST-QUARTER INVESTOR MEETINGS

5 A FUNDAMENTALLY DIFFERENT COMPANY Doubled in Size Net Sales $10B $21B Balanced Geographic Mix N America Sales # of value-creating regions 60% 50% 2 4 A Branded Company OEM revenue # of $1B+ brands ~20% ~5% 1 7 Global Scale Plants FIRST-QUARTER INVESTOR MEETINGS

6 WITH A STRONG TRACK RECORD OF PERFORMANCE Ongoing Earnings per Diluted Share $11.39 $12.38 $10.02 $7.05 $ ONGOING EARNINGS PER SHARE GROWTH RATE OF 57% 5 FIRST-QUARTER INVESTOR MEETINGS

7 LEADING POSITION BY REGION #1 #1 #1 Western Company #1 EVERY HOME EVERYWHERE 6 FIRST-QUARTER INVESTOR MEETINGS

8 STRONGEST BRAND PORTFOLIO Premium Mass * Value WHIRLPOOL CORPORATION HAS SEVEN** $1 BILLION+ BRANDS 7 FIRST-QUARTER INVESTOR MEETINGS

9 VALUE-CREATION DRIVERS 8 FIRST-QUARTER INVESTOR MEETINGS

10 LONG TERM STRATEGIC GROWTH LEVERS Indesit Acquisition 2x historical scale in Europe #1 in 5 of top 7 European countries $350 million of acquisition synergies Hefei Acquisition 5x historical scale in China Deep market penetration with 10x distribution points Meaningful growth platform in critical country North America Multi-Year Growth Cycle Progressing in a multi-year growth cycle Leverage right-sized fixed cost structure Tremendous innovation pipeline Latin America Industry leading position in Brazil Significant growth opportunity in Latin America International Global leader in compressor business 9 FIRST-QUARTER INVESTOR MEETINGS

11 U.S. MULTI-YEAR DEMAND GROWTH US T7 Industry Units (in thousands) 50,000 ~+4% ~+3% +5% 45,000 +6% +6% 40,000 +9% 35, FIRST-QUARTER INVESTOR MEETINGS

12 LEADING BRANDS AVAILABLE WHERE PEOPLE SHOP Strong Balance of Sales in Each U.S. Channel (WHR share in sales channel) Diverse Portfolio of Brands 2015 Estimate Big Box Retailers Key Accounts Independent Retailers 11 FIRST-QUARTER INVESTOR MEETINGS

13 REDUCED COST BASE ENABLES MARGIN EXPANSION Margin Expansion from U.S. Demand Growth U.S. Demand (T-6) Whirlpool s U.S. Breakeven volume 12 FIRST-QUARTER INVESTOR MEETINGS

14 LEADING SHARE POSITIONS ACROSS EUROPE Position in Top 7 Countries Country by Size Whirlpool s Position Russia Germany United Kingdom France Italy Spain Poland 13 FIRST-QUARTER INVESTOR MEETINGS

15 AND $350M IN SYNERGIES THROUGH 2018 $100M $130M $120M $350M SG&A / Engineering Product / Operational Platform Procurement Synergies + Manufacturing plan in Italy approved + Legal entity mergers proceeding as planned + Purchasing agreements signed INTEGRATION PROGRESS ON TRACK: STRONG ACCELERATION OF SYNERGIES AHEAD 14 FIRST-QUARTER INVESTOR MEETINGS

16 BRL/USD BRAZIL REMAINS CHALLENGING MARGINS STABILIZED Real: continued currency volatility Latin America operating margins stabilized and improving 12% 7% 7% Brazil: steepest GDP decline since % 4% Q14 1Q15 2Q15 3Q15 4Q15-4 DEPLOYED ACTIONS OFFSETTING CURRENCY IMPACT: RIGHT-SIZED FIXED COST STRUCTURE 15 FIRST-QUARTER INVESTOR MEETINGS

