Whirlpool Corporation Reports 2005 Second-Quarter Results; Company
Achieves Record Sales; Results Reflect Progress in Mitigating
Higher Material Costs BENTON HARBOR, Mich., July 21
/PRNewswire-FirstCall/ -- Whirlpool Corporation (NYSE:WHR) today
announced second-quarter 2005 net earnings of $96 million, or $1.42
per diluted share, compared to $106 million, or $1.53 per diluted
share, in the same period last year. The decline was driven by
significantly higher material and oil-related costs. (Logo:
http://www.newscom.com/cgi-bin/prnh/20040202/DETU004LOGO ) Net
sales of $3.6 billion were a second-quarter record and increased 9
percent from last year. Excluding currency translations, net sales
increased by approximately 5 percent. "We are pleased with our
global operating performance given the significant magnitude of the
material cost increases in the second quarter and throughout the
first half of the year," said Jeff M. Fettig, Whirlpool's chairman,
president and chief executive officer. "The success of the actions
we have been taking to adjust to the global cost environment has
positioned us well for the balance of the year." The company's
second-quarter results reflect approximately $180 million of higher
material and oil-related costs, as well as unfavorable currency,
and higher restructuring expense compared to the same period last
year. These costs were mitigated through a combination of factors,
including price increases, mix improvement, productivity and
cost-control initiatives, as well as a lower effective tax rate.
Cash used in operating activities for the first half was $109
million compared to cash provided of $82 million last year,
primarily due to higher planned working capital. Cash flow was also
impacted by planned increases in capital investments in the
company's global operating platform and innovation to support
future growth. For the first half of 2005, record sales of $6.8
billion increased 8 percent from the prior-year period. Excluding
currency translations, sales increased approximately 5 percent.
Year-to-date earnings of $182 million were significantly impacted
by material and oil-related costs of approximately $370 million and
declined 12 percent from the first half of 2004. Fettig added: "We
expect positive year-over-year earnings momentum to increase during
the remainder of the year as our combined ongoing actions continue
to build and overcome the material cost increases." RECENT
MILESTONES * Whirlpool Corporation has been named to the "2005 List
of Top 20 U.S. Companies for Leaders," making this the second
consecutive year the company has been acknowledged for its focus on
developing leaders within the company. Sponsored by global human
resources services firm Hewitt Associates and The Human Resource
Planning Society (HRPS), the "Top 20 Companies for Leaders" were
selected by an independent panel of judges. * Whirlpool Corporation
has been named one of "25 Noteworthy Companies for Diversity" by
DiversityInc magazine. The company was recognized for its excellent
community philanthropy, employee-resource groups and measurement of
diversity success. * Whirlpool was the premier sponsor of the 2005
Jimmy Carter Work Project (JCWP), an annual initiative to build
homes for families in need and raise awareness of the critical
shortage of affordable housing. During the week of June 19th, 238
homes in Michigan and Canada were built by JCWP volunteers, which
included more than 300 Whirlpool employees from the company's
operations around the world. Whirlpool also directly sponsored the
construction of 10 homes during the JCWP, which is associated with
Habitat for Humanity International. * Whirlpool Corporation
received an Industrial Design Excellence Award (IDEA) from the
Industrial Designers Society of America (IDSA). The prestigious
award was in recognition of the Whirlpool brand Fabric Freshener,
an innovative portable appliance that releases odors and relaxes
wrinkles from fabrics in about 30 minutes. The product also was
awarded a special innovation prize at the annual French trade fair,
la Foire de Paris. * For the second consecutive year, the Great
Place to Work Institute named Whirlpool's Brazilian subsidiary,
Multibras, as one of the "100 Best Companies to work for in Latin
America." New Innovations * The Whirlpool(R) Velos(TM) g2Convect
appliance allows consumers to grill, bake, broil and steam like a
traditional oven but with the speed of a microwave. The large
capacity microwave hood combines a new convection cooking
capability and the company's g2max(TM) speedcook technology. *
Whirlpool brand introduced the unique Fast Fill(TM) water
dispensing system, which gives consumers the ability to fill any
size cup, glass or container with chilled water twice as fast as
previous dispensers. The system is the first to have a measured
fill feature and a 180-degree rotating faucet. * KitchenAid
introduced a new version of its top-rated Dual Fuel Range to
include steam-assist technology -- a cooking feature used by
