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Whirlpool Corporation Reports First-Quarter 2016 Results

The following excerpt is from the company's SEC filing.

Record Ongoing Operating Profit and EPS

Reaffirms 2016 EPS and FCF Guidance

Announced $1 Billion Share Buyback Program and 11% Dividend Increase

BENTON HARBOR, Mich.,

April 26, 2016

- Whirlpool Corporation (NYSE: WHR) announced today

-quarter GAAP net earnings of

$150 million

per diluted share, compared to

$191 million

per diluted share, reported for the same prior-year period. Ongoing business earnings per diluted share

totaled a first-quarter record

in the same prior-year period, primarily driven by acquisition synergies, the benefits of cost and capacity-reduction initiatives and ongoing cost productivity.

Net sales in the quarter were

$4.6 billion

$4.8 billion

during the same prior-year period. Excluding the impact of currency, sales increased by

percent.

“Our record first-quarter results were in line with our expectations and we completed our existing share repurchase program,” said Jeff M. Fettig, chairman and chief executive officer of Whirlpool Corporation. “We remain confident in our ability to deliver our 2016 guidance as we capitalize on robust demand in the U.S., new product introductions and strong productivity around the globe.”

-quarter GAAP operating profit totaled

$283 million

$303 million

in the same prior-year period. Record

-quarter ongoing business operating profit

$339 million

, or approximately

7.3 percent

of sales, compared to

$318 million

percent of sales, in the same prior-year period. Acquisition synergies, the benefits of cost and capacity-reduction initiatives, and ongoing cost productivity more than offset unfavorable currency and weak emerging market demand.

For the

three months ended

March 31, 2016

, the company reported cash used in

operating activities of

$(661) million

$(569) million

in the same prior-year period. Whirlpool Corporation reported free cash flow

$(739) million

in the first three months of

$(651) million

OUTLOOK

For the full year

, Whirlpool Corporation expects to report GAAP earnings per diluted share of

$11.25

$12.00

and ongoing business earnings per diluted share of

$14.00

$14.75

2016 EPS Outlook

GAAP Diluted EPS

$11.25 - $12.00

Restructuring Expense

Combined Acquisition Related Transition Costs

Legacy Product Warranty and Liability Expense

Ongoing Business Diluted EPS

$14.00 - $14.75

(i) Diluted EPS available to Whirlpool.

, the company expects to generate free cash flow

$800 million

. Included in this guidance are acquisition related restructuring cash outlays of up to

$200 million

, legacy product warranty and liability costs of $155 million and capital spending of

$750 million

“Our strategy to create long-term value for our shareholders remains unchanged,” said Fettig. “We remain focused on delivering substantial shareholder value by leveraging our leading brand and product innovation, larger global footprint and best cost structure. In addition to our strong business performance, with our $1 billion share repurchase program and increased dividend we have appropriate flexibility to deliver on our capital allocation priorities.”

-QUARTER REGIONAL REVIEW

Whirlpool North America

Whirlpool North America reported

-quarter net sales of

$2.4 billion

$2.3 billion

in the same prior-year period. Excluding the impact of currency, sales increased

The region reported a

-quarter operating profit of

$250 million

$276 million

in the same prior-year period. Ongoing business segment operating profit

-quarter record of $

253 million

percent of sales, compared to $

230 million

percent of sales, in the same prior-year period. Revenue growth and ongoing cost productivity more than offset unfavorable currency.

The company expects full-year

industry unit shipments to

increase by

Whirlpool Europe, Middle East and Africa

Whirlpool Europe, Middle East and Africa reported

$1.2 billion

$1.3 billion

in the same prior-year period. Excluding the impact of currency, sales decreased

$55 million

$17 million

totaled $

58 million

35 million

percent of sales, in the same prior-year period. Acquisition synergies and ongoing cost productivity more than offset unfavorable currency and lower unit volumes.

industry unit shipments to be flat to up 2 percent.