17 LATIN AMERICA ATTRACTIVE GROWTH SEGMENTS Percent of LAR Sales % 39% + Global compressor business stable 15% 19% + LAR International continues to profitably grow + Extend and expand is performing well Latin America as % of total company 53% 23% 42% 16% - Brazil core appliances impacted by rapid currency devaluation and demand reduction + Long-term growth through appliance penetration BRAZIL CORE TODAY REPRESENTS LESS THAN 10% OF GLOBAL SALES 16 FIRST-QUARTER INVESTOR MEETINGS

18 LARGE APPLIANCE PENETRATION GROWTH POTENTIAL Appliance Household Penetration 100% 98% 58% 88% 55% 53% 65% 1% 1% LAR Int l* LAR Int l * LAR Int l * Refrigeration Laundry Dishwashing EACH PERCENT INCREASE IN PENETRATION IS WORTH $145M IN NET SALES FOR WHIRLPOOL 17 FIRST-QUARTER INVESTOR MEETINGS

19 WHIRLPOOL CHINA A NEW GROWTH PLATFORM Hefei Sanyo (acquired in 2014) Strong growth engine Exceptional distribution capability Market penetration Installed manufacturing capacity Whirlpool Global technology leadership Global management Global scale Broad product portfolio #1 Western Company in Asia Strong profitable growth Deep market penetration Complete brand portfolio Strong product offerings Low cost manufacturing footprint 18 FIRST-QUARTER INVESTOR MEETINGS

20 WHIRLPOOL CHINA DISTRIBUTION OPPORTUNITY Number of Outlets Tier 1-4 Penetration Tier 5-7 Penetration Rural Penetration Service Centers >30, % 100% ~75% ~70% ~5,500 ~25% ~3,000 ~0 ~ FIRST-QUARTER INVESTOR MEETINGS

21 ASIA REGION STRONG DEMAND POTENTIAL Appliance Unit Volumes Demographics (middle class growth rate) Appliance Penetration % 36% China CAGR through % 16% India CAGR through 2020 EACH PERCENT INCREASE IN PENETRATION IS WORTH $140M IN NET SALES FOR WHIRLPOOL 20 FIRST-QUARTER INVESTOR MEETINGS

22 2016 OVERVIEW 21 FIRST-QUARTER INVESTOR MEETINGS

23 2016 FINANCIAL GUIDANCE (AS OF 1/29/16 EARNINGS CALL) GAAP Diluted EPS $11.25 $12.00 Ongoing Business Diluted EPS (1) $14.00 $14.75 Free Cash Flow (2) ~ $700 $800 million ACTIONS IN PLACE TO DELIVER ANOTHER RECORD YEAR OF PERFORMANCE 22 FIRST-QUARTER INVESTOR MEETINGS

24 2016 CAPITAL ALLOCATION STRATEGY Allocation Considerations Fund the Business Targeted Capital Structure Dividends Criteria Capital Investment: 3.5% of Sales x Debt / EBITDA target 25 30% Trailing 12 month earnings (guideline) Share Repurchase $250M repurchased in 2015 $225M authorization remaining as of 12/31/2015 M&A Strategic Fit Strong Value Creation Capacity to Execute CAPITAL ALLOCATION PLAN TO DRIVE LONG-TERM VALUE CREATION FOR OUR SHAREHOLDERS 23 FIRST-QUARTER INVESTOR MEETINGS