professional chefs. This range is the first full-size, freestanding
model to offer steam technology in the U.S. and requires no special
plumbing or remodeling for installation. * Gladiator(TM)
GarageWorks by Whirlpool Corporation expanded its suite of
organizational products for the garage with the introduction of the
Gladiator Cadet(TM) series. The suite of floor cabinets, project
centers, and work benches complement the brand's more featured
products and extends the distribution of Gladiator products to a
broader base of consumers. * Brastemp brand introduced Brastemp
Colors, a new line of refrigerators with colors that appeal to the
growing number of Brazilian consumers interested in both functional
and design innovation. SECOND QUARTER REGION REVIEW Whirlpool North
America operations delivered record second-quarter revenue of $2.2
billion, an increase of 5 percent from the prior-year period. The
company's U.S. unit shipments of major appliances (T-7) were
essentially equal to last year as strong Whirlpool branded
performance was offset by lower OEM shipments. Total U.S. appliance
industry unit shipments were up approximately 2 percent. Sales were
positively impacted by price increases and a favorable product mix.
Continued higher material and oil-related costs led to a 12-percent
decline in operating profit. The impact from higher costs and
planned manufacturing downtime was mitigated through improved
pricing and mix, productivity gains and strong cost controls.
During the quarter, the company announced an additional price
increase on selected products, effective July 3, to mitigate higher
oil-related costs. Based on current economic conditions, the
company expects full-year industry unit shipments in 2005 to
increase by approximately 1-to-2 percent. Whirlpool Europe sales of
$770 million increased 9 percent from the prior- year period,
representing a record second quarter. Excluding currency
translations, sales increased approximately 4 percent. Strong
volume gains and the strength of Whirlpool brand performance drove
the improved results. The sales improvements were achieved despite
an estimated decline in industry unit shipments of approximately 3
percent. Operating profit improved 4 percent as higher raw material
costs were offset by strong brand and product mix, productivity
improvements, lower general and administrative expense, and price
increases. Based on current economic conditions, the company
expects full-year industry unit shipments in 2005 to be flat to
down 1 percent. Whirlpool Latin America sales of $494 million
increased 26 percent from the prior-year period. Excluding currency
translations, sales increased approximately 8 percent driven by
appliance and compressor price increases and improved product mix.
Industry unit shipments of appliances are estimated to have
increased 8 percent during the quarter. Price increases,
productivity improvements, lower freight costs and aggressive cost
reductions more than offset significantly higher raw material costs
and unfavorable currency, and led to an operating profit of $31
million, an 88 percent increase from the prior-year period. The
company expects macro-economic conditions in Brazil to remain
positive during the second half of the year. As a result, the
company continues to anticipate a 4-to-5 percent increase in
industry unit shipments in 2005. Whirlpool Asia sales of $123
million increased 12 percent from the prior- year period primarily
due to improved market share performance and new product
introductions. Excluding currency translations, sales increased
approximately 9 percent. Operating profit was down slightly from
last year, primarily due to higher material costs. Based on current
economic conditions, the company continues to expect full-year
industry unit shipments to increase 3-to-5 percent. Outlook "Our
focused action plans to mitigate higher material and oil-related
costs are on track and are being effectively executed," said
Fettig. "Given that oil prices remain volatile, we expect full-year
material and oil-related cost increases closer to the higher end of
our previous guidance of $500-to- $550 million, much of which has
been absorbed in our first-half results." He added: "Given this
challenging environment, we expect that our global operations will
continue to benefit from innovation, strong mix, execution of
previously announced price increases, higher levels of controllable
productivity, reductions in non-product related spending and the
acceleration of new product introductions. Based on our assessment
of the current environment, we continue to expect full-year
earnings-per-share of $5.90-to- $6.10, and free cash flow to be in
the $250-to-$300 million range." Subsequent Event On July 17, 2005,
Whirlpool Corporation announced that it has made a proposal to
acquire Maytag Corporation (NYSE:MYG) for $17 per Maytag share. The
proposal represents a 21 percent premium over the price offered by
Triton Acquisition Holding in their current agreement with Maytag.