Whirlpool Latin America

Whirlpool Latin America reported

$0.7 billion

0.9 billion

in the same prior-year period. Excluding the impact of currency, sales decreased by

-quarter GAAP operating profit of

$42 million

$59 million

percent of sales, in the same prior-year period. Improved price/mix and the benefits of cost and capacity-reduction initiatives partially offset unfavorable currency and a weaker demand environment in Brazil.

industry unit shipments in Brazil to decrease by 10 percent.

Whirlpool Asia

Whirlpool Asia reported

$371 million

$378 million

$25 million

$24 million

27 million

26 million

percent of sales, in the same prior-year period, primarily driven by ongoing cost productivity and unit volume growth.

industry unit shipments to be flat.

(1) A reconciliation of ongoing business earnings per diluted share, a non-GAAP financial measure, to reported net earnings per diluted share available to Whirlpool and other important information, appears below.

(2) A reconciliation of ongoing business operating profit, a non-GAAP financial measure, to reported operating profit and other important information, appears below.

(3) A reconciliation of free cash flow, a non-GAAP financial measure, to cash provided by (used in) operating activities and other important information, appears below.

(4) A reconciliation of ongoing business segment operating profit (loss), a non-GAAP financial measure, to reported segment operating profit (loss) and other important information, appears below.

-QUARTER 2016 // PRODUCT LEADERSHIP, INNOVATION AND AWARDS

Whirlpool Corporation is the global home appliance industry leader with deep consumer insights and a strong portfolio of brands worldwide. We offer compelling home solutions both within and beyond our core appliance business, delivering innovation that matters to consumers and positioning our company for continued growth and profitability.

Company Awards & Recognition

Fortune Magazine named Whirlpool Corporation as one of the World's Most Admired Companies in 2016 for the sixth consecutive year in the Home Equipment, Furnishings industry.

The Environmental Protection Agency (EPA) recognized Whirlpool Corporation with the 2016 ENERGY STAR Partner of the Year - Product Brand Owner Award for outstanding contribution to reducing greenhouse gas emissions by manufacturing energy-efficient kitchen and laundry appliances.

Product Innovation

KitchenAid

brand dishwashers were awarded the top spot as ranked by an industry leading consumer magazine in the United States.

brand received nine International Consumer Electronics Show (CES) Innovation Awards.

Torrent

Magnetic Drive Blender was chosen by Red Dot as a winner of the "Best of the Best" award for ground-breaking product design.

Bauknecht

brand PremiumCare washers and dryers received the iF Design Award for Design Excellence.

About Whirlpool Corporation

Whirlpool Corporation (NYSE: WHR) is the number one major appliance manufacturer in the world, with approximately

$21 billion

in annual sales,

97,000

employees and 70 manufacturing and technology research centers throughout the world in 2015. The company markets

Whirlpool, KitchenAid, Maytag, Consul, Brastemp, Amana, Bauknecht, Jenn-Air, Indesit

and other major brand names in nearly every country around the world. Additional information about the company can be found at whirlpoolcorp.com, or find us on Twitter at @WhirlpoolCorp.

Whirlpool Additional Information

This document contains forward-looking statements about Whirlpool Corporation and its consolidated subsidiaries (“Whirlpool”) that speak only as of this date. Whirlpool disclaims any obligation to update these statements. Forward-looking statements in this document may include, but are not limited to, statements regarding expected earnings per share, cash flow, industry unit shipments, 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.