25 APPENDIX 24 FIRST-QUARTER INVESTOR MEETINGS

26 RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES We supplement the reporting of our financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-gaap financial measures, some of which we refer to as "ongoing business" measures, including ongoing business operating profit, ongoing business operating margin, ongoing business earnings (loss) before income taxes, earnings before interest and taxes (EBIT), EBIT margin, ongoing business EBIT, ongoing business EBIT margin, ongoing business earnings per diluted share, ongoing business segment operating profit, ongoing business segment operating margin, and free cash flow. Ongoing business measures exclude items that may not be indicative of, or are unrelated to, results from our ongoing business operations and provide a better baseline for analyzing trends in our underlying businesses. Management believes that free cash flow provides investors and stockholders with a relevant measure of liquidity and a useful basis for assessing the company's ability to fund its activities and obligations. We believe that these non-gaap measures provide meaningful information to assist investors and stockholders in understanding our financial results and assessing our prospects for future performance. Because non-gaap financial measures are not standardized, it may not be possible to compare these financial measures with other companies non- GAAP financial measures having the same or similar names. These ongoing business financial measures should not be considered in isolation or as a substitute for reported operating profit, earnings (loss) before income taxes, net earnings per diluted share available to Whirlpool, reported operating profit by segment, and cash provided by (used in) operating activities, the most directly comparable GAAP financial measures. These non-gaap financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results and the following reconciliations to corresponding GAAP financial measures, provide a more complete understanding of our business. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. 25 FIRST-QUARTER INVESTOR MEETINGS

27 2014 FOURTH-QUARTER ONGOING BUSINESS SEGMENT OPERATING PROFIT (LOSS) The reconciliation provided below reconciles the non-gaap financial measure ongoing business segment operating profit (loss) with the most directly comparable GAAP financial measure, segment operating profit (loss), for the three months ended December 31, Ongoing business segment operating margin is calculated by dividing ongoing business segment operating profit (loss) by segment net sales. Segment Operating Profit (Loss) Restructuring Expense (a) Investment Expense (b) Three Months Ended December 31, 2014 Antitrust and Dispute Resolutions (e) Acquisition Related Costs and Inventory PPA (c)(d) Ongoing Business Segment Operating Profit (Loss) North America $ 255 $ $ $ $ $ 255 Latin America EMEA Asia (22 ) Other/Eliminations (140 ) (66 ) Total Whirlpool Corporation $ 281 $ 35 $ 26 $ 2 $ 111 $ FIRST-QUARTER INVESTOR MEETINGS

28 FULL-YEAR ONGOING BUSINESS MEASURES The reconciliation provided below reconciles the non-gaap financial measures, ongoing business operating profit and ongoing business earnings per diluted share, with the most directly comparable GAAP financial measures, reported operating profit and net earnings per diluted share available to Whirlpool, for the twelve months ended December 31, 2013, December 31, 2012 and December 31, Ongoing business operating margin is calculated by dividing ongoing business operating profit by ongoing business net sales. Ongoing business net sales excludes Brazilian (BEFIEX) tax credits from reported net sales. Twelve Months Ended December 31, Operating Profit Earnings Per Diluted Share Reported GAAP measure $ 1,249 $ 869 $ 792 $ $ 5.06 $ 4.99 Restructuring expense Brazilian tax credits (BEFIEX) (109) (37) (266) (1.35) (0.47) (3.41) U.S. Energy Tax Credits (1.56) - (4.68) Brazilian collection dispute and antitrust resolutions Investment expense Brazilian government settlement Investment and intangible impairment Benefit plan curtailment gain - (49) (35) - (0.38) (0.28) Contract and patent resolutions Normalized tax rate adjustment Supplier quality recovery - - (61) - - (0.49) Supplier-related quality issue - - (7) - - (0.06) Ongoing business operations measure $ 1,353 $ 1,024 $ 559 $ $ 7.05 $ 2.05 For more information, see document titled GAAP Reconciliations at investors.whirlpoolcorp.com/annuals-proxies.cfm. 27 FIRST-QUARTER INVESTOR MEETINGS