Whirlpool's proposed transaction is valued at $2.3 billion in cash
and stock (based on assumed debt of $969 million). "We believe that
our proposal is both financially and strategically compelling,"
said Fettig. "The combination would deliver significant value to
both Maytag and Whirlpool shareholders, and lead to substantial
efficiencies with direct benefits to consumers and trade
customers." Whirlpool's proposal is subject to the satisfactory
completion of due diligence and negotiation of a mutually
acceptable definitive merger agreement. The table below reconciles
cash (used in) provided by operating activities as prepared in
accordance with accounting principles generally accepted in the
United States to free cash flow. Management believes this
comparison of free cash flow provides shareholders with a relevant
measure of liquidity and a useful basis for assessing the Company's
ability to fund its activities. There are limitations to using
non-GAAP financial measures, including the difficulty associated
with comparing companies that use similar performance measures
whose calculations may differ from the Company's calculations. Free
cash flow is cash (used in) provided by operating activities after
capital expenditures, proceeds from the sale of fixed assets and
dividends paid. The following is a reconciliation of the most
comparable GAAP measure to free cash flow as defined by the
company. (millions of dollars) YTD YTD June 30 June 30 2005 2005
2004 Projection (1) Cash (used in) provided by operating activities
($109) $82 $862 Capital expenditures (175) (131) (500)-(550)
Proceeds from sale of fixed assets 4 23 50 Dividends paid (57) (59)
(112) ------ ------ ----------- Free cash flow ($337) ($85) $250 -
$300 Note (1): Amounts for 2005 included in the table above are
projections. Such projections are based upon many estimates and are
inherently subject to change based on future decisions made by
management and the board of directors of the company and
significant economic, competitive and other uncertainties and
contingencies. Additional operating segment information is
available in the "Investors" section of
http://www.whirlpoolcorp.com/ . At 10:00 a.m. (EDT) Thursday, July
21, 2005, the company will host a conference call, which can be
heard by visiting http://www.whirlpoolcorp.com/ and clicking on the
"Investors" button and then the "Conference Call Audio" menu item.
*T7 refers to the following household appliance categories:
washers, dryers, refrigerators, freezers, dishwashers, ranges and
compactors. Whirlpool Corporation is the world's leading
manufacturer and marketer of major home appliances, with annual
sales of over $13 billion, 68,000 employees, and nearly 50
manufacturing and technology research centers around the globe. The
company markets Whirlpool, KitchenAid, Brastemp, Bauknecht, Consul
and other major brand names to consumers in more than 170
countries. Additional information about the company can be found on
the Internet at http://www.whirlpoolcorp.com/ This news release
contains forward-looking statements that speak only as of this
date. The company disclaims any obligation to update such
information. Forward-looking statements include, but are not
limited to, statements regarding expected earnings per share, cash
flow, and material costs for the full year 2005, as well as the
expected consequences of enacted price increases. Although the
company believes that the expectations reflected in the
forward-looking statements are reasonable, it can give no assurance
that those expectations will prove to have been correct. Many
factors could cause actual results to differ materially from the
Company's forward-looking statements. Among these factors are: (1)
the cost of raw materials and components, especially steel and the
impact of rising oil prices; (2) the financial impact of the
Company's announced price increases will be dependent upon such
factors as the strength of the Company's brands in the market
place, the strength of consumer demand for the Company's products,
and other factors outside of the Company's control such as the
general economic conditions prevailing at the time the new pricing
goes into effect; (3) rising worldwide transportation costs due to
historically high and volatile oil prices, capacity constraints,
and other factors; (4) the ability to gain or maintain market share
in an intensely competitive global market; (5) the success of the
Company's global strategy to develop brand differentiation and
brand loyalty; (6) the Company's global operating platform
initiatives; (7) the success of the Latin American businesses
operating in challenging and volatile environments; (8)
continuation of the Company's strong relationship with Sears
Holdings Corporation in North America, which accounted for
approximately 17% of consolidated net sales of $13 billion in 2004;
(9) currency exchange rate fluctuations; (10) social, economic and
political volatility in developing markets; (11) continuing
uncertainty in the North American, Latin American, Asian and
European economies; (12) the effectiveness of the series of
restructuring actions the Company has announced and/or completed
through 2004; (13) U.S. interest rates; (14) new Asian competitors;
(15) changes to the obligations as presented in the contractual
obligations table; (16) changes in the funded position of the U.S.