WHIRLPOOL CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE PERIODS ENDED

MARCH 31

(Millions of dollars, except share data)

Three Months Ended

Expenses

Cost of products sold

Gross margin

Selling, general and administrative

Intangible amortization

Restructuring costs

Operating profit

Other income (expense)

Interest and sundry income (expense)

Interest expense

Earnings before income taxes

Income tax expense

Net earnings

Less: Net earnings available to noncontrolling interests

Net earnings available to Whirlpool

Per share of common stock

Basic net earnings available to Whirlpool

Diluted net earnings available to Whirlpool

Dividends declared

Weighted-average shares outstanding (in millions)

Comprehensive income (loss)

CONSOLIDATED CONDENSED BALANCE SHEETS

December 31,

(Unaudited)

Assets

Current assets

Cash and cash equivalents

Accounts receivable, net of allowance of $171 and $160, respectively

Inventories

Deferred income taxes

Prepaid and other current assets

Total current assets

Property, net of accumulated depreciation of $6,182 and $5,953, respectively

Goodwill

Other intangibles, net of accumulated amortization of $342 and $327, respectively

Other noncurrent assets

Total assets

19,672

19,010

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

Accrued expenses

Accrued advertising and promotions

Employee compensation

Notes payable

Current maturities of long-term debt

Other current liabilities

Total current liabilities

Noncurrent liabilities

Long-term debt

Pension benefits

Postretirement benefits

Other noncurrent liabilities

Total noncurrent liabilities

Stockholders’ equity

Common stock, $1 par value, 250 million shares authorized, 111 million shares issued, and 76 million and 77 million shares outstanding, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

(2,177

(2,332

Treasury stock, 35 million and 33 million shares, respectively

(2,624

(2,399

Total Whirlpool stockholders’ equity

Noncontrolling interests

Total stockholders’ equity

Total liabilities and stockholders’ equity

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Millions of dollars)

Operating activities

Adjustments to reconcile net earnings to cash provided by (used in) operating activities:

Depreciation and amortization

Curtailment gain

Changes in assets and liabilities:

Accrued expenses and current liabilities

Taxes deferred and payable, net

Accrued pension and postretirement benefits

Cash used in operating activities

Investing activities

Capital expenditures

Proceeds from sale of assets and business

Change in restricted cash

Investment in related businesses

Cash used in investing activities

Financing activities

Proceeds from borrowings of long-term debt

Repayments of long-term debt

Net proceeds (repayments) from short-term borrowings

Dividends paid

Repurchase of common stock

Common stock issued

Cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

SUPPLEMENTAL INFORMATION - CONSOLIDATED FINANCIAL STATEMENTS RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Millions of dollars except per share data)

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 (loss), ongoing business operating margin, earnings before interest and taxes (EBIT), earnings before interest and taxes (EBIT) margin, ongoing business earnings before interest and taxes (EBIT), ongoing business earnings before interest and taxes (EBIT) margin, ongoing business earnings (loss) before income taxes, ongoing business earnings per diluted share, ongoing business segment operating profit (loss), 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 (loss), net earnings per diluted share available to Whirlpool, reported operating profit (loss) 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.

First-Quarter

Ongoing Business Operating Profit, Ongoing Business Earnings Before Interest and Taxes and Ongoing Business Earnings per Diluted Share

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 three months ended

March 31, 2015

. Ongoing business operating margin is calculated by dividing ongoing business operating profit by net sales.

Earnings Before Interest & Taxes

Reported GAAP Measure

Benefit Plan Curtailment Gain

Combined Acquisition Related Transition Costs and Inventory Purchase Price Allocation

Pension Settlement Charges

Antitrust and Dispute Resolutions

Normalized Tax Rate Adjustment

(0.52)

Ongoing Business Measure

(5) Earnings Before Interest & Taxes is a non-GAAP measure calculated by adding Interest and sundry income (expense) [approximately $

(53) million

] and Operating Profit.

(30) million

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, reported segment operating profit (loss), for the three months ended

. Ongoing business segment operating margin is calculated by dividing ongoing business segment operating profit (loss) by segment net sales.

Other/Eliminations

Total Whirlpool Corporation

Note: numbers may not reconcile due to rounding

Full Year

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 ended

December 31, 2015

. 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 Ended

Gain/Expenses Related to a Business Investment

million] and Operating Profit.