29 2015 FULL-YEAR ONGOING BUSINESS MEASURES The reconciliation provided below reconciles the non-gaap financial measures ongoing business operating profit, ongoing business earnings before interest and taxes and ongoing business earnings per diluted share, with the most directly comparable GAAP financial measures, operating profit and net earnings per diluted share available to Whirlpool, for the twelve months ending December 31, Ongoing business operating margin is calculated by dividing ongoing business operating profit by net sales. Ongoing business EBIT margin is calculated by dividing ongoing business EBIT by net sales. Operating Profit Twelve Months Ended December 31, 2015 Earnings Before Interest & Taxes (3) Earnings per Diluted Share Reported GAAP Measure $ 1,285 $ 1,196 $ 9.83 Restructuring Expense (a) Combined Acquisition Related Transition Costs (c) Benefit Plan Curtailment Gain (g) (62) (62) (0.63) Gain/Expenses Related to a Business Investment (f) (46) (0.44) Legacy Product Warranty and Liability Expense (h) Pension Settlement Charges (i) Antitrust and Dispute Resolutions (e) Ongoing Business Measure $ 1,559 $ 1,445 $ (3) Earnings Before Interest & Taxes is a non-gaap measure calculated by adding Interest and sundry income (expense) [approximately $(89) million] and Operating Profit 28 FIRST-QUARTER INVESTOR MEETINGS

30 2016 FORECASTED FULL-YEAR ONGOING BUSINESS MEASURES The reconciliation provided below reconciles the non-gaap financial measures ongoing business operating profit, ongoing business earnings before interest and taxes and ongoing business earnings per diluted share, with the most directly comparable GAAP financial measures, operating profit and net earnings per diluted share available to Whirlpool, for the projected twelve months ending December 31, Ongoing business operating margin is calculated by dividing ongoing business operating profit by net sales. Ongoing business EBIT margin is calculated by dividing ongoing business EBIT by net sales. Twelve Months Ending December 31, 2016 Operating Profit Earnings Before Interest & Taxes (3) Earnings per Diluted Share Reported GAAP Measure $ 1,525 1,625 $ 1,400 1,500 $ Restructuring Expense (a) Combined Acquisition Related Transition Costs (c),(4) Ongoing Business Measure $ 1,800 1,900 $ 1,675 1,775 $ (3) Earnings Before Interest & Taxes is a non-gaap measure calculated by adding Interest and sundry income (expense) [approximately $(125) million] and Operating Profit (4) The $30 million combined acquisition related transition cost adjustment is expected to impact the EMEA region. This adjustment is required to calculate ongoing operating margin for the EMEA region. None of the other regions are expected to incur adjustments full year GAAP and ongoing business tax rate assumption is approximately percent. 29 FIRST-QUARTER INVESTOR MEETINGS

31 FOOTNOTES a. RESTRUCTURING EXPENSE - During the fourth quarter of 2014, we recorded restructuring charges of $35 million. The earnings per diluted share impacts are calculated based on income tax impacts of $8 million. During the full year of 2015, we recorded restructuring charges of $201 million. The earnings per diluted share impacts is calculated based on income tax impacts of $41 million. For the full year 2016, the company expects to recorded restructuring charges of $250 million. The expected earnings per diluted share impacts is calculated based on income tax impact of $60 million. b. INVESTMENT EXPENSE - During the fourth quarter of 2014 we recognized an investment expense of $40 million related to the acquisitions of Hefei Sanyo and Indesit. The earnings per diluted share impact is calculated based on an income tax impact of $9 million. c. COMBINED ACQUISITION RELATED TRANSITION COSTS - During the fourth quarter of 2014, we recognized acquisition related transition costs of $98 million associated with the acquisition of a majority interest in Hefei Sanyo and the acquisition of Indesit. The earnings per diluted share impacts is calculated based on an income tax impact of $21 million. During the full year of 2015, we recognized acquisition related transition costs of $64 million associated with these acquisitions. The earnings per diluted share impacts is calculated based on an income tax impact of $13 million. For the full year 2016, the company expects to recognize acquisition related transition costs of $30 million. The expected earnings per diluted share impacts is calculated based on income tax impact of $7 million. d. INVENTORY PURCHASE PRICE ALLOCATION- During the fourth quarter of 2014, the company recognized an inventory purchase price adjustment of $13 million associated with its acquisitions of Hefei Sanyo and Indesit. The earnings per diluted share impact is calculated based on an income tax impact of $3 million. 30 FIRST-QUARTER INVESTOR MEETINGS

