Whirlpool Corp: Form 10-Q for the period ended Mar 31, 2025

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote understanding of the results of operations and financial condition of the Company and generally discusses the results of operations for the current three months ended period compared to the same prior-year period. MD&A is provided as a supplement to, and should be read in connection with, the Consolidated Condensed Financial Statements and Notes to the Consolidated Condensed Financial Statements included in this Form 10-Q.

Certain references to particular information in the Notes to the Consolidated Condensed Financial Statements are made to assist readers.

ABOUT WHIRLPOOL

Whirlpool Corporation ("Whirlpool") is a leading kitchen and laundry appliance company, in constant pursuit of improving life at home and inspiring generations with our brands. The company is driving meaningful innovation to meet the evolving needs of consumers through its iconic brand portfolio, including Whirlpool, KitchenAid, JennAir, Maytag, Amana, Brastemp, Consul, and InSinkErator. In 2024, the Company reported approximately $17 billion in annual sales, 44,000 employees, and 55 manufacturing and technology research centers. We conduct our business through four operating segments, which consist of Major Domestic Appliances ("MDA") North America; MDA Latin America; MDA Asia; and Small Domestic Appliances ("SDA") Global. The MDA Europe segment was deconsolidated as of April 1, 2024.

OVERVIEW

Whirlpool delivered first-quarter net earnings (loss) available to Whirlpool of $71 million (net earnings margin of 2.0%), or $1.28 per share, compared to net earnings (loss) available to Whirlpool of $(259) million (net earnings margin of (5.8)%), or $(4.72) per share in the same prior-year period, which included a non-cash charge related to the held for sale treatment for EMEA and other EMEA transaction costs of $259 million. Whirlpool delivered cash provided by (used in) operating activities of $(721) million for the three months ended March 31, 2025, compared to $(873) million in the same prior year period and had capital expenditures of $72 million and $115 million, respectively.

Net earnings margins were favorably impacted by cost take out, product price/mix, and the non-cash charge related to the EMEA transaction in the same prior-year period. This improvement was partially offset by currency impacts primarily in Latin America and a higher adjusted effective tax rate compared to the same prior-year period.

Our global cost take out and pricing actions continue to deliver shareholder value as we navigate through a challenging macro environment in North America. This is demonstrated by the year-over-year margin expansion in the first-quarter. We remain confident in delivering over $200 million of cost take out, successfully implementing previously announced pricing actions, and expanding margins in 2025.

RESULTS OF OPERATIONS

The following table summarizes the consolidated results of operations for the periods presented:

Consolidated - Millions of dollars, except per share data

(1) Not meaningful ("nm")

(2) As a result of the GAAP earnings loss for the three months ended March 31, 2024 the impact of antidilutive shares was excluded from the loss per share calculation on a GAAP basis.

Consolidated net sales decreased 19.4% for the three months ended March 31, 2025 compared to the same period in 2024. The decrease for the three months ended March 31, 2025 was primarily driven by divestiture of our European major domestic appliances business. Excluding the impact of foreign currency, net sales decreased 16.1% for the three months ended March 31, 2025, compared to the same period in 2024.

The consolidated gross margin percentage for the three months ended March 31, 2025 increased to 16.8% compared to 14.3% in the same prior-year period. The increase was primarily driven by cost take out and favorable product price/mix, partially offset by unfavorable impact from foreign currency.

Our reportable segments consist of MDA North America; MDA Latin America; MDA Asia; and Small Domestic Appliances ("SDA") Global. The MDA Europe business was deconsolidated upon the completion of the European contribution agreement transaction with Arcelik as of April 1, 2024. For additional information, see Note 13 to the Consolidated Condensed Financial Statements.

The following is a discussion of results for each of our operating segments.

MDA NORTH AMERICA

Net Sales

Net sales decreased 0.3% for the three months ended March 31, 2025 compared to the same period in 2024. The decrease was primarily driven by unfavorable currency partially offset by favorable product price/mix. Excluding the impact from foreign currency, net sales increased 0.1% for the three months ended March 31, 2025, compared to the same period in 2024.

