The FINANCIAL — Whirlpool Corporation (NYSE: WHR) announced on February 9 that full-year 2008 earnings from continuing operations were $5.50 per diluted share compared to $8.10 per diluted share reported in the same period last year. The company reported annual net sales of $18.9 billion, a decrease of 3 percent from the prior year.
Fourth-quarter net earnings decreased 76 percent to $44 million, or $0.60 per diluted share, compared to $187 million, or $2.38 per diluted share reported during the previous year. Sales of $4.3 billion for the quarter decreased 19 percent from the $5.3 billion reported in the fourth quarter of 2007. Excluding the impact of foreign exchange translation, the company's fourth-quarter sales declined approximately 13 percent.
Fourth-quarter earnings reflect sharply lower global unit sales and production volumes, higher material and oil-related costs and unfavorable foreign currency exchange movements compared to the fourth quarter of 2007. The company also recorded $77 million of restructuring costs compared to $15 million in the prior year. Results were also unfavorably impacted by a $32 million product recall expense related to a supplier quality issue. These items were partially offset by an income tax benefit, favorable price/mix, lower incentive compensation and cost reduction initiatives during the quarter. The company's results included $43 million in asset sale gains compared with $24 million of asset sale gains in the previous year.
"The severity and scope of the global economic downturn has significantly increased over the last several months and had a significant impact on consumer demand in all parts of the world," said Jeff M. Fettig, Whirlpool Corporation chairman and chief executive officer. "We have moved very quickly to adjust our business to much lower demand levels by significantly reducing costs and production levels while continuing to focus on providing our trade customers with an ongoing cadence of innovation which represents great value to consumers."
During the fourth quarter, Whirlpool Corporation accessed its existing $2.2 billion credit facility and is in full compliance with its bank covenants. Given the generally negative and highly volatile global economic climate and the challenges in global credit markets, the company is proactively taking steps to assure its future financial flexibility. The company has initiated discussions with banks to seek additional flexibility within its capital structure.
FOURTH-QUARTER REGIONAL REVIEW
Whirlpool North America
Fourth-quarter sales of $2.5 billion declined 18 percent from the prior year. Excluding the effects of currency, sales declined approximately 16 percent from the prior year. U.S. industry unit shipments of major appliances (T7)* declined approximately 10 percent.
The North America region reported an operating loss of $20 million compared to an operating profit of $175 million in the previous year. Significantly lower sales and unit production levels, unfavorable foreign exchange, product recall costs and higher material and oil-related costs were the primary unfavorable factors affecting the company's fourth-quarter operating profit. These factors were partially offset by favorable price/mix, ongoing cost reduction initiatives and a $23 million gain related to the sale of an asset.
Based on current economic conditions, the company expects full-year 2009 U.S. industry unit shipments to decline approximately 10 percent from 2008.
Whirlpool Europe
Whirlpool Europe reported fourth-quarter sales of $938 million, a 16 percent decrease from the prior year. Excluding the effects of currency, sales declined approximately 7 percent from the previous year. Overall industry unit demand during the quarter declined approximately 10 percent from the prior year.
Operating profit decreased to $2 million from $73 million reported in the previous year. European results were adversely impacted by unfavorable foreign currency fluctuations, higher material costs and sharply lower production rates during the fourth quarter.
Based on current economic conditions in the European region, the company expects full-year 2009 industry unit shipments to decline approximately 8 percent from 2008 levels.
Whirlpool Latin America
Fourth-quarter net sales declined 26 percent to $777 million. Excluding currency translation, sales for appliances and compressors decreased approximately 14 percent. Sales results reflected sharply lower industry unit demand throughout the Latin American region and in the global compressor operation.
Operating profit totaled $110 million in the fourth quarter compared with $156 million in the prior year. The overall results were unfavorably impacted by foreign currency exchange, lower revenues, higher material costs and the non-recurrence of a $15 million asset sale gain recorded in the previous year. These items were partially offset by favorable price/mix and cost reduction initiatives.
Full-year results represent record net sales and earnings. In addition, Latin America continued to build upon its industry leading position in both appliance and compressors.
Based on current economic conditions in Latin America, the company expects full-year 2009 shipments to be flat to down 5 percent.
Whirlpool Asia
Whirlpool Asia reported fourth-quarter sales of $140 million, decreasing 10 percent from the prior year. Excluding the impact of currency, sales increased approximately 7 percent predominantly due to higher unit volume and favorable price/mix. Operating profit during the quarter was $3 million compared to an operating loss of $4 million in the prior year. The year-over- year increase in operating profit resulted from higher volume and favorable trends in productivity and product price/mix. These favorable items were partially offset by higher material costs and unfavorable foreign currency exchange.
The company expects full-year 2009 industry unit shipments to be flat to down 5 percent from 2008 levels.
Outlook
For the full-year 2009, Whirlpool Corporation expects earnings per diluted share from continuing operations to be between $3.00 and $4.00. For the full year, the company expects to generate free cash flow between $300 million and $400 million. The company's earnings and free cash flow projections are based upon our current economic forecasts and business plans.
"We expect 2009 economic conditions to be among the most challenging that we have faced," said Jeff M. Fettig, Whirlpool Corporation chairman and chief executive officer. "Significant demand declines, volatile cost and currency levels are expected throughout the year. To succeed in this environment we are aggressively taking additional steps, beyond actions previously announced, to further reduce all areas of cost, production capacity, working capital and capital expenditures. We will continue to have focused investments in new product innovation to further strengthen our branded market position with our consumers."