32 FOOTNOTES, continued e. ANTITRUST AND DISPUTE RESOLUTIONS - During the full year 2015, we recognized expenses of $35 million related to antitrust and dispute resolutions. The diluted earnings per share impact is calculated based on an income tax impact of $7 million. f. GAIN/EXPENSES RELATED TO BUSINESS INVESTMENT - During the full year 2015, we recognized a gain related to a business investment of $63 million and an expense of $17 million. The earnings per diluted share impact is calculated based on an income tax impact of $13 million. g. BENEFIT PLAN CURTAILMENT GAIN - During the full year 2015, we recorded a benefit plan curtailment gain of $62 million. The earnings per diluted share impact is calculated based on an income tax impact of $13 million. h. LEGACY PRODUCT WARRANTY AND LIABILITY EXPENSE - During the full year 2015, we recognized expenses of $39 million related to legacy product warranty and liability actions on heritage Indesit product in Europe and a $3 million charge associated with a separate product recall in North America. The earnings per diluted share impact is calculated based on an income tax impact of $9 million. i. PENSION SETTLEMENT CHARGES - During the full year 2015, the company recognized expenses of $3 million related to a Canadian pension settlement and $12 million related to an EMEA pension settlement. The earnings per diluted share impact is calculated based on an income tax impact of $3 million. 31 FIRST-QUARTER INVESTOR MEETINGS

33 FREE CASH FLOW As defined by the company, free cash flow is cash provided by (used in) operating activities after capital expenditures, proceeds from the sale of assets and businesses and changes in restricted cash. The reconciliation provided below reconciles twelve month actual 2015 and 2014 and projected 2016 full year free cash flow with cash provided by (used in) operating activities, the most directly comparable GAAP financial measure. Twelve Months Ended December 31, (millions of dollars) Outlook Cash Provided by (Used in) Operating Activities $1,225 $1,479 $1,400 - $1,550 Capital expenditures, proceeds from sale of assets/businesses and changes in restricted cash* (605) (625) (700) (750) Free Cash Flow $620 $854 ~ $700 - $800 *The change in restricted cash relates to the private placement funds paid by Whirlpool to acquire majority control of Whirlpool China and which are used to fund capital and technical resources to enhance Whirlpool China s research and development and working capital. 32 FIRST-QUARTER INVESTOR MEETINGS

34 INDEX OF SUPPORTING DATA Slide Slide Title Notes 6 Strongest brand portfolio * Whirlpool ownership of the Hotpoint brand in the EMEA and Asia regions is not affiliated with the Hotpoint brand sold in the Americas ** Our leading portfolio of brands includes Whirlpool, Maytag, KitchenAid, Embraco, Brastemp, Consul, and Indesit, each of which generates annual revenues in excess of $1 billion. 9 U.S. multi-year demand growth AHAM 10 Leading brands available where people shop Big box retailers are Sears, Lowes and Home Depot 12 Leading share positions across Europe GFK, internal research 14 Brazil remains challenging margins stabilized Bloomberg 16 Large appliance penetration growth potential *LAR Int l Includes: Central America and South America excluding Brazil Net Sales opportunity calculated based on 1% of households purchasing 1 additional home appliance at Whirlpool s average selling price and adjusting for Whirlpool s share position 19 Asia region strong demand potential * Net Sales opportunity calculated based on 1% of households purchasing 1 additional home appliance at Whirlpool s average selling price and adjusting for Whirlpool s share position 33 FIRST-QUARTER INVESTOR MEETINGS

35 34 FIRST-QUARTER INVESTOR MEETINGS