Cost of Products Sold

Cost of products sold for the three months ended March 31, 2025 decreased 2.6% compared to the same period in 2024. The decrease was primarily driven by cost productivity.

EBIT

EBIT increased for the three months ended March 31, 2025 compared to the same period in 2024. The increase for the three months ended was primarily due to cost take out and favorable product price/mix. EBIT margin was 6.2% for the three months ended March 31, 2025, compared to 5.6% for the same period in 2024.

MDA LATIN AMERICA

Net Sales

Net sales decreased 11.9% for the three months ended March 31, 2025, compared to the same period in 2024. The decrease was primarily driven by unfavorable impacts of foreign currency partially offset by favorable product price/mix. Excluding the impact from foreign currency, net sales increased 2.4% for the three months ended March 31, 2025, respectively, compared to the same period in 2024.

Cost of Products Sold

Cost of products sold for the three months ended March 31, 2025 decreased 10.9% compared to the same period in 2024. The decrease was primarily driven by foreign currency.

EBIT

EBIT decreased for the three months ended months ended March 31, 2025 compared to the same period in 2024. The decrease for the three months ended was primarily driven by unfavorable currency and a indirect tax benefit in the same period in 2024, partially offset by favorable cost take out and product price/mix. EBIT margin was 6.6% for the three months ended March 31, 2025, compared to 7.8% for the same period in 2024.

MDA ASIA

Net Sales

Net sales increased 12.3% for the three months ended March 31, 2025 compared to the same period in 2024. The increase was primarily driven by increased volume and favorable product price/mix. Excluding the impact from foreign currency, net sales increased 16.5% for the three months ended March 31, 2025 compared to the same period in 2024.

Cost of Products Sold

Cost of products sold for the three months ended March 31, 2025 increased 8.1% compared to the same period in 2024. The increase was primarily driven by increased volume.

EBIT

EBIT increased for the three months ended March 31, 2025 compared to the same period in 2024. The increase was primarily driven by cost take out and increased volume. EBIT margin was 7.0% for the three months ended March 31, 2025 compared to 4.6% for the same period in 2024.

SDA GLOBAL

Net Sales

Net sales increased 7.9% for the three months ended March 31, 2025 compared to the same period in 2024. The increase for the three months ended was primarily driven by favorable product price/mix partially offset by unfavorable impacts from foreign currency. Excluding the impact from foreign currency, net sales increased 9.9% for the three months ended March 31, 2025 compared to the same period in 2024.

Cost of Products Sold

Cost of products sold for the three months ended March 31, 2025 increased 4.8% compared to the same period in 2024. The increase was primarily driven by product mix and increased volume on product attachments and accessories.

EBIT

EBIT increased for the three months ended March 31, 2025 compared to the same period in 2024. The increase for the three months ended was primarily driven by favorable product price/mix. EBIT margin was 18.5% for the three months ended March 31, 2025 compared to 18.1% for the same period in 2024.

MDA EUROPE

Net Sales, Cost of Products Sold, and EBIT

MDA Europe consisted of our European major domestic appliance business which was contributed to Beko Europe as of April 1, 2024. Therefore, the Company had no net sales, cost of products sold, or EBIT for MDA Europe after the first quarter of 2024. For additional information on the financial performance of MDA Europe for the three months ended March 31, 2024, see our Form 10-Q for the quarter then ended.

Selling, General and Administrative

The following table summarizes selling, general and administrative expenses as a percentage of net sales by region for the periods presented:

(1) Not meaningful ("nm")

Consolidated selling, general and administrative expenses decreased for the three months ended March 31, 2025, compared to the same period in 2024 primarily due to the disposal of our European major domestic appliance business on April 1, 2024.

For additional information, see Notes 1 and 14 to the Consolidated Condensed Financial Statements.

Restructuring

We incurred restructuring charges of $10 million for the three months ended March 31, 2025 compared to $23 million for the same period in 2024. For additional information, see Note 11 to the Consolidated Condensed Financial Statements.

For the full year 2025, we expect to incur approximately $75 million of restructuring charges, inclusive of the restructuring charges recorded for the three months ended March 31, 2025. Substantially all will result in cash settlement.