pension plans; (17) continued strength of the U.S. builder
industry; (18) the threat of terrorist activities or the impact of
war; (19) the Company's estimate of its annual effective tax rate
of approximately 31.7%; and (20) the success of the Company's
proposal to acquire Maytag Corporation and, if the acquisition is
completed, the Company's ability to realize expected benefits. This
material is not a substitute for the prospectus/proxy statement
Whirlpool and Maytag would file with the Securities and Exchange
Commission if a definitive agreement with Maytag is reached.
Investors are urged to read any such prospectus/proxy statement,
when available, which would contain important information. The
prospectus/proxy statement would be, and other documents filed by
Whirlpool and Maytag with the Securities and Exchange Commission
are, available free of charge at the SEC's website
(http://www.sec.gov/ ) or from Whirlpool by directing a request to
Whirlpool Corporation, 2000 North M-63, Mail Drop 2800, Benton
Harbor, MI 49022-2692, Attention: Larry Venturelli, Vice President
Investor Relations. Whirlpool is not currently engaged in a
solicitation of proxies from the stockholders of Maytag in
connection with Whirlpool's proposed acquisition of Maytag. If a
proxy solicitation commences, Whirlpool, Maytag and their
respective directors, executive officers, and other employees may
be deemed to be participants in such solicitation. Information
about Whirlpool's directors and executive officers is available in
Whirlpool's proxy statement, dated March 18, 2005, for its 2005
annual meeting of stockholders. Additional information about the
interests of potential participants will be included in the
prospectus/proxy statement Whirlpool and Maytag would file if a
definitive agreement with Maytag is reached. WHIRLPOOL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE
PERIOD ENDED JUNE 30 (millions of dollars except per share data)
Three Months Ended Six Months Ended ------------------
---------------- 2005 2004 2005 2004 -------- --------- -------
-------- Net sales $3,556 $3,264 $6,764 $6,271 EXPENSES: Cost of
products sold 2,825 2,539 5,344 4,858 Selling, general and
administrative 533 516 1,035 1,000 Restructuring costs 7 - 14 1
-------- --------- ------- -------- 3,365 3,055 6,393 5,859
-------- --------- ------- -------- OPERATING PROFIT 191 209 371
412 OTHER INCOME (EXPENSE): Interest and sundry income (expense)
(17) (10) (29) (15) Interest expense (34) (30) (69) (64) --------
--------- ------- -------- EARNINGS BEFORE INCOME TAXES AND OTHER
ITEMS 140 169 273 333 Income taxes 41 62 87 123 -------- ---------
------- -------- EARNINGS BEFORE EQUITY EARNINGS AND MINORITY
INTERESTS 99 107 186 210 Equity in earnings (loss) of affiliated
companies - - 1 (3) Minority interests (3) (1) (5) - --------
--------- ------- -------- NET EARNINGS $96 $106 $182 $207 ========
========= ======= ======== Per share of common stock: Basic net
earnings $1.44 $1.56 $2.73 $3.04 ======== ========= =======
======== Diluted net earnings $1.42 $1.53 $2.69 $2.96 ========
========= ======= ======== Dividends declared $.43 $.43 $.86 $.86
======== ========= ======= ======== Weighted-Average Shares
Outstanding (in millions) Basic 66.8 68.0 66.8 68.3 Diluted 67.9
69.5 67.9 70.0 WHIRLPOOL CORPORATION CONSOLIDATED CONDENSED BALANCE
SHEETS (millions of dollars) (Unaudited) June 30 December 31 2005
2004 ----------- ----------- ASSETS CURRENT ASSETS Cash and
equivalents $188 $243 Trade receivables, less allowances (2005:
$94; 2004: $107) 2,123 2,032 Inventories 1,772 1,701 Prepaid