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, 2016

Twelve Months Ending

$ 1,525 - 1,625

$ 1,400 - 1,500

$ 1,800 - 1,900

$ 1,675 - 1,775

$ 14.00 - 14.75

(125) million

Adjustments are required to calculate full-year 2016 ongoing operating margins for the North America, Latin America, EMEA and Asia regions. The acquisition related transition cost adjustment is expected to have a $29 million impact in the EMEA region and a $2 million impact in the Asia region. The legacy product warranty and liability expense adjustment is expected to have a $3 million impact in the North America region and a $1 million impact in the EMEA region.

Footnotes:

RESTRUCTURING

EXPENSE

During the first quarters of 2015 and 2016, we recorded restructuring charges of $33 million and $47 million, respectively. The earnings per diluted share impacts are calculated based on income tax impacts of $8 million and $10 million, respectively.

During the full year 2015, we recorded restructuring charges of $201 million. The earnings per diluted share impact is calculated based on an income tax impact of $41 million. For the full year 2016, the company expects to recognize restructuring charges of $250 million. The earnings per diluted share impact is calculated based on an income tax impact of $55 million.

BENEFIT PLAN CURTAILMENT GAIN

- During the first quarter of 2015, we recorded a benefit plan curtailment gain of $47 million. The earnings per diluted share impact is calculated based on an income tax impact of $11 million. 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.

COMBINED ACQUISITION RELATED TRANSITION COSTS AND INVENTORY PURCHASE PRICE ALLOCATION -

During the first quarter of 2015 and 2016, we recognized acquisition related transition costs of $15 million and $5 million, respectively, associated with the acquisition of a majority interest in Hefei Sanyo and the acquisition of Indesit. The earnings per diluted share impacts are calculated based on an income tax impact of $4 million and $1 million. During the first quarter of 2015, we recognized a $2 million inventory purchase price allocation adjustment. The earnings per diluted share impact is calculated based on an income tax impact of $0 million.

During the full year 2015, we recognized acquisition related transition costs of $64 million, associated with these acquisitions. The earnings per diluted share impact 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 $32 million. The expected earnings per diluted share impact is calculated based on income tax impact of $7 million.

PENSION SETTLEMENT CHARGES

- During the first quarter of 2015, the company recognized expenses of $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. 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.

ANTITRUST AND DISPUTE RESOLUTIONS

- During the first quarter of 2015, we recognized expenses of approximately $10 million related to antitrust resolutions. The earnings per diluted share impact is calculated based on an income tax impact of $2 million. During the full year 2015, we recognized expenses of $35 million related to antitrust and dispute resolutions. The earnings per diluted share impact is calculated based on an income tax impact of $7 million.

NORMALIZED TAX RATE ADJUSTMENT

- During the first quarters of 2015 and 2016, we made adjustments to ongoing business diluted EPS to reconcile specific items reported to anticipated full-year effective tax rates of approximately 24% and 22%, respectively.

LEGACY PRODUCT WARRANTY AND LIABILITY EXPENSE -

During the first quarter of 2016, the company recognized expenses of $4 million related to legacy product warranty and liability actions. The earnings per diluted share impact is calculated based on an income tax impact of $1 million. 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.

GAIN/EXPENSES RELATED TO A BUSINESS INVESTMENT

- During the full year 2015, we recognized a gain related to a business investment of $63 million and an expense of $17

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

and projected 2016 full-year free cash flow with cash provided by (used in) operating activities, the most directly comparable GAAP financial measure.

Three Months Ended March 31,

(millions of dollars)

2016 Outlook

Cash Provided by (Used in) Operating Activities

$1,400 - $1,550

Capital expenditures, proceeds from sale of assets/businesses and change in restricted cash*

(700) - (750)

$700 - $800

The change in restricted cash relates to the private placement funds paid by Whirlpool to acquire majority control of

and which are used to fund capital and technical resources to enhance

Whirlpool China

’s research and development and working capital.

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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