(Gain) Loss on Sale and Disposal of Businesses

There were no amounts recorded to (Gain) loss on sale and disposal of businesses for the three months ended March 31, 2025, compared to $247 million for the same period of 2024. The amounts recorded in 2024 were related to the divestiture of our European major domestic appliance business and were primarily due to fair value fluctuations driven by seasonality of net working capital, and transaction costs.

For additional information, see Note 14 to the Consolidated Condensed Financial Statements.

Interest and Sundry (Income) Expense

Net interest and sundry income was $32 million for the three months ended March 31, 2025 compared to $29 million in the same prior year period in 2024.

For additional information, see Note 9 to the Consolidated Condensed Financial Statements.

Interest Expense

Interest expense was $77 million for the three months ended March 31, 2025 compared to $90 million in the same prior year period of 2024.

Income Taxes

Income tax expense was $43 million for the three months ended March 31, 2025 compared to income tax expense of $76 million in the same prior year period of 2024. The decrease for the three months ended March 31, 2025 is primarily due to an overall lower level of earnings and tax benefits recognized in Q1 2025 related to the completion of legal entity restructuring projects in connection with the disposal of our European major appliance business, partially offset by associated valuation allowances. For more information, see Note 12 to the Consolidated Condensed Financial Statements.

Other Information

Our Critical Accounting Policies and Estimates for goodwill and other indefinite-lived intangibles are disclosed in Note 1 to the Consolidated Financial Statements and in Management's Discussion and Analysis of our annual report on Form 10-K for the fiscal year ended December 31, 2024.

We continue to monitor the significant global economic uncertainty to assess the outlook for demand for our products and the impact on our business and our overall financial performance. Our Maytag and InSinkErator trademarks continue to be at risk at March 31, 2025. None of our reporting units or other indefinite-lived intangible assets are presently at risk for future impairment.

For additional information, see Note 1 to the Consolidated Condensed Financial Statements.

FINANCIAL CONDITION AND LIQUIDITY

Background

Our objective is to finance our business through operating cash flow and the appropriate mix of long-term and short-term debt. By diversifying the maturity structure, we avoid concentrations of debt, reducing liquidity risk. We have varying needs for short-term working capital financing as a result of the nature of our business. We regularly review our capital structure and liquidity priorities, which include funding innovation and growth through capital expenditures and research and development expenditures as well as opportunistic mergers and acquisitions; and providing returns to shareholders through dividends, share repurchases and debt repayment.

The Company believes that free cash flow provides stockholders with a relevant measure of liquidity and a useful basis for assessing Whirlpool's ability to fund its activities and obligations. Whirlpool has historically been able to leverage its free cash flow generation to fund our operations, pay for any debt servicing costs and allocate capital for reinvestment in our business, funding share repurchases and dividend payments.

On February 20, 2024, Whirlpool’s wholly-owned subsidiary, Whirlpool Mauritius Limited, executed the sale of 30.4 million equity shares of Whirlpool India via an on-market trade. The transaction reduced Whirlpool’s ownership in Whirlpool India from 75% to 51%, and generated sales proceeds of approximately $462 million on settlement. The Company used transaction proceeds to reduce debt. We have announced our intent to reduce our ownership stake in Whirlpool India and continue to evaluate various transaction structures, including via market sale and negotiated transaction. We expect to complete a transaction by mid-to-late 2025. Transaction proceeds are expected to further reduce debt. Sale of Whirlpool India shares is subject to Company board approval, and we have not recorded any impact relating to this announcement as of March 31, 2025.

Our short-term potential uses of liquidity include funding our business operations, ongoing capital spending, debt repayment, and returns to shareholders. As of March 31, 2025, we had $1.85 billion of debt maturing within the next twelve months, which we expect to pay through refinancing, free cash flow generation, cash on hand and potential transaction proceeds.

We monitor the credit ratings and market indicators of credit risk of our lending, depository, derivative counterparty banks, and customers regularly, and take certain actions to manage credit risk. We diversify our deposits and investments in short-term cash equivalents to limit the concentration of exposure by counterparty.