expenses 84 74 Deferred income taxes 160 189 Other current assets
299 275 ----------- ----------- Total Current Assets 4,626 4,514
----------- ----------- OTHER ASSETS Investment in affiliated
companies 19 16 Goodwill, net 167 168 Other intangibles, net 105
108 Deferred income taxes 319 323 Prepaid pension costs 329 329
Other assets 160 140 ----------- ----------- 1,099 1,084
----------- ----------- PROPERTY, PLANT AND EQUIPMENT Land 88 91
Buildings 1,073 1,073 Machinery and equipment 5,919 5,933
Accumulated depreciation (4,607) (4,514) ----------- -----------
2,473 2,583 ----------- ----------- Total Assets $8,198 $8,181
=========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES Notes payable $515 $244 Accounts payable 2,047
2,297 Employee compensation 274 300 Deferred income taxes 49 57
Accrued expenses 809 811 Restructuring costs 11 13 Income taxes 96
110 Other current liabilities 135 146 Current maturities of
long-term debt 8 7 ----------- ----------- Total Current
Liabilities 3,944 3,985 ----------- ----------- OTHER LIABILITIES
Deferred income taxes 215 240 Pension benefits 377 367
Postemployment benefits 512 499 Other liabilities 227 256 Long-term
debt 1,113 1,160 ----------- ----------- 2,444 2,522 -----------
----------- MINORITY INTERESTS 91 68 STOCKHOLDERS' EQUITY Common
stock, $1 par value: 90 90 Shares authorized - 250 million Shares
issued - 90 million (2005); 90 million (2004) Shares outstanding -
67 million (2005); 67 million (2004) Paid-in capital 777 737
Retained earnings 2,721 2,596 Accumulated other comprehensive
income (loss) (619) (601) Treasury stock - 24 million (2005); 23
million (2004) (1,250) (1,216) ----------- ----------- Total
Stockholders' Equity 1,719 1,606 ----------- ----------- Total
Liabilities and Stockholders' Equity $8,198 $8,181 ===========
=========== WHIRLPOOL CORPORATION CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30
(millions of dollars) 2005 2004 -------- -------- OPERATING
ACTIVITIES Net earnings $182 $207 Adjustments to reconcile net
earnings to net cash flows provided by (used in) operating
activities: (Gain) loss on disposition of assets (4) 1 Depreciation
and amortization 224 226 Changes in assets and liabilities: Trade
receivables (174) (160) Inventories (120) (236) Accounts payable
(206) 47 Restructuring charges, net of cash paid - (20) Taxes
deferred and payable, net (19) 73 Accrued pension 31 27 Other - net
(23) (83) -------- -------- Cash Provided By (Used In) Operating
Activities $(109) $82 -------- -------- INVESTING ACTIVITIES
Capital expenditures $(175) $(131) Proceeds from sale of assets 4
23 Acquisitions of businesses, net of cash acquired - (2) --------
-------- Cash Used In Investing Activities $(171) $(110) --------
-------- FINANCING ACTIVITIES Proceeds of short-term borrowings,
net $268 $260 Repayments of long-term debt (5) (11) Dividends paid
(57) (59) Purchase of treasury stock (34) (250) Common stock issued
under stock plans 33 53 Other 26 (16) -------- -------- Cash
Provided By (Used For) Financing Activities $231 $(23) --------
-------- Effect of Exchange Rate Changes on Cash and Equivalents
$(6) $(5) -------- -------- Decrease in Cash and Equivalents $(55)
$(56) Cash and Equivalents at Beginning of Period 243 249 --------
-------- Cash and Equivalents at End of Period $188 $193 ========
======== http://www.newscom.com/cgi-bin/prnh/20040202/DETU004LOGO
DATASOURCE: Whirlpool Corporation CONTACT: Media: Tom Kline,
+1-269-923-3738, or Financial: Larry Venturelli, +1-269-923-4678, ,
both of Whirlpool Corporation Web site:
http://www.whirlpoolcorp.com/
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