Cash and cash equivalents

The Company had cash and cash equivalents of approximately $1.0 billion at March 31, 2025. For cash in each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and expected future foreign investments. Our intent is to permanently reinvest these funds outside of the United States and our current plans do not demonstrate a need to repatriate the cash to fund our U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable United States taxes (if any) and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with the repatriation of cash due to the complexity of its hypothetical calculation.

At March 31, 2025, we had cash or cash equivalents greater than 1% of our consolidated assets in Brazil (3.0%) and India (1.8%). In addition, we had no third-party accounts receivable outside of the United States greater than 1% of our consolidated assets. We continue to monitor general financial instability and uncertainty globally.

Revolving credit facility and other committed credit facilities

The Company maintains a $3.5 billion revolving credit facility and a committed $1.5 billion term loan as of March 31, 2025. In addition to these facilities, we have committed credit facilities in Brazil and India that provide borrowings up to approximately $186 million at March 31, 2025.

We were in compliance with our interest coverage ratio under the revolving credit facility and term loan as of March 31, 2025. For additional information, see Note 5 to the Consolidated Condensed Financial Statements.

Notes payable

Notes payable consists of short-term borrowings payable to banks and commercial paper, which are generally used to fund working capital requirements. At March 31, 2025, we have $619 million of notes payable outstanding primarily under the commercial paper programs. For additional information, see Note 5 to the Consolidated Condensed Financial Statements.

Trade customers

We continue to review customer conditions globally. We had no material impacts from customer insolvencies during the three months ended March 31, 2025, nor do we have immediate visibility into material customer insolvency situations occurring in the future. We continue to monitor these situations, considering each geographic region, the unique credit risk specific to the country, marketplace and economic environment, and take appropriate risk mitigation steps.

For additional information on guarantees, see Note 6 to the Consolidated Condensed Financial Statements.

Share Repurchase Program

For additional information about our share repurchase program, see Note 10 to the Consolidated Condensed Financial Statements.

Sources and Uses of Cash

The following table summarizes the net increase (decrease) in cash and cash equivalents for the periods presented:

Cash Flows from Operating Activities

Cash used in operating activities decreased during the three months ended March 31, 2025 compared to the same prior year period in 2024. The decrease in cash used in operating activities was primarily driven by fluctuations in working capital and the impacts of the deconsolidation of the MDA Europe business.

The timing of cash flows from operations varies significantly throughout the year primarily due to changes in production levels, sales patterns, promotional programs, funding requirements, credit management, as well as receivable and payment terms. Depending on the timing of cash flows, the location of cash balances, as well as the liquidity requirements of each country, external sources of funding are used to support working capital requirements.

Cash Flows from Investing Activities

Cash used in investing activities during the three months ended March 31, 2025 decreased compared to the same period in 2024, primarily driven by lower capital expenditures.

Cash Flows from Financing Activities

Cash provided by financing activities during the three months ended March 31, 2025 decreased compared to the same period in 2024. In 2024, cash proceeds of $462 million were generated upon the sale of minority interest shares in Whirlpool India. For additional information, see Note 14 to the Consolidated Condensed Financial Statements.

Financing Arrangements

The Company had total committed credit facilities of approximately $5.2 billion at March 31, 2025. These facilities are geographically reflective of the Company's global operations. The Company is confident that the committed credit facilities are sufficient to support its global operations. We had $1.5 billion and $1.5 billion drawn on the committed credit facilities (representing amounts drawn on the term loan) at March 31, 2025 and December 31, 2024, respectively, which were used to fund the InSinkErator acquisition in the fourth quarter of 2022.

For additional information about our financing arrangements, see Note 5 to the Consolidated Condensed Financial Statements.

Dividends

On February 17, 2025, our Board of Directors approved a quarterly dividend on our common stock of $1.75 per share.

Off-Balance Sheet Arrangements

In the ordinary course of business, we enter into agreements with financial institutions to issue bank guarantees, letters of credit, and surety bonds. These agreements are primarily associated with unresolved tax matters in Brazil, as is customary under local regulations, and other governmental obligations and debt agreements. At March 31, 2025, we had approximately $286 million outstanding under these agreements.

For additional information about our off-balance sheet arrangements, see Notes 5 and 6 to the Consolidated Condensed Financial Statements.

FORWARD-LOOKING PERSPECTIVE

Earnings per diluted share presented below are net of tax. We currently estimate our anticipated 2025 full-year GAAP tax rate between 20 and 25%. We currently estimate earnings per diluted share for 2025 as follows:

For the full-year 2025, we expect to generate cash from operating activities of approximately $1 billion and capital expenditures of approximately $450 million.

OTHER MATTERS

For additional information regarding certain of our loss contingencies/litigation, see Note 6 to the Consolidated Condensed Financial Statements. Unfavorable outcomes in these proceedings could have a material adverse effect on our financial statements in any particular reporting period.

Antidumping

As previously reported, Whirlpool filed petitions in 2011 and 2015 alleging that Samsung, LG and Electrolux violated U.S. and international trade laws by dumping large residential washers into the U.S. Those petitions resulted in orders imposing antidumping duties on certain large residential washers imported from South Korea, Mexico, and China, and countervailing duties on certain large residential washers from South Korea. In August 2022, the order covering certain large residential washers from China was extended for an additional five years. In September 2024, the order covering certain large residential washers from Mexico was extended for an additional five years.

Raw Materials and Global Economy

The current domestic and international political environment have contributed to uncertainty surrounding the future state of the global economy. We have experienced raw material inflation in certain prior years based on the impact of U.S. tariffs and other global macroeconomic factors.

The recent imposition of significant trade policy and tariff actions by the U.S. government, including but not limited to tariffs on imported steel and aluminum products, multiple tariffs on certain imports from China, tariffs on certain imports from Canada and Mexico, and baseline tariffs on most imports from most other countries, are creating significant uncertainty and potential risks for our business. These tariffs have increased the cost of certain raw materials and components, impacting our cost of products sold. While we are actively exploring opportunities to mitigate these increased costs, there can be no guarantee that we will be able to fully offset the impact of these tariffs. Furthermore, the imposition of retaliatory tariffs from other countries on our exported products could negatively affect our sales and marketplace access in those countries. The long-term effects of these tariffs and any future trade policy changes on the global economy and our industry remain uncertain and could have a material adverse effect on our financial statements in any particular reporting period.

In addition to existing and potential additional tariff actions by the U.S. government and retaliatory actions by others, and certain additional factors beyond our control, including the conflict in Ukraine and related sanctions, the Israel-Palestinian conflict, the Red Sea conflict and its impact on shipping and logistics, and government actions in China, among other factors, we expect to continue to experience the following impacts: a global shortage of certain components, such as semiconductors, raw material and input cost inflation, and fluctuations in logistics availability, timing and costs. This could require us to modify our current business practices, and could have a material adverse effect on our financial statements in any particular reporting period.

(a) Evaluation of disclosure controls and procedures

Prior to filing this report, we completed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of March 31, 2025. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025.

(b) Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting that occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, other than as set forth below.

Changes in foreign trade policies and other factors beyond our control may adversely impact our business and financial performance.

The current domestic and international political environment, including changes in administrations, government shutdowns and changes to trade laws, regulations and policies, including tariffs, sanctions, and import/export controls, has resulted in uncertainty surrounding the future state of the global economy. Many of our most significant competitors are are foreign companies with varying global production footprints, and in an escalating global trade conflict, tariffs, sanctions or other trade policy actions by various governments could be favorable to our competitors.

The U.S. government recently implemented significant trade policy and tariff actions, including but not limited to tariffs on imported steel and aluminum products, multiple tariffs on certain imports from China, tariffs on certain imports from Canada and Mexico, and baseline tariffs on most imports from most other countries. These actions have increased the cost of certain raw materials and components and created significant uncertainty and potential risks for our business. Certain countries have announced retaliatory tariffs in response to such actions. The U.S. government may in the future propose and implement additional changes to international trade agreements, tariffs, taxes, and other government rules and regulations and, if initiated, retaliatory tariffs or other actions may be taken by certain governments. While the future financial impact of these actions and potential additional U.S. tariff actions and retaliatory actions by other countries remains unknown, the impacts could have a material adverse effect on our financial statements in any particular reporting period.